Engels proceeds, then, to look at these series of exchanges, starting from the initial material balances in the hands of the three classes, and the 2 milliards in money in the hands of farmers.
The farmers, out of their production of 5 milliards, in the previous year, replace their working-capital of 2 milliards directly from that production, just as a farmer replaces seed corn out of their output of corn. That leaves them with 3 milliards of output. They also have the 2 milliards of money. They pay this to the landlords as rent.
“Circulation passing between only two of these three classes is called imperfect by the Physiocrats; circulation which takes place between all three classes is called perfect.” (p 319)
The landlords buy 1 milliard of means of subsistence from the farmers (imperfect), thus handing back half of the rent they had received. Quesnay does not refer any further to the state or church, which received a portion of these revenues as taxes and tithes, so all of this is subsumed under the heading of the transactions with the landlords.
“In regard to the landlord class proper, however, he says that its expenditure (in which that of all its retainers is included) is unfruitful expenditure, at least as regards the great bulk of it with the exception of that small portion which is used “for the maintenance and improvement of their lands and the raising of their standard of cultivation”. But by “natural law” their proper function consists precisely in “the provision of good management and expenditures for the maintenance of their patrimony”, or, as is explained further on, in making the avances foncieres, that is, outlays for the preparation of the soil and for the provision of all equipment needed by the farms, which enable the farmer to devote his whole capital exclusively to the business of actual cultivation.” (p 319-20)
A parallel could be drawn with the ruling-class of, today, whose revenues come from their renting out of money-capital, i.e. coupon payments on bonds, and dividends on shares. The vast majority of capital accumulation comes from reinvested, realised profits, not from additional financing from the issue of new shares. Only a tiny fraction of the shares traded on stock markets is of new shares issued to raise finance for capital investment. The majority of trading is just speculation – the buying and selling of existing bonds and shares.
And, of course, in relation to that portion of capital accumulation that is financed by the issue of new shares or bonds, the owners of money-capital that buy these shares and bonds do so with money previously paid to them (revenues) as interest/dividends out of realised profits. In other words, a payment of a revenue to them for which nothing was provided of equal value.
The landlords use the second milliard of rent to buy manufactured goods from the sterile class to buy means of subsistence from the farmers (perfect). The farmers, now, have the full 2 milliards of money, paid in rent, back in their hands. At the same time, of the 3 milliards of products they had, they have now sold 2 milliards – 1 milliard to landlords, and 1 milliard to the sterile class.
The farmers, now, use 1 milliard of the money returned to them to buy manufactured goods from the sterile class, which it sells from its initial stock.
“... a large part of these goods consists of agricultural implements and other means of production required in agriculture.” (p 320)
The sterile class, then, uses this same 1 milliard of money to buy raw materials from the farmers to replace its own working-capital consumed in the previous year's production (imperfect).
“Thus the two milliards expended by the farmers in payment of rent have flowed back to them, and the movement is closed. So this is the solution of the great riddle,
“What becomes of the net product, which has been appropriated as rent, in the course of economic circulation?”” (p 320)
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