“The whole problem was partly solved by the fact that the part of the farmer’s constant capital, which does not itself consist of labour newly added or in machinery, does not circulate at all, but is already deducted, replaces itself in his own production, and therefore also—apart from the machinery—his whole circulating product consists of wages and profit and consequently can be consumed in linen. This was one part of the solution.” (p 140)
But, in fact, if we divide total production into the two departments, one producing means of production the other means of consumption, then the relation can be seen as characterising the entire process of social reproduction. What Department I sells to Department II is only a small part of its total output. In terms of use values, it comprises constant capital, but, in terms of value, it comprises only Department I revenues, i.e. equal to the new value created by labour in Department I. So, it has the appearance that what is constant capital for one is revenue for another.
If we take the use values sold by Department I to Department II, in Marx's reproduction schema, they have a value of 2000. If we assume they are machines, then, examining each machine, its value is made up of 1,333 constant capital, and 666 new value added. But, in reality, this is an illusion, when viewed in value terms, and from the perspective of Department I's total output. The total value of Department I output is 6000, not 2000. The 2000 is only the new value added by labour/revenue, and so available for consumption. In value terms, none of this 2000 comprises constant capital, even though in terms of use values that is the form it assumes. The whole of Department I's constant capital is reproduced not from an exchange with Department II, but entirely within Department I itself, from its own production. It is this component of total output that comprises the c in c + v + s, in relation to the total output, and it appears nowhere in the GDP or National Income data, precisely because it forms a revenue for no one. It is not new value added, but the value preserved and transferred to current output.
Again illustrating the error of Michael Roberts, who tried to deal with this issue by equating this c with the capital goods accumulated out of profit, Marx notes,
“Here we leave entirely out of account the part of the profit which is transformed into new capital (both circulating and fixed, variable and constant capital). It has nothing to do with our problem, for here new variable capital as well as the new constant capital are created and replaced by new labour (a part of the surplus-labour).” (p 141)
It has nothing to do with where the demand for the equivalent of the consumed means of production comes from, i.e. from what fund it is replaced.
“So putting this case on one side, the total of labour newly added, in a year for example, is equal to the total of profit and wages, i.e., equal to the total of the annual revenue spent on products which enter into individual consumption, such as food, clothing, heating, dwelling-house, furniture, etc.
The total of these products going into consumption is equal in value to the total labour added annually (to the total value of the revenue), This quantity of labour must be equal to the total labour contained in these products, both the added and the pre-existing labour. In these products not only the labour newly added, but also the constant capital they contain, must be paid for. Their value is therefore equal to the total of profit and wages.” (p 141)
In terms of Marx's reproduction schema, total wages and profit is 3000 (2000 in Department I, 1000 in Department II). This is also the value of Department II output/GDP. Total wages and profit form the demand for this output, not just the 1000 of new value added by Department II, but the also the 2000 of constant capital (intermediate production), used in its production. But, as described above, this constant capital for Department II, is only revenue for Department I. In value terms, considered from the standpoint of total social production, it comprises not one penny of constant capital, but only the new value created by Department I labour.
“Thus although the final product—the linen, which represents all consumable products—consists of newly-added labour and constant capital, and so the final producers of this consumable product can only consume that part of it which consists of the labour last added, of their total wages and profits, their revenue—nevertheless all the producers of constant capital consume or realise their newly-added labour only in the consumable product. Thus although this consists of labour added and constant capital, its purchase price consists—in addition to that part of the product which is equal to the quantity of labour last added—of the total quantity of all the labour added in the production of its constant capital. They realise all added labour in the consumable product instead of in their own product—so that in this respect it is the same as if the consumable product consisted entirely of wages and profit, of labour added.” (p 143)
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