Department I’s efforts to accumulate by selling its additional product to Department II have met with an unlooked-for result: a deficit for the capitalists of Department II serious enough to prevent even simple reproduction on the old scale.
Having got to this crucial point, Marx seeks to lay bare the root of the problem by a careful and detailed exposition:
‘Let us now take a closer look at the accumulation in Department II. The first difficulty with reference to IIc, that is to say the conversion of an element of the commodity-capital of II into the natural form of constant capital of II, concerns simple reproduction. Let us take the formula previously used. (1,000v + 1,000s) I are exchanged for 2,000 IIc. Now, if one half of the surplus-product of I, or 500s, is reincorporated in Department I as constant capital, then this portion, being detained in Department I, cannot take the place of any portion of IIc. Instead of being converted into articles of consumption, it is made to serve as an additional means of production in Department I itself.... It cannot perform this function simultaneously in I and II. The capitalist cannot spend the value of his surplus-product for articles of consumption, and at the same time consume the surplus-product itself productively, by incorporating it in his productive capital. Instead of 2,000 I(v + s), only 1,500 are exchangeable for 2,000 IIc, namely 1,000v + 500s of I. But 500 Ic cannot, be reconverted from the form of commodities into productive constant capital of II.’[124]
By now, hardly anybody could fail to be convinced that the difficulty is real, but we have not taken a single step nearer a solution. This, incidentally, is where Marx has to do penance for his ill-advised continual recourse in an earlier over-simplification, to a fictitious moment of transition—in order in elucidate the problem of accumulation—from simple reproduction to enlarged reproduction, making his major premise accumulation at its very inception, in its feeble infancy instead its vigorous stride. There was something to be said, at least, for this fiction, so long as it was just a question of accumulation within Department I. The capitalists of Department I, who denied themselves part of what they had been wont to consume, at once had a new hoard of money in hand with which they could start capitalisation. But when it comes to Department II, the same fiction only piles on the difficulties. The ‘abstinence’ of the capitalists in Department I here finds expression in a painful loss of consumers for whose expected demand production had largely been calculated. Since the capitalists of Department II, on whom we tried the experiment whether they might not possibly be the long-sought buyers of the additional product of accumulation in Department I, are themselves in sore straits—not knowing as yet where to go with their own unsold product—they are even less likely to be of any help to us. There is no shutting our eyes to the fact that an attempt to make one group of capitalists accumulate at the expense of the other is bound to get involved in glaring inconsistencies.
Yet another attempt to get round the difficulty is subsequently mentioned by Marx who at once rejects it as a subterfuge. The unmarketable surplus value in Department II that is the result of accumulation in Department I might be considered a reserve of commodities the society is going to need in the course of the following year. This interpretation Marx counters with his usual thoroughness:
‘(1) ... the forming of such supplies and the necessity for it applies to all capitalists, those of I as well as of II. Considering them in their capacity as sellers of commodities, they differ only by the fact that they sell different kinds of commodities. A supply of commodities of II implies a previous supply of commodities of I. If we neglect this supply on the one side, we must also do so on the other. But if we count them in on both sides, the problem is not altered in any way. (2) Just as this year closes on the side of II with a supply of commodities for the next year, so it was opened by a supply of commodities on the same side, taken over from last year. In the analysis of annual reproduction, reduced to its abstract form, we must therefore strike it out at both ends. By leaving this year in possession of its entire production, including the supply held for next year, we take from it the supply of commodities transferred from last year, and thus we have actually to deal with the aggregate product of an average year as the object of our analysis. (3) The simple circumstance that the difficulty which must be overcome did not show itself in the analysis of simple reproduction proves that it is a specific phenomenon due merely to the different arrangement of the elements of Department I with a view to reproduction, an arrangement without which reproduction on an expanded scale cannot take place at all.’[125]
The last remark, be it noted, is equally damaging to his own earlier attempt at resolving the specific difficulties of accumulation by moments pertaining to simple reproduction, viz. the formation of a hoard consequent upon the gradual turnover of the fixed capital in the hands of the capitalists which was previously adduced as the explanation of accumulation in Department I.
Marx then proceeds to set out enlarged reproduction in the form of diagrams. But no sooner does he begin to analyse his diagram, than the same difficulty crops up anew in a slightly different guise. Assuming that the capitalists of Department II must for their part convert 140s into constant capital so as to make accumulation possible for the others, he asks:
‘Therefore Department II must buy 140s for cash without recovering this money by a subsequent sale of its commodities to I. And this is a process which is continually repeated in every new annual production, so far as it is reproduction on an enlarged scale. Where does II get the money for this?’[126]
In the following, Marx tries out various approaches in order to discover this source. First the expenditure on variable capital by the capitalists in Department II is closely scrutinised. True, it exists in the form of money; but its proper function is the purchase of labour power, and it cannot possibly be withdrawn and made to serve, maybe, for purchasing additional means of production.
‘This continually repeated departure from and return to the starting point, the pocket of the capitalist, does not add in any way to the money moving in this cycle. This, then, is not a source of the accumulation of money.’[127]
Marx then considers all conceivable dodges, only to show them up as evading the issue.
‘But stop!’ he exclaims. ‘Isn’t there a chance to make a little profit?’[127]
He considers whether the capitalists could not manage to save a little of the variable capital by depressing the wages of the workers below the normal average and thus to tap a new source of money for accumulation. A mere flick of his fingers, of course, disposes of this notion:
‘But it must not be forgotten that the wages actually paid (which determine the magnitude of the variable capital under normal conditions) do not depend on the benevolence of the capitalists, but must be paid under certain conditions. This does away with this expedient as a source of additional money.’[127]
He even explores what hidden methods there may be of ‘saving’ on the variable capital, such as the truck system, frauds, etc., only to comment finally: ‘This is the same operation as under (1), only disguised and carried out by a detour. Therefore it must likewise be rejected as an explanation of the present problem.’[128]
All efforts to make the variable capital yield a new source of money for the purpose of accumulation are thus unrewarded: ‘In short, we cannot accomplish anything with 376 IIv for the solution of this question.’[128]
Marx next turns to the cash reserves which the capitalists in Department II keep for the circulation of their own consumption and investigates whether none of this money can be diverted to the purposes of capitalisation. Yet this, he allows, is ‘still more impossible’.
‘Here the capitalists of the same department are standing face to face, heavily buying and selling their articles of consumption. The money required for these transactions serves only as a medium of circulation and must flow back to the interested parties in the normal course of things, to the extent that they have advanced it to the circulation, in order to pass again and again over the same course.’[129]
The next attempt to follow belongs, as was to have been expected, to the category of those ‘subterfuges’ which Marx ruthlessly refutes: the attempt to explain that money-capital can be formed in the hands of one capitalist group in Department II by defrauding the other capitalists within the same department—viz. in the process of the mutual selling of consumer goods. No time need be wasted on this little effort.
Then comes a more sober proposition: ‘Or, a certain portion of IIs, represented by necessities of life, might be directly converted into new variable capital of Department II.’[130]
It is not quite clear how this can help us over the hurdle, help to get accumulation going. For one thing, the formation of additional variable capital in Department II is not much use if we have no additional constant capital for this department, being in fact engaged on the task of finding it. For another thing, our present concern is to see if we can find in Department II a source of money for the purchase of additional means of production from I, and Department II’s problem how to place its own additional product in some way or other in the process of production is beside the point. Further, is the implication that the respective consumer goods should be used ‘direct’, i.e. without the mediation of money, in the production of Department II, so that the corresponding amount of money can be diverted from variable capital to the purpose of accumulation? If so, we could not accept the solution. Under normal conditions of capitalist production, the remuneration of the workers by consumer goods direct is precluded, one of the corner-stones of capitalist economy being the money-form of the variable capital, the independent transaction between the worker as buyer of commodities and producer of consumer goods. Marx himself stresses this point in another context:
‘We know that the actual variable capital consists of labour-power, and therefore the additional must consist of the same thing. It is not the capitalist of I who among other things buys from II a supply of necessities of life for his labourers, or accumulates them for this purpose, as the slave holder had to do. It is the labourers themselves who trade with II.’[131]
And that goes for the capitalists of Department II just as much as for those of Department I, thus disposing of Marx’s last effort.
Marx ends up by referring us to the last part of Capital, volume ii, chapter 21, the ‘Concluding Remarks sub iv’, as Engels has called them. Here we find the curt explanation:
‘The original source for the money of II is v + s of the gold producers in Department I, exchanged for a portion of IIc. Only to the extent that the gold producer accumulates surplus-value or converts it into means of production of I, in other words, to the extent that he expands his production, does his v + s stay out of Department II. On the other hand, to the extent that the accumulation of gold on the part of the gold producer himself leads ultimately to an expansion of production, a portion of the surplus-value of gold production not spent as revenue passes into Department II as additional variable capital of the gold producers, promotes the accumulation of new hoards in II and supplies it with means by which to buy from I without having to sell to it immediately.’[132]
After the breakdown of all conceivable attempts at explaining accumulation, therefore, after chasing from pillar to post, from A I to B I, and from B I to A II, we are made to fall back in the end on the very gold producer, recourse to whom Marx had at the outset of his analysis branded as ‘absurd’. The analysis of the reproductive process, and the second volume of Capital finally comes to a close without having provided the long sought-for solution to our difficulty.
CHAPTER IX
THE DIFFICULTY VIEWED FROM THE ANGLE OF THE PROCESS OF CIRCULATION
The flaw in Marx’s analysis is, in our opinion, the misguided formulation of the problem as a mere question of ‘the sources of money’, whereas the real issue is the effective demand, the use made of goods, not the source of the money which is paid for them. As to money as a means of circulation: when considering the reproductive process as a whole, we must assume that capitalist society must always dispose of money, or a substitute, in just that quantity that is needed for its process of circulation. What has to be explained is the great social transaction of exchange, caused by real economic needs. While it is important to remember that capitalist surplus value must invariably pass through the money stage before it can be accumulated, we must nevertheless try to track down the economic demand for the surplus product, quite apart from the puzzle where the money comes from. As Marx himself says in another passage:
‘The money on one side in that case calls forth expanded reproduction on the other, because the possibility for it exists without the money. For money in itself is not an element of actual reproduction.’[133]
And in a different context, Marx actually shows the question about the ‘sources of money’ to be a completely barren formulation of the problem of accumulation.
In fact, he had come up against this difficulty once before when examining the process of circulation. Still dealing with simple reproduction, he had asked, in connection with the circulation of the surplus value:
‘But the commodity capital must be monetised before its conversion into productive capital, or before the surplus-value contained in it can be spent. Where does the money for this purpose come from? This question seems difficult at the first glance, and neither Tooke nor anyone else has answered it so far.’[134]
And he was then quite uncompromising about getting to the root of the matter: ‘The circulating capital of 500 p.st. advanced in the form of money-capital, whatever may be its period of turn-over, may now stand for the total capital of society, that is to say, of the capitalist class. Let the surplus-value be 100 p.st. How can the entire capitalist class manage to draw continually 600 p.st. out of the circulation, when they continually throw only 500 p.st. into it?’[135]
All that, mind you, refers to simple reproduction, where the entire surplus value is used for the personal consumption of the capitalist class. The question should therefore from the outset have been put more precisely in this form: how can the capitalists secure for themselves consumer goods to the amount of £100 surplus value on top of putting £500 into circulation for constant and variable capital? It is immediately obvious that those £500 which, in form of capital, always serve to buy means of production and to pay the workers, cannot simultaneously defray the expense of the capitalists’ personal consumption. Where, then, does the additional money come from?—the £100 the capitalists need to realise their own surplus value? Thus all theoretical dodges one might devise for this point are summarily disposed of by Marx right away:
‘It should not be attempted to avoid this difficulty by plausible subterfuges.
‘For instance: So far as the constant circulating capital is concerned, it is obvious that not all invest it simultaneously. While the capitalist A sells his commodities so that his advanced capital assumes the form of money, there is on the other hand, the available money-capital of the buyer B which assumes the form of his means of production which A is just producing. The same transaction, which restores that of B to its productive form, transforms it from money into materials of production and labour-power; the same amount of money serves in the two-sided process as in every simple purchase C-M. On the other hand, when A reconverts his money into means of production, he buys from C, and this man pays B with it, etc., and thus the transaction would be explained.
‘But none of the laws referring to the quantity of the circulating money, which have been analysed in the circulation of commodities (vol. i, chap, iii), are in any way changed by the capitalist character of the process of production.
‘Hence, when we have said that the circulating capital of society, to be advanced in the form of money, amounts to 500 p.st., we have already accounted for the fact that this is on the one hand the sum simultaneously advanced, and that, on the other hand, it sets in motion more productive capital than 500 p.st., because it serves alternately as the money fund of different productive capitals. This mode of explanation, then, assumes that money as existing whose existence it is called upon to explain.
‘It may be furthermore said: Capitalist A produces articles which capitalist B consumes unproductively, individually. The money of B therefore monetises the commodity-capital of A, and thus the same amount serves for the monetisation of the surplus-value of B and the circulating constant capital of A. But in that case, the solution of the question to be solved is still more directly assumed, the question: Whence does B get the money for the payment of his revenue? How does he himself monetise this surplus-portion of his product?
‘It might also be answered that that portion of the circulating variable capital, which A continually advances to his labourers, flows back to him continually from the circulation, and only an alternating part stays continually tied up for the payment of wages. But a certain time elapses between the expenditure and the reflux, and meanwhile the money paid out for wages might, among other uses, serve for the monetisation of surplus-value. But we know, in the first place, that, the greater the time, the greater must be the supply of money which the capitalist A must keep continually in reserve. In the second place, the labourer spends the money, buys commodities for it, and thus monetises to that extent the surplus-value contained in them. Without penetrating any further into the question at this point, it is sufficient to say that the consumption of the entire capitalist class, and of the unproductive persons dependent upon it, keeps step with that of the labouring class; so that, simultaneously with the money thrown into circulation by the labouring class, the capitalists must throw money into it, in order to spend their surplus-value as revenue. Hence money must be withdrawn from circulation for it. This explanation would merely reduce the quantity of money required, but not do away with it.
‘Finally it might be said: A large amount of money is continually thrown into circulation when fixed capital is first invested, and it is not recovered from the circulation until after the lapse of years, by him who threw it into circulation. May not this sum suffice to monetise the surplus-value? The answer to this is that the employment as fixed capital, if not by him who threw it into circulation, then by some one else, is probably implied in the sum of 500 p.st. (which includes the formation of a hoard for needed reserve funds). Besides, it is already assumed in the amount expended for the purchase of products serving as fixed capital, that the surplus-value contained in them is also paid, and the question is precisely, where the money for this purpose came from.’[136]
This parting shot, by the way, is particularly noteworthy in that Marx here expressly repudiates the attempt to explain realisation of the surplus value, even in the case of simple reproduction, by means of a hoard formed for the periodical renewal of fixed capital. Later on, with a view to realising the surplus value under the much more difficult conditions of accumulation, he makes more than one tentative effort to substantiate an explanation of this type which he himself dismissed as a ‘plausible subterfuge’.
Then follows a solution which has a somewhat disconcerting ring: ‘The general reply has already been given: When a mass of commodities valued at x times 1,000 p.st. has to circulate, it changes absolutely nothing in the quantity of the money required for this circulation, whether this mass of commodities contains any surplus-value or not, and whether this mass of commodities has been produced capitalistically or not. In other words, the problem itself does not exist. All other conditions being given, such as velocity of circulation of money, etc., a definite sum of money is required in order to circulate the value of commodities worth x times 1,000 p.st., quite independently of the fact how much or how little of this value falls to the share of the direct producers of these commodities. So far as any problem exists here, it coincides with the general problem: Where does all the money required for the circulation of the commodities of a certain country come from?’[137]
The argument is quite sound. The answer to the general question about the origin of the money for putting a certain quantity of commodities into circulation within a country will also tell us where the money for circulating the surplus value comes from. The division of the bulk of value contained in these commodities into constant and variable capital, and surplus value, does not exist from the angle of the circulation of money—in this connection, it is quite meaningless. But it is only from the angle of the circulation of money, or of a simple commodity circulation, that the problem has no existence. Under the aspect of social reproduction as a whole, it is very real indeed; but it should not, of course, be put in that misleading form that brings us back to simple commodity circulation, where it has no meaning. We should not ask, accordingly: Where does the money required for realising the surplus value come from? but: Where are the consumers for this surplus value? It is they, for sure, who must have this money in hand in order to throw it into circulation. Thus, Marx himself, although he just now denied the problem to exist, keeps coming back to it time and again:
‘Now, there are only two points of departure: The capitalist and the labourer. All third classes of persons must either receive money for their services from these two classes, or, to the extent that they receive it without any equivalent services, they are joint owners of the surplus-value in the form of rent, interest, etc. The fact that the surplus-value does not all stay in the pocket of the industrial capitalist, but must be shared by him with other persons, has nothing to do with the present question. The question is: How does he maintain his surplus-value, not, how does he divide the money later after he has secured it? For the present case, the capitalist may as well be regarded as the sole owner of his surplus-value. As for the labourer it has already been said that he is but the secondary point of departure, while the capitalist is the primary starting point of the money thrown by the labourer into circulation. The money first advanced as variable capital is going through its second circulation, when the labourer spends it for the payment of means of subsistence.
‘The capitalist class, then, remains the sole point of departure of the circulation of money. If they need 400 p.st. for the payment of means of production, and 100 p.st. for the payment of labour-power, they throw 500 p.st. into circulation. But the surplus-value incorporated in the product, with a rate of surplus-value of 100 per cent, is equal to the value of 100 p.st. How can they continually draw 600 p.st. out of circulation, when they continually throw only 500 p.st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.’[138]
Marx further explodes another device which might conceivably be thought adequate to the problem, i.e. a more rapid turnover of money enabling a larger amount of value to circulate by means of a smaller amount of money. The dodge will not work, of course, since the velocity of money in circulation is already taken into account by equating the aggregate bulk of commodities with a certain number of pounds sterling. But then at last we seem in sight of a proper solution:
‘Indeed, paradoxical as it may appear at first sight, it is the capitalist class itself that throws the money into circulation which serves for the realisation of the surplus-value incorporated in the commodities. But, mark well, it is not thrown into circulation as advanced money, not as capital. The capitalist class spends it for their individual consumption. The money is not advanced by them, although they are the point of departure of its circulation.’[139]
This lucid and comprehensive account is the best evidence that the problem is not just imaginary but very real. It provides a solution, not by disclosing a new ‘source of money’ for the realisation of the surplus value, but by pointing out at last the consumers of this surplus value. We are still, on Marx’s assumption, within the bounds of simple reproduction; the capitalist class, that is to say, use the whole of their surplus value for personal consumption. Since the capitalists are the consumers of surplus value, it is not so much a paradox as a truism that they must, in the nature of things, possess the money for appropriating the objects of consumption, the natural form of this surplus value. The circulatory transaction of exchange is the necessary consequence of the fact that the individual capitalist cannot immediately consume his individual surplus value, and accordingly the individual surplus product, as could, for instance, the employer of slave labour. As a rule the natural material form of the surplus product tends to preclude such use. The aggregate surplus value of the capitalists in general is, however, contained in the total social product—as long as there is simple reproduction—as expressed by a corresponding quantity of consumer goods for the capitalist class, just as the sum total of variable capital has its corresponding equivalent in the quantity of consumer goods for the working class, and as the constant capital of all individual capitalists taken together is represented by material means of production in an equivalent quantity. In order to exchange the unconsumable individual surplus values for a corresponding amount of consumer goods, a double transaction of commodity exchange is needed: first, the sale of one’s own surplus product and then the purchase of consumer goods out of the surplus product of society. These two transactions can only take place among members of the capitalist class, among individual capitalists, which means that their agent, the money, thereby merely changes hands as between one capitalist and another without ever being alienated from the capitalist class in general. Since simple reproduction inevitably implies the exchange of equivalents, one and the same amount of money can serve year by year for the circulation of the surplus value, and only an excess of zeal will inspire the further query: where does the money which mediates the capitalists’ own consumption come from in the first place? This, question, however, reduces to a more general one: how did money capital initially come into the hands of the capitalists, that money capital of which they always retain a certain part for their personal consumption, apart from what they use for productive investment? Put in this way, however, the question belongs in the chapter of so-called ‘primitive accumulation’, i.e. the historical genesis of capital, going beyond the framework of an analysis of the process of circulation as well as of reproduction.
Thus the fact is clear and unequivocal—so long as we remain within the bounds of simple reproduction. Here the problem is solved by the premises themselves; in fact, the solution is already anticipated by the very concept of simple reproduction which indeed is based on the entire surplus value being consumed by the capitalist class. This implies that it must also be the latter who buy it, that is to say, individual capitalists must buy it from each other.
‘In the present case’, Marx says himself, ‘we had assumed, that the sum of money which the capitalist throws into circulation until the first surplus-value flows back to him, is exactly equal to the surplus-value which he is going to produce and monetise. This is obviously an arbitrary assumption, so far as, the individual capitalist is concerned. But it must be correct when applied to the entire capitalist class, when simple reproduction is assumed. It expresses the same thing that this assumption does, namely, that the entire surplus-value is consumed unproductively, but it only, not any portion of the original capital stock.’[140]
But simple reproduction on a capitalist basis is after all an imaginary quantity in economic theory: no more and no less legitimate, and quite as unavoidable as √−1 in mathematics. What is worse, it cannot offer any help at all with the problem of realising the surplus value in real life, i.e. with regard to enlarged reproduction or accumulation. Marx himself says so for a second time in the further development of his analysis.
Where does the money for realising the surplus value come from if there is accumulation, i.e. not consumption but capitalisation of part of the surplus value? Marx’s first answer is as follows:
‘In the first place, the additional money-capital required for the function of the increasing productive capital is supplied by that portion of the realised surplus-value which is thrown into circulation by the capitalists as money-capital, not as the money form of their revenue. The money is already present in the hands of the capitalists. Only its employment is different.’[141]
Our investigation of the reproductive process has already made us familiar with this explanation, and we are equally familiar with its defects; for one thing, the answer rests on the moment of the first transition from simple reproduction to accumulation. The capitalists only yesterday consumed their entire surplus value, and thus had in hand an appropriate amount of money for their circulation. To-day they decide to ‘save’ part of the surplus value and to invest it productively instead of squandering it. Provided that material means of production were manufactured instead of luxury goods, they need only put part of their personal money fund to a different use. But the transition from simple reproduction to expanded reproduction is no less a theoretical fiction than simple reproduction of capital itself, for which reason Marx immediately goes on to say:
‘Now, by means of the additional productive capital, its product, an additional quantity of commodities, is thrown into circulation. Together with this additional quantity of commodities, a portion of the additional money required for its circulation is thrown into circulation, so far as the value of this mass of commodities is equal to that of the productive capital consumed in their production. This additional quantity of money has precisely been advanced as an additional money-capital, and therefore it flows back to the capitalist through the turn-over of his capital. Here the same question reappears, which we met previously. Where does the additional money come from, by which the additional surplus-value now contained in the form of commodities is to be realised?’[142]
The problem could not be put more precisely. But instead of a solution, there follows the surprising conclusion:
‘The general reply is again the same. The sum total of the prices of the commodities has been increased, not because the prices of a given quantity of commodities have risen, but because the mass of the commodities now circulating is greater than that of the previously circulating commodities, and because this increase has not been offset by a fall in prices. The additional money required for the circulation of this greater quantity of commodities of greater value must be secured, either by greater economy in the circulating quantity of money—whether by means of balancing payments, etc., or by some measure which accelerates the circulation of the same coins,—or by the transformation of money from the form of a hoard into that of a circulating medium.’[143]
All this amounts to an exposition along these lines: under conditions of developing and growing accumulation, capitalist reproduction dumps ever larger masses of commodity values on the market. To put this commodity mass of a continually increasing value into circulation requires an ever larger amount of money. This increasing amount of money must be found somehow or other. All this is, no doubt, plausible and correct as far as it goes, but our problem is not solved, it is merely wished away.
One thing or the other! Either we regard the aggregate social product in a capitalist economy simply as a mass, a conglomeration of commodities of a certain value, seeing under conditions of accumulation, a mere increase in this undifferentiated mass of commodities and in the bulk of its value. Then all we need say is that a corresponding quantity of money is required for circulating this bulk of value, that with an increasing bulk of value the quantity of money must also increase, unless this growth of value is offset by acceleration of, and economy in, the traffic. And the final question, where does all money originally come from, could then be answered on Marx’s recipe: from the gold mines. This, of course, is one way of looking at things, that of simple commodity circulation. But in that case there is no need to drag in concepts such as constant and variable capital, or surplus value, which have no place in simple commodity circulation, belonging essentially to the circulation of capitals and to social reproduction; nor is there need to inquire for sources of money for the realisation of the social surplus value under conditions of first simple, and then enlarged, reproduction. Under the aspect of simple commodity circulation puzzles of this kind are without meaning or content. But once these questions have been raised, once the course has been set for an investigation into the circulation of capitals and social reproduction, there can be no appealing to the sphere of simple commodity circulation, where there is no such problem at all, and consequently no solution to it. There can be no looking for the answer there, and then saying triumphantly that the problem has long been solved and in fact never really existed.
All this time, it appears, Marx has been tackling the problem from a wrong approach. No intelligent purpose can be served by asking for the source of the money needed to realise the surplus value. The question is rather where the demand can arise—to find an effective demand for the surplus value. If the problem had been put in this way at the start, no such long-winded detours would have been needed to show whether it can be solved or not. On the basis of simple reproduction, the matter is easy enough: since all surplus value is consumed by the capitalists, they themselves are the buyers and provide the full demand for the social surplus value, and by the same token they must also have the requisite cash in hand for circulation of the surplus value. But in this showing it is quite evident that under conditions of accumulation, i.e. of capitalisation of part of the surplus value, it cannot, ex hypothesi, be the capitalists themselves who buy the entire surplus value, that they cannot possibly realise it. True, if the capitalised surplus value is to be realised at all, money must be forthcoming in adequate quantities for its realisation. But it is quite impossible that this money should come from the purse of the capitalist class itself. Just because accumulation is postulated, the capitalists cannot buy their surplus value themselves, even though they might, in abstracto, have the money to do so. But who else could provide the demand for the commodities incorporating the capitalised surplus value?
‘Apart from this class (the capitalists), there is, according to our assumption—the general and exclusive domination of capitalist production—no other class but the working class. All that the working class buys is equal to the sum total of its wages, equal to the sum total of the variable capital advanced by the entire capitalist class.’[144]
The workers, then, are even less able than the capitalist class to realise the capitalised surplus value. Somebody must buy it, if the capitalists are still to be able to recover the capital they have accumulated and advanced; and yet—we cannot think of any buyers other than capitalists and workers. ‘How can the entire capitalist class accumulate money under such circumstances?’[144]
Realisation of the surplus value outside the only two existing classes of society appears as indispensable as it looks impossible. The accumulation of capital has been caught in a vicious circle. At any rate, the second volume of Capital offers no way out.
If we should now ask why Marx’s Capital affords no solution to this important problem of the accumulation of capital, we must bear in mind above all that this second volume is not a finished whole but a manuscript that stops short half way through.
The external form of its last chapters in particular proves them to be in the nature of notes, intended to clear the author’s own mind, rather than final conclusions ready for the reader’s enlightenment. This fact is amply authenticated by the man best in the position to know: Friedrich Engels, who edited the second volume. In his introduction to the second volume he reports in detail on the conditions of the preliminary studies and the manuscripts Marx had left, which were to form the basis of this volume:
‘The mere enumeration of the manuscripts left by Marx as a basis for Volume II proves the unparalleled conscientiousness and strict self-criticism which he practised in his endeavour to fully elaborate his great economic discoveries before he published them. This self-criticism rarely permitted him to adapt his presentation of the subject, in content as well as in form, to his ever widening horizon, which he enlarged by incessant study.
‘The material ... consists of the following parts: First, a manuscript entitled “A contribution to the Critique of Political Economy”, containing 1,472 quarto pages in 23 divisions, written in the time from August, 1861, to June, 1863. It is a continuation of the work of the same title, the first volume of which appeared in Berlin, in 1859.... This manuscript, valuable though it is, could not be used in the present edition of Volume II.
‘The manuscript next following in the order of time is that of Volume III....
‘The period after the publication of Volume I, which is next in order, is represented by a collection of four manuscripts for Volume II, marked I-IV by Marx himself. Manuscript I (150 pages) presumably written in 1865 or 1867, is the first independent, but more or less fragmentary, elaboration of the questions now contained in Volume II. This manuscript is likewise unsuited for this edition. Manuscript III is partly a compilation of quotations and references to the manuscripts containing Marx’s extracts and comments, most of them relating to the first section of Volume II, partly an elaboration of special points, particularly a critique of Adam Smith’s statements as to fixed and circulating capital and the source of profits; furthermore, a discussion of the relations of the rate of surplus-value to the rate of profit, which belongs in Volume III. The references furnished little that was new, while the elaborations for Volumes II and III were rendered valueless through subsequent revisions and had to be ruled out for the greater part. Manuscript IV is an elaboration, ready for printing, of the first section and the first chapters of the second section of Volume II, and has been used in its proper place. Although it was found that this manuscript had been written earlier than Manuscript II, yet it was far more finished in form and could be used with advantage for the corresponding part of this volume. I had to add only a few supplementary parts of Manuscript II. This last manuscript is the only fairly completed elaboration of Volume II and dates from the year 1870. The notes for the final revision, which I shall mention immediately, say explicitly: “The second elaboration must be used as a basis.”
‘There is another interruption after 1870, due mainly to ill health. Marx employed this time in his customary way, that is to say he studied agronomics, agricultural conditions in America and especially Russia, the money market and banking institutions, and finally natural sciences, such as geology and physiology. Independent mathematical studies also form a large part of the numerous manuscripts of this period. In the beginning of 1877, Marx had recovered sufficiently to resume once more his chosen life’s work. The beginning of 1877 is marked by references and notes from the above named four manuscripts intended for a new elaboration of Volume II, the beginning of which is represented by Manuscript V (56 pages in folio). It comprises the first four chapters and is not very fully worked out. Essential points are treated in footnotes. The material is rather collected than sifted, but it is the last complete presentation of this most important first section. A preliminary attempt to prepare this part for the printer was made in Manuscript VI (after October, 1877, and before July, 1878), embracing 17 quarto pages, the greater part of the first chapter. A second and last attempt was made in Manuscript VII, dated July 2, 1878, and consisting of 7 pages in folio.
‘About this time Marx seems to have realised that he would never be able to complete the second and third volume in a manner satisfactory to himself, unless a complete revolution in his health took place. Manuscripts V-VIII show traces of hard struggles against depressing physical conditions far too frequently to be ignored. The most difficult part of the first section had been worked over in Manuscript V. The remainder of the first, and the entire second section, with the exception of Chapter 17, presented no great theoretical difficulties. But the third section, dealing with the reproduction and circulation of social capital, seemed to be very much in need of revision. Manuscript II, it must be pointed out, had first treated of this reproduction without regard to the circulation which is instrumental in effecting it, and then taken up the same question with regard to circulation. It was the intention of Marx to eliminate this section and to reconstruct it in such a way that it would conform to his wider grasp of the subject. This gave rise to Manuscript VIII, containing only 70 pages in quarto. A comparison with Section III, as printed after deducting the paragraphs inserted out of Manuscript II, shows the amount of matter compressed by Marx into this space.
‘Manuscript VIII is likewise merely a preliminary presentation of the subject, and its main object was to ascertain and develop the new points of view not set forth in Manuscript II, while those points were ignored about which there was nothing new to say. An essential part of Chapter 17, Section II, which is more or less relevant to Section III, was at the same time drawn into this discussion and expanded. The logical sequence was frequently interrupted, the treatment of the subject was incomplete in various places, and especially the conclusion was very fragmentary. But Marx expressed as nearly as possible what he intended to say on the subject.
‘This is the material for Volume II, out of which I was supposed “to make something”, as Marx said to his daughter Eleanor shortly before his death.’[145]
We cannot but admire this ‘something’ which Engels managed to ‘make’ from material of such a kind. As far as our present problem is concerned, however, this detailed report makes it clear that no more than the first two of the three sections that make up volume ii were anything like ready for print in the manuscripts Marx left: the section ‘On the Circulation of Money and Commodity Capital’ and on ‘The Causes of Circulation and the Turnover of Capital’. The third section which treats of the reproduction of total capital is merely a collection of fragments which Marx himself considered to be ‘very much in need of revision.’ Yet it is the last part of this section, i.e. chapter 21, ‘On Accumulation and Enlarged Reproduction’, which is of primary importance in the present context, and of the whole book this is the most incomplete. It comprises thirty-five pages of print in all and breaks off right in the middle of the analysis.
Besides this extraneous circumstance, we would suggest another point of great influence. Marx’s investigation of the social reproductive process starts off, as we have seen, from the analysis of Adam Smith which came to grief, among other reasons, because of the erroneous doctrine that the price of all commodities is composed of v + s. Polemics against this dogma dominated Marx’s entire analysis of the reproductive process. He devoted all his attention to proving that the total capital of society must serve, not only for consumption to the full amount of the various sources of revenue, but also for renewal of the constant capital. And inasmuch as the purest theoretical form for this line of reasoning is given, not by enlarged reproduction, but by simple reproduction, Marx tends to consider reproduction mainly from a point of view that is the very opposite of accumulation, from the assumption that the entire surplus value is consumed by the capitalists. How greatly these polemics influenced his analysis is proved by his returning time and again in the course of his work to the attack on Adam Smith from the most various angles. So already in volume i, the following pages are devoted to it: vol. i, sect. 7, chap. 24, (2), pp. 588-602, and in vol. ii, pp. 417-56, p. 473, pp. 504-8, and pp. 554 f.
Marx again takes up the question of total reproduction in volume iii but from the start becomes once more involved with the problem set by Smith to which he devotes the whole of his 49th chapter and most of chapter 50 (pp. 968-92 and 992-1022). Finally, in Theorien ueber den Mehrwert, we again find detailed polemics against Smith’s dogma: pp. 164-253 in vol. i, and pp. 92, 95, 126, 233, and 262 in vol. ii, part 2. Marx repeatedly stressed and emphasised the fact that he considered replacement of the constant capital from the aggregate social product the most difficult and important problem of reproduction.[146] The other problem, that of accumulation, i.e. realisation of the surplus value for the purpose of capitalisation, was thus pushed into the background, so that in the end Marx hardly touched upon it.
This problem being of such paramount importance for capitalist economy, it is not surprising that bourgeois economists have dealt with it again and again. Attempts to grapple with this vital question for capitalist economy, with the question whether capital accumulation is possible in practice, come up time and again in the history of economic theory. To these historical attempts, before and after Marx, at solving this problem we shall now turn.
SECTION TWO
★
HISTORICAL EXPOSITION OF THE PROBLEM
★
FIRST ROUND
SISMONDI-MALTHUS v. SAY-RICARDO—MacCULLOCH
CHAPTER X
SISMONDI’S THEORY OF REPRODUCTION
The first grave doubts as to the divine character of the capitalist order came to bourgeois economists under the immediate impact of the first crises of 1815 and 1818-19 in England. Even then it had still been external circumstances which led up to these crises, and they appeared to be ephemeral. Napoleon’s blockade of the Continent which for a time had cut off England from her European markets and had favoured a considerable development of home industries in some of the continental countries, was partly responsible; for the rest the material exhaustion of the Continent, owing to the long period of war, made for a smaller demand for English products than had been expected when the blockade was lifted. Still, these early crises were enough to reveal to the contemporary world the sinister aspects of this best of all social orders. Glutted markets, shops filled with goods nobody could buy, frequent bankruptcies—and on the other hand the glaring poverty of the toiling masses—for the first time all this starkly met the eyes of theorists who had preached the gospel of the beautiful harmonies of bourgeois laissez-faire and had sung its praises in all keys. All contemporary trade reports, periodicals and travellers’ notes told of the losses sustained by English merchants. In Italy, Germany, Russia, and Brazil, the English disposed of their commodity stocks at a loss of anything between 25 per cent and 331⁄3 per cent. People at the Cape of Good Hope in 1818 complained that all the shops were flooded with European goods offered at lower prices than in Europe and still unmarketable. From Calcutta there came similar complaints. From New Holland whole cargoes returned to England. In the United States, a contemporary traveller reports, ‘there was no town nor hamlet from one end to the other of this immense and prosperous continent where the amount of commodities displayed for sale did not considerably exceed the means of the purchasers, although the vendors tried to attract custom by long-term credits, all sorts of facilities for payment, payment by instalments and acceptance of payment in kind’.
At the same time, England was hearing the desperate outcry of her workers. The Edinburgh Review of 1820[147] quotes an address by the Nottingham frame-work knitters which contained the following statements:
‘After working from 14 to 16 hours a day, we only earn from 4s. to 7s. a week, to maintain our wives and families upon; and we farther state, that although we have substituted bread and water, or potatoes and salt, for that more wholesome food an Englishman’s table used to abound with, we have repeatedly retired, after a heavy day’s labour, and have been under the necessity of putting our children supperless to bed, to stifle the cries of hunger. We can most solemnly declare, that for the last eighteen months we have scarcely known what it was to be free from the pangs of hunger.’[148]
Then Owen in England, and Sismondi in France, almost simultaneously raised their voices in a weighty indictment of capitalist society. Owen, as a hard-headed Englishman and citizen of the leading industrial state, constituted himself spokesman for a generous social reform, whereas the petty-bourgeois Swiss rather lost himself in sweeping denunciations of the imperfections of the existing social order and of classical economics. And yet, by so doing, Sismondi gave bourgeois economics a much harder nut to crack than Owen, whose fertile practical activities were directly applied to the proletariat.
Sismondi explained in some detail that the impetus for his social criticism came from England, and especially her first crisis. In the second edition of his Nouveaux Principes d’Économie Politique Ou De La Richesse Dans Ses Rapports Avec La Population,[149] eight years after the publication of the first edition in 1819, he writes as follows:
‘It was in England that I performed the task of preparing the new edition. England has given birth to the most celebrated Political Economists: the science is cultivated even at this time with increased ardour.... Universal competition or the effort always to produce more and always cheaper, has long been the system in England, a system which I have attacked as dangerous. This system has used production by manufacture to advance with gigantic steps, but it has from time to time precipitated the manufacturers into frightful distress. It was in presence of these convulsions of wealth that I thought I ought to place myself, to review my reasonings and compare them with facts.—The study of England has confirmed me in my “New Principles”. In this astonishing country, which seems to be subject to a great experiment for the instruction of the rest of the world, I have seen production increasing, whilst enjoyments were diminishing. The mass of the nation here, no less than philosophers, seems to forget that the increase of wealth is not the end in political economy, but its instrument in procuring the happiness of all. I sought for this happiness in every class, and I could nowhere find it. The high English aristocracy has indeed arrived to a degree of wealth and luxury which surpasses all that can be seen in other nations; nevertheless it does not itself enjoy the opulence which it seems to have acquired at the expense of the other classes; security is wanting and in every family most of the individuals experience privation rather than abundance.... Below this titled and not titled aristocracy, I see commerce occupy a distinguished rank; its enterprises embrace the whole world, its agents brave the ices of the poles, and the heats of the equator, whilst every one of its leading men, meeting on Exchange, can dispose of thousands. At the same time, in the streets of London, and in those of the other great towns of England, the shops display goods sufficient for the consumption of the world.—But have riches secured to the English merchant the kind of happiness which they ought to secure him? No: in no country are failures so frequent, nowhere are those colossal fortunes, sufficient in themselves to supply a public loan to uphold an Empire, or a republic, overthrown with as much rapidity. All complain that business is scarce, difficult, not remunerative. Twice, within an interval of a few years, a terrible crisis has ruined part of the bankers, and spread desolation among all the English manufacturers. At the same time another crisis has ruined the farmers, and been felt in its rebound by retail dealers. On the other hand, commerce, in spite of its immense extent, has ceased to call for young men who have their fortunes to make; every place is occupied, in the superior ranks of society no less than in the inferior; the greater number offer their labour in vain, without being able to obtain remuneration.—Has, then, this national opulence, whose material progress strikes every eye, nevertheless tended to the advantage of the poor? Not so. The people of England are destitute of comfort now, and of security for the future. There are no longer yeomen, they have been obliged to become day labourers. In the towns there are scarcely any longer artisans, or independent heads of a small business, but only manufacturers. The operative, to employ a word which the system has created, does not know what it is to have a station; he only gains wages, and as these wages cannot suffice for all seasons, he is almost every year reduced to ask alms from the poor-rates.—This opulent nation has found it more economical to sell all the gold and silver which she possessed, to do without coin, and to depend entirely on a paper circulation; she has thus voluntarily deprived herself of the most valuable of all the advantages of coin: stability of value. The holders of the notes of the provincial banks run the risk every day of being ruined by frequent and, as it were, epidemic failures of the bankers; and the whole state is exposed to a convulsion in the fortune of every individual, if an invasion or a revolution should shake the credit of the national bank. The English nation has found it more economical to give up those modes of cultivation which require much hand-labour, and she has dismissed half the cultivators who lived in the fields. She has found it more economical to supersede workmen by steam-engines; she has dismissed ... the operatives in towns, and weavers giving place to power-looms, are now sinking under famine; she has found it more economical to reduce all working people to the lowest possible wages on which they can subsist, and these working people being no longer anything but a rabble, have not feared plunging into still deeper misery by the addition of an increasing family. She has found it more economical to feed the Irish with potatoes, and clothe them in rags; and now every packet brings legions of Irish, who, working for less than the English, drive them from every employment. What is the fruit of this immense accumulation of wealth? Have they had any other effect than to make every class partake of care, privation and the danger of complete ruin? Has not England, by forgetting men for things, sacrificed the end to the means?’[150]
This mirror, held up to capitalist society almost a century before the time of writing, is clear and comprehensive enough in all conscience. Sismondi put his finger on every one of the sore spots of bourgeois economics: the ruin of small enterprise; the drift from the country; the proletarisation of the middle classes; the impoverishment of the workers; the displacement of the worker by the machine; unemployment; the dangers of the credit system; social antagonisms; the insecurity of existence; crises and anarchy. His harsh, emphatic scepticism struck a specially shrill discord with the complacent optimism, the idle worship of harmony as preached by vulgar economics which, in the person of MacCulloch in England and of Say in France, was becoming the fashion in both countries. It is easy to imagine what a deep and painful impression remarks like the following were bound to make:
‘There can only be luxury if it is bought with another’s labour; only those will work hard and untiringly who have to do so in order to get not the frills but the very necessities of life.’[151]
‘Although the invention of the machine which increases man’s capacity, is a blessing for mankind, it is made into a scourge for the poor by the unjust distribution we make of its benefits.’[152]
‘The gain of an employer of labour is sometimes nothing if not despoiling the worker he employs; he does not benefit because his enterprise produces much more than it costs, but because he does not pay all the costs, because he does not accord the labourer a remuneration equal to his work. Such an industry is a social evil, for it reduces those who perform the work to utmost poverty, assuring to those who direct it but the ordinary profits on capital.’[153]
‘Amongst those who share in the national income, one group acquires new rights each year by new labours, the other have previously acquired permanent rights by reason of a primary effort which makes a year’s labour more advantageous.’[154]
‘Nothing can prevent that every new discovery in applied mechanics should diminish the working population by that much. To this danger it is constantly exposed, and society provides no remedy for it.’[155]
‘A time will come, no doubt, when our descendants will condemn us as barbarians because we have left the working classes without security, just as we already condemn, as they also will, as barbarian the nations who reduced those same classes to slavery.’[156]
Sismondi’s criticism thus goes right to the root of the matter; for him there can be no compromise or evasion which might try to gloss over the dark aspects of capitalist enrichment he exposed, as merely temporary shortcomings of a transition period. He concludes his investigation with the following rejoinder to Say:
‘For seven years I have indicated this malady of the social organism, and for seven years it has continuously increased. I cannot regard such prolonged suffering as the mere frictions which always accompany a change. Going back to the origin of income, I believe to have shown the ills we experience to be the consequence of a flaw in our organisation, to have shown that they are not likely to come to an end.’[157]
The disproportion between capitalist production and the distribution of incomes determined by the former appears to him the source of all evil. This is the point from which he comes to the problem of accumulation with which we are now concerned.
The main thread of his criticism against classical economics is this: capitalist production is encouraged to expand indefinitely without any regard to consumption; consumption, however, is determined by income.
‘All the modern economists, in fact, have allowed that the fortune of the public, being only the aggregation of private fortunes, has its origin, is augmented, distributed and destroyed by the same means as the fortune of each individual. They all know perfectly well, that in a private fortune, the most important fact to consider is the income, and that by the income must be regulated consumption or expenditure, or the capital will be destroyed. But as, in the fortune of the public, the capital of one becomes the income of another, they have been perplexed to decide what was capital, and what income, and they have therefore found it more simple to leave the latter entirely out of their calculations. By neglecting a quality so essential to be determined, Say and Ricardo have arrived at the conclusion, that consumption is an unlimited power, or at least having no limits but those of production, whilst it is in fact limited by income.... They announced that whatever abundance might be produced, it would always find consumers, and they have encouraged the producers to cause that glut in the markets, which at this time occasions the distress of the civilised world; whereas they should have forewarned the producers that they could only reckon on those consumers who possessed income.’[158]
Sismondi thus grounds his views in a theory of income. What is income, and what is capital? He pays the greatest attention to this distinction which he calls ‘the most abstract and difficult question of political economics’. The fourth chapter of his second book is devoted to this problem. As usual, Sismondi starts his investigation with Robinson Crusoe. For such a one, the distinction between capital and income was still ‘confused’; it becomes ‘essential’ only in society. Yet in society, too, this distinction is very difficult, largely on account of the already familiar myth of bourgeois economics, according to which ‘the capital of one becomes the income of another’, and vice versa. Adam Smith was responsible for this confusion which was then elevated to an axiom by Say in justification of mental inertia and superficiality. It was loyally accepted by Sismondi.
‘The nature of capital and of income are always confused by the mind; we see that what is income for one becomes capital for another, and the same object, in passing from hand to hand, successively acquires different denominations; the value which becomes detached from an object that has been consumed, appears as a metaphysical quantity which one expends and the other exchanges, which for one perishes together with the object itself and which for the other renews itself and lasts for the time of circulation.’[159]
After this promising introduction, Sismondi dives right into the difficult problem and declares: all wealth is a product of labour; income is part of wealth, and must therefore have the same origin. However, it is ‘customary’ to recognise three kinds of income, called rent, profit and wage respectively, which spring from the three sources of ‘land, accumulated capital and labour’. As to the first thesis, he is obviously on the wrong tack. As the wealth of a society, i.e. as the aggregate of useful objects, of use-values, wealth is not merely a product of labour but also of nature who both supplies raw materials and provides the means to support human labour. Income, on the other hand, is a concept of value. It indicates the amount to which an individual or individuals can dispose over part of the wealth of society or of the aggregate social product. In view of Sismondi’s insistence that social income is part of social wealth, we might assume him to understand by social income the actual annual fund for consumption. The remaining part of wealth that has not been consumed, then, is the capital of society. Thus we obtain at least a vague outline of the required distinction between capital and income on a social basis. At the very next moment, however, Sismondi accepts the ‘customary’ distinction between three kinds of income, only one of which derives exclusively from ‘accumulated capital’ while in the other two ‘land’ or ‘labour’ are conjoined with capital. The concept of capital thus at once becomes hazy again. However, let us see what Sismondi has to say about the origin of these three kinds of income which betray a rift in the foundations of society. He is right to take a certain development of labour productivity as his point of departure.
‘By reason of the advances both in industry and science, by which man has subjugated the forces of nature, every worker can produce more, far more, in a day than he needs to consume.’[160]
Sismondi thus rightly stresses the fact that the productivity of labour is an indispensable condition for the historical foundation of exploitation. Yet he goes on to explain the actual origin of exploitation in a way typical of bourgeois economics: ‘But even though his labour produces wealth, this wealth, if he is called upon to enjoy it, will make him less and less fit for work. Besides, wealth hardly ever remains in the possession of the man who must live by the work of his hands.’[160]
Thus he makes exploitation and class antagonism the necessary spur to production, quite in accord with the followers of Ricardo and Malthus. But now he comes to the real cause of exploitation, the divorce of labour power from the means of production.