Theories of Surplus Value, Part 1, Chapter 4 - Part 24

(b) Replacement of the Constant Capital by Means of the Exchange of capital against Capital

Marx here once more explains the absurdity of Smith's position, adopted by orthodox economics ever since, that the value of commodities, and so of national output, can be divided into factor incomes – wages, profit, interest and rent. As Marx has described in Capital II, III, and earlier in this volume, it cannot, for the simple reason that a portion of the value of the commodity is not the result of new value created, this year, by labour, but is the result of the transfer of value of constant capital, of the dead labour of previous years. Nor can this be resolved, as Smith and other economists since have proposed, by claiming that the value of this constant capital itself resolves into those other factor incomes. It cannot, because the value of the commodities that comprise the constant capital, itself also comprises a portion that represents the value of constant capital, used in its own production.

A portion of total output, therefore, never is circulated and exchanged against revenue, but is always itself only exchanged with capital, i.e. a portion of total output, equal to the value of constant capital, is always set aside solely to replace the consumed constant capital.

“When a coal-mine supplies coal to an ironworks and gets from the latter iron which enters into the operations of the coal-mine as means of production, the coal is in this way exchanged for capital to the amount of the value of this iron, and reciprocally the iron, to the amount of its own value, is exchanged as capital for coal. Both (considered as use-values) are products of new labour, although this labour was produced with means of labour that were already in existence. But the value of the product of the year's labour is not the product of the labour [newly added] in the year. It also replaces the value of the past labour which was materialised in the means of production. Therefore the part of the total product which is equal to this value is not a part of the product of the year’s labour, but the reproduction of past labour.” (p 187-8)

As Marx set out in Capital III, this is where his insistence on calculating the value of the consumed capital, on the basis of its current reproduction cost, rather than on the basis of historic prices, is vital. As Marx set out in Capital III, it is the physical components of the capital that must be reproduced on a like for like basis, for social reproduction to continue, on at least the same scale. If social productivity rises, less social labour-time is required to reproduce these use values. A smaller proportion of total output, of total social labour-time is required to effect that reproduction. This is reflected in the fact that the value transferred to current production, by the constant capital, is also likewise reduced. Whatever was paid for those commodities is irrelevant. Their value is determined by their current reproduction cost.

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