One must first recognize the relationship between this chapter and the next. As Marx notes early, simple reproduction is a mental exercise alone, more fiction than any capitalist economy in historical reality. So why study simple reproduction? As a building block of analysis for understanding the real object of analysis: expanded reproduction.
Simple reproduction, reproduction on the same scale, appears as an abstraction, inasmuch as on the one hand the absence of all accumulation or reproduction on an extended scale is a strange assumption in capitalist conditions, and on the other hand conditions of production do not remain exactly the same in different years (and this is assumed). The assumption is that a social capital of a given magnitude produces the same quantity of commodity-value this year as last, and supplies the same quantum of wants, although the forms of the commodities may change in the process of reproduction. However, as far as accumulation does take place, simple reproduction is always a part of it, and can therefore be studied by itself, and is an actual factor of accumulation (470).So what is Marx's approach to simple reproduction?
He writes: "But this purely formal manner of presentation is no longer sufficient once we consider the total social capital and the value of its product." What changes when one shifts from abstract individual capital to the actual circulation of all capitals? "[T] movement is not only a replacement of values, but a replacement of materials, and is therefore conditioned not just by the mutual relations of the value componenets of the social product but equally bu their use-values, their material shape" (470).
With this line, Marx forces us to think hard about why individual capital + individual capital is not enough to represent the complexity of total social capital. In other words, why is the sum more than just the sum?
The most obvious answer is that individual capitals play specific roles in relation to each other, as elements in the total social circulation. Given this, we have to subdivide into department I and department II. It should be a given that these divisions are arbitrary and could further be divided into numberless smaller divisions. The point has been made, though: a break with individual capitals towards a consideration of social capital. However, one thing I'm a little uneasy with in this analysis is the fact that Marx wants us to think about use-value, that is, the difference between a business making machines for other businesses versus machines that make Christmas toys. This is all well and good. But all sorts of other specificities are arbitrarily elided by Marx when he makes statements indicating that all Department Is can be combined together in analysis, that the parts being made by one company can be grouped together with those of another. Other considerations of the historical record of capital are also suspended: revolutions in prices, technological changes that require abandoning old machines for new ones, the price differences between parts, spatial differences in supplies and populations, etc. (469-483).
It seems to me that this exercise indicates that for all sorts of reasons (all sorts of use-value-related reasons), the total equilibrium of simple (and expanded) reproduction is impossible to achieve. It is "an accident," as he indicates in the next chapter. But the point of Marx's analysis at this point is, rather than indicating why the regular imbalances occur is to understand under what perfect conditions an irregular equilibrium could be achieved. Or can it even be achieved at all?
What analytical value is there in allowing in one element of use-value while suspending all others? I believe the point is that it can help us parse out all the chaotic elements that can go wrong, to show that, even under near-perfect conditions, the very facticity of an element like the distinction in departments is enough to throw a wrench into the gears.
As far as I understand it, the heart of the matter is that the division of production into two departments, along with the attendant assumptions of wear and tear, replacement of parts creates uneven timing of investment and production which inevitably leads to hoards (see the voluntary and involuntary stock formation section in chapter six) and contradictions that must be displaced somehow through the expansion of the market.
Below I will include the more interesting quotes from the rest of the chapter. But for now, let's examine the temporal irregularity of normal production to examine how crises are immanent to it.
First, Marx points out that while the total quantity one must spend on replacing the wear and tear of machines or dealing with the comings and goings of a seasonal labor force remain mathematically the same, the periodicity of these factors means that at certain moments, surplus-value is building and accumulating with nowhere to go, and sometimes a lot of surplus-value is needed at hand in order to be converted into constant and variable capital (526).
Second, Marx states almost as an ontological condition that the whole collection of machines and means of production are all "of different ages, and just as each year people functioning in these branches of production die, so each year do quantities of fixed capital reach the end of their life" (528).
Third, unless the cycle of means of production can be completed in a year, which is highly unlikely, then the year to year expenditures of an individual capitalist will look different.
Finally, we have the hypothesis that if Deparment II needs to save up money for a new machine in the future, and if it therefore withholds a certain amount each year, spending less on constant capital (since it can keep using the machines from the last time), then Department I would have 200 extra value that it could not sell. Further, if Department II produces as many commodities as it needs to stay in business but Department I has 200 less to spend than before, then Department II has 200 worth of commodities left unsold. Hence, a simultaneous problem of overproduction on both sides(!).
How can this be resolved? Marx spend the rest of this section trying to work it out. You can read all the prosaic math formulas on pages 530 onward, but the conclusion is basically that this scenario is impossible to resolve within the limits of simple reproduction:
The law that when reproduction proceeds normally (whether it be on a simple or on an extended scale) the money advanced by the capitalist producer to the circulation must return to its point of departure (whether the money is his own or borrowed) excludes once and for all the hypothesis that 200 IIc(d) is converted into money by means of money advanced by I (533).Finally, we have the goods on page 542, where Marx indicates that the lack of inputs for the commodity and monetary surplus requires a foreign market to provide things commodities and customers. Such a solution is, of course, still imperfect and only defers an internal contradiction. From here, Luxemburg and Lenin . . . :
If IIc (1) is greater than IIc (2), foreign commodities must be imported to realise the money-surplus in Is. If, conversely, IIc (1) is smaller than IIc (2), commodities II (articles of consumption) will have to be exported to realise the depreciation part of IIc in means of production. Consequently in either case foreign trade is necessary.
Foreign trade could help out in either case: in the first case in order to convert commodities I held in the form of money into articles of consumption, and in the second case to dispose of the commodity surplus. But since foreign trade does not merely replace certain elements (also with regard to value), it only transfers the contradictions to a wider sphere and gives them greater latitude (544).
The summary of Marx's conclusions are on pages 542 to 545. They are the highlight of the chapter. He describes how hoards in precapitalist times are necessary to ensure the welfare of a population, but "in capitalist production however, they are an evil." This reminds us again of Marx's discussion about involuntary and voluntary stock earlier. Simple reproduction, mathematically, must become expanded reproduction. There is no other. Simple reproduction is like a square triangle.
Okay, other thoughts . . .
- (487): Marx argues against the thesis of underconsumption, showing that it is a logical tautology (since the function of consumers is to spend money, then the problem must be that the consumers do not have money, but that money must come from the capitalist class, which in no way helps them exit the crisis) and that historically, all crises are precipitated by higher wages and attempts to increase consumption. Take that, Keynes.
- (488): In the midst of his long section working out the contours of money capital, Marx makes his point very clear: money may change hands between capitalists and workers, but in each exchange, the worker will always have to give the money back as part of their consumption fund. So ultimately, money is just bait that reels in the value (labour-power) of the workers, who must use their wages to exchange for the commodities that they themselves made: The "general law that money advanced to the circulation by producers of commodities returns to them in the normal course of commodity circulation. From this it incidentally follows that if any money-capitalist at all stands behind the producer of commodities and advances to the industrial capitalist money-capital (in the strictest meaning of the word, i.e., capital-value in the form of money), the real point of reflux for this money is the pocket of this money-capitalist."
- (490): Marx introduces the concept of the worker who lives hand-to-mouth and hence must be paid in advances and wages frequently but in small amounts. Here, the analytical significance is that the workers' necessity for small and frequent distribution of money places a strain on the limited money supply. The amount of money in circulation, remember, is in no way determined by the total amount of value in circulation but rather by factors such as how much is paid each time and how frequently. Therefore, one can find phrases like "£1,500 are needed to circulate the equivalent value of £5,000."
- (497): Finally, Marx ends the money section by spelling out the role of merchant capital. That is, the capitalist must spend money in order to make back surplus-value. Merchant capitalists are seen as parasites because they seem totally unproductive, but all capitalists are parasites insofar as the expenditure of money in business is ultimately the same princpiple of casting out money in order to receive it back, with surplus-value added.
- (498): With the advent of Department I, Marx indicates that one can no longer assume that constant capital is converted into money, which is spent on the next cycle's means of production. Instead it must be understood as the machines themselves remain, and they can be used again as new means of production. Hence, we must understand the role of Department I in total social capital as distinct from an individual capital in isolation, who draws its means of production out of thin air.
- (502): Marx shows that Adam Smith's reified brain was only able to see commodities as revenue split into v + s (wages and profit) because he did not see department one.
And it is this circumstance which induced Adam Smith to maintain that the value of the annual product resolves itself into v + s. This is true 1) only for that part of the annual product which consists of articles of consumption; and 2) it is not true in the sense that this total value is produced in II and that the value of its product is equal to the value of the variable capital advanced in II plus the surplus-value produced in II. It is true only in the sense that II(c + v + s) is equal to II(v + s) + I(v + s), or because II is equal to I(v + s).
Regarding point 2) above, Marx shows that the value of labour-power and constant capital in Department I is carried over to the means of production (dead labour as constant capital) in Department II. So it appears as though all value is produced in Department II when in actuality Department II is only the last step in a longer process.
- (508): Marx poses the difference between Volume I and Volume II nicely as the difference between individual and total social capital: the product of an individual capital can take any form and it could go anywhere. Volume I was entirely indifferent to what commodities were used for after the point of sale. With total social capital, all elements of reproduction must balance out such that the products eventually replace the original constant capital. Hence, Volume II tracks the path of consumed constant capital from Department I to II and back again to Department I.
- (516-519): A very interesting explanation that examines the same exchange from the standpoint of capitalist and standpoint of worker. For a capitalist selling his product, it is realizing the surplus-value of a commodity. For the worker, it is merely exchanging money for equivalent capital. In each exchange, the positioning of each subject as either commodity-owner and money-owner resolves in such a way that the capitalist ultimately possesses all of the capital and the worker can only exchange at fixed rates. This leads Marx to next discuss (520) the social reproduction of classes. Not in terms of anything like ideology or politics; merely in terms of why the working class continually makes so little money compared to the capitalist. An antagonistic relationship is thus preserved.
- (545-556): The section on the reproduction of Money Capital demonstrates the problems of hoards and the necessity for money to circulate as productive capital. Several problems are raised from 549 onwards. All this concludes on page 556 when Marx writes that the irregularity of the money supply explain the rise of the merchant capital class:
all these different aspects of spontaneous movement had only to be noted, and made conspicuous, through experience, in order to give rise to a methodical use of the mechanical appliances of the credit system and to a real fishing out of available loanable capitals.
(556-564): Marx refutes Destutt de Tracy's theories of accruing profit by selling dear to demonstrate that it is logically impossible. Ultimately, the point is that in a logical system built to explain simple reproduction, one cannot simply account for profits and gains without explaining how to resolve deficits and hoards. Only expanded reproduction can do so. Onto the next chapter . . .