““If we consider a nation as a whole, it has no net product; for since the products have only a value equal to the costs of their production, when these costs are deducted, the whole value of the products is deducted… The annual revenue is the gross revenue” [Jean-Baptiste Say]. (Traité d’économie politique…, Troisième édition, Paris, 4811, t. II, p. 469.)” (p 103)
As commodities' value is reduced to revenue, and so, however labour is employed, the revenues created form a necessary demand for total production. Supply creates its own demand.
“The value of the total annual products is equal to the quantity of labour-time materialised in them. If this aggregate value is deducted from the annual product, then in fact, so far as value is concerned, there remains no value, and by this deduction both the net revenue and the gross revenue have come to a final end.” (p 103)
And, if we were to accept Smith's absurd dogma, then we would, indeed, conclude that total output = GDP = National Income. The only proviso would be that introduced by Keynes, which is that a portion of revenue may be saved rather than consumed, and would then be available to fund net investment. In other words, a portion of revenue would go to provide demand for capital goods, rather than consumption goods. Michael Roberts also put forward that Keynesian view, as his explanation of where the demand for means of production comes from, when he wrote,
“The demand for goods and services in a capitalist economy depends on the new value created by labour and appropriated by capital. Capital appropriates surplus value by exploiting labour-power and buys capital goods with that surplus value. Labour gets wages and buys necessities with those wages. Thus it is wages plus profits that determine demand (investment and consumption).”
But, of course, as Marx points out, if we take simple reproduction, this cannot explain where demand for means of production (capital goods) comes from, and even with expanded reproduction, it only explains where the fund for the additional means of production comes from, not that for replacement of the already consumed means of production!
Say is wrong on a number of counts. He is wrong that all the produced values are consumed in a year. For example, not all the value of fixed capital produced in a year is consumed in a year, because the fixed capital may have a lifespan of say 10 years, and only 10% of its value is consumed each year, as wear and tear. Again, the role of fixed capital has caused confusion in the analysis of the c in c + v + s, in relation to national output. The value of c, as value produced in previous years, has been identified with that fixed capital, rather than the raw and auxiliary materials, for example, as referred to previously in relation to Michael Robert's bastardised version of the rate of profit.
“But in the second place: a part of the annual consumption of values consists of values that are used not as the stock for consumption, but as means of production, and which are returned to production (either in the same form or in the form of an equivalent), just as they originated in production. The second part consists of the values which can enter into individual consumption over and above the first part. These form the net product.” (p 103)
Marx notes that all economists after Smith, including Ricardo, accepted this “absurd dogma”, with the exception of Ramsay and Jones. Marx quotes Ramsay in relation to Ricardo.
““Mr. Ricardo,” he says, “[…seems to…] consider the whole produce as divided between wages and profits, forgetting the part necessary for replacing fixed capital” (p. 174, note).” (p 104)
As Marx notes, when Ramsay speaks of “fixed capital” he means constant capital in Marx's terms. Ramsay notes that, because each capital largely replaces its fixed capital and means of production by buying them from other producers, each capitalist looks at this from the perspective of their profits, in terms of exchange-value, rather than use-value. But, as Marx points out, this does not change the fact that, from the perspective of the total social capital, it is the use values that must be replaced, on a “like for like basis”, and not the exchange-values. As Ricardo correctly argued, Marx says, to the extent that rising productivity reduces the value of these use values, the more it raises the rate of profit, and vice versa.
For any individual capital, a depreciation of the value of its fixed capital will appear as a capital loss, even as it results in a higher rate of profit, but Marx points out,
“... this is true only to a very small extent for that part of the capital which consists of raw materials or completed commodities (which do not form part of the fixed capital). The existing amount of these that can be depreciated in this way is always only an insignificant magnitude compared with the total production. It holds good for each capitalist only to a slight extent for that part of his capital expended as circulating capital. On the other hand—since the profit is equal to the proportion of the surplus-value to the total advanced capital, and since the quantity of labour that can be absorbed depends not on the value but on the quantity of raw materials and on the efficiency of the means of production—not on their exchange-value but on their use-value—it is clear that the greater the productivity of industry in the branches whose product enters into the formation of constant capital, the smaller the outlay of constant capital required to produce a given quantity of surplus-value; consequently the greater the proportion of this surplus-value to the whole advanced capital, and therefore the higher the rate of profit for a given amount of surplus-value.” (p 105-6)
This contrasts starkly with the arguments put forward by the proponents of the TSSI and historic pricing. Marx's statement, here, is consistent with his position set out in Capital I that expansion of capital is expansion of the workforce, i.e. expansion of the force that creates new value and surplus value.
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