Theories of Surplus Value, Part I, Chapter 4 - Part 30

Marx explains this by a less clear and more circuitous route, which is, however, closer to the actual exchange relations. In other words, we can assume that the iron, wood and machine producers demand for coal, and that of other consumers remains unchanged. So, the former will continue to demand 10,000 tons of coal, and other consumers 20,000 tons. In that case, at £1.20 per ton, sales to the iron, wood and machine producers will be worth £12,000 and sales to other consumers £24,000. But, the coal producer needs to pay £16,000 for constant capital to the former leaving a shortfall of £4,000.

Marx sets out these exchanges as actual exchanges of commodities. So, the coal producer gives £12,000 of coal to the producers of iron, wood and machines, and gets £16,000 of commodities from them. Similarly, the coal producer gives £24,000 of coal to the producers of consumer goods, which could be represented by a linen producer, and obtains £24,000 of linen back.

But, then the coal producer must give £4,000 worth of linen to the producers of iron, wood, and machines, thereby making good the £4,000 deficit they had with them. This leaves the coal producers with £20,000 worth of linen, equal to the new value created, to consume as revenue.

In reality, with money transactions the coal producer would buy £16,000 worth of constant capital, and hand over £16,000. They would sell £12,000 of coal to the producers of constant capital. They would then sell £24,000 of coal to the linen producer, and obtain £24,000 in money. Out of this they would spend £20,000 to buy linen, thereby leaving their accounts and income and expenditure all square. The £4,000 deficit of their expenditure over income in relation to constant capital, would be matched by their £4,000 surplus of income over expenditure in the purchase of consumer goods.

But, there seems to be a problem here, as Marx describes. As a result of these relative price movements, whether we take it that the coal producer hands over £4,000 of linen to the producers of constant capital, or whether they hand over an additional £4,000 in money, which can be used to buy linen, this seems to provide an additional £4,000 of revenue to the producers of constant capital.

“However, it is not prima facie evident how the lowered productivity in the ironworks, machine building, timber-felling, etc., is to enable their producers to consume a larger revenue than before, since the price of their articles is supposed to be equal to their values, and, consequently, to have risen only in proportion to the diminished productivity of their labour.” (p 194) 

There are only two possible causes for the value of the iron, timber and machines to have risen. Either the productivity of the labour employed in these industries has fallen, or else the cost of their own constant capital has risen. If it is the former, Marx says, then these producers must use 60% more labour than before. In fact, this is wrong. If the value of their output has risen by 60%, the amount of additional living labour they use will depend on the organic composition of capital (actually the technical composition). So, the value of the constant capital was £10,000 and is now £16,000. It originally comprised one third £3,333 constant capital, and two-thirds, £6,666 living labour.

If the increase in value is due solely to a reduction in the productivity of living labour, in the production of wood, iron and machines, that means the division becomes £3,333 constant capital, and £12,666 living labour, so that the additional living labour rises not by 60% but by 6000/6666 = 90%.

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