Marx sets that out in his extended formula for the circuit of industrial capital.
The value of a commodity, Marx shows, does not, as Smith claimed, resolve entirely into revenues (wages, profit of enterprise, interest, rent, taxes) because these revenues are equal only to the new value added to the commodity by labour in current production, which divides into v + s. But, the value of the commodity is equal not to v + s, but c + v + s, in other words, not only to the new value created in production, but also to the value of the raw materials used in its production, and the wear and tear of the fixed capital. Smith tried to get around this, by the deception of claiming that the raw materials and fixed capital were also the product of labour, to which Marx responded that they too, were not only the product of labour, but, themselves made up of of c + v + s.
When considering total output value, therefore, it is never equal to revenues, to the new value created by labour in the given year, but to the new value created by labour in that year (GDP, National Income) plus the value of the materials and wear and tear of fixed capitals consumed in that production, but which were produced in the previous year, or years prior to that. But, when we come to look, therefore, at the total value of commodities to be circulated, and which have their equivalent value in money, that also cannot be equal to “new value growth (which we measure in hours of labour worked by the whole labour force in an economy)”, as Roberts claims.
Suppose that we have an economy where in a given year the amount of abstract labour/new value is equal to 1,000 hours. This 1,000 hours divides into 500 v, and 500 s. We will ignore the fact that the 500 s is subsequently divided into profit, interest, rent and taxes. In addition to this new value, however, it processes materials and so on, with a value of 2000 hours, produced, not this year, but in previous years. So, whilst the new value, which is represented by GDP/National Income is 1,000, the total output value of the economy is 3,000. It is this 3,000 that must find its equivalent in money, for all of these commodities to be circulated. Marx sets this out in Capital II, III, and in Theories of Surplus Value, dealing with the same error made by Roberts, that was put forward by those of his day, such as Tooke.
“This erroneous conception of the ratio of the quantity of money required for the realisation of revenue to the quantity of money required to circulate the entire social product is the necessary result of the uncomprehended, thoughtlessly conceived manner in which the various elements of material and value of the total annual product are reproduced and annually replaced. It has therefore already been refuted.”
(Capital II, Chapter 20)
If, as a result of capital accumulation, more labour is, then, employed, so that, in the following year, we have 1200 hours of new value produced, dividing into 600 v and 600 s, this in itself is only possible, if, in addition, it has additional materials and fixed capital to work with, materials and fixed capital produced not by labour in the current year, but which was undertaken the previous year/s, and constituted a part of the surplus product in those years! (Indeed, in order to employ the additional labour, it is not only additional material and fixed capital that must have been produced in the previous year, as part of the surplus product, but also the physical components of the variable-capital, i.e. wage goods.)
In other words, if we assume no change in social productivity, the 20% increase in current labour, would require a 20% increase in the amount of materials and fixed capital available for it to process. So, the total value of commodities to be circulated, in the current year, would not rise by this increase in new value production of 200 hours, but would rise by 600 hours, i.e. by an additional 400 hours, constituting the value of the additional materials and wear and tear of fixed capital, processed during this year.
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