Theories of Surplus Value, Part I, Chapter 4 - Part 80

If we consider the total product, as divided into those two departments A and B, with A producing consumption goods and B producing means of production, all of A's output has been accounted for. Part of A's output is used solely to meet the consumption needs of producers in A. As previously set out, it doesn't matter that the producer of food takes part of their consumption in linen, and vice versa.

In total, revenue has just exchanged with revenue. But, another part of A's output was required to exchange with B to obtain the means of production (intermediate goods) that A required. By completing this exchange, all of A's output is accounted for, and in the process, part of B's output is simultaneously accounted for.

In the example used, in fact, all of B's output is accounted for, because it was assumed that all of its constant capital was produced by current labour. In other words that it began with no constant capital. The constant capital of the miller was produced solely by the current labour of the farmer, and the constant capital of the baker by the current labour of the farmer plus the miller. But, as set out above, this is not possible, because all production requires constant capital, as well as current labour, and as capital accumulation proceeds, the quantity of this constant capital, particularly raw materials, gets progressively and proportionally larger. So, we now have this further portion of the value of B's output that must be accounted for.

It is quite clear that this portion of output cannot be exchanged with revenue because, all of A's output has already been accounted for. For the same reason the the national accounts always omit this element of national output, and so progressively understate the value of national output, because following Adam Smith, they equate national output with national income (revenue) and expenditure, i.e. as Marx describes solely with the value of value added, and so only with the consumption fund.

This portion of B's output can, therefore, only be accounted for by an exchange of capital with capital. In other words, all of that portion of B's output that is not equal to the value of revenue/new value produced in B is exchanged with itself. The farmer who uses 5 hours value of seed in the production of grain with a value of 15 hours (10 hours added by their current labour) thereby takes 5 hours of value in seed out of their current production, simply to replace their constant capital. They are thereby left with two-thirds of their output to exchange. Its value, equal to 10 hours, is equal to their revenue. They can thereby exchange this value with the baker, obtaining bread with a value of 10 hours for their consumption. We would then have the following situation.

Farmer

c 5 + (v + s) 10 = 15.

Of this, 5 is used as seed, and 10 sold to the miller.

Miller

c 10 + (v + s) 10 = 20.

All of this is sold to the baker, but of the 20 hours value of bread they receive they can only consume half, the other half being used to once more buy grain form the farmer.

Baker

c 20 + (v + s) 10 = 30.

They consume a third of their product themselves as revenue, and exchange the other two-thirds with the miller, thereby reproducing their constant capital.

If we considered the situation in respect of the economy as a whole, it would be

c 5 + (v +s) 30 = 35.

But, only 30 is resolvable into revenue (v + s), or wages, profit, interest and rent. The other 5 hours of value forms revenue for no one. It forms a part of the total output value, but must be reproduced in kind out of the current production.

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