Adam Smith's Absurd Dogma - Part 48 of 52

So, say at the start of the year, there is 2 social working years of cotton, sitting waiting to be processed. This value is not value of current production. It already exists. The value was created by past labour. In the case of cotton it may be labour of last year, or, in part, years before that. For timber, it would certainly be labour of many past years, and so too for the wear and tear of fixed capital.

The spinner, in their year's labour, turns the cotton into yarn. But, considered from the perspective of this labour, as abstract, value creating labour, its clear that, in terms of the new value it creates, this cannot replace the value of the cotton itself (2 years congealed labour). The new value created amounts to just 1 social year, whereas the value of the cotton is 2 social years. Moreover, the 1 social year of new value, is revenue producing labour. All of it is required as revenue to meet the current consumption needs of workers and capitalists, leaving nothing left over to cover demand for cotton. Its equivalent must come, not in the form of cotton or constant capital, but of consumption goods, required to keep the workers, capitalists, and landlords alive for the next year. So, even if it amounted to an equal amount as the constant capital (i.e. if the value of consumed constant capital amounted to just 1 social year) it could not be used for that purpose. But, from what has been said, its clear that this is not required, because the constant capital is not reproduced from revenues, as Smith, the neoclassical school, and Keynesians believe, but is reproduced from capital itself. By processing the 2 social working-years of cotton already held in stock, at the start of the year, the concrete spinning labour preserves this value, and simply transfers it to the value of the end product. Its not abstract labour that produces this value, but concrete labour that preserves it.

At the end of the year, a total output value of 3 social working years exists, even though only 1 social working year of value creating labour has been undertaken. It exists, now, in the form of yarn, whereas, at the start of the year, the constant capital consisted of 2 social working years of cotton. The labour has not reproduced the value of this cotton – it is logically impossible to do so, because 1 is not 2 – it has merely preserved it, in a different form – yarn as against cotton.

When the next year begins, the spinner now requires a stock of another 2 social working years value of cotton, because the previous stock has been turned into yarn. But, as Marx says, this is now available, because simultaneously, as spinning labour is turning cotton into yarn, the consumed cotton is being replaced by cotton growing labour. When the spinner sells the yarn, they obtain the revenue of 1 social working year, required for the consumption of the worker and capitalist, but also they obtain the preserved value of the cotton, now transferred to the yarn, which they now use to buy its replacement from the cotton grower. This is the circuit of industrial capital, whereby, these material balances are being continually replaced from simultaneous production of inputs, as described by Marx in Capital II. 

In this can be seen the impossibility of Smith's absurd dogma, and its neoclassical and Keynesian descendants.

These material balances as well as those that replace the revenue,

“consists of the constant capital which enters into raw materials, and secondly of the constant capital which enters into the formation of the capital, and thirdly of the constant capital which enters into auxiliary materials.” (p 245)

In other words, it is the constant capital consumed in Department I, in producing materials and fixed capital. It is the seed used to produce grain, the coal to produce coal, the machines to produce machines, as well as the coal to produce steel and fuel machines that produce machines and steel, and produce grain, as well as the steel that produces coal and machines, and so on. All of this is production that simply reproduces constant capital, none of which is exchanged with Department II, and forms no part of the value of consumption goods, and produces no revenues as its equivalent. So, it appears nowhere in GDP data, or National Income data.

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