Theories of Surplus Value, Part I, Chapter 3 - Part 40

The solution to this problem was set out in Capital II and III, in describing the process of social reproduction. It is that not all of the value of national output is bought by revenues. The value of national output is not the same as the value of national income or national expenditure, as the orthodox economics textbooks, claim. National Income is only equal to the new value produced by labour during the year, and equal to the value of the consumption fund. But, the value of national output is equal to this new value created, plus the value of constant capital used in production (including the physical replacement of worn out fixed capital) and this portion of value is bought not by revenue but by capital. It is not consumed, but goes simply to replace, in kind, the consumed materials and other means of production.

As Marx points out, this process, in reality, does not occur from one year to another, but is a continuous process within which outputs are simultaneously inputs, and any breakdown of this continuity is one of the reasons for a crisis breaking out. 

“The simultaneous production of yarn and loom as products alongside the production process into which they enter as products but from which they do not emerge as products, explains how it is that the part of the value of the linen equal to the value of the material worked up into it—[such as yarn], loom, etc.—can be again transformed into yarn, loom, etc. If this production of the elements of linen did not proceed simultaneously with the production of the linen itself, the 8 yards of linen, even when they have been sold and transformed into money, could not be retransformed once more from money into the constant elements of linen.” (p 115)

In this respect, Marx gives a practical example of such a crisis.

“As for example is now the case with the yarn or cloth of the cotton manufacturers, as a result of the American Civil War. The mere sale of their product is no guarantee for them that it will be retransformed, since there is no cotton on the market.” Note *, p 115)

I have covered these various breakdowns of the circuit, discussed by Marx, in my book, "Marx and Engels' Theories of Crisis".

Whatever assumptions are made about varying compositions of constant capital to living labour, or different proportions of revenue spent on buying more of one commodity as opposed to another, they do not change things. If an average composition is determined, then this will determine the proportion of output that must go to replace constant capital, and the proportion available for consumption. If more revenue is spent on the purchase of one commodity, less is spent on another.

“Let us assume that A is the total product of society: then one-third of this total product can be bought by the producers for their own consumption, bought and paid for with the total of their wages and their profits, equal to the total newly-added labour, the amount of their aggregate revenue. They have no fund with which to pay for, to buy and consume, the other two-thirds. Just as the newly-added labour, the one-third which consists of profit and wages, is itself covered by its own product, or withdraws only that part of the value of the product which contains one-third of the total labour, newly-added labour or its equivalent, so must the two-thirds of pre-existing labour be covered by its own product. That is to say, the constant capital remains equal to itself and replaces itself out of that part of the value which represents the constant capital in the total product. The exchange between various commodities, the series of purchases and sales between different spheres of production, brings about a change in form only in the sense that the constant capitals in the various production spheres mutually replace each other in the proportion in which they were originally contained in them.” (p 124-5)

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