(2) One portion of the 400 s of (a), equal to the 100 v of (b); in other words, one-quarter of the surplus-value of (a) is exchanged for luxuries in the following way: The laborers of (b) received from the capitalists of their subdivision 100 p. st. in wages. With this amount these laborers bought onequarter of the surplus-value of (a), in other words, commodities consisting of necessities of life. The capitalists of (a) buy with this same money articles of luxury to the same amount, which equals 100 v of (b), or one-half of the entire product in luxuries of (b). In this way the capitalists of (b) recover their variable capital in the form of money and are enabled to resume reproduction after having invested this amount once more in labor-power, since the entire constant capital of the whole department II has been reproduced by the exchange between I (v+s) and lie. The labor-power of the laborers of lib, the producers of articles of luxury, is under these circumstances, only saleable because the product created by them as an equivalent for their own wages is consumed by the capitalists of Ila. (The same applies to the sale of the labor-power of I, since the lie for which I (v + s) is exchanged, consists of both articles of luxury and necessities of life, and that which is reproduced by means of I (v + s) consists of the means of production of both luxuries and necessities.)
(3) We now come to the exchange between a and b, to the extent that it is merely a transaction between the capitalists of these two subdivisions. So far we have disposed of the variable capital (400) v and of one portion of the surplusvalue (100) s in (a), and of the variable capital (100) v in (b). We had furthermore assumed that the average propor- 470 Capital.
tion of the expenditure of the capitalist revenue was in both classes two-fifths for luxuries and three-fifths for necessities. Apart from the 100 thus expended for luxuries, the entire department therefore still has to spend 60 for luxuries in (a) and the same proportion, or 40, in (b).
(Ha) is then divided into 240 for necessities and 160 for (lib) s is divided into 60 for necessities and 40 for luxuries; 60 + 40 = 100s (lib). The last 40 are consumed by this class out of its own product (two-fifths of its surplusvalue); the 60 for necessities are obtained by this class through the exchange of 60 of its surplus-value for 60 s of a.
We have, then, for the entire capitalist class of II, the following situation (v plus s in subdivision (a) consisting of necessities, in subdivision (b) of luxuries): Considering a and b, each by itself, we have the transaction: If we retain, for the sake of simplicity, the same proportion between the variable and constant capital of each subdivision (which, by the way, is not at all necessary), we obtain for 400 v (a) a constant capital of 1600, and for 100 v (b) a constant capital of 400, and we have the following two subdivisions a and b in department II: Accordingly, 1600 of the 2000 He in articles of consump- Simple Reproduction. 471 tion, which are exchanged for 2000 I (v + s), are disposed of for means of production of necessities of life, and 400 for means of production of luxuries.
The 2000 I (v + s)., then, would be divided into (800 v + 800 s) I, for the 1600 means of production of necessities of life in section a, and (200 v + 200 s) I, for the 400 means of production of luxuries in b.
A considerable part of the instruments of labor, strictly so called, as well as of the raw and auxiliary materials, etc., is homogeneous for both departments. But so far as the transaction of the exchanges of the various portions of value of the total product I (v + s) are concerned, such a division would be immaterial. Both the above named 800 v of I and 200 v of I are realized by the spending of wages for articles of consumption 1000 c of II, and the money-capital advanced for this purpose is uniformly distributed, on its return, among the capitalist producers of I, reproducing their variable capital in money at the rate advanced by them. On the other hand, so far as the realization of the 1000 s of I is concerned, the capitalists will likewise draw uniformly, in proportion to the magnitude of their surplus-value, 600 Ila and 400 lib out of the entire second half of He, equal to 1000; in other words, those who make up for the constant capital of Ila will draw 480, or threefifths, out of 600 c of Ila, and 320, or two-fifths, out of 400 c of lib, a total of 800; while those who make up for the constant capital of lib will draw 120, or three-fifths out of 600 c of Ila and 80, or two-fifths out of 400 c of lib, a total That which is arbitrary in this case is the proportion of the variable to the constant capital of both I and II and so is the uniformity of this proportion for I and II and their subdivisions. As for this uniformity, it has been assumed merely for the sake of simplifying the matter, and it would not alter in any way the fundamental conditions of the problem and its solution, if we had assumed different proportions. However, the necessary result of all this, on the basis of simple reproduction, is the following: 472 Capital.
(1) That the new product in values created by the labor of one year in the natural form of means of production, divisible into v plus s, must be equal to the value of the constant capital c of the product in values created by the other part of annual labor, reproduced in the form of articles of consumption. If it were smaller than lie, it would be impossible for II to reproduce its entire constant capital; if it were greater, a surplus would remain unused. In either case, the assumption of simple reproduction would be violated.
(2) That in the case of annual product which is reproduced in the form of articles of consumption, the variable capital v advanced in the form of money can be realized by its recipients, to the extent that they are laborers producing luxuries, only in that portion of the necessities of life which embodies for its capitalist producers primarily their surplus-value; so that v, invested in the production of luxuries, is equal in value to a corresponding portion of s produced in the form of necessities, and must be smaller than the whole of this s, which is s of Ila; and that, finally, the variable capital of the capitalist producers of luxuries returns to them in the form of money only by means of the realization of that v in this portion of s. This phenomenon is quite analogous to the realization of I (v +s) in lie; only that in the second case, it is the v of lib which is realized in a portion of s of Ila of the same value. These conditions determine the proportions of the various quantities in every distribution of the total annual product, to the extent that it actually enters into the process of the annual reproduction promoted by circulation. I (v+s) can be realized only in lie, and lie can renew its function as a component part of productive capital only by means of this realization; in the same way, the v of lib can be realized only in a portion of s of Ila, and v of lib can only thus be reconverted into the form of money-capital. Of course, all this applies only to the extent that it is a result of the process of reproduction itself, so that the capitalists of ITb do not, for instance, take up money-capital for v by Simple Reproduction. 473 credit from others. So far as mere quantity is concerned, the transactions for the exchange of the various portions of the annual product can take place only in the way indicated above, so long as the scale and the conditions determining value remain stationary, and so long as these strict conditions are not altered by the commerce with foreign countries.
Now, if we were to say after the manner of Adam Smith that I(v + s) resolves itself in He, and He resolves itself into I(v + s), or, as he says more frequently and more absurdly, I(v + s) constitutes the component parts of the price (or value in exchange, as he has it) of He, and He constitutes the entire component part of the value of I(v + s), then we could and should say that the v of lib resolves itself into s of Ha, or the s of Ha into the v of lib, or the v of lib forms a component part of the s of Ila, or, vice versa, the surplus-value thus resolves itself into wages, or into variable capital, and the variable capital forms a component part of the surplus-value. This absurdity is indeed found in Adam Smith, since according to him wages are determined by the value of the necessities of life, and the values of these commodities in their turn by the value of the wages (variable capital) and surplus-value contained in them. He is so absorbed in the fractional parts, into which the product in values of one working day is divided on the basis of capitalist production — namely into v plus s — that he quite forgets that it is immaterial in the simple exchange of commodities, whether the equivalents existing in various natural forms consist of paid or unpaid labor, since their production costs in either case the same amount of labor; and that it is also immaterial, whether the commodity of A is a means of production and that of B an article of consumption, and whether one commodity has to serve as a component part of capital after its sale, while another passes into the fund for consumption and is consumed, according to Adam, as revenue. The use to which the buyer puts his commodity does not fall within the scope of the exchange of commodities, does not concern the circulation, and does 474 Capital.
not affect the value of the commodity. This fact is no! in the least affected by the truth that, in the analysis of the circulation of the annual social product as a whole, the definite use for which it is intended, the mode of consumption of the various component parts of that product, must be taken into consideration.
In mentioning the fact that the conversion of the v of lib into a portion of the s of Ila of the same value, and the further transactions between the s of Ila and the s of lib, it is by no means assumed that either the individual capitalists of Ila and lib or their respective totalities divide their surplus-value in the same proportion between necessities of life and articles of luxury. The one may spend more in this consumption, the other more in that. On the basis of simple reproduction we have merely assumed that a sum of values equal to the entire surplus-value is realized in a fund for consumption. The limits are thus given. Within each department, the one may do more in a, the other in b. But this may compensate itself mutually, so that the capitalist classes of a and b, each taken as a whole, each participate in the same proportion in both of them. The proportions of value — the proportional share of the two classes of producers, a and b, in the total value of the product of II — and with them a definite quantitative proportion between the departments of production supplying those products, are necessarily given in any concrete case; only a proportion chosen as an illustration is a hypothetical one. It does not alter the qualitative elements of the proposition, if we select another illustration; only the quantitative determinations would be altered. But if any circumstances cause an actual change in the proportional magnitude of a and b, then the conditions of simple reproduction would likewise be changed correspondingly.
Since the v of lib is realized in an equivalent portion of the s of Ila, it follows that to the extent that the portion of the annual product consisting of luxuries grows, absorbing an increasing share of the labor-power in the production Simple Reproduction: 475 of luxuries, to the same extent is the reconversion of variable capital advanced by lib into money conditioned on the prodigality of the capitalist class, who spend a considerable portion of their surplus-value in articles of luxury. It is by this means that the reconversion of this variable capital into money is promoted, and thereby the existence and reproduction of the laborers employed in lib, by supplying them with the articles of consumption necessary for their life.
Every crisis momentarily lessens the consumption of luxuries. It retards and checks the reconversion of the v of lib into money-capital, permitting it only partially and thus throwing a certain number of the laborers employed in the production of luxuries out of employment, while it on the other hand clogs by this means the sale of the necessary articles of consumption and reduces it. And there are, besides, the unproductive laborers who are dismissed at the same time, laborers who receive for their services a portion of the funds spent by the capitalists for luxuries (these laborers are themselves luxuries), and who take part to a very considerable extent in the consumption of necessities of life, etc. The reverse takes place in periods of prosperity, particularly during the times of bogus prosperity, in which the relative value of money, expressed in commodities, decreases primarily for other reasons (without any other actual revolution in values), so that the price of commodities rises independently of their own value. It is not alone the consumption of necessities of life which increases at such times. The working class, actively re-inforced by its entire reserve army, also enjoys momentarily articles of luxury ordinarily out of its reach, articles which at other times constitute for the greater part "necessities" only for the capitalist class. This contributes to a rise in prices from this quarter.
It is purely a tautology to say that crises are caused by the scarcity of solvent consumers, or of a paying consumption. The capitalist system does not know any other modes of consumption but a paying one, except that of the pauper or of the "thief." If any commodities are unsaleable, it means that no solvent purchasers have been found for them, 476 Capital.
in other words, consumers (whether commodities are bought in the last instance for productive or individual consumption). But if one were to attempt to clothe this tautology with a semblance of a profounder justification by saying that the working class receive too small a portion of their own product, and the evil would be remedied by giving them a larger share of it, or raising their wages, we should reply that crises are precisely always preceded by a period in which wages rise generally and the working class actually get a larger share of the annual product intended for consumption. From the point of view of the advocates of "simple" (!) common sense, such a period should rather remove a crisis. It seems, then, that capitalist production comprises certain conditions which are independent of good or bad will and permit the working class to enjoy that relative prosperity only momentarily, and at that always as a harbinger of a coming crisis.41 We saw a while ago that the proportion between the production of necessities of life and that of luxuries requires the division of II (v + s) into Ila and lib, and thus of He into (Ha) c and (lib) c. Hence this division touches the character and the quantitative conditions of production to their very roots, and is an essential factor in its general conformation.
Simple reproduction is essentially directed toward consumption as an end, although the securing of surplus-value appears as the compelling motive of the individual capitalists; but surplus-value in this case, whatever may be its proportional magnitude, is supposed to serve merely for the individual consumption of the capitalist.
So far as simple reproduction is a part, and the most important one at that, of annual reproduction on an enlarged scale, consumption remains as a motive accompanying the accumulation of wealth as an end and distinguished from it. In reality, the matter appears more complicated, because some partners in the loot, the surplus-value of the capitalist, figure as consumers independently of him.
41 Advooates of the theory of crises of Rodbertus are requested to make a note of this.
Simple Reproduction. 47*7 V. THE PROMOTION OF THE TRANSACTIONS BY THE CIRCULA-TION OF MONEY.
So far as we have analyzed circulation up to the present, it proceeded between the various classes of producers as indicated in the following diagrams: (1) Between class I and class II: This disposes of the circulation of He (2000), which is exchanged for I (1000 v + 1000 s).
Leaving aside for the present the 4000 c of I, there still remains the circulation of v + s within class II. Now II (v + s) is subdivided between the subclasses Ila and lib in the following manner: The 400 v of a circulate within their own subclass; the laborers paid with these wages buy with them articles of consumption, produced by themselves, from their employers, the capitalists of Ila.
Since the capitalists of both subclasses spend three-fifths of their surplus-value in products of Ila (necessities) and two-fifths in products of lib (luxuries), the three-fifths of the surplus-value of a, or 240, are consumed within the subclass Ila itself; likewise two-fifths of the surplus-value of b (produced in the form of articles of luxury and existing as such) within the subclass lib.
There remains to be exchanged between Ila and lib: On the side of Ila: 160 s; on the side of lib: 10U v + 60 s. These compensate one another. The laborers of lib buy with their 100 in the form of money necessities of life to that amount from Ila. The capitalists of lib likewise buy necessities from Ila to the amount of three-fifths, or 60, of their surplus-value. The capitalists of Ila thus obtain the money required for investing, as above assumed, two-fifths of their surplus-value, or 160 s, in luxuries produced by lib (100 v held by the capitalists of lib as a product reimbursing them for 478 Capital the wages paid by them, and 60 s). The diagram for this transaction is the brackets indicating the amounts circulated and consumed within their own subclass.
The direct reflux of the money-capital advanced in variable capital, which takes place only in the case of the capitalist class of Ha who produce necessities of life, is but an expression, modified by special conditions, of the previously mentioned general law, that money advanced to the circulation by producers of commodities returns to them in the normal circulation of commodities. Consequently, if a money capitalist stands behind the producer of commodities and advances to the industrial capitalist money-capital (using this term in its strictest meaning, that is to say, capital-value in the form of money), the final point of reflux for this money is the pocket of this money-capitalist. In this way the mass of the circulating money belongs to that department of money-capital which is concentrated and organized in the form of banks, etc., although the money circulates more or less through all hands. The way in which this department advances its capital necessitates continually the final reflux to it in the form of money, although this takes place by way of the reconversion of the industrial capital into money-capital.
The circulation of commodities always requires two things: Commodities which are thrown into circulation, and money which is likewise thrown into it. "The process of circulation...does not, like direct barter of products, become extinguished upon the use-values changing places and hands. The money does not vanish on dropping out of the circuit of the metamorphosis of a given commodity. It is constantly being precipitated into new places in the arena of circulation vacated by other commodities," etc. (Volume I, chapter III, page 126.)
For instance, in the circulation between lie and I (v + s) we assumed that 500 pounds sterling in gold had been advanced for it. In the innumerable processes of circulation, Simple Reproduction. 479 into which the circulation between great social groups resolves itself, now this, now that producer will first appear in one or the other group as a buyer, throwing money into circulation. Quite aside from individual, circumstances, this is conditioned on the difference of the periods of production and thus of the turn-overs of the various commodity-capitals. Now II buys with these 500 pounds sterling means of production of the same value from I, and I buys from II articles of consumption valued at 500 pounds sterling. Hence the money flows back to II, but this department does not in any way increase its wealth by this reflux. It had thrown 500 pounds sterling in money into circulation and drew the same amount out of it in commodities; then it sells 500 pounds sterling worth of commodities and draws out of circulation the same amount in money; thus the 500 pounds sterling flow back to it. As a matter of fact, II has thrown into circulation 500 pounds sterling in money and 500 pounds sterling in commodities, a total of 1000 pounds sterling. It draws out of the circulation 500 pounds sterling in commodities and 500 pounds sterling in money. The circulation requires for the handling of 500 pounds sterling in commodities of I and 500 pounds sterling in commodities of II only 500 pounds sterling in money; and whoever has first advanced money in the purchase of commodities from other producers, recovers it when selling his own. Hence, if department I had been the first to buy commodities from II for 500 pounds sterling, and to sell later on to II commodities valued at 500 pounds sterling, these 500 pounds sterling would have returned to I instead of II.
In class I, the money invested in wages, in other words, the variable capital advanced in the form of money, does not return directly in this form, but indirectly by a detour. But in II, the 500 pounds sterling return directly from the laborers to the capitalists, and this return is always direct, in the case where purchase and sale takes place repeatedly between the same persons in such a way that they are acting alternately as buyers and sellers of commodities. The capitalist of II pays for the labor-power in money; he thereby 480 Capital.
incorporates his labor-power in his capital and assumes the role of an industrial capitalist over his laborers as wage earners only by means of this transaction in circulation, which is for him merely a conversion of money-capital into productive capital. Thereupon the laborer, who is in the first instance a seller of his own labor-power, assumes in the second instance the role of a buyer, a possessor of money, while the capitalist acts now as a seller of commodities. In this way the capitalist recovers the money invested by him in wages. Unless this sale of his commodities implies cheating, etc., and remains but an exchange of equivalents in money and commodities, it is not a process by which the capitalist enriches himself. He does not pay the laborer ■twice, first in money, and then in commodities. His money returns to him as soon as the laborer exchanges it for his commodities.
Now, the money-capital converted into variable capital, the money advanced for wages, plays a prominent role in the circulation of money itself. For the laborer must live from hand to mouth and cannot give the industrial capitalists any credit for long periods. Hence variable capital in the form of money must be advanced simultaneously at innumerable localities in the social production in certain short intervals, such as weeks, etc., whatever may be the various periods of turn-over of the capitals in the different lines of industry. These intervals succeed one another with relative rapidity, and the shorter they are, the smaller is relatively the total amount of money thrown into circulation through this channel. In every country with a capitalist production the money-capital so advanced constitutes a proportionately influential share of the total circulation, so much more so as the same money, before its return to its point of departure, roams through many channels and serves as a medium of circulation for innumerable other businesses.
Now let us consider the circulation between I (v + s) and lie from a different point of view.
The capitalists of I advance 1000 pounds sterling in the Simple Reproduction. 481 payment of wages. The laborers buy with this money 1000 pounds sterling's worth of commodities from the capitalists of II. These in turn buy with the same money means of production from the capitalists of I. These capitalists of I thereby recover their variable capital in the form of money, while the capitalists of II have reconverted one-half of their constant capital from the form of commodities into that of productive capital. The capitalists of II advance 500 pounds sterling more for the purchase of means of production from the capitalists of I. The capitalists of I spend this money in articles of consumption of II. These 500 pounds sterling thus return to the capitalists of II. They advance this amount again, in order to reconvert the last quarter of their constant capital, existing in the form of commodities, into means of production of I, its natural productive form. This money flows back to I, and once more withdraws from II articles of consumption to the same amount, returning 500 pounds sterling to II. The capitalists of II are then once more in possession of 500 pounds sterling in money and 2000 pounds sterling of constant capital, the latter having been reconverted from the form of commodity-capital into that of productive capital. By means of 1500 pounds sterling, a quantity of commodities valued at 5000 pounds sterling has been circulated. (1) I paid 1000 pounds sterling to his laborers for their labor-power of the same value; (2) the laborers bought with these same 1000 pounds sterling articles of consumption from II; (3) II bought with the same money means of production from I, thereby restoring to I its variable capital of 1000 pounds sterling in the form of money; (4) II buys 500 pounds sterling's worth of means of production from I; (5) I buys with the same 500 pounds sterling articles of consumption from II; (6) II buys with the same 500 pounds sterling means of production from I; (7) I buys with the same 500 pounds sterling articles of consumption from II. Thus 500 pounds sterling have returned to II, which it had thrown into circulation aside from its 2000 pounds sterling in commodities and 482 Capital.
for which it did not withdraw any equivalent from circulation.42 The exchange, therefore, follows this course: (1)1 pays 1000 pounds sterling in money for labor-power, or, in short, commodities at 1000 pounds sterling.
(2) The laborers buy with their wages amounting to 1000 pounds sterling articles of consumption from II; therefore we have again commodities at 1000 pounds sterling.
(3) II buys with the 1000 pounds sterling received from the laborers means of production to the same amount; hence, once more, commodities at 1000 pounds sterling.
By this transaction the 1000 pounds sterling have returned to I in the money-form of its variable capital.
(4) II buys 500 pounds worth of means of production from I, or, commodities at 500 pounds sterling.
(5) I buys with the same 500 pounds sterling articles of consumption from II; or, commodities at 500 pounds sterling.
(6) II buys with the same 500 pounds sterling means of production from I; or, commodities at 500 pounds sterling.
(7) I buys with the same 500 pounds sterling articles of consumption from II; or, commodities at 500 pounds sterling.
Total amount of value of commodities converted: 500 pounds sterling.
The 500 pounds sterling advanced by II in its first additional purchase have returned to it.
This, then, is the result: (1) I possesses variable capital in the form of money to the amount of 1000 pounds sterling, which it had originally advanced to the circulation. It has furthermore expended 1000 pounds sterling for its individual consumption, in the shape of its product in commodities; that is to say, has spent 42 This presentation differs somewhat from that given in another place of this section farther along. There I throws likewise an additional amount of 500 p. st. into circulation. Here II alone supplies the additional money for the circulation. But this does not alter the final result— F. E.
Simple Reproduction. 483 money which it had originally received for the sale of means of production to the amount of 1000 pounds sterling.
On the other hand, the natural form in which variable capital existing in the form of money must be incorporated in order to be preserved, in other words, labor-power, has been maintained by consumption, and having been reproduced exists once more as the sole commodity which its owners have for sale in order to make a living. The relation of wage workers and capitalists, then, has likewise been reproduced.
(2) The constant capital of II is reproduced in its natural form, and the 500 p. st. advanced by the same department to the circulation have likewise returned to its hands.
So far as the laborers of I are concerned, the circulation takes place according to the simple schedule C — M — C. Labor-power1 C — 1000 p. st. as the money-form of the variable capital of I; M2 — necessities of life to the amount of 1000 p. st.; C3 — these 1000 p. st. monetize to the same amount the constant capital of II existing in the form of commodities, of necessities of life.
From the point of view of the capitalists of II, the process is C — M, the transformation of a portion of their product into money, from which it is reconverted into the elements of productive capital, namely into a portion of the means of production required by them.
In the case of the advance of money of 500 p. st., made by the capitalists of II in the purchase of an additional portion of means of production, the money-form of that portion of lie which exists as yet in the form of commodities, of articles of consumption, is anticipated, in the transaction M — C, in which II buys with M, and C is sold by I, the money (II) is converted into a portion of productive capital, while C (I) passes through the transaction C — M, changes itself into money, which, however, does not represent any component part of productive capital for I, but merely monetized surplus-value expended solely for articles of consumption.