“If III, II and I are united in one person, and if he spins up the entire product of his cotton harvest, then he does not use any part of this harvest at all to replace his agricultural capital. He does not employ part of his capital in cotton-growing—in expenditure on cotton-growing, seeds, wages, machinery—and another part in spinning, but he first puts a part of his capital into cotton-growing, then this part plus a second into spinning, and then the whole of these two first parts, now existing in the form of yarn, plus a third part, into weaving. Now when the fabric of 4,000 yards has been woven, how is he to replace its elements? While he was weaving he wasn’t spinning, and he had no material from which to spin; while he was spinning he did not grow any cotton. Therefore his elements of production cannot be replaced.” (p 52)
Marx puts forward a false solution to that problem, suggesting that he could buy these elements out of the proceeds of the sale of the cloth. It is a false solution because, of course, it means that the cost of buying these inputs would include the incorporated profits.
But, as suggested earlier, the cloth manufacturer does not produce cloth all of a sudden and then obtain funds to be used to reproduce the capital they have consumed. A portion of the 4,000 metres of cloth – approximately 80 metres – is being sold each week, and out of the proceeds a portion goes to pay the wages of weavers, spinners and cotton growers, for that week. Just as, during that week, the weavers weave, the spinners spin, and the cotton growers cultivate the cotton.
Another portion of the proceeds of the sale of the cloth goes to cover the wear and tear of the looms and spinning machines, and so on.
Suppose a capitalist had 4,000 metres of cloth with a value of £400, including a surplus value £37.70. If they sell 80 metres per week, at the end of the first week, for instance, they might use some of the £8 of proceeds to pay the wages of cotton growers to begin growing cotton, and may continue that for some weeks, until the cotton harvest is brought in. At that point, a further portion of the £8 proceeds, from the continued sale of the cloth would begin to pay the wages of spinners, as capital then is invested in spinning. The spinners would then spin the cotton, brought in from the cotton harvest, into yarn, and pass it to the weavers.
As the process of spinning is much faster than the process of growing cotton, it would quickly become necessary to devote some of the proceeds from selling cloth to the payment of weavers, as well as spinners and cotton growers. But, for the same reason, the finished cloth is more quickly produced, and available to replace that which has been sold.
By this process, the gradual sale of cloth and the realisation of the capital and surplus value contained in it, would reproduce the consumed capital.
Marx himself was not happy about the formulation he had initially set down. He scratched it out, and replaced it with the text as it is presented. As Marx himself still seemed to recognise there was still a problem, and this is probably one of those areas that Marx would have reworked had he lived long enough to complete his work. So, for example, he writes,
“We seem to have returned here to the question with which we have already been concerned on two other occasions, once when discussing John Stuart Mill, and again during the general analysis of the relationship between constant capital and revenue. The continual recurrence of this question shows that there is still a hitch somewhere. Really this belongs into Chapter III on profit. But it fits in better here.” (p 49)
The real answer lies in the difference between the rate of profit and the annual rate of profit, as Marx's explanation intimates, but does not spell out. In other words, X amount of capital produces cotton, with 10% profit in say six months. It could be realised at that point. The value of the capital, as commodity-capital, is £100, but is tied up as its now transferred to the spinning department, where it resides for two months. Again the 10% profit could be realised at this point, if the yarn was sold, but instead its passed to the weaving department, where it resides for four months before being sold.
So, the rate of profit may be 10% at each point, but its 10% for six months, two months, four months, which translates into different annual rates of profit of 20%, 60% and 30%. But, as one single capital, it is not advanced for six months, two months, and four months, but for a year in its entirety. Where previously, the cotton grower would have turned over their capital in six months, now they have to wait for a year, until the cotton has been spun and woven, before it is reproduced, and so the annual rate of profit is reduced accordingly.
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