Marx then sets out his argument about the way the amortisation fund for machinery is used as an accumulation fund. He says, assume a machine with a value of £12,000 lasts for 12 years. The cost of repairs over its lifetime is included in its £12,000 value. As it lasts 12 years, it transfers £1,000 p.a. in wear and tear to the output it produces. This £1,000, incorporated in the value of the output, then comes back, but is not immediately used, because only at the end of 12 years is the machine replaced. Each year, over the 12 years, then, this £1,000 is accumulated in the amortisation fund, so that, at the end of the 12 years, £12,000 is available to buy the replacement machine.
Its quite true, as Marx says, that in any particular year, the number of machines that requires actual replacement, may be more or less than the average. Suppose there are 12 firms, each with one of these machines, or that one firm has 12 machines. On average, one machine a year physically needs to be replaced. However, in any one year, it may be the case that no machines are replaced, or it could be the case that a quarter, half, or all of them are replaced.
In my book, Marx's Capital Translated for the 21st Century, Volume II, I have set out that a process of synchronisation of replacement arises, because firms tend to replace existing equipment, even before its worn out, whenever some qualitatively new technology is introduced that revolutionises production. That has been marked with personal computers, where every 18 months, on average, machines with processors twice as fast as the previous generation are introduced, and this is accompanied with new generations of software to run on the machines that takes advantage of the greater processing power, expanded memory and storage capacity etc. But, also, where additional machines are introduced, this will go along with the replacement also of old machines, so that for each firm, a growing proportion of its equipment will be of a similar age.
“But the fact remains, that although a large part of the value of the annual product, of the value which is paid for it each year, is needed to replace, for example, the old machines after twelve years, it is by no means actually required to replace one-twelfth in kind each year, and in fact this would not be feasible. This fund may be used partly for wages or for the purchase of raw material, before the commodity, which is constantly thrown into circulation but does not immediately return from circulation, is sold and paid for. This cannot, however, be the case throughout the whole year, since the commodities which complete their turnover during the year realise their whole value, and must therefore replace the wages, raw material and used up machinery contained in them, as well as pay surplus-value.” (p 480)
The problem here, as I described in my book, is also that if, in a particular year, the fund available for replacing machines is used to accumulate materials and labour-power, in the following year, when more machines are thereby needing to be replaced, the funds for that would have to be taken from those designed to buy materials and labour-power, which would mean those purchases had to be reduced, and that creates unnecessary instability in the production process. Why would you buy additional machines at a time when that meant employing less labour and materials?
“Hence where much constant capital, and therefore also much fixed capital, is employed, that part of the value of the product which replaces the wear and tear of the fixed capital, provides an accumulation fund, which can be invested by the person controlling it, as new fixed capital (or also circulating capital), without any deduction whatsoever having to be made from the surplus-value for this part of the accumulation (see McCulloch). This accumulation fund does not exist at levels of production and in nations where there is not much fixed capital. This is an important point, It is a fund for the continuous introduction of improvements, expansions etc.” (p 480)
In reality, the amortisation fund, and the accumulation fund become intertwined so that what was intended for replacement is used at one point for accumulation, whereas what was accumulated for expansion, replaces what was taken from the amortisation fund, at another. Moreover, all of this is facilitated by the use of bank credit, so that these differences can be smoothed out.
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