## Tuesday, 31 March 2015

### Capital II, Chapter 21 - Part 19

Marx then sets out how extended reproduction can occur under three different scenarios.

### 1) First Illustration

Department 1) c 4000 + v 1000 + s 1000 = 6000

Department 2) c 1500 + v 750 + s 750 = 3000

Total 9000

Half of Department 1(s) is accumulated = £500. Of this, on the basis of the organic composition of capital (4:1), £400 becomes additional constant capital, and £100 additional variable capital.

So, Department 1 now stands as

c 4400 + v 1100 = 5500

Its total output is £6,000, but now £4,400 of this goes just to replace and increase its own constant capital. That leaves it with £1,600 of output to exchange with Department 2.

So, Department 1 workers buy £1100 of consumer goods from Department 2, whilst Department 1 capitalists buy £500 of consumer goods from Department 2. With the £1,600 received from these sales, Department 2 buy £1,600 of constant capital to replace that it has used up.

But, Department 2 only had £1,500 of constant capital, so this assumes that it has to also accumulate, so as to expand its constant capital, and its own output. But, in accordance with its organic composition of capital (2:1), if its constant capital rises by £100, its variable capital must rise by 50, i.e. it needs more labour-power to process this greater quantity of material.

So, Department 2 has increased its capital advanced by £150 - £100 for constant capital, and £50 for variable capital. It advances this capital from its surplus value. £150 of Department 2 commodities, previously consumed by its capitalists are now consumed by workers (£100 Department 1 - £50 Department 2).

So, the situation now is:-

Department 1 c 4400 + v 1100. Capitalists now have £500 to spend buying consumption goods.

Department 2 c 1600 + v 800. Capitalists have £600 to spend.

So, if the capital was accumulated on this basis, with the previous 100% rate of surplus value, the larger amount of labour-power would now process the larger quantity of constant capital resulting in a higher level of output. It is now.

Department 1) c 4400 + v 1100 + s 1100 = 6600

Department 2) c 1600 + v 800 + s 800 = 3200.

Total = £9,800.

Output in Department 1 has risen by 600/6000 = 10%, and in Department 2 by 200/3000 = 6.66%.

The process of accumulation then continues. Half of Department 1's surplus value of £1,100 is accumulated. That is £550, allocated £440 to constant capital, and £110 for variable capital.

Now we have:

c 4840 + v 1210 (+s 550 after £550 has been accumulated) = £6,600.

Now, v+s (£1210 + £550 = £1,760) becomes the new demand for Department 2 consumer goods. But, again Department 2 only has £1,600 of goods available to exchange with Department 1 i.e. the proportion of its output equal to c. So, £160 of goods currently consumed by Department 2 capitalists must instead be sold to Department 1, in exchange for the additional constant capital.

So, Department 2 then has £1,760 of constant capital, but must then increase its variable capital to £880 (half of £1760) in line with its organic composition of capital.

We will then have in the next cycle.

Department 1 c 4840 + v 1210 + s 1210 = 7260

Department 2 c 1760 + v 880 + s 880 = 3520

That gives a rise of 660/6600 = 10% for Department 1, and 320/3200 = 10% for Department 2.

“If things are to proceed normally, accumulation in II must take place more rapidly than in I, because otherwise the portion I(v + s) which must be converted into commodities II will grow more rapidly than II c, for which alone it can be exchanged.” (p 516)

This was one problem in the USSR, where the plan continually gave priority to increasing accumulation in Department 1.

Continuing on this basis we get after five years.

Department 1 C 6442 + V 1610 + S 1610 = 9662

Department 2 C 2342 + V 1172 + S 1172 = 4686

That represents an increase of 3662/6000 = 61% for Department 1, and 1686/3000 = 56% for Department 2. Department 1 capital has risen from 4000 + 1000 = £5000 to 6442 + 1610 = 8052. That is an increase of 3052/5000 = 61% . Department 2 capital has risen from 1500 + 750 = £2250 to 2342 + 1172 = £3514 = 56%.