Rosa Luxemburg
The Accumulation of Capital

Section One
The Problem of Reproduction

Chapter 7
Analysis of Marx’s Diagram of Enlarged Reproduction

The first enlargement of reproduction gave the following picture.

I. 4,400c + 1,100v + 1,100s = 6,600 
II. 1,600c +    800v +    800s = 3,200 
Total:  9,800 

This already clearly expresses the interdependence of the two departments – but it is a dependence of a peculiar kind. Accumulation here originates in Department I, and Department II merely follows suit. Thus it is Department I alone that determines the volume of accumulation. Marx effects accumulation here by allowing Department I to capitalise one-half of its surplus value; Department II, however, may capitalise only as much as is necessary to assure the production and accumulation of Department I. He makes the capitalists of Department II consume 600s as against the consumption of only 500s by the capitalists of Department I who have appropriated twice the amount of value and far more surplus value. In the next year, he assumes the capitalists of Department I again to capitalise half their surplus value, this time making the capitalists of Department II capitalise more than in the previous year summarily fixing the amount to tally exactly with the needs of Department I. 500s now remain for the consumption of the capitalists of Department I – less than the year before – surely a rather queer result of accumulation on any showing. Marx now describes the process as follows:

‘Then let Department I continue accumulation at the same ratio, so that 550s are spent as revenue, and 55s accumulated. In that case, 1,100 Iv are first replaced by 1,100 Ic, and 550 Is must be realised in an equal amount of commodities of II, making a total of 1,650 I(v + s). But the constant capital of II, which is to be replaced, amounts only to 1,600, and the remaining 50 must be made up out of 800 IIs. Leaving aside the money aspect of the matter, we have as a result of this transaction:

‘I. 4,400c + 550s (to be capitalised); furthermore, realised in commodities of II for the fund for consumption of the capitalists and labourers of I, 1,650 (v + s)
II. 1,650c + 825v + 725s.

‘In Department I, 550s must be capitalised. If the former proportion is maintained, 440 of this amount form constant capital, and 110 variable capital. These 110 must be eventually taken out of 725 IIs, that is to say, articles of consumption to the value of 110 are consumed by the labourers of I instead of the capitalists of II, so that the latter are compelled to capitalise these 110s which they cannot consume. This leaves 615 IIs of the 725 IIs. But if II thus converts these 110 into additional constant capital, it requires an additional variable capital of 55. This again must be taken out of its surplus value. Subtracting this amount from 615 IIs, we find that only 560 IIs remain for the consumption of the capitalists of II, and we obtain the following values of capital after accomplishing all actual and potential transfers:

I. (4,400c + 440c) + (1,100v + 110v) = 4,840c + 1,210v            = 6,050   
II. (1,600c + 50c + 110c) + 800v + 25v + 55v) = 1,760c + 880v = 2,640    
Total: 8,690(1)

This quotation is given at length since it shows very clearly how Marx here effects accumulation in Department I at the expense of Department II. In the years that follow, the capitalists of the provisions department get just as rough a deal. Following the same rules, Marx allows them in the third year to accumulate 264s – a larger amount this time than in the two preceding years. In the fourth year they are allowed to capitalise 290s and to consume 678s, and in the fifth year they accumulate 320s and consume 745s. Marx even says: ‘If things are to proceed normally, accumulation in II must take place more rapidly than in I because that portion of I(v + s) which must be converted into commodities of IIc, would otherwise grow more rapidly than IIc, for which it can alone be exchanged.’(2)

Yet the figures we have quoted fail to show a quicker accumulation in Department II, and in fact show it to fluctuate. Here the principle seems to be as follows: Marx enables accumulation to continue by broadening the basis of production in Department I. Accumulation in Department II appears only as a condition and consequence of accumulation in Department I: absorbing, in the first place, the other’s surplus means of production and supplying it, secondly, with the necessary surplus of consumer goods for its additional labour. Department I retains the initiative all the time, Department II being merely a passive follower. Thus the capitalists of Department II are only allowed to accumulate just as much as, and are made to consume no less than, is needed for the accumulation of Department I. While in Department I half the surplus value is capitalised every time, and the other half consumed, so that there is an orderly expansion both of production and of personal consumption by the capitalists, the twofold process in Department II takes the following erratic course:

table data

Here there is no rule in evidence for accumulation and consumption to follow; both are wholly subservient to the requirements of accumulation in Department I.

Needless to say, the absolute figures of the diagram are arbitrary in every equation, but that does not detract from their scientific value. It is the quantitative ratios which are relevant, since they are supposed to express strictly determinate relationships. Those precise logical rules that lay down the relations of accumulation in Department I, seem to have been gained at the cost of any kind of principle in construing these relations for Department II; and this circumstance calls for a revision of the immanent connections revealed by the analysis.

It might, however, be permissible to assume the defect to lie in a rather unhappy choice of example. Marx himself, with the diagram quoted above, proceeded forthwith to give a second example in order to elucidate the movements of accumulation, where the figures of the equation run in the following order:

I. 5,000c + 1,000v + 1,000s = 7,000 
II. 1,430c +    285v +    285s = 2,000 
Total:  9,000 

In contrast to the previous example, the capital of both departments is here seen to have the same composition, i.e. constant and variable capital are in a ratio of 5 to 1. This already presupposes a considerable development of capitalist production, and accordingly of social labour productivity – a considerable preliminary expansion of the scale of production, and finally, a development of all the circumstances which bring about a relatively redundant surplus population in the working class. We are no longer introduced to enlarged reproduction, as in the first example, at the stage of the original transition from simple to enlarged reproduction – the only point of that is in any case for the sake of abstract theory. This time, we are brought face to face with the process of accumulation as it goes on at a definite and rather advanced stage of development. It is perfectly legitimate to assume these conditions, and they in no way distort the principles we must employ in order to work out the individual loops of the reproductive spiral. Here again Marx takes for a starting point the capitalisation of half the surplus value in Department I.

‘Now take it that the capitalist class of I consumes one-half of the surplus-value, or 500, and accumulates the other half. In that case (1,000v + 500s) I, or 1,500, must be converted into 1,500 IIc. Since IIc amounts to only 1,430, it is necessary to take 70 from the surplus-value. Subtracting this sum from 285s leaves 215 IIs. Then we have:

‘I. 5,000c + 500s (to be capitalised)  + 1,500(v + s) in the fund set aside for consumption by capitalists and labourers.
‘II. 1,430c + 70s (to be capitalised) + 285v + 215s.

As 70 IIs are directly annexed by IIc, a variable capital of 70:5, or 14, is required to set this additional constant capital in motion. These 14 must come out of the 215s, so that only 201 remain, and we have:

‘II. (1,430 + 70c + (285v + 14v) + 201s’.(3)

After these preliminary arrangements, capitalisation can now proceed. This is done as follows:

In Department I the 500s which have been capitalised are divided into five-sixths (417c) + one-sixth (83v). These 83v withdraw a corresponding amount from IIs which serves to buy units of constant capital and thus accrues to IIc. An increase of IIc by 83 involves the necessity of an increase in IIv by 17 (one-fifth of 83). After the completion of this turnover we therefore have:

I. (5,000c + 417s) + (1,000v + 83s)v = 5,417c + 1,083v = 6,500 
II. (1,500c +   83s) +    (299v + 17s)   = 1,538c +    316v = 1,899 
Total:  8,399 

The capital of Department I has grown from 6,000 to 6,500, i.e. by one-twelfth; in Department II it has grown from 1,715 to 1,899, i.e. by just over one-ninth.

At the end of the next year, the results of reproduction on this basis are:

I. 5,417c + 1,083v + 1,083s =   7,583 
II. 1,583c +    316v +    316s =   2,215 
Total:    9,798 

If the same ratio is maintained in the continuance of accumulation, the result at the end of the second year is as follows:

I. 5,869c + 1,173v + 1,173s =   8,215 
II. 1,715c +    342v +    342s =   2,399 
Total: 10,614 

And at the end of the third year:

I. 6,358c + 1,271v + 1,271s =   8,900 
II. 1,858c +    371v +    371s =   2,600 
Total: 11,500 

In the course of three years, the total social capital has increased from I. 6,000 + II. 1,715 = 7,715 to I. 7,629 + II. 2,229 = 9,858, and the total product from 9,000 to 11,500.

Accumulation in both departments here proceeds uniformly, in marked difference from the first example. From the second year onwards, both departments capitalise half their surplus value and consume the other half. A bad choice of figures in the first example thus seems to be responsible for its arbitrary appearance. But we must check up to make sure that it is not only a mathematical manipulation with cleverly chosen figures which this time ensures the smooth progress of accumulation.

In the first as well as in the second example, we are continually struck by a seemingly general rule of accumulation: to make any accumulation possible, Department II must always enlarge its constant capital by precisely the amount by which Department I increases (a) the proportion of surplus value for consumption and (b) its variable capital. If we take the example of the first year as an illustration, the constant capital of Department II must be increased by 70. And why? because this capital was only 1,430 before.

But if the capitalists of Department I wish to accumulate half their surplus value (1,000) and to consume the other half, they need consumer goods for themselves and for their workers to the tune of 1,500 units which they can obtain only from Department II in exchange for their own products – means of production. Since Department II has already satisfied its own demand for producer goods to the extent of its own constant capital (1,430), this exchange is only possible if Department II decides to enlarge its own constant capital by 70. This means that it must enlarge its own production – and it can do so only by capitalising a corresponding part of its surplus value. If this surplus value amounts to 285 in Department II, 70 of it must be added to the constant capital. The first step towards expansion of production in Department II is thus demonstrated to be at the same time the condition for, and the consequence of increased consumption by the capitalists of Department I. But to proceed. Hitherto, the capitalists of Department I could only spend one-half of their surplus value (500) on personal consumption. To capitalise the other half, they must redistribute these 500s in such a way as to maintain at least the previous ratio of composition, i.e. they must increase the constant capital by 417 and the variable capital by 83. The first operation presents no difficulties: the surplus value of 500 belonging to the capitalists of Department I is contained in a natural form in their own product, the means of production, and is fit straightway to enter into the process of production; Department I can therefore enlarge its constant capital with the appropriate quantity of its own product. But the remaining 83 can only be used as variable capital if there is a corresponding quantity of consumer goods for the newly employed workers. Here it becomes evident for the second time that accumulation in Department I is dependent upon Department II: Department I must receive for its workers 83 more consumer goods than before from Department II. As this is again possible only by way of commodity exchange, Department I can satisfy its demands only on condition that Department II is prepared for its part to take up products of Department I, producer goods, to the tune of 83. Since Department II has no use for the means of production except to employ them in the process of production, it becomes not only possible but even necessary that Department II should increase its own constant capital, by these very 83 which will now be used for capitalisation and are thus again withdrawn from the consumable surplus value of this department. The increase in the variable capital of Department I thus entails the second step in the enlargement of production in Department II. All material prerequisites of accumulation in Department I are now present and enlarged reproduction can proceed. Department II, however, has so far made only two increases in its constant capital. The result of this enlargement is that if the newly acquired means of production are indeed to be used, the quantity of labour power must be increased correspondingly. Maintaining the previous ratio, the new constant capital of requires a new variable capital of 31. This implies the necessity to capitalise a corresponding further amount of the surplus value. Thus the fund for the capitalists’ personal consumption in Department II comes to be what remains of the surplus value (285s) after deduction of the amounts used for twice enlarging the constant capital (70 + 83) and a commensurate increase in the variable capital (31) – a fund of 101, after deducting a total of 184. Similar operations in the second year of accumulation result for Department II in its surplus value being divided into 158 for capitalisation and 158 for the consumption of its capitalists, and in the third year, the figures become 172 and 170 respectively.

We have studied this process so closely, tracing it step by step, because it shows clearly that the accumulation of Department II is completely determined and dominated by the accumulation of Department I. Though this dependence is no longer expressed, as in Marx’s first example, by arbitrary changes in the distribution of the surplus value, it does not do away with the fact itself; even if now the surplus value is always neatly halved by each department, one-half for capitalisation and the other for personal consumption. Though there is nothing to choose between the capitalists of the two departments as far as the figures are concerned, it is quite obvious that Department I has taken the initiative and actively carries out the whole process of accumulation, while Department II is merely a passive appendage. This dependence is also expressed in the following precise rule: accumulation must proceed simultaneously in both departments, and it can do so only on condition that the provisions-department increases its constant capital by the precise amount by which the capitalists of the means-of-production department increase both their variable capital and their find for personal consumption. This equation (increase IIc = increase Iv + increase Is.c.)(4) is the mathematical cornerstone of Marx’s diagram of accumulation, no matter what figures we may choose for its concrete application. But now we must see whether capitalist accumulation does in actual fact conform to this hard and fast rule.

Let us first return to simple reproduction. Marx’s diagram, it will be remembered, was as follows:

 I. 4,000c + 1,000v + 1,000s = 6,000 means of production
II. 2,000c +    500v +    500s = 3,000 means of consumption

Here, too, we established certain equations which form the foundation of simple reproduction; they were:

  1. The product of Department I equals in value the sum of the two constant capitals in Departments I and II.
  2. The constant capital of Department II equals the sum of variable capital and surplus value in Department I – a necessary consequence of (a).
  3. The product of Department II equals the sum of variable capital and surplus value in both departments – a necessary consequence of (a) and (b).

These equations correspond to the conditions of capitalist commodity production (at the restricted level of simple reproduction, however). Equation (b), for instance, is a result of the production of commodities, entailed by the fact, in other words, that the entrepreneurs of either department can only obtain the products of the other by an exchange of equivalents. Variable capital and surplus value in Department I together represent the demand of this department for consumer goods. The product of Department II must provide for the satisfaction of this demand, but consumer goods can only be obtained in exchange for an equivalent part of the product of Department I, the means of production. These equivalents, useless to Department II in their natural form if not employed as constant capital in the process of production, will thus determine how much constant: capital there is to be in Department II. If this proportion were not adhered to, if, e.g., the constant capital of Department II (as a quantity of value) were larger than I (v + s), then it could not be completely transformed into means of production, since the demand of Department I for consumer goods would be too small; if the constant capital (II) were smaller than I(v + s.c), either the previous quantity of labour power could not be employed in this department, or the capitalists could not consume the whole of their surplus value. In all these cases, the premises of simple reproduction would be violated.

These equations, however, are not just an exercise in mathematics, nor do they merely result from the system of commodity production. To convince us of this fact, there is a simple means at hand. Let us imagine for a moment that, instead of a capitalist method of production, we have a socialist, i.e. a planned society in which the social division of labour has come to replace exchange. This society also will divide its labour power into producers of means of production and producers of means of consumption. Let us further imagine the technical development of labour to be such that two-thirds of social labour are employed in the manufacture of producer goods and one third in the manufacture of consumer goods. Suppose that under these conditions 1,500 units (reckoned on a daily, monthly, or yearly basis) suffice to maintain the whole working population of the society, one thousand of these being employed, according to our premise, in Department soc. I (making means of production), and five hundred in Department soc. II (making consumer goods), and that the means of production dating from previous labour periods and used up during one year’s labour, represent 3,000 labour units. This labour programme, however, would not be adequate for the society, since considerably more labour will be needed to maintain all those of its members who do not work in the material, the productive sense of the term: the child, the old and sick, the civil servant, the artist and the scientist. Moreover, every society needs certain reserves against a rainy day, as a protection against natural calamities. Taking it that precisely the same quantity of labour and, similarly, of means of production as that required for the workers’ own maintenance is needed to maintain all the non-workers and to build up the reserves, then, from the figures previously assumed, we should get the following diagram for a regulated production:

 I. 4,000c + 1,000v + 1,000s = 6,000 means of production
II. 2,000c +    500v +    500s = 3,000 means of consumption

Here c stands for the material means of production that have been used, expressed in terms of social labour time; v stands for the social labour time necessary to maintain the workers themselves and s for that needed to maintain those who do not work and to build up the reserves.

If we check up on the proportions of this diagram, we obtain the following result: there is neither commodity production nor exchange, but in truth a social division of labour. The products of Department I are assigned to the workers of Department II in the requisite quantities, and the products of Department II are apportioned to everyone, worker or no, in both departments, and also to the reserve-fund; all this being the outcome not of an exchange of equivalents but of a social organisation that plans and directs the process as a whole – because existing demands must be satisfied and production knows no other end but to satisfy the demands of society.

Yet all that does not detract from the validity of the equations. The product of Department I must equal Ic + IIc: this means simply that Department I must annually renew all the means of production which society has used up during one year’s labour. The product of Department II must equal the sum of I(v + s) + II(v + s): this means that society must each year produce as many consumer goods as are required by all its members, whether they work or not, plus a quota for the reserve fund. The proportions of the diagram are as natural and as inevitable for a planned economy as they are for a capitalist economy based upon anarchy and the exchange of commodities. This proves the diagram to have objective social validity, even if, just because it concerns simple reproduction, it has hardly more than theoretical interest for either a capitalist or a planned economy, finding practical application only in the rarest of cases.

The same sort of scrutiny must now be turned on the diagram of enlarged reproduction. Taking Marx’s second example as the basis for our test, let us again imagine a socialist society. From the point of view of a regulated society we shall, of course, have to start with Department II, not with Department I. Assuming this society to grow rapidly, the result will be an increasing demand for provisions by its members, whether they work or not. This demand is growing so quickly that a constantly increasing quantity of labour – disregarding for the moment the progress of labour productivity – will be needed for the production of consumer goods. The, quantities required, expressed in terms of social labour incorporated in them, increase from year to year in a progression of, say, 2,000 : 2,215 : 2,399 : 2,600 and so on. Let us further assume that technical conditions demand an increasing amount of means of production for producing this growing quantity of provisions, which, again measured in terms of social labour, mounts from year to year in the following progression: 7,000 : 7,583 : 8,215 : 8,900 and so on. To achieve this enlargement of production, we must further have a growth in the labour performed per annum according to the following progression: 2,570 : 2,798 : 3,030 : 3,284. [The figures correspond to the respective amounts of I(v + s) + II(v + s).] Finally, the labour performed annually must be so distributed that one-half is always used for maintaining the workers themselves, a quarter for maintaining those who do not work, and the last quarter for the purpose of enlarging production in the following year. Thus we obtain the proportions of Marx’s second diagram of enlarged reproduction for a socialist society. In fact, three conditions are indispensable if production is to be enlarged in any society, even in a planned economy:

  1. the society must have an increasing quantity of labour power at its disposal;
  2. in every working period, the immediate needs of society must not claim the whole of its working time, so that part of the time can be devoted to making provision for the future and its growing demands;
  3. means of production must be turned out year after year in sufficiently growing quantities – without which production cannot be enlarged on a rising scale.

In respect of all these general points, Marx’s diagram of enlarged reproduction has objective validity – mutatis mutandis – for a planned society.

It remains to test whether it is also valid for a capitalist economy. Here we must ask first of all: what is the starting point of accumulation? That is the approach on which we have to investigate the mutual dependence of the accumulative process in the two departments of production. There can be no doubt that under capitalist conditions Department his dependent upon Department I in so far as its accumulation is determined by the additional means of production available. Conversely, the accumulation in Department I depends upon a corresponding quantity of additional consumer goods being available for its additional labour power. It does not follow, however, that so long as both these conditions are observed, accumulation in both departments is bound, as Marx’s diagram makes it appear, to go on automatically year after year. The conditions of accumulation we have enumerated are no more than those without which there can be no accumulation. There may even be a desire to accumulate in both departments, yet the desire to accumulate plus the technical prerequisites of accumulation is not enough in a capitalist economy of commodity production. A further condition is required to ensure that accumulation can in fact proceed and production expand: the effective demand for commodities must also increase. Where is this continually increasing demand to come from, which in Marx’s diagram forms the basis of reproduction on an ever rising scale?

It cannot possibly come from the capitalists of Departments I and II themselves – so much is certain right away – it cannot arise out of their personal consumption. On the contrary, it is the very essence of accumulation that the capitalists refrain from consuming part of their surplus value which must be ever increasing – at least as far as absolute figures are concerned – that they use it instead to make goods for the use of other people. It is true that with accumulation the personal consumption of the capitalist class will grow and that there may even be an increase in the total value consumed; nevertheless it will still be no more than a part of the surplus value that is used for the capitalists’ consumption. That indeed is the foundation of accumulation: the capitalists’ abstention from consuming the whole of their surplus value. But what of the remaining surplus value, the part that is accumulated? For whom can it be destined? According to Mark’s diagram, Department I has the initiative: the process starts with the production of producer goods. And who requires these additional means of production? The diagram answers that Department II needs them in order to produce means of consumption in increased quantities. Well then, who requires these additional consumer goods? Department I, of course – replies the diagram – because it now employs a greater number of workers. We are plainly running in circles. >From the capitalist point of view it is absurd to produce more consumer goods merely in order to maintain more workers, and to, turn out more means of production merely to keep this surplus of workers occupied. Admittedly, as far as the individual capitalist is concerned, the worker is just as good a consumer, i.e. purchaser of his commodity, as another capitalist or anyone else, provided that he can pay. Every individual capitalist realises his surplus value in the price of his commodity, whether he sells it to the worker or to some other buyer. But this does not hold true from the point of view of the capitalist class as a whole. The working class in general receives from the capitalist class no more than an assignment to a determinate part of the social product, precisely to the extent of the variable capital. The workers buying consumer goods therefore merely refund to the capitalist class the amount of the wages they have received, their, assignment to the extent of the variable capital. They cannot return a groat more than that; and if they are in a position to save in order to make themselves independent as small entrepreneurs, they may even return less, though this is the exception.

Part of the surplus value is consumed by the capitalist class itself in form of consumer goods, the money exchanged for these being retained in the capitalists’ pockets. But who can buy the products incorporating the other, the capitalised part of the surplus value? Partly the capitalists themselves – the diagram answers – who need new means of production for the purpose of expanding production, and partly the new workers who will be needed to work these new means of production. But that implies a previous capitalist incentive to enlarge production; if new workers are set to work with new means of production, there must have been a new demand for the products which are to be turned out.

Perhaps the answer is that the natural increase of the population creates this growing demand. In fact, the growth of the population and its needs provided the starting point for our examination of enlarged reproduction in an hypothetical socialist society. There the requirements of society could serve as an adequate basis, since the only purpose of production was the satisfaction of wants. In a capitalist society, however, the matter is rather different. What kind of people are we thinking of when we speak of an increase in the population? There are only two classes of the population according to Marx’s diagram, the capitalists and the workers. The natural increase of the former is already catered for by that part of the surplus value which is consumed inasmuch as it increases in absolute quantity. In any case, it cannot be the capitalists who consume the remainder, since capitalist consumption of the entire surplus value would mean a reversion to simple reproduction. That leaves the workers, their class also growing by natural increase. Yet a capitalist economy is not interested in this increase for its own sake, as a starting point of growing needs.

The production of consumer goods for Iv and IIv is not an end in itself, as it would be in a society where the economic system is shaped for the workers and the satisfaction of their wants. In a capitalist system, Department II does not produce means of consumption in large quantities simply to keep the workers of Departments I and II. Quite the contrary: a certain number of workers in Departments I and II can support themselves in every case because their labour power is useful under the obtaining conditions of supply and demand. This means that the starting point of capitalist production is not a given number of workers and their demands, but that these factors themselves are constantly fluctuating, ‘dependent’ variables of the capitalist expectations of profit. The question is therefore whether the natural increase of the working class also entails a growing effective demand over and above the variable capital. And that is quite impossible. The only source of money for the working class in our diagram is the variable capital which must therefore provide in advance for the natural increase of the workers. One way or the other: either the older generation must earn enough to keep their offspring – who cannot, then, count as additional consumers; or, failing that, the next generation, the young workers, must turn to work in order to obtain wages and means of subsistence for themselves – in which case the new working generation is already included in the number of workers employed. On this count, the process of accumulation in Marx’s diagram cannot be explained by the natural increase of the population.

But wait! Even under the sway of capitalism, society does not consist exclusively of capitalists and wage labourers. Apart from these two classes, there are a host of other people: the landowners, the salaried employees, the liberal professions such as doctors, lawyers, artists and scientists. Moreover, there is the Church and its servants, the Clergy, and finally the State with its officials and armed forces. All these strata of the population can be counted, strictly speaking, neither among the capitalist nor among the working class. Yet society has to feed and support them. Perhaps it is they, these strata apart from the capitalists and wage labourers, who call forth enlarged reproduction by their demand. But this seeming solution cannot stand up to a closer scrutiny. The landowners must as consumers of rent, i.e. of part of the surplus value, quite obviously be numbered among the capitalist class; since we are here concerned with the surplus value in its undivided, primary form, their consumption is already allowed for in the consumption of the capitalist class. The liberal professions in most cases obtain their money, i.e. the assignment to part of the social product, directly or indirectly from the capitalist class who pay them with bits of their own surplus value. And the same applies to the Clergy, with the difference only that its members also obtain their purchasing power in part from the workers, i.e from wages. The upkeep of the State, lastly, with its officers and armed forces is borne by the rates and taxes, which are in their turn levied upon either the surplus value or the wages. Within the limits of Marx’s diagram there are in fact only the two sources of income in a society: the labourers’ wages and the surplus value. All the strata of the population we have mentioned as apart from the capitalists and the workers, are thus to be taken only for joint consumers of these two kinds of income. Marx himself rejects any suggestion that these ‘third persons’ are more than a subterfuge:

‘All members of society not directly engaged in reproduction, with or without labour, can obtain their share of the annual produce of commodities – in other words, their articles of consumption ... only out of the hands of those classes who are the first to handle the product, that is to say, productive labourers, industrial capitalists, and real estate owners. To that extent their revenues are substantially derived from wages (of the productive labourers), profit and ground rent, and appear as indirect derivations when compared to these primary sources of revenue. But, on the other hand, the recipients of these revenues, thus indirectly derived, draw them by grace of their social functions, for instance that of a king, priest, professor, prostitute, soldier, etc., and they may regard these functions as the primary sources of their revenue.’(5)

And about the consumers of interest and ground rent as buyers, Marx says:

‘Now, if that portion of the surplus-value of commodities, which the industrial capitalist yields in the form of ground rent or interest to other shareholders in the surplus value, cannot be in the long run converted into money by the sale of the commodities, then there is an end to the payment of rent and interest, and the landowners or recipients of interest can no longer serve in the role of miraculous interlopers, who convert aliquot portions of the annual reproduction into money by spending their revenue. The same is true of the expenditure of all so-called unproductive labourers, State officials, physicians, lawyers, etc., and others who serve economists as an excuse for explaining inexplicable things, in the role of the “general public”.’(6)

Seeing that we cannot discover within capitalist society any buyers whatever for the commodities in which the accumulated part of the surplus value is embodied, only one thing is left: foreign trade. But there are a great many objections to a method that conceives of foreign trade as a convenient dumping ground for commodities which cannot be found any proper place in the reproductive process. Recourse to foreign trade really begs the question: the difficulties implicit in the analysis are simply shifted – quite unresolved – from one country to another. Yet if the analysis of the reproductive process actually intends not any single capitalist country but the capitalist world market, there can be no foreign trade: all countries are ‘home’. This point is made by Marx already in the first volume of Capital, in connection with accumulation:

‘We here take no account of export trade, by means of which a nation can change articles of luxury either into means of production or means of subsistence, and vice versa. In order to examine the object of our investigation in its integrity, free from all disturbing subsidiary circumstances, we must treat the whole world as one nation and assume that capitalist production is everywhere established and has possessed itself of every branch of industry.’(7)

The same difficulty presents itself if we consider the matter from yet another aspect. In Marx’s diagram of accumulation we assumed that the portion of the social surplus value intended for accumulation exists from the first in a natural form which demands it to be used for capitalisation.

‘In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already, comprises the material element of new capital.’(8)

In the figures of our diagram:

 I. 5,000c + 1,000v + 1,000s = 7,000 means of production
II. 1,430c +    285v +    285s = 2,000 means of consumption

Here, a surplus value of 570s can be capitalised because from the very outset it consists in means of production. To this quantity of producer goods there correspond besides additional consumer goods to the amount of 140s that 684s can be capitalised in all. But the process here assumed of simply transferring means of production to constant capital on the one hand, consumer goods to variable capital on the other, in commensurate quantities, is in contradiction with the very structure of capitalist commodity production. Whatever natural form the surplus value may have, there can be no immediate transfer to the place of production for the purpose of accumulation. It must first be realised, it must be turned into hard cash.(9)

Of the surplus value in Department I, 500 are fit to be capitalised, but not until they have first been realised; the surplus value has to shed its natural form and assume the form of pure value before it can be added to productive capital. This is true for each individual capitalist and also for the aggregate capitalist of society, it being a prime condition for capitalist production that the surplus value must be realised in the form of pure value. Accordingly, regarding reproduction from the point of view of society as a whole –

‘We must not follow the manner copied by Proudhon from bourgeois economy, which looks upon this matter as though a society with a capitalist mode of production would lose its specific historical and economic characteristics by being taken as a unit. Not at all. We have, in that case, to deal with the aggregate capitalist.’(10)

The surplus value must therefore shed its form as surplus product before it can re-assume it for the purpose of accumulation; by some means or other it must first pass through the money stage. So the surplus product of Departments I and II must be bought – by whom? On the above showing, there will have to be an effective demand outside I and II, merely in order to realise the surplus value of the two departments, just so that the surplus product can be turned to cash. Even then, we should only have got to the stage where the surplus value has become money. If this realised surplus value is further to be employed in the process of enlarging reproduction, in accumulation, an even larger demand must be expected for the future, a demand which is again to come from outside the two departments. Either the demand for the surplus product will therefore have to increase annually in accordance with the rate of increase of the accumulated surplus value, or – vice versa – accumulation can only proceed precisely in so far as the demand outside I and II is rising.

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(1) Capital, vol.ii, pp.598-9.

(2) Ibid., p.599.

(3) Ibid., pp.600-1.

(4) Surplus consumption.

(5) Capital, vol.ii, p.429.

(6) Ibid., pp.531-532.

(7) Op. cit., vol.i, p.594, note 1.

(8) Ibid., p.594.

(9) Here we can leave out of account instances of products capable in part of entering the process of production without any exchange, such as coal in the mines. Within capitalist production as a whole such cases are rare (cf. Marx, Theorien ..., vol.ii, part 2, pp.255ff.)

(10) Capital, vol.i, p.503.

Last updated on: 11.12.2008