Theories of Surplus Value, Part I, Chapter 4 - Part 79

In the example given, the total value of output was equal to 30 hours, and this was also equal to the value of the consumable product. All of the total product was thereby reducible to revenue. That was so even though two-thirds of the value of the consumable product comprised constant capital, and only one-third new value added by the baker. The constant capital here is the equivalent of what in the GDP figures constitutes “intermediate production”. That is it is the value of all those inputs which are used in the production of the final consumable product.

Wikipedia describes it like this.

“Conceptually, the aggregate "intermediate consumption" is equal to the amount of the difference between Gross Output (roughly, the total sales value) and Net output (gross value added or GDP)...

Thus, intermediate consumption is an accounting flow which consists of the total monetary value of goods and services consumed or used up as inputs in production by enterprises, including raw materials, services and various other operating expenses.”

But, the only reason we arrived at this conclusion that all of this value of final production was entirely resolvable into the new value added, was because we began by assuming that the only constant capital consumed was that which was created in the current year by the expenditure of labour. So, we assumed that the farmer did not use any constant capital, for example. In fact, of course, this is impossible. In order to produce grain, the farmer must himself consume constant capital. Seed is required for any grain to be produced; tools are required for planting, cultivation and harvesting; barns are required; fertiliser is required and so on.

All of this production must be reproduced out of the value of his production, and is, therefore, unavailable for consumption as revenue. Moreover, it is not just the farmer in this position. The farmer is provided with tools from the machine maker, who likewise has constant capital that must be reproduced out of their own production, and whose value is thereby not available as revenue. The machine maker is similarly provided with steel from the steel producer, wood from the timber producer and so on, all of whom have constant capital that must be reproduced out of their production.

Back To Part 78

Forward To Part 80