William J. Blake: An American Looks at Karl Marx
We have hitherto considered the accumulation of capital, as realized in the sphere of circulation, as a theoretical concept, but the price of production as descriptive of the total movement of profits in reality. The theory of total accumulation—that is, of the reproduction of the entire capital structure—in reality is the final control of Marxist theory set forth in the third volume of Capital.
Why a Special Theory Is Required
The theory of the three factors, wages, rents, and profits, allows nowhere of the possibiliy of a social reproduction of capital.
For this theory assumes that all three partners in production (it also assumes that the capitalists and landlords contribute to production) consume the resultant product by way of distribution, the worker by means of subsistence, the landlord and capitalist by articles of necessity and luxury both.
But, on this theory, the amount of capital reinvested in enterprise is not accounted for, save by declaring it to be an abstinence of the capitalist from consumption. Apart from merely psychological theories (or rather ethical theories like “abstinence”), we require an economic theory that tells us what there is in the continuous production of labor that enables a part of that production to be utilized for consumption and a part for means of production.
For the capitalist cannot, by any chemistry known, convert his means of consumption, even in the form of surplus-value, into means of production, socially.
A given capitalist can produce candy, or mayonnaise, as surplus-value products, and instead of gorging himself with these products of labor, sell the excess and buy machinery with the proceeds. But unlike bourgeois economics, which flatters itself that it has an answer both by abstinence and by purchase, Marx realizes that for the totality of production, this is no answer at all.
We must explain, then, how it is that the entire labor of a country provides means of production and consumption both, how these are divided, what part capitalists consume as revenue and what they reinvest. No interchanges between individuals are significant for this enquiry.
The Two Characters of Labor the Key
By his theory that concrete labor transfers value and abstract labor creates value, Marx begins his examination. Let us consider a manufacturer of means of consumption, say dresses.
He produces $100,000 worth, sold at their value. The constant capital transferred is $60,000, the variable capital is decomposed into $20,000 means of subsistence for the workers, and $20,000 surplus-value.
The capitalist requires $60,000 in constant capital, of course, to recommence production on the same scale. He has sold means of consumption to the extent of $100,000 and must obtain means of production for $60,000. These are concrete means of production, cloth, thread, patterns, etc. These concrete means of production mean, of course, that other enterprises exist that make a business of these means of production.
The capitalist uses $20,000 to buy the use of labor-power. They too (the workers) must find, somewhere in the social capital, those who furnish them with means of subsistence, produce these necessities.
But the capitalist has no need, strictly speaking, to reinvest the $20,000 of surplus-value, that part of the new value created, into the purchase of the means of production; he can take these proceeds of the means of consumption he has sold, to wit, dresses, and with them buy other means of consumption, such as Packards and champagne.
The Manufacture of Means of Production
Suppose, however, we take the manufacturer of iron pipes, good only for use in producing something else. Let us assume the figures of production and their division are the same as for the manufacturer of the means of consumption. But the production cannot be consumed, as such, by either the capitalist or the workers. They are in a different sphere of production, that of means of production.
That is, their production is of use only as capital (as constant capital). It must be employed in the reproduction of capital. It can find a market only if the constant capital it is to replace has already been transferred.
Hence, the manufacturer of the means of production requires, ultimately, that the other branches of industry shall be active. For he depends on renewal, and renewal depends on the sale of previous merchandise.
Two conclusions are clear. For accumulation to be possible in any enterprise, social reproduction is assumed: that is, a reproduction of capital in a series of related enterprises, at the least, and these depend on general business to keep going.
Secondly, apart from the division of production into transferred constant capital, wages, and surplus-value, it is necessary that commodities exist which by their utility—that is, their specific adaptability to production-can replace the constant capital utilized in previous production—So that for total accumulation, it is necessary that the total production of society have a determined composition, not only as to value, but as to specific utility.
How the Two Sections Operate
Up to this point we have a mere résumé of what was previously known. But for the motion of capital we simply need to know that commodities are made either for consumption or for production (the latter, constant capital, therefore).
Let us suppose that the total production of the United States is $90,000,000,000. Section I (means of consumption) has a value of 33⅓ per cent, and Section II (constant capital) of 66⅔ per cent. Let us assume the following divisions:
| Section I | constant 20 billions, wages 5 billions, surplus-value 5 billions = 30 |
| Section II | constant 40 billions, wages 10 billions, surplus-value 10 billions = 60 |
| Total | constant 60 billions, wages 15 billions, surplus-value 15 billions = 90 |
Here we have the division by value of two sections of production divided according to specific utility in production. Concrete and abstract labor are shown as reproducing constant capital (concrete labor), 60 billions; variable capital (abstract labor, new value), 30 billions. The total of means of production is 60 billions, that equals constant capital; of means of consumption 30 billions, that equals total wages and total consumptive revenue of the total capital. This addition, which makes all sections congruent, is not a mere summation; it is a check-up on total production by the separation of the two kinds of labor cutting across the two modes of production, and yet combining them significantly.
If Section II is to be realized, its production must be sold to Section I. For Section I, the production must be realized by way of sale to wage-workers and capitalists for consumption. Both must be realized, Section I because otherwise there would be no sale of consumption goods. For Section II there must be a realization by Section I, otherwise their constant capital has no possibility of being utilized, since means of production are not an end in themselves: the end of production is consumption.
We see, then, that the sum total of constant capital in both sections of production must equal Section II as a total, and the amount of variable capital (including surplus-value) must equal Section I as a total. The constant capital is an accumulation of objects of concrete utility to the producers of Section I; thus the amount of value that is transferred as constant capital by concrete labor is equal to the total of Section II, and the amount of value created by abstract labor is equal to Section I, as amounts, but their disposition cuts across the two sections of production.
But, of course, since means of production are used internally by manufacturers of means of production, such as coal for steel-makers, a part of the constant capital is used within Section II before the total production of means of production is made available to Section I.
Means of Consumption Specifically
Since workers employed in the manufacture of means of consumption purchase these means out of the production of that sphere, it follows that a part of Section I is realized within that sphere: it is that part represented by new value created by abstract labor (that is, wages plus surplus-value).
The Two Sections as an Ensemble
The internal consumption of these two sections can be shown in parentheses. Section I, 20 billions constant (5 billions variable, 5 billions surplus). Section II (40 billions constant), 10 billions variable, 10 billions surplus.
In Section II 20 billions is not realized: for these are in the concrete form of means of production and cannot be consumed as such by the workers or the capitalists. Nor can it be used as means of production within the section, for the 40 billions has provided this. Hence the 20 billions must serve as means of production for manufacturers of means of consumption.
But in Section I the 20 billions of constant capital transferred has not been realized within the section. As it consists of consumption goods, it cannot be utilized for more production. It is clear, then, that the 20 billions surplus of one section must be exchanged against the 20 billions surplus of the other.
Details of the Relations of the Two Sections
The capitalists of Section I buy 20 billions in constant capital from those in Section II.
In other words, the new value added by abstract labor in Section II is being realized by means of money sales to Section I.
Out of these receipts the capitalists of Section II spend 10 billions in buying the consumption goods of Section I.
Out of these receipts the capitalists in Section II spend 10 billions in wages, which their workers use to buy consumption goods from the capitalists of Section I.
By these means the relations between Sections I and II are terminated. This is what we term the scheme of simple reproduction, or the realization of all sections of production at an equivalence.
Hence Marx has completely shown how concrete labor, in the shape of utility and the transfer of value, has interpenetrated with abstract labor, in the shape of new value. Or, summarized in a formula:
Simple reproduction requires that the sum of variable capital and of surplus-value in Section II (means of production) be equal to the sum of constant capital in Section I (means of consumption).
Law of the Extended Reproduction of Capital (Accumulation)
We have assumed, for illustration, that the capitalists consume their surplus-value. But, although this would explain reproduction of capital (that is, the provision of total new capital after a certain time by the workers, but not the increase of that total), the student is aware, by now, that a portion of that surplus-value must be reinvested, if the quantity of capital is to increase.
In order for this to take place, it is necessary that the sum of the variable capital and of surplus-value in Section II (means of production) be somewhat larger than the sum of constant capital in Section I. A formula makes this clear:
Section I, 15 billion constant, 7.5 billion variable, 7.5 billion surplus.
Section II, 40 billion constant, 10 billion variable, 10 billion surplus.
As in the means of consumption (I), constant capital is now less than the sum of variable capital and surplus-value of the means of production section, the capitalists of Section I will not demand the full sum of 20 billions from those of Section II, but will convert a part of their surplus into capital. This must originate in Section I, as consumption is the end of production, for realization.
But suppose the capitalists of Section II also accumulate half of their surplus-value, that is, 5 billions. Assuming the organic composition of capital unchanged, they can add to the previous total of 40 billions in constant and 10 billions in variable by 5 billions, divided as follows: 4 billion to constant and 1 billion to variable capital. Hence in Section II (means of production manufacture) 44 billions will now be consumed within the section, as constant capital transferred. Only 16 billions, consisting of 11 billions variable and 5 billions surplus, would have to be realized in Section I. (The assumed reduction of surplus-value from 10 to 5 billions is absurd, but the illustration is of principle; the actual results will be given later.)
Now let us assume an annual cycle of production, for all society, so as to obtain the actual movement of capitalism. We began with 40 plus 10 plus 10 for Section II, and this is the production, for, say 1939, as it arose out of the situation at the end of 1938. But by withholding 5 out of 10 for enlargement of capital, we enter 1939 with 44 billions of constant capital to transfer, 11 billions with which to pay wages, and only 5 billions remain for capitalist consumption, as revenue.
The capitalists of II must sell to those of I, nonconsumable means of production (for them) of at least 16 billions in order to realize. But for the capitalists of I to buy the additional billion, they must augment their constant capital by that amount. They can take that billion only out of their surplus-value, which is the increment of new value they have.
If their organic composition remains the same the capitalists, when adding a billion to their constant capital in I, must add 500 millions also to their variable capital, to preserve the proportion. Hence their variable capital at the opening of the year 1939 rises to 8 billions. So that at the opening of 1939 we have a new formula, if extended reproduction occurs:
Section I, 16 billions constant, 8 billions variable, 6 billions surplus = 30.
Section II, 44 billions constant, 11 billions variable, 5 billions surplus = 60.
The same processes of transfer take place as in the previous amounts, from section to section, except for the differing quantities. But the new production takes place on the basis of a total constant and variable capital, for both sections, of 79 billions instead of 72.5 billions, owing to 5 billions being added in Section II and 1.5 billions in Section I.
Now, if the rate of surplus-value to variable capital remains identical for 1939 as for 1938, we enter 1940 with the following picture:
Section I, 16 billion constant, 8 billion variable, 8 billion surplus = 32.
Section II, 44 billion constant, I1 billion variable, 11 billion surplus = 66.
And this goes on in increasing amounts, ideally, from year to year.
Origin and Consequences of the Theory of Social Accumulation
Although it is true that the social process of accumulation is now made known to us completely, it is clear that for the millions of competing enterprises that make up capitalism, their internal fluctuations of fortune, expressed by the whirl of prices (nearly always away from value), make it extremely difficult to trace this total, unless one had a guiding theory of production from the very beginning.
The apparently innocent beginnings of the theory of Marxian value—the distinction between use-value and exchange-value; the separation accordingly of concrete labor that produces use-value and abstract that produces value itself, manifested only in exchange; the realization of this exchange quality of value by the use-value of another commodity; the consequent lesson that use-value can transfer value, so that constant capital, or use-values are transferred, whereas new values are added by abstract labor; that concrete and abstract labors are united in the same process so that the eye does not distinguish their contributions; that one is physical and the other social—all this filiation of ideas that so many superficial critics say Marxism could do without, comes to fruition in the schemes of total reproduction, which show how this system of definitions is confirmed by the final test, the motion of capitalism as a whole: its reproduction on a historically enlarging basis. And this motion was what the theory of value was originated to explore. Without the two characters of labor, the theory of reproduction becomes impossible and the theory of a surplus merely static.
Apparent Equilibrium Is Only an Illustration
It would seem that by these formulas Marx shows a harmonious equilibrium between the two sections of production. But that is to misread his purpose. He illustrates the mechanisms by which the transfers take place; for this he assumes an ideal model, exactly as for the theory of value he assumed that objects exchanged at their value, and, to isolate surplus-value, at exact equivalence. But since the ideal conditions of harmonious reproduction would require a constant and definite proportion of value and of use-value throughout the social production, and the complete realization of both value and concrete use by both sections, there is no correspondence between a formula based on what would happen were these conditions fulfilled, and what does happen in fact, except that it enables us to trace the objects of such transfers among their distortions, and to explain the satisfaction of these objects when, as, and if they are attained.
But the “anarchy of production,” in Engels’s phrase, means that these harmonious transfers are no more realized than is the law of value in perfectly congruent prices.2
The theoretical consequences of Marx’s theory of total reproduction are quite important. If the two qualities of labor are taken into consideration, then the crude theory of underconsumption is eliminated, for it is based on the assumption that the products of labor are all consumed.
Once exploitation, leading to surplus-value by way of the two characters of labor, is shown to connote reproduction of capital, the idea of a permanent sales crisis as haunting capitalism is shown to be baseless. The crises must be sought in the interruptions of transfers between the two sections, and these interruptions in the class relations within the productive apparatus. The theory of possible reproduction explains why crises take place only at intervals instead of continuously. Hence, while underconsumptionism is often confused with Marxism, it lacks its theoretical system, and so is the reverse of the Marxian theory of total social accumulation.
The theory of accumulation leads straight into that of crises. But while the Marxian structure is solid, and all theories must dance in its salons, it is true that for those who seek to identify Marxist science (not to “improve” or “revise” it), the theory of accumulation offers the richest possibilities for extension and further integration.
1. This difficult chapter is indispensable for students specializing in economics. It can be eliminated by those desiring to study only Marxist outlines.
2. Segal states (Principes d’Économie Politique, p. 232) that Otto Bauer and Tugan-Baranowski held that these schemes showed capitalist harmony as possible.