The Accumulation Of Capital Part 5

The figures in this diagram express quant.i.ties of value, amounts of money which are chosen arbitrarily, but their ratios are exact. Each department is characterised by the use-form of the commodities produced.

Their mutual circulation takes place as follows: Department I supplies the means of production for the entire productive process, for itself as well as for Department II. From this alone it follows that for the undisturbed continuance of reproduction--for we still presume simple reproduction on the old scale--the total produce of Department I (I 6,000) must have the same value as the sum of constant capitals in both departments: (I 4,000_c_ + II 2,000_c_). Similarly, Department II supplies provisions for the whole of society, for its own workers and capitalists as well as for the workers and capitalists of Department I.

Hence it follows that for the undisturbed course of consumption and production and its renewal on the old scale it is necessary that the total quant.i.ty of provisions supplied by Department II should equal in value all the incomes of the employed workers and capitalists of society [here II 3,000 = I(_1,000v + 1,000s_) + II(_500v + 500s_)].

Here we have indeed expressed relations.h.i.+ps of value which are the foundation not only of capitalist reproduction but of reproduction in every society. In every producing society, whatever its social form, in the primitive small village community of the Bakairi of Brazil, in the _oikos_ of a Timon of Athens with its slaves, or in the imperial _corvee_ farm of Charlemagne, the labour power available for society must be distributed in such a way that means of production as well as provisions are produced in adequate quant.i.ties. The former must suffice for the immediate production of provisions as well as for the future renewal of the means of production themselves, and the provisions in their turn must suffice for the maintenance of the workers occupied in the production alike of these same provisions and of the means of production, and moreover for the maintenance of all those who do not work.

In its broad outline, Marx's scheme corresponds with the universal and absolute foundation of social reproduction, with only the following specifications: socially necessary labour appears here as value, the means of production as constant capital, the labour necessary for the maintenance of the workers as variable capital and that necessary for the maintenance of those who do not work as surplus value.

In capitalist society, however, the connections between these two great departments depend upon exchange of commodities, on the exchange of equivalents. The workers and capitalists of Department I can only obtain as many provisions from Department II as they can deliver of their own commodities, the means of production. The demand of Department II for means of production, on the other hand, is determined by the size of its constant capital. It follows therefore that the sum of the variable capital and of the surplus value in the production of producer goods [here I(_1,000v + 1,000s_)] must equal the constant capital in the production of provisions [here II(2,000_c_)].

An important proviso remains to be added to the above scheme. The constant capital which has been spent by the two departments is in reality only part of the constant capital used by society. This constant capital is divided into two parts; the first is fixed capital--premises, tools, labouring cattle--which functions in a number of periods of production, in every one of which, however, only part of its value is absorbed by the product, according to the amount of its wear and tear.

The second is circulating capital such as raw materials, auxiliary semi-finished products, fuel and lighting--its whole value is completely absorbed by the new product in every period of production. Yet only that part of the means of production is relevant for reproduction which is actually absorbed by the production of value; without becoming less correct, an exact exposition of social circulation may disregard the remaining part of the fixed capital which has not been absorbed by the product, though it should not completely forget it. This is easy to prove.

Let us a.s.sume that the constant capital, 6,000_c_, in the two departments, which is in fact absorbed by the annual product of these departments, consists of 1,500_c_ fixed and 4,500_c_ circulating capital, the 1,500_c_ of fixed capital representing here the annual wear and tear of the premises, machinery and labouring cattle. This annual wear and tear equals, say, 10 per cent of the total value of the fixed capital employed. Then the total social capital would really consist of _19,500c + 1,500v_, the constant capital in both departments being 1,500_c_ of fixed and 4,500_c_ of circulating capital. Since the term of life of the aggregate fixed capital, with a 10 per cent wear and tear, is ten years _ex hypothesi_, the fixed capital needs renewal only after the lapse of ten years. Meanwhile one-tenth of its value enters into social production in every year. If all the fixed capital of a society, with the same rate of wear and tear, were of equal durability, it would, on our a.s.sumption, need complete renewal once within ten years. This, however, is not the case. Some of the various use-forms which are part of the fixed capital may last longer and others shorter, wear and tear and duration of life are quite different in the different kinds and individual representations of fixed capital. In consequence, fixed capital need not be renewed--reproduced in its concrete use-form--all at once, but parts of it are continually renewed at various stages of social production, while other parts still function in their older form.

Our a.s.sumption of a fixed capital of 15,000_c_ with a 10 per cent rate of wear and tear does not mean that this must be renewed all at once every ten years, but that an annual average renewal and replacement must be effected of a part of the total fixed social capital corresponding to one-tenth of its value; that is to say, Department I which has to satisfy the needs of society for means of production must reproduce, year by year not only all its raw and partly finished materials, etc., its circulating capital to the value of 4,500, but must also reproduce the use-forms of its fixed capital--premises, machinery, and the like--to the extent of 1,500, corresponding with the annual wear and tear of fixed capital. If Department I continues in this manner to renew one-tenth of the fixed capital in its use-form every year, the result will be that every ten years the total fixed capital of society will have been replaced throughout by new items; thus it follows that the reproduction of those parts disregarded so far is also completely accounted for in the above scheme.

In practice, the procedure is that every capitalist sets aside from his annual production, from the realisation of his commodities, a certain amount for the redemption of his fixed capital. These individual annual deductions must amount to a certain quant.i.ty of capital, therefore the capitalist has in fact renewed his fixed capital, that is, he has replaced it by new and more efficient items. This alternating procedure of building up annual reserves of money for the renewal of fixed capital and of the periodical employment of the acc.u.mulated amounts for the actual renewal of fixed capital varies with the individual capitalist, so that some are acc.u.mulating reserves, while others have already started their renewals. Thus every year part of the fixed capital is actually renewed. The monetary procedure here only disguises the real process which characterises the reproduction of fixed capital.

On closer observation we see that this is as it should be. The whole of the fixed capital takes part in the process of production, for physically the ma.s.s of usable objects, premises, machinery, labouring cattle, are completely employed. It is their peculiarity as fixed capital, on the other hand, that only part of the value is absorbed in the production of value, since in the process of reproduction (again postulating simple reproduction), all that matters is to replace in their natural form the values which have been actually used up as means of subsistence and production during a year's production. Therefore, fixed capital need only be reproduced to the extent that it has in fact been used up in the production of commodities. The remaining portion of value, embodied in the total use-form of fixed capital, is of decisive importance for production as a labour process, but does not exist for the annual reproduction of society as a process of value-formation.

Besides, this process which is here expressed by relations of value applies equally to every society, even to a community which does not produce commodities. If once upon a time, for instance, say ten years'

labour of 1,000 fellaheen was required for the construction of the famous Lake Moeris and the related Nile ca.n.a.ls--that miraculous lake, which Herodotus tells us was made by hand--and if for the maintenance of this, the most magnificent drainage system of the world, the labour of a further 100 fellaheen was annually required (the figures, of course, are chosen at random), we might say that after every hundred years the Moeris dam and the ca.n.a.ls were reproduced anew, although in fact the entire system was not constructed as a whole in every century. This is manifestly true. When, amid the stormy incidents of political history and alien conquests, the usual crude neglect of old monuments of culture set in--as displayed, e.g. by the English in India when the reproductional needs of ancient civilisations were understood no longer--then in the course of time the whole Lake Moeris, its water, dikes and ca.n.a.ls, the two pyramids in its midst, the colossus upon it and other marvellous erections, disappeared without a trace, as though they had never been built. Only ten lines in Herodotus, a dot on Ptolemy's map of the world, traces of old cultures, and of villages and cities bear witness that at one time rich life sprang from this magnificent irrigation system, where to-day there are only stretches of arid desert in inner Lybia, and desolate swamps along the coast. There is only one point where Marx's scheme of simple reproduction may appear unsatisfactory or incomplete in relation to constant capital, and that is when we go back to that period of production, when the total fixed capital was first created. Indeed, society possesses transformed labour amounting to more than those parts of fixed capital which are absorbed into the value of the annual product and are in turn replaced by it. In the figures of our example the total social capital does not consist of _6,000c + 1,500v_, as in the diagram, but of _19,500c + 1,500v_. Though 1,500 of the fixed capital (which, on our a.s.sumption, amounts to 15,000) are annually reproduced in the form of appropriate means of production, an equal amount is also consumed by the same production each year, though the whole of the fixed capital as a use-form, an aggregate of objects, has been renewed. After ten years, society possesses in the eleventh, just as in any other year, a fixed capital of 15,000, whereas it has annually achieved only 1,500_c_; and its constant capital as a whole is 19,500, whereas it has created only 6,000. Obviously, since it must have created this surplus of 13,500 fixed capital by its labour, it possesses more acc.u.mulated past labour than our scheme of reproduction warrants. Even at this stage, the annual labour of society must be based on some previous annual labour that has been h.o.a.rded. This question of past labour, however, as the foundation of all present labour, brings us to the very first beginning which is as meaningless with regard to the economic development of mankind as it is for the natural development of matter. The scheme of reproduction grasps the social process as perpetually in motion, as a link in the endless chain of events, it neither wants to demonstrate its initial origin, nor should it do so.

The social reproductive process is always based on past labour, we may trace it back as far as we like. Social labour has no beginning, just as it has no end. Like the historical origin of Herodotus' Lake Moeris, the beginnings of the reproductive process in the history of civilisation are lost in the twilight of legend. With the progress of techniques and with cultural development, the means of production change their form, crude paleoliths are replaced by sharpened tools, stone implements by elegant bronze and iron, the artisan's tool by steam-driven machinery.

Yet, though the means of production and the social organisation of the productive process continually change their form, society already possesses for its labour process a certain amount of past labour serving as the basis for annual reproduction.

Under capitalist methods of production past labour of society preserved in the means of production takes the form of capital, and the question of the origin of this past labour which forms the foundation of the reproductive process becomes the question of the genesis of capital.

This is much less legendary, indeed it is writ in letters of blood in modern history. The very fact, however, that we cannot think of simple reproduction unless we a.s.sume a h.o.a.rd of past labour, surpa.s.sing in volume the labour annually performed for the maintenance of society, touches the sore spot of simple reproduction; and it shows that simple reproduction is a fiction not only for capitalist production but also for the progress of civilisation in general. If we merely wish to understand this fiction properly, and to reduce it to a scheme, we must presume, as its _sine qua non_, results of a past productive process which cannot possibly be restricted to simple reproduction but inexorably points towards enlarged reproduction. By way of ill.u.s.tration, we might compare the aggregate fixed capital of society with a railway.

The durability and consequently the annual wear and tear of its various parts is very different. Parts such as viaducts and tunnels may last for centuries, steam engines for decades, but other rolling stock will be used up in a short time, in some instances in a few months. Yet it is possible to work out an average rate of wear and tear, say thirty years, so that the value of the whole is annually depreciated by one thirtieth.

This loss of value is now continually made good by partial reproduction of the railway (which may count as repairs), so that a coach is renewed to-day, part of the engine to-morrow, and a section of sleepers the day after. On our a.s.sumption then, the old railway is replaced by a new one after thirty years, a similar amount of labour being performed each year by the society so that simple reproduction takes place. But the railway can only be reproduced in this manner--it cannot be so produced. In order to make it fit for use and to make good its gradual wear and tear, the railway must have been completed in the first place. Though the railway can be repaired in parts, it cannot be made fit for use piecemeal, an axle to-day and a coach to-morrow. Indeed, the very essence of fixed capital is always to enter into the productive process in its entirety, as a material use-value. In order to get this use-form ready in the first place, society must apply a more concentrated amount of labour to its manufacture. In terms of our example, the labour of thirty years that is used for repairs, must be compressed into, say, two or three years. During this period of manufacture, society must therefore expend an amount of labour far greater than the average, that is to say it must have recourse to expanding reproduction; later, when the railway is finished, it may return to simple reproduction. Though we need not visualise the aggregate fixed capital as a single coherent use-object or a conglomeration of objects which must be produced all at once, the manufacture of all the more important means of production, such as buildings, transport facilities, and agricultural structures, requires a more concentrated application of labour, and this is true for the modern railway or steams.h.i.+p as much as it was for the rough stone-axe and the handmill. Therefore it is only in theory that simple reproduction can be conceived as alternating with enlarged reproduction; the latter is not only a general condition of a progressive civilisation and an expanding population, but also the _sine qua non_ for the economic form of fixed capital, or those means of production which in every society correspond to the fixed capital.

Marx deals with this conflict between the formation of fixed capital and simple reproduction but indirectly, in connection with fluctuations in the wear and tear of the fixed capital, more rapid in some years than in others. Here he emphasises the need for perpetual 'over-production', i.e. enlarged reproduction, since a strict policy of simple reproduction would periodically lead to reproductive losses. In short, he regards enlarged reproduction under the aspect of an insurance fund for the fixed capital of the society, rather than in the light of the actual productive process.[87]

In quite a different context Marx appears to endorse the opinion expressed above. In _Theories on the Surplus Value_, vol ii, part 2, a.n.a.lysing the conversion of revenue into capital, he speaks of the peculiar reproduction of the fixed capital, the replacement of which in itself already provides a fund for acc.u.mulation. He draws the following conclusion:

'The point we have in mind is as follows: even if the aggregate capital employed in machine manufacture were just large enough to make good the annual wear and tear of the machines, many more machines could be annually produced than are required, since the wear and tear is in parts merely _idealiter_ and must be made good _realiter_, _in natura_, only after a certain number of years. Capital so employed supplies each year a ma.s.s of machinery which becomes available for, and antic.i.p.ates new, capital investments. Let us suppose, for instance, a machine manufacturer who starts production this year. During this year, he supplies machines for 12,000. If he were merely to reproduce the machines he has manufactured, he would have to produce, during the subsequent eleven years, machines for 1,000 only, and even then, a year's production would not be consumed within the year. Still less could it be consumed, if he were to employ the whole of his capital. To keep this capital working, to keep it reproducing itself every year, a new and continuous expansion of the branches of manufacture that require these machines, is indispensable. This applies even more, if the machine manufacturer himself acc.u.mulates. In consequence, even _if the capital invested in one particular branch of production is simply being reproduced_,[88] a continuous acc.u.mulation in the other branches of production must go with it.'[89]

We might take the machine manufacturer of Marx's example as ill.u.s.trating the production of fixed capital. Then the inference is that if society maintains simple reproduction in this sphere, employing each year a similar amount of labour for the production of fixed capital (a procedure which is, of course, impossible in practical life), then annual production in all other spheres must expand. But if here, too, simple reproduction is to be maintained, then, if the fixed capital once created is to be merely renewed, only a small part of the labour employed in its creation can be expended. Or, to put it the other way round: if society is to provide for investment in fixed capital on a large scale, it must, even a.s.suming simple reproduction to prevail on the whole, resort periodically to enlarged reproduction.

With the advance of civilisation, there are changes not only in the form of the means of production but also in the quant.i.ty of value they represent--or better, changes in the social labour stored up in them.

Apart from the labour necessary for its immediate preservation, society has increasingly more labour time and labour power to spare, and it makes use of these for the manufacture of means of production on an ever increasing scale. How does this affect the process of reproduction? How, in terms of capitalism, does society create out of its annual labour a _greater_ amount of capital than it formerly possessed? This question touches upon enlarged reproduction, and it is not yet time to deal with it.

FOOTNOTES:

[84] For the sake of simplicity, we shall follow general usage and speak here and in the following of annual production, though this term, strictly speaking, applies in general to agriculture only. The periods of industrial production, or of the turnover of capitals, need not coincide with calendar years.

[85] The distinction between intellectual and material labour need not involve special categories of the population in a planned society, based on common owners.h.i.+p of the means of production. It will always find expression in the existence of a certain number of spiritual leaders who must be materially maintained. The same individuals may exercise these various functions at different times.

[86] _Capital_, vol. ii, p. 459.

[87] _Capital_, vol. ii, pp. 544-7. Cf. also p. 202 on the necessity of enlarged reproduction under the aspect of a reserve fund.

[88] Marx's italics.

[89] _Theorien uber den Mehrwert_, vol. ii, part 2, p. 248.

_CHAPTER V_

THE CIRCULATION OF MONEY

In our study of the reproductive process we have not so far considered the circulation of money. Here we do not refer to money as a measuring rod, an embodiment of value, because all relations of social labour have been expressed, a.s.sumed and measured in terms of money. What we have to do now is to test our diagram of simple reproduction under the aspect of money as a means of exchange.

Quesnay already saw that we shall only understand the social reproductive process if we a.s.sume, side by side with the means of production and consumer goods, a certain quant.i.ty of money.[90]

Two questions now arise: (1) by whom should the money be owned, and (2) how much of it should there be? The answer to the first question, no doubt, is that the workers receive their wages in the form of money with which they buy consumer goods. From the point of view of society, this means merely that the workers are allocated a certain share of the fund for consumption: every society, whatever its historical form of production, makes such allocations to its workers. It is, however, an essential characteristic of the capitalist form of production that the workers do not obtain their share directly in the form of goods but by way of commodity exchange, just as it is an essential feature of the capitalist mode of production that their labour power is not applied directly, as a result of a relation of personal domination, but again by way of commodity exchange: the workers selling their labour power to the owners of the means of production, and purchasing freely their consumer goods. Variable capital in its money form is the expression and medium of both these transactions.

Money, then, comes first into circulation by the payment of wages. The capitalist cla.s.s must therefore set a certain quant.i.ty of money circulating in the first place, and this must be equal to the amount they pay in wages. The capitalists of Department I need 1,000 units of money, and the capitalists of Department II need 500 to meet their wages bill. Thus, according to our diagram, two quant.i.ties of money are circulating: I(1,000_v_) and II(500_v_). The workers spend the total of 1,500 on consumer goods, i.e. on the products of Department II. In this way, labour power is maintained, that is to say the variable capital of society is reproduced in its natural form, as the foundation of all other reproductions of capital. At the same time, the capitalists of Department II dispose of their aggregate product (1,500) in the following manner: their own workers receive 500 and the workers of Department I receive 1,000. This exchange gives the capitalists of Department II possession of 1,500 money units: 500 are their own variable capital which has returned to them; these may start circulating again as variable capital but for the time being they have completed their course. The other 1,000 accrue to them year by year out of the realisation of one-third of their own products. The capitalists of Department II now buy means of production from the capitalists of Department I for these 1,000 money units in order to renew the part of their own constant capital that has been used up. By means of this purchase, Department II renews in its natural form half of the constant capital II_c_ it requires. Department I now has in return 1,000 money units which are nothing more than the money originally paid to its own workers. Now, after having changed hands twice, the money has returned to Department I, to become effective later as variable capital. This completes the circulation of this quant.i.ty of money for the moment, but the circulation within society has not yet come to an end. The capitalists of Department I have not yet realised their surplus value to buy consumer goods for themselves; it is still contained in their product in a form which is of no use to them. Moreover, the capitalists of Department II have not yet renewed the second half of their constant capital. These two acts of exchange are identical both in substance and in value, for the capitalists of Department I receive their goods from Department II in exchange for the I(1,000_c_) means of production needed by the capitalists of Department II. However, a new quant.i.ty of money is required to effect this exchange. It is true that the same money which has already completed its course, might be brought into circulation again for this purpose--in theory, there could be no objection to this.

In practice, however, this solution is out of the question, for the needs of the capitalists, as consumers, must be satisfied just as constantly as the needs of the workers--they run parallel to the process of production and must be mediated by specific quant.i.ties of money.

Hence it follows that the capitalists of both departments--that is to say all capitalists--must have a further cash reserve in hand, in addition to the money required as variable capital, in order to realise their own surplus value in the form of consumer goods. On the other hand, before the total product is realised and during the process of its production, certain parts of the constant capital must be bought continually. These are the circulating parts of the constant capital, such as raw and auxiliary materials, semi-finished goods, lighting and the like. Therefore, not only must the capitalists of Department I have certain quant.i.ties of money in hand to satisfy their needs as consumers, but the capitalists of Department II must also have money to meet the requirements of their constant capital. The exchange of 1,000s I (the surplus value of Department I contained in the means of production) against goods is thus effected by money which is advanced partly by the capitalists of Department I in order to satisfy their needs as consumers, and partly by the capitalists of Department II in order to satisfy their needs as producers.[91] Both lots of capitalists may each advance 500 units of the money necessary for the exchange, or possibly the two departments will contribute in different proportions. At any rate, two things are certain: (_a_) the money set aside for the purpose by both departments must suffice to effect the exchange between I(1,000_s_) and II(1,000_c_); (_b_) whatever the distribution of this money between the two departments may have been, the exchange transaction completed, each department of capitalist production must again possess the same amount of money it had earlier put into circulation. This latter maxim applies quite generally to social circulation as a whole: once the process of circulation is concluded, money will always have returned to its point of origin. Thus all capitalists, after universal exchange, have achieved a twofold result: first they have exchanged products which, in their natural form, were of no use to them, against other products which, in their natural form, the capitalists require either as means of production or for their own consumption. Secondly, they have regained possession of the money which they set in circulation so as to effect these acts of exchange.

This phenomenon is unintelligible from the point of view of simple commodity circulation, where commodity and money continually change places--possession of the commodity excluding the possession of money, as money constantly usurps the place which the commodity has given up, and _vice versa_. Indeed, this is perfectly true with regard to every individual act of commodity exchange which is the form of social circulation. Yet this social circulation itself is more than mere exchange of commodities: it is the circulation of capital. It is, however, an essential and characteristic feature of this kind of circulation, that it does not only return to the capitalist the value of his original capital plus an increase, the surplus value, but that it also a.s.sists social reproduction by providing the means of production and labour power in the natural form of productive capital, and by ensuring the maintenance of those who do not work. Possessing both the means of production and the money needed, the capitalists start the total social process of circulation; as soon as the social capital has completed its circuit, everything is again in their hands, apportioned to each department according to the investments made by it. The workers have only temporary possession of money during which time they convert the variable capital from its money form into its natural form. The variable capital in the capitalists' hands is nothing but the outward shape of part of their capital, and for this reason it must always revert to them.

So far, we have only considered circulation as it takes place between the two large departments of production. Yet 4,000 units of the first Department's produce remain there in the form of means of production to renew its constant capital of 4,000_c_. Moreover 500 of the consumer goods produced in Department II [corresponding to the surplus value II(500_s_)] also remain in this department in the form of consumer goods for the capitalist cla.s.s. Since in both departments the mode of production is capitalistic, that is unplanned, private production, each department can distribute its own products--means of production in Department I and consumer goods in Department II--amongst its own capitalists only by way of commodity exchange, i.e. by a large number of individual sale transactions between capitalists of the same department.

Therefore the capitalists of both departments must have a reserve of money with which to perform these exchange transactions--to renew both the means of production in Department I and the consumer goods for the capitalist cla.s.s in Department II. This part of circulation does not present any features of specific interest, as it is merely simple commodity circulation. Vendor and purchaser alike belong to the same category of agents of production, and circulation is concerned only with money and commodity changing hands within the same cla.s.s and department.

All the same, the money needed for this circulation must from the outset be in the hands of the capitalist cla.s.s: it is part of their capital.

So far, the circulation of total social capital presents no peculiarities, even if we consider the circulation of money. From the very outset it is self-evident that society must possess a certain quant.i.ty of money to make this circulation possible, and this for two reasons: first, the general form of capitalist production is that of commodity production which implies the circulation of money; secondly, the circulation of capital is based upon the continuous alternation of the three forms of capital: money capital, productive capital, and commodity capital. And as it is this very money, finally, which operates as capital--our diagram referring to capitalist production exclusively--the capitalist cla.s.s must have possession of this money, as it has possession of every other form of capital; it throws it into circulation in order to regain possession as soon as the process of circulation has been completed.

At first glance, only one detail might strike us: if the capitalists themselves have set in motion all the money which circulates in society, they must also advance the money needed for the realisation of their own surplus value. Thus it seems that the capitalists as a cla.s.s ought to buy their own surplus value with their own money. As the capitalist cla.s.s has possession of this money resulting from previous periods of production, even prior to the realisation of the product of each working period, the appropriation of surplus value at first sight does not seem to be based upon the unpaid labour of the wage labourer--as it in fact is--but merely the result of an exchange of commodities against an equivalent quant.i.ty of money both supplied by the capitalist cla.s.s itself. A little reflection, however, dispels this illusion. After the general completion of circulation, the capitalists, now as before, possess their money funds which either reverted to them or remained in their hands. Further, they acquired consumer goods for the same amount which they have consumed. (Note that we are still confining ourselves to simple reproduction as the prime condition of our diagram of reproduction: the renewal of production on the old scale and the use of all surplus value produced for the personal consumption of the capitalist cla.s.s.)

Moreover, the illusion vanishes completely if we do not confine ourselves to one period of production but observe a number of successive periods in their mutual interconnections. The value the capitalist puts into circulation to-day in the form of money for the purpose of realising his own surplus value, is in fact nothing but his surplus value resulting from the preceding period of production in form of money. The capitalist must advance money out of his own pocket in order to buy his goods for consumption. On the one hand, the surplus value which he produces each year either exists in a natural form which renders it unfit for consumption, or, if it takes a consumable form, it is temporarily in the hands of another person. On the other hand, he (the capitalist) has regained possession of the money, and he is now making his advances by realising his surplus value from the preceding period. As soon as he has realised his new surplus value, which is still embodied in the commodity-form, this money will return to him.

Consequently, in the course of several periods of production, the capitalist cla.s.s draws its consumer goods from the pool, as well as the other natural forms of its capital. The quant.i.ty of money originally in its possession, however, remains unaffected by this process.

Investigation of the circulation of money in society shows that the individual capitalist can never invest the whole of his money capital in production but must always keep a certain money reserve to be employed as variable capital, i.e. as wages. Further, he must keep a capital reserve for the purchase of means of production at any given period, and in addition, he must have a cash reserve for his personal consumption.

The process of reproducing the total social capital thus entails the necessity of producing and reproducing the substance of money. Money is also capital, for Marx's diagram which we have discussed before, conceives of no other than capitalist production. Thus the diagram seems incomplete. We ought to add a further department, that of production of the means of exchange, to the other two large departments of social production [those of means of production (I) and of consumer goods (II)]. It is, indeed, a characteristic feature of this third department that it serves neither the purposes of production nor those of consumption, merely representing social labour in an undifferentiated commodity that cannot be used. Though money and its production, like the exchange and production of commodities, are much older than the capitalist mode of production, it was only the latter which made the circulation of money a general form of social circulation, and thus the essential element of the social reproductive process. We can only obtain a comprehensive diagram of the essential points of capitalist production if we demonstrate the original relations.h.i.+p between the production and reproduction of money and the two other departments of social production.

Here, however, we deviate from Marx. He included the production of gold (we have reduced the total production of money to the production of gold for the sake of simplicity) in the first department of social production.

'The production of gold, like that of metals generally, belongs to department I, which occupies itself with means of production.'[92]

This is correct only in so far as the production of gold is the production of metal for industrial purposes (jewellery, dental stoppings, etc.). But gold in its capacity as money is not a metal but rather an embodiment of social labour _in abstracto_. Thus it is no more a means of production than it is a consumer good. Besides, a mere glance at the diagram of reproduction itself shows what inconsistencies must result from confusing means of exchange with means of production. If we add a diagrammatic representation of the annual production of gold as the substance of money to the two departments of social production, we get the following three sets of figures:

I. _4,000c + 1,000v + 1,000s = 6,000_ means of production II. _2,000c + 500v + 500s = 3,000_ means of subsistence III. _20c + 5v + 5s = 30_ means of exchange

This quant.i.ty of value of 30, chosen by Marx as an example, obviously does not represent the quant.i.ty of money which circulates annually in society; it only stands for that part which is annually reproduced, the annual wear and tear of the money substance which, on the average, remains constant so long as social reproduction remains on the same level. The turnover of capital goes on in a regular manner and the realisation of commodities proceeds at an equal pace. If we consider the third line as an integral part of the first one, as Marx wants us to do, the following difficulty arises: the constant capital of the third department consists of real and concrete means of production, premises, tools, auxiliary materials, vessels, and the like, just as it does in the two other departments. Its product, however, the 30_g_ which represent money, cannot operate in its natural form as constant capital in any process of production. If we therefore include this 30_g_ as an essential part of the product of Department I (6,000 means of production) the means of production will show a social deficit of this size which will prevent Departments I and II from resuming their reproduction on the old scale. According to the previous a.s.sumption--which forms the foundation of Marx's whole diagram--reproduction as a whole starts from the product of each department in its actual use-form. The proportions of the diagram are based upon this a.s.sumption; without it, they dissolve in chaos. Thus the first fundamental relation of value is based upon the equation: I(6,000) equals I(4,000_c_) + II(2,000_c_). This cannot apply to the product III(30_g_), since neither department can use gold as a means of production [say, in the proportion of I(20_c_) + II(10_c_)]. The second fundamental relation derived from this is based upon the equation I(1,000_v_) + I(1,000_s_) = II(2,000_c_). This would mean, with regard to the production of gold, that as many consumer goods are taken from Department II as there are means of production supplied to it. But this is equally untrue. Though the production of gold removes concrete means of production from the total social product and uses them as its constant capital, though it takes concrete consumer goods for the use of its workers and capitalists, corresponding to its variable capital and surplus value, the product it supplies yet cannot operate in any branch of production as a means of production, nor is it a consumer good, fit for human consumption. To include the production of money in the activities of Department I, therefore, is to run counter to all the general proportions which express the relations of value in Marx's diagram, and to diminish the diagram's validity.