The starting point for analysing and understanding expanded reproduction, must then be different to that used to analyse simple reproduction. The figures used above give us the following schema of reproduction.
Department I
c 4000 + v 1000 + s 1000 = 6000
Department II
c 1500 + v 375 + s 375 = 2250
On this basis, we begin with an economy where the reality of accumulation is assumed, so that the proportions between Department I and II, are different from the start. The equality of revenues with consumption, no longer applies, because Department I (v + s) no longer equals Department II (c). Department II is then relatively smaller than in conditions of simple reproduction, because a portion of total output is accumulated, net investment, rather than consumed. Department II begins with only 1500 of means of production, and requires less labour to process it, in turn producing less surplus value, and a smaller output of consumer goods. Department I, replaces Department II means of production on a like for like basis, so that all of Department II output is consumed.
However, as Marx says in Capital III, Chapter 39, although capitalist production is production for profit, and not to meet the needs of consumption, the underlying motivation for accumulation, is the belief by capitalists that the market will expand, and that they must expand their own production in order to grab their share of this larger market, in order to grab additional profit. The prime driver is this competition. In which case, its clear that the additional accumulation in Department I cannot continue without there being also an expansion, and accumulation of capital in Department II.
As Lenin sets out in “On The So Called Market Question”, on the assumption of the same technical composition of capital, when Department I expands in the next period, it will need to employ 10% more labour, and this additional labour will require wage goods, produced by Department II, which necessitates that Department II, must expand, in order to meet this additional demand. Moreover, if Department I continues to accumulate 50% of surplus value, that still means that its demand for consumer goods for capitalists will expand in absolute terms, by 10% from 500 to 550, again requiring an expansion of output in Department II. In other words, both consumption and saving (accumulation) increases over time, even though not all revenue is consumed. That is because the economy itself expands.
On the basis of the figures for Department II, that is not possible. If we assume that Department II must also accumulate 50% of its surplus value, that means that we need to start from a different relation between Department I and II.
The following schema was provided by Ken Tarbuck, in his analysis of Bukharin on The Economics of the Transition Period.
He assumes a closed economy, rate of surplus value of 100%, rate of accumulation of 50%, and organic composition of capital of 5:1. Total output in each department is designated w, with the subscript 1 and 2 referring to the particular department. The starting position is:
Department 1
c 10834 + v 2166 + s 2166 = 15166 w
Department II
c 3166 + v 633 + s 633 = 4432 w
Total social product is 15,166 (w1) + 4,432 (w2) = 19,598
Looking at the process of social reproduction and accumulation, we then get the following division.
Department I
c 10834 + v 2166 + s 1083 + 902.5 cs + 180.5 vs
In other words, 50% of produced surplus value is consumed unproductively, with the other half being accumulated into constant and variable capital in the ratio 5:1.
Similarly, for
Department II
c 3166 + v 633 + s 316.5 + 263.5 cs + 53 vs (NB. should actually be (263.75 and 52.75)
We can now see, how the schedules of supply and demand for means of production and consumption arise, and how an accumulation of capital in both Department I and II then occurs.
Supply for Department I in Production Period 1 (PP1) is:
10834 c + 2166 v + 2166 s = 15,166
Demand for this output comes from
10834 (c1) this is the replacement, in kind, of Department I means of production from its own output
902.5 (c1), which represents the accumulation of constant capital by Department I from its surplus value/product.
3166 (c2), which is the replacement of Department II means of production consumed in its own production.
263.5 (c2), which is the additional means of production demanded by Department II, a a result of its own accumulation of capital, out of surplus value.
Total demand is then also 15,166.
and supply for Department II is:
c 3166 + v 633 + s 633 = 4432
Demand for this output comes from
2,166 (v1) demand for consumer goods from Department I workers
180.5 (v1) demand for consumer goods by the additional Department I workers employed as a result of capital accumulation.
1,083 (s1) demand for consumer goods from Department I capitalists
633 (v2) demand for consumer goods by Department II workers
53 (v2) demand for consumer goods from the additional Department II workers resulting from capital accumulation.
316.5 (s2) demand for consumer goods from Department II capitalists
Again total demand amounts to 4432.
Production Period 2 then begins with capital of 18,199, compared with 16,799 at the start of Period 1. Additional capital of 1400 has been accumulated.
At the end of three cycles total capital would be 21,360, an increase of 4561.
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