Marx sets out the features that distinguish the process of expanded reproduction – accumulation – from those that characterise simple reproduction, where the surplus is consumed unproductively.
“Firstly: Both the constant and variable elements of production which are accumulated consist of newly added labour. They are not used as revenue, although they arise from profit. They consist of profit or surplus labour, whereas in the case of simple reproduction part of the product represents past labour (i.e., in this context, labour which has not been performed in the current year).” (p 380-1)
In other words, as shown in Marx's expanded form of the circuit of capital, simple reproduction can be seen in the top section, whereby,
P … C` M`.M – C (LP + MP) … P.
Here, M is merely unit of account. It represents the money equivalent of C, the current reproduction cost of the commodities previously consumed in production. It simply, thereby, replaces those consumed commodities on a like for like basis. Insofar as these commodities represent constant capital, it thereby simply replaces the value of these commodities, which were themselves the product of previous labour. If, as here, the circuit is taken as being a year, it represents the labour spent in the previous year producing the consumed raw materials, and the equivalent of the wear and tear of fixed capital. Similarly, the productive-capital comprises also variable-capital, and this is the money equivalent of the current reproduction cost of the means of subsistence required by the workers, which takes the form of money wages.
But, the accumulation is represented by the lower line, whereby M`, having divided into M and m, now forms a new circuit, whereby m, the surplus value is accumulated as additional means of production and labour-power. Because m is equal to the surplus value, and because the surplus value is solely attributable to the surplus labour that has been undertaken, all of m that is accumulated is attributable to new labour, and none of it is attributable to the preserved value of constant capital.
“Secondly: If the labour-time in certain branches is lengthened, that is, if no additional instruments or machines are employed, the new product must indeed, to a certain extent, pay for the more rapid wear and tear of the old [tools or machines], and this accelerated consumption of the old constant capital is likewise an aspect of accumulation.” (p 381)
In other words, its obvious, as stated in the example above, that if, say, the iron producer buys additional tools, so as to enable an expanded workforce to produce more iron, the value of these tools will form a part of the value of their increased output of iron, just as will the additional labour used in its production, and the additional iron ore, coal etc. But, as Marx describes, in Capital, once industrial production reaches a certain level of development, it becomes very elastic in being able to expand output, without adding additional fixed capital. So, workers can be employed on overtime, so the same number of workers simply use the existing machines and tools more extensively. Additional workers may be employed and shift systems introduced, so that an increased amount of labour uses the existing machines more extensively, and more intensively. So, no additional fixed capital is required, immediately, but its more intensive and extensive use means that it wears out more quickly, and the value of its replacement must, thereby, be recovered in the value of the additional output.
“Thirdly: As a result of the additional money capital which arises in the process of [extended] reproduction—partly through the freeing of capital, partly through the conversion of part of the product into money, partly because, as a result of the money collected by the producer, the demand for other [commodities], e.g., [those offered by the] sellers of luxury goods, is reduced—the systematic replacement of the elements [of production] is by no means a necessity, as it is in the case of simple reproduction.” (p 381)
The concept of freeing of money-capital was discussed in Chapter 22, and was previously discussed in Capital III, Chapter 6. In other words, as production expands, and social productivity rises, this reduces the value of elements of constant capital. This results in a release of money-capital that creates the illusion of additional profit, as capital is released as revenue. This additional revenue can then be used to accumulate additional capital. Expanded reproduction implies that a portion of profit that would have previously been used to buy luxury goods, is instead diverted to buy additional means of production and labour-power.
For simple reproduction to occur, i.e. for production to occur on the same scale, the elements of production, i.e. the means of production and labour-power, must be physically replaced, out of current production, on a like for like basis. But, that is not a necessity as regards expanded reproduction. The profit obtained by the capitalist can be accumulated, or may be spent unproductively in luxury consumption or speculation on financial and property markets, or other forms of gambling. That is in addition to that profit being subject to a further variable division into rents, interest and taxes, leading to revenues landing in the pockets of other exploiting classes and strata, who use it unproductively. The same is true of the capital released as revenue.
“With the additional money anyone can buy or command products, although the producer from whom the purchase is made may neither expend his revenue on the product of the purchaser nor replace his capital with it. [Additional capital (constant or variable) must appear in the form of money capital on one side, even if this only exists in the form of outstanding claims, whenever it is not balanced by a corresponding addition on the other side.]” (p 381)
This restates the point made in Chapter 17 that, in a money economy, Say's Law, by which supply creates its own demand, does not apply. A seller sells in order to sell and obtain money. Having sold, and obtained money, there is no necessity for them to again spend that money buying the commodities of the person from whom they obtained the money, or indeed the commodities of anyone else.
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