In the next subsection, Marx, then, moves on from the impossibility of replacing the constant capital of Department II, by means of exchanges within Department II to the impossibility of replacing the whole constant capital by exchanges between Department I and II. That is so for the reasons set out above. Department I replaces the constant capital of Department II, by exchanging it for consumption goods equal to the value of Department I revenues. It can do so only because this portion of Department I output is entirely composed of revenues, and no constant capital, in terms of its value. But, they are revenues that cannot be consumed in Department I production, precisely because, Department I only produces use values that are consumed productively. Similarly, Department II uses its revenues solely to buy the consumption goods it produces, leaving no revenues left to buy constant capital – as we have assumed simple reproduction. On the same basis, as Department I has used its revenues to buy the remaining consumption goods from Department II, it has no revenues left to be used for the purchase of constant capital.
Even in the case of expanded reproduction, where part of Department I and II profits are used to buy additional means of production, and wage goods, this is an answer to the question of where this additional capital is funded from, not where the demand for the currently consumed Department I means of production comes from, and the funds to buy it. In Marx's schema in Capital II, Chapter 20, in other words, the question remains of where the 4000 c finds its demand.
Marx examines the other side of Smith's “absurd dogma”, here, which appears in the form of the statement that the price of the consumed constant capital, as well as the value added must be paid by consumers. Marx quotes Smith in relation to the circulation of currency, in this regard.
““The circulation of every country may be considered as divided into two different branches; the circulation of the dealers with one another, and the circulation between the dealers and the consumers.” (Garnier explains that by dealers Adam Smith here means “all traders, manufacturers, artisans, and so on; in a word, the agents of the trade and industry of a country”). “Though the same pieces of money, whether paper or metal, may be employed sometimes in the one circulation and sometimes in the other; yet as both are constantly going on at the same time, each requires a certain stock of money, of one kind or another, to carry it on, the value of the goods circulated between the different dealers never can exceed the value of those circulated between the dealers and the consumers; whatever is bought by the dealers being ultimately destined to be sold to the consumers” ( [Wealth of Nations, O.U.P. edition, Vol. I, pp. 358–59], [Garnier] t. II, b. II, ch. II, pp. 292–93).” (p 125)
The question of the velocity of circulation, and commercial credit, has to be discounted, here. Marx also deals with this error in relation to its application by Tooke. In fact, because the value of output exceeds the value of revenues/GDP, and does so because a large and growing part of output consists of Department I production that simply replaces Department I means of production, the amount of currency required must be always exceed that required to finance exchanges between Department I and II, because it must also finance those additional exchanges within Department I.
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