In other words, if we take the example given previously, which is taken from Capital II, the output of Department II is made up:
2000 c + 500 v + 500 s = 3000
So, Department II has £2,000 of means of production, which are processed into items of consumption. In this process, the Department II workers are paid £500 in wages. They create £1,000 of new value, which leaves £500 as surplus value. Of the total value of output of Department II, which is equal to the annual product, or National Income, of £3,000, the Department II workers, therefore, spend their wages of £500 buying consumption goods, leaving £2,500 of goods left to be bought. A further £500 of new value was produced in Department II, and has been distributed as surplus value, in revenues – profit, interest and rent. Some will have gone as profit of enterprise to functioning capitalists, some will have gone as interest payments to money-lending capitalists (dividends to shareholders, coupon interest to bondholders etc.) who have lent money to Department II capitalists, and some as rent to landlords, who have rented land to Department II capitalists.
This further £500 in the possession of these capitalists and landlords is then expended as revenue, to buy another £500 of consumption goods, leaving £2,000 of these commodities to buy.
It may be objected that part of the value of the annual product is not made solely of the value of new labour added, but also of the value of the constant capital used for its production, equal to £2,000. But, a closer inspection shows that this £2,000 of constant capital, used in the production of the annual product, is itself only equal to the value of the labour expended in Department I, for the production of that constant capital, i.e. the intermediate production.
A look at Department I shows its output to be:
c 4000 + v 1000 + s 1000 = 6,000
The workers of Department I create £2,000 of new value, in the shape of means of production, which represents intermediate production, bought by Department II.
The workers of Department I are paid £1,000 in wages, and use this to buy consumption goods from Department II. Department II is thereby left with £1,000 of consumption goods still to sell. Of the £2,000 of new value created in Department II, £1,000 has been paid to workers as wages, leaving £1,000 of surplus value, paid as profit, interest and rent to Department I functioning-capitalists, share and bondholders, and landlords.
They spend the £1,000 buying the remaining £1,000 of consumption goods produced by Department II.
All of the national product of £3,000 is, therefore, bought and consumed, with the national income of £3,000, divided into wages, profits, interest and rent. However, a look at the national output shows that, in addition to the £2,000 of means of production, produced by Department I, and exchanged for consumer goods with Department II, i.e. the intermediate production, Department I produced a further £4,000 of output, which was not traded.
This additional £4,000 of output value was not the consequence of new value produced in the current year, nor is it the consequence of the value of fixed capital, which has been excluded from the analysis. This £4,000 of additional output value comes from the value of labour expended in previous years, and contained in the value of circulating constant capital, used in Department I. By the same token, this £4,000 of additional output value plays no part in the exchange with Department II, and so creates no revenue for anyone. It does not arise as either wages, profit, nor interest for anyone. Its value, as with its physical product, goes solely to reproduce that circulating constant capital, consumed in production.
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