Capital II, Chapter 21 - Part 23

3) Replacement of IIc in Accumulation 

In illustration 1) 1(v+s/2) = 2 (c) = £1500. In illustration 2) 1(v+s/2) is greater than 2(c). The difference is made up by a reallocation of the supply of consumer goods previously allocated to Department 2 capitalists, and a consequent reallocation of their funds from consumption spending to capital accumulation.

“Here the replacement for II is not a simple reproduction of its constant capital, but accumulation, an augmentation of its constant capital by that portion of its surplus-product which it exchanges for means of production of I. This augmentation implies at the same time a corresponding addition to variable capital II out of its own surplus-product.” (p 524)

In 3) “I(v + ½s) is smaller than IIc. In this case II does not fully reproduce its constant capital by means of exchange and must make good the deficit by purchase from I. But this does not entail any further accumulation of variable capital II, since its constant capital is fully reproduced only by this operation. On the other hand that part of capitalists I who accumulate only additional money-capital, have already accomplished a portion of this accumulation by this transaction.” (p 524)

In other words, demand from Department 1 workers and capitalists is insufficient to cover the consumption of constant capital in Department II. The implication being that the additional demand for consumer goods comes from within Department 2 itself. Department 2 makes up the difference by advancing additional money-capital, buying without selling, enabling Department 1 capitalists to sell without buying, and thereby to hoard the difference as potential money-capital.

“The premise of simple reproduction, that I(v + s) is equal to IIc, is not only incompatible with capitalist production, although this does not exclude the possibility that in an industrial cycle of 10-11 years some year may show a smaller total production than the preceding year, so that not even simple reproduction takes place compared to the preceding year.” (p 524)

But, during a process of accumulation, 2(c) could become bigger than 1(v+s). In other words, the total output of Department 2, having met the needs of its own workers and capitalists might have more production than can be exchanged with Department 1.

“This would mean an over-production in II and could not be adjusted in any other way than by a great crash, in consequence of which some capital of II would get transferred to I.” (p 525)

Under capitalism, because expanded reproduction is inherent, 1(v+s) cannot equal 2(c). 

“On the other hand, if I(s/x) is taken as that portion of Is which is spent by capitalists I as revenue, I(v + s/x) may be equal to, larger, or smaller than, IIc. But I(v + s/x) must always be smaller than II(c + s) by as much as that portion of IIs which must be consumed under all circumstances by capitalist class II.” (p 525)

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