Sunday, 21 November 2021

Adam Smith's Absurd Dogma - Part 18 of 52

If a farmer plants 100 kilos of seeds, with a value of 10 hours labour (£10 exchange-value), and expends 100 hours of labour (£100) producing 110 kilos grain, the grain has a value of 110 hours (£110 exchange-value), consisting of £10 preserved by the action of current labour as concrete labour, and £100 of new value created by that same labour acting as abstract, value creating labour. The current labour does not create £110 of value, and so does not reproduce the £10 of value of the seeds, which is merely transferred, being pre-existing value. It is reproduced as use value, by the labour acting as concrete labour, which metamorphoses that use value into new forms, which comprise the end product, only as a consequence of the action of the current labour.

“All newly added labour is represented in the value newly created during the year, and this in turn is divided into the three revenues: wages, profit and rent. — Thus, on the one hand, no excess social labour remains for the replacement of the consumed constant capital, which must be replaced partially in kind and according to its value, and partially merely according to its value (for pure wear and tear on fixed capital). On the other hand, the value annually created by labour, divided into wages, profit and rent, and to be expended in this form, appears not to suffice to pay for, or buy, the constant portion of capital, which must be contained, outside their own value, in the annual product.” (p 836)

As already described, that problem is solved in Volume II, and in Theories of Surplus Value. Marx comes back to it, here, because, now, the division of surplus value into rent, interest and profit of enterprise has been dealt with, and so the question of revenues and social reproduction can be addressed on a higher and more concrete level, and because “precisely in the form of wages, profit and rent there is contained an incredible blunder in analysis, which pervades all political economy since Adam Smith.” (p 836), i.e. his absurd dogma.

Marx again examines this process, and begins with Department II, whose output is consumed totally from revenues – rent, profit, interest, wages and taxes. Its value resolves into c + v + s, however. Of this, the constant capital cannot be consumed by the recipients of these revenues, but can only be used productively. It forms no part of the revenues of Department II, but is equal to the revenues of Department I.

“In Class I the product consists of the same constituents, as regards form. But that part which here forms revenue, wages + profit + rent, in short, the variable portion of capital + surplus-value, is not consumed here in the natural form of products of this Class I, but in products of Class II. The value of the revenues of Class I must, therefore, be consumed in that portion of products of Class II which forms the constant capital of II to be replaced. The portion of the product of Class II which must replace its constant capital is consumed in its natural form by the labourers, capitalists and landlords of Class I. They spend their revenue for this product of II. On the other hand, the product of I, to the extent that it represents a revenue of Class I, is productively consumed in its natural form by Class II, whose constant capital it replaces in kind.” (p 837-8)

We are left, then, with the consumed constant capital in Department I of 4000. There are no revenues available to form a demand for it, or equivalently, derived from it. The demand for it comes, not from revenue, but from capital.

“Finally, the used-up constant portion of capital of Class I is replaced out of the very products of this class, which consist precisely of means of labour, raw and auxiliary materials, etc., partly through exchange by capitalists of I among themselves, partly so that some of these capitalists can directly use their own product once more as means of production.” (p 838)


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