Part Three: The Reproduction and Circulation of the Total Social Capital
Marx analyses the circulation of individual capitals as part of the total social capital.
For the individual capital to be able to lay out money as capital not only labour-power, but also specific MP had to be available.
In order for LP to be reproduced, and so available, means of consumption must be available in the market.
For the capitalist to sell his product, to realise his commodity capital in the form of money, there has to be a market for that product.
It is through these purchases and sales of commodities that the interdependence of the various individual capitals as parts of the total social capital is expressed.
They are the material content of the individual exchange relationships between individual capitalists and between capitalist and workers.
Marx analysed these relations of interdependence in terms of the two departments of social production:
Department I is the production of MP
Department II is the production of means of consumption (MC) subdivided into:
IIa producing workers’ MC
IIb producing ‘luxuries’ for capitalists’ consumption
Capitals of department I produce MP for departments I and II, capitals of department IIa produce MC for workers of departments I and II, capitals of department IIb produce for the consumption of all capitalists.
C1 + V1 + S1 = MP
C2 + V2 + S2 = MC
(where C = constant capital, V = variable capital and S = SV)
In simple reproduction all the SV is simply consumed, thus the system will be in equilibrium when MC (the amount of the MC produced) equals V1 + V2 + S1 + S2 (the amount consumed by capitalists and workers) and when MP (the amount of MP produced) equals C1 + C2 (the amount consumed by both departments).
If this is the case then every individual capitalist will be able to buy what he needs at its value, and will be able to sell his product (and so realise his SV).
In expanded reproduction the capitalist will devote some of S to buying MC for himself, and some to buying MP and LP (and so MC) in order to expand production.
Thus for expanded reproduction the output of departments I and IIa must be increased and that of department IIb reduced.
In the same way, if capitalists are steadily increasing the value composition of capital, then the output of department I will have to increase relative to that of department II.
Marx shows how the market mediates these interrelationships in order to make sure that commodities are in fact produced in the required proportions (that equilibrium is indeed achieved), e.g. if too few MC and too many MP are produced, the price of MP falls below their value and that MC rise above their value. Capital will therefore flow into the production of MC and out of the production of MP so that equilibrium is restored.
Thus the market operates in order to ensure proportionality between departments.
This implies that disproportionality on its own cannot give rise to a crisis, because the market automatically adjusts the proportions between departments.
Hence a crisis cannot arise out of circulation alone.
Even if the crisis breaks out in the sphere of circulation (e.g. capitalists are burdened with unsold commodities), the source of the crisis must be sought in the conditions of production of SV.
That is, some capitalists cannot sell their commodities because others have stopped buying them. Other capitalists have stopped buying them because they have decided to withhold their capital: they are neither buying MC, nor are they buying MP and LP.
But if they are not buying MP and LP it must be because they judge the conditions for the production of SV to be unfavourable (e.g. the rate of profit too low).
Thus a fall in the rate of profit is expressed in the refusal of some capitalists to invest, so that others find themselves with unsold commodities: the crisis first appears in the sphere of circulation but it has its roots in production.
Marx’s reproduction schemes have played an important role in subsequent Marxist debate about the breakdown of capitalism.
Some have argued that for Marx the source of the crisis was disproportionality between departments. This leads to the reformist argument that state intervention can regulate production to solve problems of disproportionality and so resolve capitalist crises.
This argument is simply based on a misreading of Marx, because Marx certainly felt that the market could look after problems of proportionality.
Others have argued that capitalism has an inherent tendency to underconsumption (i.e. to produce more than can be sold – this is a variant of the disproportionality thesis).
The argument is that as more and more SV is produced the problems of ‘spending’ that SV increase: the total that department II can produce is limited by the size of the consumption of workers and capitalists, thus the bulk of the increase in production must take place in department I.
But the argument then goes, why should capitalists go on producing MP without limit, if those MP are not destined to produce more MC in the end?
This leads to the argument therefore, that the survival of capitalism depends on a massive increase in unproductive consumption (i.e. luxuries, weapons, etc) to absorb the ever increasing SV (this is the argument of Baran and Sweezy: Monopoly Capitalism as well as of some theories of the “permanent arms economy”)
The answer to this argument is that capitalists will go on buying more MP not without limit, but so long as it is profitable for them to do so.
If the amount of SV produced cannot be spent on LP and MP in the existing proportions (because there are not enough new workers), then it can be spent by increasing the organic composition of capital (spending more on MP relative to LP), and capitalists will do this so long as it is profitable to do so.
Thus again it is not underconsumption that precipitates a crisis, but the unfavourable conditions for the production of SV.
Chapter 18 – Introduction
Chapter 19 – Former Presentations of the Subject
Chapter 20 – Simple Reproduction
Chapter 21 – Accumulation and Reproduction on an Expanded Scale