The primitive communist society (and the same will be true of future communist society) must devote a portion of its current social product to simply reproduce the means of production consumed in current production, a proportion which, therefore, is not available for consumption. It must devote another portion of its total output to reproduce the means of consumption used during the current year. Only then is a remainder of its total social product available as a surplus product, available to increase consumption or for use as accumulation in the following year.
The same applies under slave society. A portion of the total product must be devoted solely to physically replacing the means of production, and a further portion must be devoted to physically reproducing the means of consumption for the slaves. Only what is left after these necessary physical replacements have been made, is the remainder of the physical product available for use by the slave owner. Under capitalism, these three funds, comprising the current value of output, correspond to constant capital, variable capital and surplus value, (c + v + s), and the proportional relation of the latter to the sum of the other two funds is equal to the rate of profit.
As Marx set out earlier, in relation to the history of rent, the same thing applies in relation to pre-capitalist forms of rent, which were again the means by which surplus value, and this surplus product was extracted from the producers. A portion of the total product again has to be devoted to the reproduction of the means of production consumed during this year's production. A second portion must go to the necessary replacement of the physical means of consumption for the producers, without which they could not continue to live, and thereby produce. Only after these physical products have been replaced, is the remaining physical product available as a surplus product, and surplus value appropriated as rent by the landlord. As Marx makes clear, it does not matter, in this respect, whether the rent is paid as a labour rent, which can only be an amount of surplus labour-time available after the peasant has expended the necessary labour-time to reproduce these other physical products, or whether it takes the form of a rent in kind, or a money rent.
These revenues – wages, profits, interest and rent – are, therefore, equal in value to the value of the consumption fund, (v + s), and able thereby to provide the necessary monetary demand for its consumption. The fact that this is the case, purely in terms of these value relations, however, does not at all mean that this will be the case, as Marx set out in Capital II, and as he sets out in greater detail in Theories of Surplus Value. As he describes there, whether consumers – productive or unproductive – use the exchange value (money) at their disposal to demand what has been produced has no logical connection to these value relations. Demand is a function of use value not value.
Say's Law, whereby supply creates its own demand only applies under conditions of barter, not in conditions where money mediates the exchange.
“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.” (TOSV2 p 505)
Moreover, although all of the realised surplus value is available to be used as revenue to fund consumption, in reality, a portion of this annual physical product, in excess of that portion required just to reproduce the consumed constant capital – and that required as an insurance fund, required to replace that destroyed by accidents – will always be destined to become additional constant capital, rather than additional consumer goods.
That is because capital is based upon expanded reproduction, and this expansion can only occur if this quantity of constant capital steadily increases. Only if there are more, or better (or more and better) machines, can more material be processed, and so more consumer goods of various kinds be produced. Only if there is simple reproduction, where all of the realised surplus value is used just to fund consumption, is it the case that all of the new additional production is consumed.
Later, it will be shown, therefore, that the basis of capital, and for accumulation, is not profit, but is this surplus physical production.
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