Thursday, 12 March 2015

Capital II, Chapter 21 - Part 10

Capitalist A may continue to produce at the same level, and on the same basis they have done previously, under simple reproduction. It is only when this surplus product appears in the hands of the buyer, B, who uses it to increase the size of their constant capital that the process of expanded reproduction begins.

“... it should be noted here that a large portion of the surplus-product (virtually additional constant capital), although produced by A, A', A'' (I) in a given year, may not function as industrial capital in the hands of B, B', B'' (I) until the following year or still later.” (p 503)

For B to buy this additional constant capital from A, they must advance money-capital for it, and the question then arises where this money-capital comes from. But, in reality, this question is no different than the question raised under simple reproduction of where the money comes from to realise the surplus value for unproductive consumption. The only difference here is the nature of the commodities purchased, and of the money paid for them. Under simple reproduction, the commodities purchased are for consumption and the money paid for them is revenue. Under extended reproduction, the commodities bought are for productive consumption, and the money advanced for them is money-capital.

In the former instance, the value of the commodities purchased is consumed along with their use value, and disappears. In the latter instance, the use value is consumed in the production process of some new commodity, and the value is transferred to that new commodity. In the former case, the money-revenue is spent and disappears into circulation. It returns to the capitalist not because of this act of spending, but because of his subsequent act of throwing his surplus product into circulation, and receiving back from circulation, the revenue he had thrown in. In the latter case, the money-capital is advanced to buy the commodities. It returns as the money-form of the commodity-capital it has helped to produce. This is separate from the surplus value incorporated into that commodity-capital, as a result of the production process, and which is also realised when the commodities comprising that commodity-capital are sold.

Whether the money is advanced as capital or spent as revenue, it can arise in circulation from one of two sources. Either B throws it into circulation from their own money hoard, or else A has previously thrown it into circulation from their money hoard, to purchase B's surplus product. 

Once we move from an assumption of exchanges mediated by money, as coin, the question resolves itself merely into a matter of the differences of balances of payments, i.e. B buys from A, and A buys from B for the same amount. If both raise Bills of Exchange, or pay by cheque, or electronic transfers, the two cancel out. Today, A would invoice A, and B would invoice B. In reality, of course, the series of exchanges would be far more complex, with A selling to B, B to D, E and F, D to A,G and X and so on. But, the total of payments are still netted off to balances, and it is only the balances which require actual payment to occur.

At this point, of trying to understand the underlying relations of social reproduction, introducing credit relations only acts to obscure rather than clarify. There are also other reasons to continue to focus on the role of actual money. Marx equates simple reproduction with the period of commodity production and exchange prior to industrial capitalism, and extended reproduction with the latter. In relation to the role of money this has the consequence that more is required.

“... first, because under capitalist production all the products (with the exception of newly produced precious metals and the few products consumed by the producer himself) are created as commodities and must therefore pass through the pupation stage of money; secondly, because on a capitalist basis the quantity of the commodity-capital and the magnitude of its value is not only absolutely greater but also grows with incomparably greater rapidity; thirdly, because an ever expanding variable capital must always be converted into money-capital; fourthly, because the formation of new money-capitals keeps pace with the extension of production, so that the material for corresponding hoard formation must be available. 

This is generally true of the first phase of capitalist production, in which even the credit system is mostly accompanied by metallic circulation, and it applies to the most developed phase of the credit system as well, to the extent that metallic circulation remains its basis.” (p 504)

At the same time, the more money required for circulation, the more pronounced the effect can be of shortages or abundances of the money-commodity, e.g. as happened with the discoveries of gold in California, Australia, and Alaska. This is true of the situation in Greece currently. If Greece converted all of its currency into electronic transfers, based on Euro denominated prices, it could remove the need for physical Euro notes and coins, and, therefore, its dependence on the ECB for currency. It could continue to undertake transactions denominated in Euros, but with all of its currency requirements provided under its own internal control, by the simple procedure of the Greek Central Bank creating new electronic deposits, i.e. Quantitative Easing.

“On the other hand the entire credit mechanism is continually occupied in reducing the actual metallic circulation to a relatively more and more decreasing minimum by means of sundry operations, methods, and technical devices. The artificiality of the entire machinery and the possibility of disturbing its normal course increase to the same extent.” (p 504)

Also, in a situation where we may have a series of A's who are sellers, but not buyers, and of B's who are buyers but not sellers, the B's may have to buy some of their additional constant capital from each other. Once again, this complex web of payments and receipts only requires the outstanding balances to be paid.

“But it is important first and foremost to assume here, as everywhere, metallic circulation in its simplest, most primitive form, because then the flux and reflux, the squaring of balances, in short all elements appearing under the credit system as consciously regulated processes present themselves as existing independently of the credit system, and the matter appears in primitive form instead of the later, reflected form.” (p 505)

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