Wednesday, 12 July 2017

Theories of Surplus Value, Part I, Chapter 6 - Part 3

Looking at the ₣2 Billion back in the hands of the farmer, it has gone through four different processes of circulation. Firstly, it acted solely as means of payment of rent.

“In this function it does not circulate any part of the annual product, but is merely a circulating draft on the part of the gross product which is equal to the rent.” (p 309)

In other words, for money to act as means of circulation, then as Marx sets out in A Contribution to the Critique of Political Economy, and in Capital I, it must act as the intermediary between the exchange of commodities. So, if A sells £1,000 of commodities to B, and vice versa, money has acted as the means of circulating these commodities, which otherwise could only have taken place by barter. But, the ₣2 Billion of rent paid to the landlords has circulated no commodities. The landlords have received the money without giving the farmers any commodities in exchange. The money has acted only as a means of payment. In reality, the landlords had a right to the ₣2 Billion of commodities, which formed the farmer's surplus value, but instead received it in money form.

The landlords use half of this sum to buy commodities from the farmers, and in this second transaction the money acts as means of purchase of commodities. Marx, at this point engages in a twenty page excursus, before getting back to the third and fourth acts of circulation, so let me now set out briefly what they are, before continuing with the more detailed discussion.

The third act is the purchase of ₣1 Billion of manufactured goods, by the landlords. This is simple circulation, as money passes in one direction, and commodities flow in the other. This is indicated by the line a-c.

Fourthly, the manufacturers buy ₣1 Billion of food from the farmers, which again represents means of circulation, c-d. But, as the detailed discussion shows, these different transactions also hide a number of important differences. For example, the purchase of food by landowners results in its consumption, and so disappears from circulation. The purchase of food by manufacturers similarly results in its consumption, but this consumption is in the form of means of subsistence for workers, who form a part of the productive-capital. Rather than simply disappearing, therefore, this use value changes form and becomes a part of labour-power. The value is thereby thrown back into circulation as this labour-power is employed in the productive process.

If we consider these now in more detail, the second transaction appears to be like the third and fourth transactions, in that in both these cases, money flows in one direction and commodities flow in the other. But, further consideration shows this is not the case. In the second transaction, money flows to the farmer from the landlord, and food flows in the opposite direction. But, the money paid out by the landlord is only the same money that the landlord had received from the farmer as rent, without any commodities moving in the other direction.

In other words, the transaction here does not represent a part of the process of reproduction. For reproduction to take place, a certain amount of value, or in the Physiocratic system use value, must be acquired and set in motion. For example, 100 kg of grain may be used as seed, and a further 900 kg used as wages for workers. Production takes place and say 1,000 kg of grain is produced. This enables the seed to be replaced and the means of subsistence, for the workers to be replaced, so reproduction can continue.

In value terms, if the seed has a value of £100, and the wages of workers is £900, and the value of output is £1,000 the grain can be sold, and with the proceeds the seed (constant capital) and the wages (variable capital) can be reproduced. But, it is clear that if the farmer gave £1,000 away first, so that consumers could buy this output that would not be the case. They would get back only the money they had given away. This would enable them to once more buy seed and labour-power, but at the end of this cycle, they would still need to sell this output. Its only if the potential buyers themselves have a means of being able to generate the money required to buy this output that reproduction could continue. If they continually require the farmer with the money to do so, this is not sustainable.

Although the Physiocrats did not see it this way, because they believed it was only agricultural labour that created value, the difference between the second transaction and the fourth transaction is that the manufacturers reproduce the capital used in their production, and so are able to continue to exchange with the farmers.

The farmers produce ₣1 Billion of food sold to manufacturers, whilst manufacturers produce ₣1 Billion of manufactured goods sold to farmers. They could simply exchange these goods repeatedly without the need for money, which here just acts as means of circulation.

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