The textile capitalist, in making the investment, does not, thereby, release any of their money-capital. What they save in wages, they spend partly on machinery, and partly on expanding their production, and so buying more material. Viewed from the perspective of consumers, the fall in the value of the commodity, resulting from introducing a machine, the consequence may be a release of both revenue and capital. In so far as the commodity is a consumption good, it releases the revenue of consumers. It means they may consume more of the commodity, more of other commodities, create a demand for some new commodity, or they may save this part of their revenue. In so far as the commodity is a wage good, its fall in value reduces the value of labour-power, which means that wages fall, and so capital, in general, sees its capital laid out as variable-capital decline, relative to constant capital, and also thereby sees capital released. To the extent that it is a component of the consumption of the capitalist, it reduces the proportion of profit required for their own reproduction, and thereby releases a portion of their revenue, to be turned into capital, available for accumulation. To the extent that the commodity is a component of constant capital, it directly results in a release of capital. Those spheres which use this commodity as an element of their constant capital see this value decline relative to their variable-capital, and thereby see a rise in the rate of profit. The released capital may be used to expand their own production, or they may throw this released capital into the money market.
To the extent that the effect is that these other spheres thereby see the value of their own output fall, it will then have second round effects. For example, a power-loom may reduce the value of cloth. But, cloth is bought by tailors. The tailors will see a fall in the value of their constant capital and rise in their rate of profit. The value of clothes will fall. But, that means that the value of labour-power falls, and so on.
“A part of the revenue thus set free, will be consumed in the same article, either because the reduction in price makes it accessible to new classes of consumers (in this case, incidentally, it is not displaced revenue that is expended on the article), or because the old consumers consume more of the cheaper article, for instance four pairs of cotton stockings instead of one pair. Another part of the revenue thus set free may serve to expand the industry into which the machinery has been introduced, or it may be used in the formation of a new industry producing a different commodity, or it may serve to expand a sphere of production which already existed before. For whatever purpose the revenue thus set free and reconverted into capital is used, it will in the first place hardly be sufficient to absorb that part of the increased population which each year streams into each branch of production, and which is now debarred from entering the old industry. It is, however, also possible for a portion of the freed revenue to be exchanged against foreign products or to be consumed by unproductive workers. But by no means does a necessary connection exist between the revenue that has been set free and the workers that have been set free of revenue.” (p 558)
But, Ricardo's argument is that capital is not released, for the capital that introduces the machine, it is just used in a different way. Variable-capital becomes transformed into constant capital, and any variable-capital that might be released is used in other places. The released revenue does mean that consumption of existing commodities may increase, or a demand for some new commodity may be developed, but Marx says the additional demand arising from the released revenue may only result in the workers who are newly entering the labour market filling these vacancies, so that the displaced workers are still left out of work.
“But the absurdity which lies concealed at the root of Ricardo’s notions, is this:
The means of subsistence which were previously consumed by the workers now discharged, remain after all in existence and are still on the market. The workers, on the other hand, are also available on the market. Thus there are, on the one hand, means of subsistence (and therefore means of payment) for workers, i.e., potential variable capital, and on the other, unemployed workers. Hence the fund is there to set them in motion. Consequently they will find employment.
Is it possible that even such an economist as Ricardo can babble such hair-raising nonsense?” (p 559)
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