Its clear, if these producers are the same capitalist. The coal producer uses some of their coal to replace the coal they burn running their steam engines, in the same way that a farmer uses a portion of their grain output as seed. This portion of output, thereby, never becomes a marketed commodity, and never produces any revenue. As a coal and iron producer, coal is also used as merely a product, rather than a commodity, as means of production, in iron production. The coal consumed in iron production is directly replaced, by the combined coal and iron producer, out of the coal they simultaneously produce in their mine. But, the coal and iron producer also simultaneously produces iron and steel used to replace the pit props and rails being worn out in the mine, in the production of coal.
None of this mutual replacement of constant capital enters into the consumable product as constant capital, none of it constitutes revenue, and also has no equivalent in the consumable product. It forms no part of GDP or National Income, and yet, as social productivity rises, and the organic composition of capital rises with it, this portion of total output becomes ever larger. Even where the economy is no longer dominated by the processing of materials, the continued growth of fixed capital means that the portion – if not the proportion – of output required to reproduce wear and tear expands.
Marx sets out the value relations involved, as against the appearance given by the use values, by giving an example of the machine maker.
“... the part of the machinery manufacturer’s constant capital which represents the wear and tear of his machine-building machines, instruments, etc.—and therefore consists neither of raw material ... nor of labour added, and so neither of wages or profit—this wear and tear is in fact made good by the machinery manufacturer appropriating for himself one or two of his own machines to serve as machine-building machines.” (p 146)
This is the same as the approach taken by Marx in Capital I, of dividing the output up into physical quantities, each representing c + v + s. So long as productivity remains constant, these physical quantities remain constant too. In the case of the machine maker, the element of c comprises both wear and tear of their own machines, which they replace, in kind, from their own production, and materials, which they cannot.
“The machinery of the machinery manufacturer himself is not sold. It is replaced in kind, deducted from the total product. Consequently the machines which he sells represent only raw material (which consists only of labour, if he has already been charged for the wear and tear of the raw material producer’s machinery) and labour added, and therefore are resolvable into linen for himself and for the raw material producer. As for what specially concerns the relations between the machinery manufacturer and the producer of raw materials, the latter has deducted, in respect of the part of his machinery that has been wasted, a quantity of iron equal to its value. He exchanges this with the machinery manufacturer, so that each of them pays the other in kind, and this process has nothing to do with the division of revenue between them.” (p 146-7)
In other words, in the same way that the farmer sells only a part of the grain they produce, retaining another part to replace their consumed seed, so the machine maker sells only part of the machines they produce, using the other portion of their production to replace, in kind, their own worn out machines. Of the grain the farmer does sell, not all of it constitutes revenue either, because, out of it, they must also cover the cost of wear and tear of their machines, and of other items of constant capital. Another way of viewing it would be if they handed grain to the machine maker for machines, and similarly to other suppliers of constant capital, who then exchanged grain for consumable products. Similarly, of the machines the machine maker sells, not all of that is revenue either, because a part must cover the cost of raw materials used in the construction of those machines. Only that portion equal to the new value created by labour (v + s) can constitute revenue, for them, and can be exchanged for consumption goods. It is only that component that passes into final production. Marx summarises it as follows.
“In reality, the constant capital is replaced by being constantly produced anew and in part by reproducing itself. The part of the constant capital which enters into the consumable product is however paid for out of the living labour which enters into the non-consumable products. Because the latter labour is not paid for in its own products, it can resolve the whole consumable product into income. A part of the constant capital, considered as part of the annual product, is only seemingly constant capital. Another part, although it enters into the total product, does not enter into the consumable product either as a component part of its value or as a use-value, but is replaced in kind, remaining always incorporated in production.” (p 147)
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