Sismondi, like Smith, confuses fixed and circulating capital with constant and variable-capital. He describes three forms of wealth – fixed capital, circulating capital, and revenue from capital. On this basis, he says,
““It is important to note that these three kinds of wealth go similarly into consumption; for everything that has been produced is of value to man only insofar as it serves his needs, and these needs are satisfied only by consumption. But fixed capital serves this purpose indirectly (d’une manière indirecte ); it is consumed slowly, helping man to reproduce what serves for his consumption” (I, 94-95), whereas circulating capital (Sismondi already identifies it with variable capital) is converted into the “worker’s consumption fund” (I, 95).” (p 143)
Lenin notes,
“It follows, therefore, that, as distinct from individual consumption, there are two kinds of social consumption. These two kinds differ very greatly. What matters, of course, is not that fixed capital is consumed slowly, but that it is consumed without forming revenue (a consumption fund) for any class of society, that it is not used personally, but productively. But Sismondi fails to see this, and realising that he has again strayed from the path in quest of the difference between social capital and revenue, he helplessly exclaims: “This movement of wealth is so abstract, it requires such considerable attention to grasp it fully (pour le bien saisir), that we deem it useful to take the simplest example” (I, 95).” (p 143)
Lenin uses fixed capital, here, in Sismondi's terminology, actually meaning constant capital. As Lenin says in a note to the text, in terms of society, it also consumes fixed capital (constant capital) but does so as productive consumption out of capital not revenue. So, having drawn attention to the distinction between capital and revenue,
“The distinction drawn falls to the ground, and the social-economic process which transforms “capital for one” into “revenue for another” remains unexplained.” (Note *, p 143)
In the simple example put forward by Sismondi, he sets out that a farmer harvests 100 sacks of wheat, part goes for seed, part to pay wages, and part he consumes himself (profit). The next year, he harvests 200 sacks. Who is to consume them, Sismondi asks, as the farmer's family cannot grow fast enough? In this example, Sismondi describes the three forms of wealth existing in this single family, and then seeks to extend this to the whole of society. He begins by recognising the need to reproduce these three forms of wealth, but, of course, given that he sees all output resolving into revenues, he cannot explain how the fixed capital (constant capital) is reproduced. Out of which revenue is this reproduction to be financed?
“He immediately forgets the theoretically extremely important reference to the need to reproduce also the fixed capital of society; and in his next chapter, in speaking of the “distribution of the national revenue among the different classes of citizens” (ch. V), he goes straight on to speak of three kinds of revenue and, combining rent and profit, he says that the national revenue consists of two parts: profit from wealth (i.e., rent and profit in the proper sense) and the workers’ means of subsistence (I, 104-05).” (p 144)
So, now, he has simply removed the fixed capital (constant capital) from the picture. He has the whole value of output resolving into v + s.
“Thus, the national revenue and the annual product balance each other and represent equal magnitudes. The entire annual product is consumed in the course of the year, but partly by the workers, who, giving their labour in exchange, turn the product into capital and reproduce it, and partly by the capitalists, who, giving their revenue in exchange, destroy it” (I, 105).” (p 144)
This is essentially the position adopted today by orthodox economics, whether of the neoclassical or Keynesian school. It is the basis of the Keynesian equation, National Income = National Expenditure, or Y = C + I, which forms the underlying assumption of the policies of demand management, in order to deal with unemployment and under-consumption.
Sismondi, having set out the importance of the distinction between capital and revenue, in finding that this is incompatible with his view that output resolves entirely into revenues, simply casts the distinction to one side.
“And then he does not see that by thrusting this question aside, he reduced the problem to utter absurdity: how can the annual product be totally consumed by the workers and capitalists in the shape of revenue, if production needs capital, or, to be more exact, means and instruments of production? They have to be produced, and they are produced every year (as Sismondi himself has only just admitted). And now all these instruments of production, raw materials, etc., are suddenly discarded and the “difficult” problem of the difference between capital and revenue is settled by the absolutely incongruous assertion that the annual product equals the national revenue.” (p 145)
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