A Contribution To The Critique of Political Economy, Chapter 1 - Part 21 of 29

As I have described elsewhere, Michael Roberts makes this same mistake of accepting Smith's absurd dogma, and, thereby, of also falling into the error of Say's Law. He wrote,

“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).”

This is false, because it omits the value of constant capital produced in previous years, and only transferred into the value of current production, as well as missing out the demand for this constant capital that must be replaced out of current production, but which cannot possibly come from revenues, all of which are used for either consumption or capital accumulation. And, Ricardo is similarly wrong, because, whilst the producer of commodities, under barter, may produce only to either consume their own production or to exchange it for other commodities to be consumed, that is not at all true in a money economy, where sale can simply be in order to obtain exchange-value itself, in the form of money.

And, as soon as we have a money economy, so that the circuit C – C, becomes C – M – C, which is actually two separate transactions C – M, followed by M – C, having sold, the seller can obtain money, which they simply hold on to. Moreover, as a commodity producer, they have costs of production, let us say of £10, consisting of materials and wages. They produce a commodity, which they expect to sell for £12, producing £2 of surplus value. If, however, the price they can obtain falls to £11, whilst their production costs remain at £10, their realised profit falls to £1, and as a small commodity producer, they may require £2 to cover their own personal consumption. Moreover, if the price falls to £9, whilst their costs of production remain the same, they cannot replace their consumed means of production, which have to be reproduced on a like for like basis, in terms of their use value, to continue production on the same scale. If they cannot do so, then the circuit of capital is broken, and a crisis ensues.

“In reproduction, just as in the accumulation of capital, it is not only a question of replacing the same quantity of use-values of which capital consists, on the former scale or on an enlarged scale (in the case of accumulation), but of replacing the value of the capital advanced along with the usual rate of profit (surplus-value). If, therefore, through any circumstance or combination of circumstances, the market-prices of the commodities (of all or most of them, it makes no difference) fall far below their cost-prices, then reproduction of capital is curtailed as far as possible.”

(Theories of Surplus Value, Chapter 17)

Marx goes on to describe other causes of such a rupture in the circuit of capital, such as the actual inputs not being physically available, or only available at much higher costs, and so on. He details such causes of crises in more detail in Capital II, and in Capital III, Chapter 6. See my book, for a more detailed discussion of these other causes of crises, set out by Marx and Engels.

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