If we examine the output of Department I, therefore, two-thirds of its output goes simply to reproduce its own constant capital – materials, wear and tear – on a like for like basis. It forms no revenue, and forms no part of the value of Department II production, or has any physical involvement in Department II production. The remaining third of Department I output is exchanged with Department II, and does physically enter Department II output. In physical terms, it appears as constant capital, for Department II, and, as such, its value is merely preserved by the actions of Department II labour. Its use value is merely transformed by Department II into the end product, and its value transferred, and only, thereby, reproduced in it. But, its value consists entirely of Department I revenues, not constant capital, and, in regard to this part only of output, it is true that what is revenue for one is constant capital for another.
Department I does not replace the value of its own consumed constant capital from the labour it undertakes, as this value is equal to its revenues required to fund its consumption, and takes the form of the third of its output exchanged with Department II. The value is rather replaced by the fact that Department I labour, as concrete labour, preserves the value of that consumed constant capital, which is, thereby, transferred to the value of its output and reproduced out of it. No revenues are possible or required, as a means of replacing this consumed constant capital. In terms of the replacement of the use values/material balances, they are replaced,
“Partly by his own reproduction (vegetative or animal), as in all agriculture and stock-raising; partly by exchange in kind of parts of one constant capital for parts of another constant capital, because the product of one sphere enters as raw material or means of production into the other sphere, and vice versa; that is, because the products of the various spheres of production, the various sorts of constant capital, enter reciprocally in kind into each other’s sphere as conditions of production.
The producers of unconsumable products are the producers of constant capital for the producers of consumable products. But at the same time their products serve them reciprocally as elements or factors of their own constant capital. That is to say, they consume each other’s products industrially.” (p 248)
“Here, therefore, there is replacement of constant capital by constant capital; in so far as this does not occur directly and without exchange, here therefore there is exchange of capital for capital, that is, of products for products on the basis of their use-value; the products enter reciprocally into their respective production processes, so that each of them is industrially consumed by the producers of the other.
This part of the capital consists neither of profit nor of wages. It contains no newly-added labour. It is not exchanged against revenue. It is neither directly nor indirectly paid for by consumers. It makes no difference whether this reciprocal replacement of capitals is carried through with the aid of merchants (that is, by merchant’s capitals) or not.” (p 250)
This last comment is the simple response to the claim of Michael Roberts that the demand for constant capital (capital goods) comes from profits, made in his comment that,
“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).”
And, Marx's comment is also a riposte to those who think that it is merely a question of recording the various sales and exchanges in a different way. It is not at all a question of whether such purchases and sales are recorded, as to whether such output is registered in national output data. If farmer's bought seeds from seed merchants, whilst seed merchants bought grain from farmers, from which they selected seed, this would change nothing. The fact is that no amount of recording can change the fact that the constant capital consumed forms no part of revenue, and so cannot appear, in aggregate, as revenue – wages, profit, rent, interest, taxes – or likewise appear in GDP.
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