If all output resolves into revenues, and is realised as a consequence of expenditure of these revenues, how can the value of this £10 of constant capital be realised, and thereby, reproduction occur. The answer is simply that, contrary to Smith, Sismondi, Say, Keynes and all modern orthodox theory, the value does not resolve entirely into revenues. The value of total output does not equal total National Income, or National Expenditure. That is only true in relation to the consumption fund, or the value of output of Department II. But, Department I output is greater than the value of the means of production it sells to Department II (intermediate production), which equals only Department I v + s. It does not sell the other component of its output, i.e. the means of production consumed in the production of means of production, because it must retain that production in order to be able to reproduce its own means of production, on a like for like basis, in the same way that the farmer retains a proportion of their output of grain to use as seed. This output is consumed, but it is not consumed by, not bought out of revenue, but by capital.
Because total output is viewed as simply an aggregate of all individual outputs, this reality is obscured. Looking into the sale of grain by the farmer to the miller, this appears no different than the sale of flour by the miller to the baker. Its only when total production is separated into the production of means of production and means of consumption that the reality can be observed. So, for the farmer, who sells only a part of their output, equal to their revenue, but who retains part of their output to replace seed (constant capital) the situation is apparent. However, when we look at the situation of the miller, they sell all their output to the baker. Yet, the reality is that they can only use £10 of what they sell as revenue. The other £10 they also must retain, in order to reproduce their consumed grain.
Suppose the farmer, instead of being paid £10 by the miller was paid in kind with £10 of flour, equal to half the value of the miller's output. In that case, both the farmer and the miller would provide the baker with £10 of flour, and would get, in exchange, £10 of bread each. Similarly, we could assume that the farmer acts as miller or vice versa. In that case, there is still £10 c (seeds) with now £10 v and £10 s. They sell £20 of flour and get £20 of bread in exchange. They must still replace the £10 of seeds out of their own production, which is not sold, and forms no part of their revenue.
The reality is further obscured by the fact that producers of means of production supply each other with means of production, and so, when considered only in terms of these individual exchanges appear no different to the exchange of means of production for consumption goods. In the case of the farmer, supplying the miller, the relation is fairly straightforward, because the miller does not provide the farmer with means of production. But, if we take something like coal and steel production, a coal producer provides the steel producer with constant capital (coal for use in furnaces), whilst the steel producer provides the coal producer with constant capital (steel for pit props, rails etc.). In that case, the appearance is given of sale and purchases, income and expenditure. But, as Marx demonstrates, this is an illusion, because all it means is that instead of each producer of means of production reproducing their own constant capital in kind, out of their own production, they all collectively do so, via mutual exchanges. In terms of revenues, i.e. of added value, nothing is changed. It does not change the reality that no revenue is involved in this process, because the replacement takes place out of capital.
As with the farmer and the miller, its only necessary to consider the coal producer and steel producer as one integrated business to see that that is the case. That is why, as Marx says in Capital II, its only necessary to view Department I and II as essentially two giant businesses to determine the true relations.
“Hence, the point of departure in discussing social capital and revenue—or, what is the same thing, the realisation of the product in capitalist society—must be the distinction between two entirely different types of social product: means of production and articles of consumption. The former can be consumed only productively, the latter only personally. The former can serve only as capital, the latter must become revenue, i.e., must be destroyed in consumption by the workers and capitalists. The former go entirely to the capitalists, the latter are shared between the workers and the capitalists.” (p 152)
The question of the realisation of the value of output, therefore, cannot, as Sismondi and the Narodniks, and other under-consumptionists believe, be reduced to the question of personal consumption out of revenues, because this leaves out the question of expenditure out of capital, i.e. productive consumption, which forms a growing component of expenditure and output.
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