Sunday, 8 February 2015

Capital II, Chapter 20 - Part 51

Marx again emphasises how much disdain he has for those economists like Adam Smith (who was followed in this by Keynes and others) who equated National Income (v+s) with National Output (c+v+s).

“We have seen that with Adam Smith the entire value of the social product resolves itself into revenue, into v + s, so that the constant capital-value is set down as zero. It follows necessarily that the money required for the circulation of the yearly revenue must also suffice for the circulation of the entire annual product, that therefore in our illustration the money required for the circulation of the articles of consumption worth 3,000 also suffices for the circulation of the entire annual product worth 9,000. This is indeed the opinion of Adam Smith, and it is repeated by Th. Tooke. This erroneous conception of the ratio of the quantity of money required for the realisation of revenue to the quantity of money required to circulate the entire social product is the necessary result of the uncomprehended, thoughtlessly conceived manner in which the various elements of material and value of the total annual product are reproduced and annually replaced. It has therefore already been refuted.” (p 479)

Businesses when they first start up, necessarily throw a considerable amount of money into circulation in exchange for the fixed capital they buy. Periodically, as this capital is replaced, they again throw large amounts of money into circulation, and this only returns to them gradually, in the value of wear and tear transferred to the end product. In addition, they also periodically have to throw money into circulation to cover large-scale repairs, or the replacement of parts of their equipment.

“While, then, on the one hand more money is withdrawn from circulation than is thrown into it, the opposite takes place on the other hand.” (p 481)

In all those industries where the production period – as opposed to the working period – is long, capitalists have to keep throwing money into circulation, because they are unable to throw commodities into circulation. A wine producer, for example, may have completed all of the working-period for the wine, but the production period continues way beyond this, as the wine ferments and matures. The capitalist cannot sell it until that process is complete. Yet, they will still have to lay out money-capital to buy labour-power to tend the vineyard, to buy means of production of various kinds, as well as spending money to cover their own consumption needs.

“During this period the money thrown by them into circulation serves to convert commodity value, including the surplus-value embodied in it, into money. This factor becomes very important in an advanced stage of capitalist production in the case of long-drawn out enterprises, such as are undertaken by stock companies, etc., for instance the construction of railways, canals, docks, large municipal buildings, iron shipbuilding, large-scale drainage of land, etc.” (p 481)

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