## Sunday, 9 June 2019

### [b) On the Exchange Between Capital and Revenue in the Case of Simple Reproduction and of the Accumulation of Capital]

“The fact that the revenue of the worker is at the same time variable capital is important only insofar as in the accumulation of capital—the formation of new capital—the surplus consisting of means of subsistence (necessaries) in the possession of the capitalist producing them can be exchanged directly for the surplus consisting of raw materials or machinery in the possession of the capitalist producing constant capital. Here one form of revenue is exchanged for the other, and, once the exchange is effected, the revenue of A is converted into the constant capital of B and the revenue of B into the variable capital of A.” (p 246)

This is a further restatement of the relations first set out in the schemas of reproduction in Capital II. The point here can be illustrated as follows. Suppose A produces constant capital and B produces wage goods. Say both produce 100 units of each. The production in each sector involves 50 units of constant capital, which is processed by labour, which, in both cases, requires 50 units of wage goods for its reproduction. In that case, A retains 50 units of its output of constant capital, which it requires to reproduce the 50 units it has consumed in current production. The workers in A cannot consume any of the constant capital they have produced. If we disregard surplus value, and only consider the variable-capital, we can consider that A workers are paid their wages in the form of the remaining 50 units of constant capital they have produced. They then exchange these 50 units of constant capital for 50 units of wage goods with the producers of B.

In other words, to consume the constant capital they have produced they must first metamorphose it into wage goods, which they do by this exchange. Now in the form of different use values, wage goods, they can consume what they have produced as revenue. A thereby reproduces its variable-capital. B, unlike A, does not need to retain half its output so as to reproduce its constant capital. It obtains the constant capital it requires to reproduce that consumed in production by exchanging wage goods for it. B exchanges 50 units of wage goods for the 50 units of constant capital it requires. So, now, A has reproduced both its constant capital, and variable-capital, whilst B has simultaneously replaced its constant capital. It has 50 units of wage goods left, and these reproduce its own variable-capital. They can, as with A, be considered as being paid directly to B workers as wages. But, unlike the 50 units of constant capital paid to A workers, which could not be consumed, the 50 units of wage goods, paid to B workers, can be consumed by them, as revenue, which, thereby, reproduces B's variable-capital.

In reality, the workers in both cases do not receive their wages in kind, but in money wages. However, these money wages only act to hide the underlying barter exchange of commodities that is the basis of the process of social reproduction set out above. And, of course, in addition to the exchanges described above, the new labour expended to process means of production into finished goods and services does not resolve solely into wages/variable-capital. The new value created itself represents revenue, but it is divided into wages and surplus value

In that case, the part that resolves into A wages exchanges into B wage goods, whilst part of A surplus value resolves into B necessaries. B obtains a portion of the constant capital they require in exchange for that portion of A output equal to A wages, and the other portion of the constant capital they require, in exchange for that portion of A output equal to A surplus value. Similarly, with the 50 units of B output remaining after this exchange, that reproduced its constant capital, part of these 50 units are paid to B workers as wages, and the remaining portion is paid out as profits, interest and rent

If we examine the situation then we see that, in terms of B, the value of its output consists of three parts. Firstly, it consists of the constant capital it requires in exchange from A. Secondly, it consists of the new value added by labour, which divides into two parts – paid labour (wages) and unpaid labour (surplus value). So, a second part of the value comprises the variable-capital (wages), whilst the third part consists of the surplus value. But, if we look at the constant capital, acquired in exchange with A, it is also apparent that it is equal to the new value added by labour in A's production – which also divides into paid and unpaid labour, or wages and surplus value. In other words, B's constant capital is the equivalent of A's wages, and A's surplus value.

In reality, therefore, all of the value of B's output is equal to and resolvable into revenue. It is equal to B wages and surplus value, plus A wages and surplus value. So, if A and B represents the total production of society, B's output is equal to the total revenue of society, i.e. National Income. This illustrates the fallacy of Adam Smith's “absurd dogma” that the value of National Output (GDP) can be totally resolved into revenue (National Income), because, here, National Income only equals the output of B, or as Marx describes it in Capital II, society's consumption fund. But, total output here also includes the 50 units of constant capital, produced by A that is never exchanged, or consumed as revenue, but is retained by A producers and consumed as capital, not revenue.

If we look at A that becomes even more apparent. The value of A output likewise resolves into the same three components. However, A (v + s), has already been accounted for, as having been metamorphosed into B (c). All that is left of A output, therefore, is its own constant capital, and this it exchanges with no one. It forms revenue for no one, because it is simply thrown back into production as constant capital, reproduced in kind. The importance of this, in relation to calculating the rate of profit, both on the assumption of continuing production, and on the basis of current reproduction costs, rather than historic prices, is set out by Marx in the next chapter, dealing with Ramsay.