If we take Marx's reproduction schemas from Capital II, we have :-
Department I
c 4000 + v 1000 + s 1000 = 6000
Department II
c 2000 + v 500 + s 500 = 3000
Total output value is then 7,000 (6.000 I + 3,000 II, less 2,000 included in II that is transferred as intermediate production from I). But, total revenues are equal to only 3,000 (2,000 in I + 1,000 in II). The difference of 4,000 is that this 4,000 of output value of Department I means of production, used in the production of means of production, has to be reproduced, on a like for like basis, and is not available for consumption, nor does any part of its value enter into the value of consumption goods. This is why the value of national output can never be the same as the value of national income, or GDP, which measures only new value added by labour during the year. Its also why any calculation of the rate of profit based on GDP data is necessarily wrong.
But, of course, the assumption that the 4,000 is not available for consumption is valid only so long as we make the assumption that social reproduction is to occur on at least the same basis and scale. Everything consumable can be consumed as revenue, if we choose. Even means of production can be sold, and exchanged for consumption goods, if so desired. In just the same way that, under expanded reproduction, a portion of revenue, stops being revenue, and is instead converted into additional capital, so too, a farmer could, for example, shut up shop, and sell off, or consume themselves their seed corn, they could slaughter all their livestock to eat, and so on, thereby converting capital into revenue. This conversion of capital into revenue is not at all an increase in surplus value, which can easily be seen if the farmer were to change their mind, and try to produce in the following year, but now having no seed to grow their crops, or livestock from which to breed.
Take a farmer who produces corn, and that all consumption is of corn. The farmer uses 10 tons of their corn as seed; they use 40 tons to pay as wages to their workers. The result is that 60 tons of corn is produced, leaving the farmer with a surplus product of 10 tons. Divided into capital and revenue, 10 tons represents capital, whilst 50 tons represents revenues (40 v + 10 s). But, there is nothing stopping the farmer from taking the 10 tons of corn required as seed for the following year, and instead consuming it. In that case, they would have converted this 10 tons of corn that is capital into revenue. It would appear as profit, just like the other 10 tons that actually does represent the profit of the farmer, and results from the surplus product created by their workers. But, it is quite clear that this “profit”, here, would be pure illusion. The workers would have produced the same additional 50 tons of corn, as before, and that would represent the same 10 tons of surplus product as before. This additional 10 tons of “profit” arises only because that portion of current production that should be designated as capital, to replace the consumed seed, has instead been used as revenue, i.e. consumed as corn by the farmer. The consequence, here, is fairly stark. Having literally consumed his seed-corn, the farmer has no seed to plant, in the following year, so social reproduction stops.
This is essentially the same thing as the release of capital in the example given by Marx, except that, in that case, the rise in productivity enables the seed itself, as use value, to be physically replaced, without the need for all its original value (historic price) being replaced. The original value of 20 tons of seed is £40, at £2 per ton, but, as Marx points out, it is only the 20 tons that must be replaced, not the £40. The 20 tons is now replaced, but its value is only £20. Had it been the case that the £40 value had to be replaced, it would have required 40 tons from the current production, not 20. So, now, 20 tons of output is thereby released, as capital, which means it is available as revenue/profit, even though there has been no increase in surplus value.
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