## Saturday, 29 October 2016

### Capital III, Chapter 49 - Part 12

If we take a situation like that analysed by the Physiocrats, the capitalist farmer may have capital solely in the form of agricultural commodities. Let's assume this can be represented solely by a quantity of grain. If we assume that 100 kg. of grain is required as seed (c), and 1,000 kg. is required as food to reproduce the labour-power of their workers (v), they can begin production with a capital made up of 1100 kg. of grain.

The 100 kg. of grain is planted by the workers, and each week for 50 weeks, as they tend and ultimately harvest the grain, they are paid 200 kg. of grain as wages, from the farmer's store constituting his variable capital. If we assume no changes in productivity, so that the value of the grain, which here also constitutes the form of the constant and variable capital, remains constant, then, at the end of the 50 weeks, 1,500 kg. of grain may be produced.

Out of this 1,500 kg., 100 kg. must be used to reproduce the constant capital consumed in its production, whilst 1,000 kg. must be put in store as variable capital, ready to pay the wages of the workers in the coming year. This leaves 400 kg. of grain as a surplus product, and surplus value in the hands of the farmer.

The new value, i.e. the annual product, or national income, produced by the workers was contained in the 1,400 kg. of grain additional to the 100 kg. required to reproduce the constant capital. Of this 1,400 kg., 1,000 kg. is required to reproduce the workers' labour-power, or else social reproduction cannot continue. This 1,000 kg. is equal to the 1,000 kg. previously laid out as variable capital. The other 400 kg. constitutes surplus value.

Assuming social reproduction occurs on the same scale, 100 kg. must reproduce the constant capital, and so cannot be consumed. It cannot form an income or revenue for anyone. Only the 1400 kg. of new value can be consumed, and thereby forms revenue – wages (1,000 kg.) and profit (400 kg.).

“In order to avoid unnecessary difficulty, one should distinguish gross output and net output from gross income and net income.

The gross output, or gross product, is the total reproduced product. With the exception of the employed but not consumed portion of fixed capital, the value of the gross output, or gross product, equals the value of capital advanced and consumed in production, that is, constant and variable capital plus surplus-value, which resolves itself into profit and rent. Or, if we consider the product of the total social capital instead of that of an individual capital, the gross output equals the material elements forming the constant and variable capital, plus the material elements of the surplus-product in which profit and rent are represented.” (p 840)

In other words, in the example above, the gross output is equal to the 1500 kg. of grain – 100 kg. c + 1000 kg. v + 400 kg. s. If we measured this output in terms of the abstract labour-time required for its production, we might have in labour hours:

100 c + 1000 v + 400 s = 1500.

If a £1 gold coin has a value of 10 labour hours, the above might be expressed as an exchange value or price, as:

10 c + 100 v + 40 s = £150.

In this example, no fixed capital is used, but if it was, the value of the fixed capital itself would not change these figures. The only element of the fixed capital that would be included is the value of the wear and tear on it.

So, if a plough with an exchange value of £100 was used, in the production, this would not change the figure above. However, if this plough loses 10% of its value each year, as a consequence of its use in production, i.e. wear and tear, this would affect the numbers, because the wear and tear here forms part of the value of the output.

We would then have:

10 (d) + 10 c + 100 v + 40 s = £160.

The 10 (d) or value of wear and tear need not be immediately used, but this amount of value must be reproduced and hoarded so that the fixed capital itself can ultimately be replaced when it is completely exhausted.