Theories of Surplus Value, Part I, Chapter 3 - Part 52

Marx gives the example of the relation between the maker of locomotives and the producer of iron and steel. The former buys iron and steel from the latter, which they use in their production. But, the production process itself leads to the production of huge quantities of iron filings, as a result of the machining of the metal. The locomotive manufacturer then sells these filings back to the iron and steel producer, who uses them once more in the production of iron and steel. The iron and steel producer, thereby continually supplies the locomotive producer with a quantity and value of iron and steel equal to that which the latter supplies to them in the form of filings.

“Between different spheres of production, where the products of each enter into the other as means of production, an exchange in kind takes place too (even though concealed by a series of money transactions) between the constant capital of the one and that of the other. In so far as this is the case, the consumers of the final product which enters into consumption have not got to replace this constant capital, since it has already been replaced.” (p 149)

The flax grower who uses a kilogram of their output as seed to replace the seed they have consumed, just like the machine producer who uses one of the machines they have produced to replace one of their own machines, they have worn out, does not thereby obtain this replacement of their constant capital free of charge.

“One quarter of wheat sold by a peasant is as dear as another, and a quarter of wheat that is sold is no cheaper than one that is returned to the land in the form of seed. Still, if the product equals 6 quarters, and the quarter equals £3—each quarter containing component parts of value for labour added, raw material and machinery—and if he has to use 1 quarter as seeds, he would only sell to consumers 5 quarters, equal to £15. They would therefore not pay for the part of the value contained in the 1 quarter of seed. And this is the point: how can the value of the product sold be equal to all the elements of value contained in it—labour added and constant capital—and how in spite of this does the consumer buy the product and yet not pay for the constant capital?” (p 149-50)

The point being that the consumer does not pay for the constant capital. The farmer produces 6 quarters of wheat, which may have a value of £6, equal to £1 constant capital (seed), and £5 added labour. Each quarter produced can be considered to have a value that is equally comprised of these components.

But, in terms of what is actually sold that amounts to only 5 quarters not 6 quarters. To the extent that each quarter's value contains a sixth constant capital, consumers, in buying this quarter, pay for the constant capital contained in it, alongside the value of the labour added.

But, not all of the output is sold. One quarter is retained by the farmer and simply replaces this constant capital, and consequently this quarter has been produced, but its value of £1 has not been bought by consumers. They have paid neither for the constant capital nor the added labour contained in this quarter. This is also why although National Income is equal to National Expenditure, neither are equal to national output.

In reality, if we look at what consumers have bought and paid for, they have bought 5 of the 6 quarters produced, and they have paid only for those 5 quarters. They have not bought or paid for the sixth quarter, which simply replaces the farmer's constant capital. In other words, the constant capital has itself been bought out of capital. Consumers have only bought and paid for a physical product whose value is equal to the value of the added labour.

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