Monday 13 February 2017

Theories of Surplus Value, Part I, Chapter 3 - Part 33

[9. Say as Vulgariser of Smith’s Theory. Say’s Identification of the Social Gross Product with the Social Revenue. Attempts to Draw a Distinction between Them by Storch and Ramsay]


I think its safe to say that J.B. Say is one of Marx's least favourite economists, vying for that position with Malthus. Marx writes,

“Say, who tries to hide his dull superficiality by repeating in absolute general phrases Smith’s inconsistencies and blunders, says: 

“If we consider a nation as a whole, it has no net product; for since the products have only a value equal to the costs of their production, when these costs are deducted, the whole value of the products is deducted… The annual revenue is the gross revenue” [Jean-Baptiste Say]. (Traité d’économie politique…, Troisième édition, Paris, 4811, t. II, p. 469.)” (p 103)

The total value of the annual production is equal to the labour-time required for its production, i.e. the labour-time required to produce the elements of constant capital, consumed in production, plus the labour-time expended on processing materials into the final product. On this basis, the cost of production does indeed equal the value of total output, so that deducting one from the other leaves a balance of zero.

“But Say thinks that the annually produced values are annually consumed. Hence for the whole nation there is no net product but only a gross product.” (p 103)

However, there are two reasons why the total value of annual production is not annually consumed. The first, and most obvious reason relates to fixed capital. A machine with a value of £1,000 may be produced during the year, but, if it has an average lifespan of ten years, only 10% of its value will be consumed each year, as wear and tear.

But much more significantly even than this fixed capital stock is the growing mass of circulating constant capital, which is produced each year, but is produced not for consumption, but merely to replace the constant capital consumed in production, and which consequently comprises revenue for no one.

“A large part of the annually produced values enters into the labour-process without entering into the process of the formation of value, that is to say without their total value being annually consumed. But in the second place: a part of the annual consumption of values consists of values that are used not as the stock for consumption, but as means of production, and which are returned to production (either in the same form or in the form of an equivalent), just as they originated in production.” (p 103)

Assuming simple reproduction, it is only that portion of the year's output over and above what must be physically set aside to replace the consumed constant capital, on a like for like basis, which forms the net product, and which, therefore, is available for consumption, and whose value equivalents are the revenues – wages, profit, interest and rent. If more is consumed than this, it can only be done on the basis of a consumption of existing capital, and a consequent reduction in social reproduction. 

A version of that situation arises in economies experiencing speculative bubbles, where there is an apparent increase in wealth, resulting not from the production of surplus value, but from capital gains – for example, the money prices of shares, bonds, property etc. rise sharply – which then leads to the owners of these assets using them as the basis for financing their consumption. In other words, the consumption is financed not out of income, resulting from production of new value, but from a consumption of capital, often via debt.

Marx quotes Storch's response to Say.

““It is […] evident that the value of the annual product is divided partly into capital and partly into profits, and that each of these parts of the value of the annual product goes regularly to purchase the product needed by the nation, as much for the purpose of preserving its capital as for renewing its consumable stock” (Storch, Cours d’économie politique, t. V: Considérations sur la nature du revenu national, Paris, 1824, pp. 134–35).” (p 103-4)

Storch goes on to illustrate this by reference to the self-sufficient Russian peasant. The peasant's revenue, their consumption during the year, does not comprise the barns in which they store materials and animals, nor does it include the seeds required to produce the next year's crop, and so on. Yet, a proportion of this year's production is none the less required to build or repair barns, to set aside and gather seed, to produce or maintain implements and so on. Say wants to claim that the net product would be that which was left over after consumption, but that is back to front.

““The (net) revenue of a nation is not the excess of values produced over the totality of values consumed (as Say, the author, imagines it to be), but only [the excess of values produced] over the values consumed in order to produce.” Therefore, “if a nation consumes all this excess in the year it is produced, it consumes all its (net) revenue “ (l.c., p. 146). “If it is admitted that the revenue of a nation is equal to its gross product, so that no capital is to be deducted, then it must also he admitted that this nation may consume unproductively the entire value of its annual product, without in the least reducing its future revenue” (l.c., p. 147). “… the products which represent the [constant] capital of a nation are not consumable” (l.c., p. 150).” (p 104)

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