Another way of viewing this is in relation to accumulation. Suppose the farmer has a surplus product of 40 tons of grain. Each year, they may then use 30 tons of that for accumulation. It is then designated as capital, rather than revenue. They consume 10 tons themselves, unproductively. But, in any year, the farmer may choose to reduce the amount they allocate for capital accumulation, and increase the amount they allocate for revenue, for their own consumption. Each year that the farmer accumulates the 30 tons of corn as capital, it thereby also increases their quantity and value of output accordingly. Suppose, it requires 20 tons allocated as seed and 10 tons allocated as wages, with these workers producing 10 tons of surplus product. The quantity of output would then rise each year by 40 tons, and the farmer's surplus product would rise by 10 tons per year. But, as soon as the 30 tons of revenue is so accumulated, and becomes capital, it has to be reproduced each year, if production is to continue on the same scale. It can now no longer be available as revenue. The 20 tons of additional seed, and the 10 tons used to hire additional labour, is now reproduced out of the increased volume of output. As the farmer's surplus product rises by 10 tons per year, they can now accumulate capital at this rate, and still increase their own consumption out of this increasing mass of surplus.
As Marx describes in Capital, where the value of commodities fall that includes those commodities consumed unproductively by capitalists. Even where their profits remain constant, therefore, the proportion of those profits they have to allocate as revenue, to finance their consumption falls, and the proportion available for capital accumulation rises.
Marx now turns to those other questions of the different outcomes resulting from whether this released capital is used for revenue or for capital accumulation, as well as looking at the effect on profit, and the rate of profit, not in the special condition of where the constant capital is reproduced in kind, but where it is replaced on a like for like basis, by exchange with other capitals.
Marx notes,
“In the course of reproduction, moreover, the farmer obtains this surplus of £20 on the same outlay, because labour has become more productive without the rate of surplus-value having risen or the workers having performed more surplus labour than previously or having received a smaller portion of the reproduced part of the product (which represents living labour). On the contrary, it is assumed that in the reproduction process the worker receives 40 quarters, whereas he received only 20 previously. This then is a rather peculiar phenomenon. It does not occur without reproduction, but it takes place in connection with it and it takes place [moreover] because the farmer replaces a part of his advances in kind. Not only the rate of profit could increase in this case, but the amount of profit as well. (With regard to the reproduction process itself, the farmer can either carry on on the old scale, in which case the price of the product will fall if he again obtains as good a harvest, because a portion of the constant capital has cost less, but the rate of profit will rise; or the farmer can increase the scale of production, sow more with the same outlay, and then both the rate of profit and the amount of profit will rise.)” (p 344)
In other words, if we consider the position at the end of the second year, the farmer has produced 200 tons with an exchange-value of £200. They then pay out £40 for fertiliser, and set aside £40 for wages. If they continue production on the same scale, they would set aside 20 tons of grain as seed, which has a value of £20. At the end of Year 1, the rate of profit was 80/120 = 40/60 = 66.66%. At the end of Year 2, the rate of profit is 100/100 = 100%. But, that is because, in this peculiar case, of the seed being reproduced in kind, £20 of capital is converted into revenue/profit, whilst the value of the capital outlay is itself reduced by £20, as a result of the fall in the value of seed. If we deducted the £20 of illusory profit, caused by the release of capital, profit would be £80, but the rate of profit would still have risen to 80% due to the fall in the value of seed (constant capital), on the basis of its current reproduction cost, as against its historic price.
If we assumed that all profit is accumulated, then, after Year 1, £80 is available for accumulation. It enables 66.6% more seed, fertiliser and labour-power to be employed. But, at the end of Year 2 (including the illusory profit) it would mean that double the amount of each could be employed. Even if we assume that the £20 of capital converted to revenue is consumed unproductively, that means that £80 could be accumulated, and with seed now having a value half what it was, this £80 means that 80% more capital can be accumulated, i.e. 80% more seed, fertiliser and labour-power. In other words, even discarding the £20 of illusory profit, the rate of profit would have risen to 80%, because, although the historic price of the 20 tons of seed, sown at the start of Year 2, was £40, its value, as determined by its current reproduction cost, has fallen to £20.
Instead of sowing 20 tons of seed, therefore, 36 tons can be sown, with a value of £36; £72 of fertiliser can be bought; and £72 of labour-power. Again this demonstrates why, in analysing the process of social reproduction, as it occurs under the specific historical conditions of capitalism, the rate of profit, which forms the basis upon which social reproduction, on an expanded scale, can occur, has to be calculated, as Marx does, on the basis of current reproduction cost, and not historic prices.
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