“In fact, the whole of the labour added annually (leaving out of account the capitalisation of profit) is equal to the labour contained in A.” (p 244)
In other words, national income, which is equal to the new value produced by labour during the year, is equal to the value of the total consumable product. But, as Marx has set out, the value of this consumable product, even taking into consideration the value of the intermediate production, which contributes to its value, is not equal to the gross national output. In fact, on the basis of the above statement, its clear why this must be the case.
If the value of the total consumable product is equal to the new value created by labour during the year (equal to National Income, divided into wages, profits, interest, rent and taxes) then it is equal to v + s. But, the value of the Gross National Product, like the value of any commodity is equal not to v + s, but c + v + s.
So, we return, by this alternative view of the situation, that in terms of the total output, we have the value of c, which is not consumed, or at least not consumed out of revenue of any kind. Rather it is consumed industrially, by capital. It exchanges not against revenue but against capital. In essence, it exchanges with itself, reproduces itself and as a product it simply replaces itself on a like for like basis.
“In its use-value, product A represents the whole part of the annual total product which enters annually into individual consumption. In its exchange-value, it represents the total quantity of labour newly added by the producers during the year.
Thus, however, we have as residuum a third part of the total product whose constituent parts, when exchanged, can represent neither the exchange of revenue against revenue nor of capital against revenue and vice versa. This is the part of product B which represents B’s constant capital. This part is not included in B’s revenue and therefore cannot be replaced by or exchanged against product A, and therefore also cannot enter as a constituent part into A’s constant capital. This part is likewise consumed, industrially consumed, to the extent that it enters not only into B’s labour-process but also into the formation of value in B. This part, therefore, like all other parts of the total product, must be replaced in the proportion in which it forms a component part of the total product, and indeed it must be replaced in kind by new products of the same sort. On the other hand, it is not replaced by any new labour.” (p 244-5)
It cannot be replaced by new labour, because all new labour takes the form of revenue, whether as I (v + s) or II (v + s), and all of that exchanges with the product of A, i.e. against consumption goods. All consumption goods have been accounted for, and all revenue to buy them has been accounted for.
The remaining component of national output, which exceeds the value of national income, therefore, consists of c, the constant capital in the shape of means of production used in the production of means of production themselves. This component must by physically reproduced on a “like for like” basis, and just as its use value is thereby reproduced, so too is its value reproduced.
The farmer who uses 100 kg of seeds for his production, must reproduce these 100 kg out of his current production, in order to continue production on the same scale. In other words, they must be physically replaced on a like for like basis. If the historic cost of these seeds was 100 hours of labour, equal to £100, but, due to a fall in productivity, the value of 100 kg of seeds is 200 hours of labour, equal to £200, it does no good to replace the consumed seeds with £100 of seeds, because that would constitute only 50 kg. representing a contraction of the capital and scale of production.
But, likewise, the value of the consumed seeds, in so far as it is related to the value of the current production, is not measured by its historic cost, but by its current reproduction cost. If we isolate the effect just to the constant capital for illustration, then if the farmer paid £100 for seeds, and as a result of a fall in productivity the value of seeds rises to £200, then we might have:-
c 100 + v 50 + s 50 = 200, and then
c 200 + v 50 + s 50 = 300.
The historic price paid for the seeds is still £100, but this historic price obscures the reality that the value of the seeds, used in production, has changed. It is this current value that is passed on to, and reproduced in, the value of the end product, not the historic price, which is why the value of the end product rises from 200 to 300. Its only on this basis that the requirement to reproduce the constant capital, on a like for like basis, can be understood.
In order to continue production on a like for like basis, the farmer must buy 100 kg of seed, which now cost £200. But, if the value of his output is only £200, based on the historic price of the seed, he then has nothing left over to buy labour-power. But, if the value of the constant capital continues to be defined in terms of its historic price, whilst the value of output is determined by its current reproduction cost, this creates an anomaly that destroys the Labour Theory of Value. We would then have:-
c 100 + v 50 + s 50 ≠ 300.
The only way this could be reconciled would be:-
c 100 + v 50 + s 150 = 300.
But, now £100 of surplus value has arisen, which has not been created by labour!! It is a surplus value that has arisen due purely to a nominal capital gain, arising from the fall in productivity and increase in the value of seeds as against their historic price. That is why, in order to be consistent with the Labour Theory of Value, the value of capital must always be calculated on its current reproduction cost, as Marx does, and not on the historic price paid for it.
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