Capital III, Chapter 49 - Part 10

The more society develops, and the more social productivity rises, so that the quantity and value of the circulating constant capital increases, as a consequence of accumulation, the greater this component of the national output becomes, and so the greater becomes the difference between the annual product/National Income, and the national output.  It is also another expression of the law of the tendency for the rate of profit to fall.  It illustrates the fact that, as social productivity rises, although the annual rate of profit, and so the general annual rate of profit rises (because the annual rate of surplus value and rate of turnover of capital rises) as the advanced capital rises at a slower rate than the rise in surplus value, this very same rise in social productivity causes a proportionally greater rise in the mass of raw materials consumed in production.  The mass of laid-out capital, as opposed to advanced capital rises at a faster rate than the rise in variable-capital and surplus value, so that the rate of profit, i.e. the profit margin falls.

This is only mitigated to the extent that rises in productivity and improvements in technology enable the amount of labour-time required for the production of this constant capital to be reduced.

“In Class I the product consists of the same constituents, as regards form. But that part which here forms revenue, wages + profit + rent, in short, the variable portion of capital + surplus-value, is not consumed here in the natural form of products of this Class I, but in products of Class II. The value of the revenues of Class I must, therefore, be consumed in that portion of products of Class II which forms the constant capital of II to be replaced. The portion of the product of Class II which must replace its constant capital is consumed in its natural form by the labourers, capitalists and landlords of Class I. They spend their revenue for this product of II. On the other hand, the product of I, to the extent that it represents a revenue of Class I, is productively consumed in its natural form by Class II, whose constant capital it replaces in kind. Finally, the used-up constant portion of capital of Class I is replaced out of the very products of this class, which consist precisely of means of labour, raw and auxiliary materials, etc., partly through exchange by capitalists of I among themselves, partly so that some of these capitalists can directly use their own product once more as means of production.” (p 837-8)

In other words, as already described, the output of Department I is not consumed by its workers, capitalists and landowners, but part of it (equal to the new value added by labour [v + s] equal to £2,000) is exchanged with Department II. It constitutes Department II's constant capital, i.e. intermediate production. Department II exchanges consumer goods for it, and these are consumed by Department I workers, capitalists and landlords.

Of the £4,000 of additional Department I output, some will be exchanged within the Department, so coal producers exchange with steel producers and so on, whilst, for example, part of the grain of the farmer will be used as seed, to replace that used in production, part of the coal produced by the coal mine will be used to fuel steam engines used to pump water from mines, in the process of producing coal.

None of this output comprises an income for anyone, even though it constitutes a growing component of the value of national output. Its quite clear, for example, that the grain produced by the farmer, which is not sold but is used as seed for the following year, produces no income for him, just as it forms no part of the consumption fund of society, i.e. it is not consumed by anyone. Just as society's production must divide into the production of means of production and consumption goods, so the value equivalent of that production divides into capital and revenue.

The proportion of the value of current output (on current reproduction costs rather than historic prices) equal to the constant capital used in current production comprises this capital component, and is set aside, for the physical replacement of the constant capital on a like for like basis. By the same token, the proportion of the value of current production, due to the newly added value contributed by labour, comprises the revenue part. This revenue divided into wages, profits, interest and rent, is then able to purchase the remaining physical output, and thereby to reproduce the variable capital, to meet the consumption needs of exploiters, and also the needs of capital accumulation.

Back To Part 9

Forward To Part 11