Remember, then, that section 1 advanced 300, and sec- tion 2 advanced 100 of the 400.
Now these 400 return in the following manner: Sec- tion 1 recovers only one-third of the money advanced by it, or 100. But it has in place of the other 200 a renewed fixed capital. Section 1 has given money to department I for these elements of fixed capital, but sold no more com- modities. So far as this money is concerned, section 1 has met department I for the purpose of buying, but not of selling later on. This money cannot return to section 1, otherwise it would receive the elements of fixed capital from I as a gift. So far as the last third of its advanced money is concerned, section 1 first acted as a buyer of circulating ele- ments of its constant capital. The same money serves de- partment I for the purchase of the remainder of the com- modities of section 1, valued at 100. This money, then, re- turns to section 1 of department II, because it acts as a seller of commodities soon after having acted as a buyer. If this money did not return, then section 1 of department II would have given to department I a sum of 100 in money for com- modities of the same value and in addition thereto 100 in 538 Capital.
538 Capital.
commodities, in other words, it would have given away its commodities as a present.
On the other hand, section 2 receives 300 in money back, while it has advanced only 100 in money. As a buyer it first threw 100 in money into circulation, and these it re- ceives back when acting as a seller. And it receives 200 more, because it acts only as a seller of commodities to that amount, but not in turn as a buyer. Hence the money can- not return to department I. The value of the depreciation of the fixed capital is thus balanced by the money thrown into circulation by section 1 of department II in the pur- chase of elements of fixed capital. But it reaches, the hands of section 2, not as money of section 1, but as money of department I.
(b) Under these conditions the remainder of He is dis- tributed so that section 1 has 200 in money, and section 2 has 400 in commodities.
Section 1 has sold all of its commodities, but 200 in money are a changed form of the fixed elements of its constant capital which it has to renew in their natural form. It acts only as a buyer in the present case and receives in exchange for its money the same value in commodities of department I having the natural form of elements of its fixed capital. Section 2 has to throw 200 p. st. into circulation, at a maximum (if department I does not advance any money for the transaction between I and II), since it is to the ex- tent of one-half of the value of its commodities only a seller to I, not a buyer from I.
It recovers from the circulation 400 p. st. It gets 200, because it has advanced them as a buyer and recovers them as a seller of commodities of the same value. It receives an- other 200, because it sells commodities of that value to 1 without buying an equivalent from I.
(c) Section 1 has 200 in money and 200c in commodities. Section 2 has 200c (w) in commodities.
Section 2 has not any advance of money to make under these circumstances, because it does not act any more in the role of a buyer from I, but only bs a seller, so that it must wait till some one wants to buy from it.
Simple 'Reproduction. 539 Section 1 advances 400 p. st. in money, of which 200 serve for a mutual exchange with department I, while 200 are used to buy from I. The last 200 serve in the purchase of the elements of fixed capital.
Department I buys from section 1 commodities to the value of 200 with 200 p. st. in money, so that section 1 thus recovers the money it had advanced for its transaction with I. And I buys with the other 200 p. st., which it has like- wise received from section 1, commodities valued at 200 from section 2, which thus recovers the value of the depreciation of its fixed capital.
The matter would not be altered by the assumption that, in the case of (c), department II instead of section 1 of this department should advance the 200 in money required for the exchange of the existing commodities. If I buys in that case first 200 in commodities from section 2 of department II — assuming that this section has only this much left to sell — then the 200 p. st. do not return to I, since section 2 of department II no longer acts in the role of buyer. But section 1 of department II has in that case 200 p. st. to spend in buying and 200 in commodities to offer for sale, making a total of 400 which it has to trade with depart- ment I. 200 p. st. in money then return to department I from section 1 of department II. When I spends them again in the purchase of 200 in commodities from section 1 of department II, then they return to department I as soon as section 1 of department II buys the second half of the 400 in commodities from I. Section 1 of department II has spent 200 p. st. in the purchase of elements of fixed capital, with- out selling anything in return. Therefore this money does not return to it, but serves to monetize the remaining 200 c of commodities of section 2 of department II, while the 200 p.
st. in money advanced by I for the promotion of the transac- tions return to it by way of section 1 of department II, not section 2. In the place of its commodities of 400 it has secured an equivalent, and t^je 200 p. st. in money advanced by it for transacting business to the extent of 800 in com- modities have likewise returned to it. Everything is there- fore settled.
540 Capital The difficulty encountered in the transaction between I (1000 v+1000 s) and II 2000 c was reduced to the diffi- culty of balancing accounts between I 400 s and II (section 1) 200 in money plus 200 c in commodities plus (section 2) 200 c in commodities. Or, to make the matter still clearer, 1 (200 s +200 s) against II (200 in money of section 1 plus 200 c in commodities of section 1 plus 200 c in commodities of section 2).
Since section I of department II exchanges 200c for com- modities of department I representing 200s, and since all the money circulating in this exchange of 400 commodities between I and II returns to him who first advances it, be he I or II, this money promoting the exchange between I and II is not an element of the problem which troubles us here. Or, to express it differently, if we assume that the money used in the transaction between 200 I s (commodities) and 200 lie (commodities of section 1, department II) serves only as a medium of payment, not as a medium of pur- chase and therefore not as a "medium of circulation," strictly speaking, it is evident that the means of production valued at 200 are exchanged for articles of consumption valued at 200, because the commodities of 200 I s and 200 He (sec- tion 1) are equivalent in value, that therefore the money serves here merely ideally, and that neither side has to advance any money to the circulation for the payment of any balance. Hence the problem does not show itself in its clearest form, until we eliminate the commodities of 200 I s and their equivalent, the commodities of 200 He (section 1), from both sides.
After the elimination of these two amounts of commod- ities of equal value, which balance one another in I and II, the remainder of the transaction shows the problem dearly, namely I 200s in commodities against II (200c in money of section 1 plus 200c in commodities of section 2).
It is evident that section 1 of department II buys with 200 in money the elements of its fixed capital from 200 I s. The fixed capital of section 1, department II, is there- by renewed in its natural form, and the surplus-value of I, to the amount of 200, is converted from the form of commod- Simple Reproduction. 541 ities (means of production representing elements of fixed capital) into that of money. Department I buys with this money articles of consumption from section 2, department II, and the result for II is that section 1 has renewed a fixed element of its constant capital in its natural form; and that section 2 has stored up another element in money which is destined to make good the depreciation of its fixed capital. And this continues every year, until this last element is also renewed in its natural form.
The first condition is here evidently that this fixed ele- ment of constant capital II, which must annually be recon- verted into money to the full extent of its value and, there- fore, entirely reproduced in its natural form (section 1), should be equal to the annual depreciation of the other fixed element of constant capital II, which continues its function in its old natural form and whose depreciation, represented by the value transferred by it to the commodities produced by it, is first accumulated in money. Such a balance of value would seem to be a law of reproduction on the same scale. This is equivalent to saying that the proportional division of labor in department I, which puts out means of produc- tion, must remain unchanged, to the extent that it produces partly circulating, partly fixed portions of the constant capi- tal of department II.
Before we analyze this more closely, we must first see how the matter looks, if the remaining amount of II c ( 1 ) is not equal to the remainder of II c (2). It may be larger or smaller. Let us study either case.
First Case.
II. (1) 220 c in money plus (2) 200 c in commodities. In this case II c (1) buys with 200 p. st. the commodities of 200 I s, and I buys with the same money the commod- ities of 200 II c (2), in other words, that portion of the fixed capital which has to be accumulated in money. This por- tion is thus converted into money. But 20 II c (1) cannot be reconverted into the natural form of fixed capital. It seems that we might remedy this inconvenience by mak- 542 Capital.
ing the remainder of I s 220 instead of 200, so that only 1780 instead of 1800 of the 2000 I would be disposed of by former transactions. Then we should have: II. (1) 220 c in money plus (2) 200 c in commodities. Section 1 of II c buys with 220 p. st. in money the 220 I s, and I buys with 200 p. st. the 200 II c (2) of commodities. But now 20 p. st. in money remain on the side of I, a por- tion of surplus-value which it can hold only in money, with- out being able to spend it in articles of consumption. The difficulty is thus merely transferred from section 1, depart- ment II c, to I s.
Let us now assume, on the other hand, that section 1, II c, is smaller than section 2, II c, then we have: Second Case.
II. (1) 180 c in money plus (2) 200 c in commodities. Section 1, department II, buys with 180 p. st. in money the commodities of 180 I s. Department I buys with the same money commodities of the same value from section 2, department II, that is to say, 180 II c (2). There remain 20 I s unsaleable on one side, and 20 [I e of section 2 on the other. In other words, commodities valued at 40 remain unsaleable.
It would not help us any to make the remainder of I equal to 180. It is true, there would not be any surplus in I under these circumstances, but the same surplus of 20 would re- main unsaleable in section 2 of department II and could not be converted into money.
In the first case, where section 1 of department II is greater than section 2 of department II, there remains a surplus of money in section 1 of department II and cannot be converted into fixed capital; or, if the remainder in I s is assumed to be equal to II c (1), the same surplus in money remains inconvertible into articles of consumption in I s.
In the second case, where II c (1) is smaller than II c (2), there remains a deficit of money on the side of 200 I s and II c (2), and an equal surplus of commodities on both Simple Reproduction. 543 sides, or, if the remainder of I s is assumed to be equal to II c (2), there remains a deficit of money and a surplus of commodities in II c (2).
If we assume the remainder of I s to be always equal to II c (1) — seeing that production is determined by demand, and reproduction is not altered by the fact that there may be a greater output of fixed elements of capital this year, and a greater output of circulating elements of constant capitals I and II next year — then I s could not be reconverted into articles of consumption in the first case, unless I brought with it a portion of the surplus-value of II and accumulated it in money instead of consuming it; in the second case there would be no other way out but an expenditure of the money on the part of I itself, an assumption which we have already rejected.
If II c (1) is greater than II c (2), then the importation of foreign commodities is required for the employment of the money-surplus in I s. If II c (1) is smaller than 11 c (2), then an exportation of commodities (articles of consump- tion) is required for the realization of the value of the de- preciation of II c in means of production. In either case, foreign trade is necessary.
Even assuming that, on the basis of simple reproduction on the same scale, the productivity of all lines of industry, and thus the proportional relation of the value of their com- modities, would remain unchanged, there would neverthe- less be an incentive for production on an enlarged scale when- ever the two last named cases may occur, in which II c (1) is greater or smaller than II c (2).
(3) Results.
With reference to the reproduction of the fixed capital, the following general remarks may be made: If a larger portion of the fixed element of II c expires this year than last and must be reproduced in its natural form — all other circumstances remaining the same, that is to say, not only the scale of production, but also the productiv- ity of labor, etc. — then that portion of the fixed capital, which is as yet only declining and must be temporarily ac- 544 Capital.
cumulated in money until its term of expiration arrives, must decline in the same proportion, since we have assumed that the sum of the fixed capital serving in II (also the sum of its values) remains unchanged. This implies the follow- ing consequences: If a greater portion of the commodity- capital of I consists of elements of the fixed capital of II c, then a correspondingly smaller portion consists of circulat- ing elements of II c, because the total production of I for II c remains unchanged. If one of these portions increases, then the other decreases, and vice versa. On the other hand, the total production of II also retains the same volume. But how is this possible, if the production of its raw materials, half-wrought products, and auxiliary materials (the circulat- ing elements of the constant capital of II) decreases? In the second place, a greater portion of fixed capital of II c, restored to its money-form, flows into department I, in order to be reconverted from its money-form into its natural form. In other words, there is a greater flow of money into depart- ment I, aside from the money circulating between I and II merely for the transaction of their business, more money which does not merely serve as a medium for the mutual exchange of their commodities, but acts onesidedly in pur- chase without a corresponding sale. At the same time the quantity of commodities of II c, the bearers of the value of the depreciation of fixed capital, would have decreased proportionately. This is that quantity of commodities of II which is not exchanged for commodities of I, but must be converted into money of I. More money would have flown from II into I for onesided purchase, and there would be fewer commodities of II which would stand only in the relation of a buyer toward I. Under these circumstances a great portion of I s — for I v has already been converted into commodities of II — would not be convertible into commodities of II, but would be held in the form of money.
The opposite case, in which the reproduction of expired fixed capitals of a certain year exceeds that of the deprecia- tion, need not be discussed in detail after the preceding state- ments.
Simple Reproduction. 545 The result would be a crisis — a crisis in production — in spite of the fact that reproduction had taken place on the same scale.
In short, unless a constant proportion between expiring (and about to be renewed) fixed capital and still continuing (merely transferring the value of its depreciation to its product) fixed capital is assumed, so long as reproduction takes place on a simple scale under the same conditions, such as productivity, volume, intensity of labor, the mass of cir- culating elements to be reproduced in one case would remain the same while the mass of fixed elements to be reproduced would have been increased. Therefore the aggregate produc- tion of I would have to increase, or, there would be a deficit in the reproduction, even aside from money matters.
In the other case, if the proportional magnitude of the fixed capital of II, to be reproduced in its natural form, should decrease and the elements of the fixed capital of II, which must be merely accumulated in money, should in- crease in the same ratio, then the quantity of the circulat- ing elements of the constant capital of II, reproduced by I, would remain unchanged, while that of the fixed elements about to be reproduced would have decreased. Hence there would be either a decrease in the aggregate production of I, or a surplus (the same as previously a deficit) which could not be converted into money.
It is true that the same labor may, in the first case, sup- ply a greater product with an increase in its productivity, extension, or intensity, and so the deficit could be covered in the first case. But such a change could not take place with- out a transfer of capital and labor from one line of produc- tion of department I to another, and every transfer would cause monetary disturbances. Furthermore, to the extent that an expansion and intensification of labor would in- crease, department I would have to exchange more of its value for less value of II. In other words, there would be a depreciation of the product of I.
The reverse would take place in the second case, where I must contract its production, which implies a crisis for its laborers and capitalists, or produce a surplus, which implies 546 Capital.
another crisis. Such a surplus is not an evil in itself, but it is an evil under the capitalist system of production.
Foreign trade could relieve the pressure in either case. In the first case it would convert products of I held in the form of money into articles of consumption, in the second case it would dispose of the surplus of commodities. But foreign trade, so far as it does not merely reproduce certain elements of production, only transfers these contradictions to a wider sphere and gives them a greater latitude.
Once that the capitalist mode of production is abolished, the problem resolves itself into the simple proposition that the magnitude of the expiring portion of fixed capital, which must be reproduced in its natural form every year (which served in our illustration for the production of articles of consumption), varies in successive years. If it is very large in a certain year (in excess of the average mortality, the same as among men), then it is so much smaller in the next year. The quantity of raw materials, half wrought articles, and auxiliary materials required for the annual production of the articles of consumption — other circumstances remaining the same — does not decrease in consequence. Hence the ag- gregate production of means of production would have to increase in the one case and decrease in the other. This can be remedied only by a continuous relative overproduction. There must be on the one hand a certain quantity of fixed capital in excess of that which is immediately required; on the other hand there must be above all a supply of raw materials, etc., in excess of the actual requirements of annual production (this applies particularly to articles of consump- tion). This sort of reproduction may take place when society controls the material requirements of its own reproduc- tion. But in capitalist society it is an element of anarchy.
This illustration of fixed capital, on the basis of an un- changed scale of reproduction, is convincing. A dispropor- tion of the production of fixed and circulating capital is one of the favorite arguments of political economists in explain- ing productive crises. That such a disproportion can and must arise even when the fixed capital is merely preserved by renewal is new to them. And yet, it can and must arise Simple Reproduction. 547 even on the assumption of an ideal and normal production on the basis of a simple reproduction of the already existing capital of society.
XII. THE REPRODUCTION OF THE MONEY SUPPLY.
One element has so far been entirely disregarded, namely the annual reproduction of gold and silver. To the extent that these metals serve as material for articles of luxury, gilding, etc., they do not deserve any special mention, any more than any other products. But they play an important role as money-material, as potential money. For the sake of simplicity, we regard only gold as material for money.
According to older statements, the entire annual produc- tion of gold amounts to about 8 — 900,000 lbs., equal to about 1100 to 1250 million marks (264 to 392.5 million dollars). But according to Soetbeer48 it amounts to only 170,675 kilo- grams, valued at about 476 million marks on an average of the years 1871 to 1875. Of this amount, Australia supplied about 167, the United States 166, Russia 93 million marks. The remainder is distributed over various countries in sums of less than 10 million marks each. The annual production of silver, during the same period, amounted to somewhat less than 2 million kilograms, valued at 354.5 million marks. Of this amount, Mexico supplied about 108, the United States 102, South America about 67, Germany about 26 mil- lion, etc.
Among the countries with predominating capitalist pro- duction only the United States are producers of gold and silver. The capitalist countries of Europe obtain almost all their gold and by far the greater part of their silver from Australia, the United States, Mexico, South America, and Russia.
But we transfer the gold mines into the country with capi- talist production whose annual reproduction we are analyz- ing, for the following reasons: 48 Ad. Soetbeer, Edelmetall-produktion. Gotha. 1S75.
548 Capital Capitalist production does not exist at all without for- eign commerce. But when we assume annual reproduction on a given scale, we also assume that foreign commerce re- places home products only by articles of other use-value, or natural form, without affecting the relations of value, such as those of the two categories known as means of production and articles of consumption and their transactions, nor the relations of constant capital, variable capital, and surplus- value, into which the value of the products of each of these categories may be dissolved. The introduction of foreign commerce into the analysis of the annually reproduced value of products can, therefore, produce only confusion, without furnishing any new point in the aspect or solution of the problem. For this reason we leave it aside. And conse- quently gold as a direct element of annual reproduction is not regarded as a commodity imported from a foreign coun- try.
The production of gold, like that of metals generally, be- longs to department I, which occupies itself with means of production. Let us assume that the annual production of gold amounts to 30 (from reasons of expediency, although it is far too high compared to the other figures of our dia- grams). Let this value be resolved into 20 c+5 v+5 s; 20 c is to be exchanged for other elements of department I c, and this is to be studied later; but the 5 v+5 s are to be exchanged for elements of II c, namely, articles of consump- tion.
As for the 5 v, every gold producing business begins by buying labor-power. This is done, not with money pro- duced by this particular business, but with a portion of the money existing in the land. The laborers buy with this 5 v articles of consumption from II, and this department buys with the same money means of pro- duction from I. Let us say that II buys from I gold for elements of its commodities (elements of constant capi- tal) to the value of 2, then 2 v flow back to the gold pro- ducers of i in money which was formerly in circulation, If II does not buy any more material from I, then I buys from II by throwing its gold into circulation, for gold can Simple Reproduction. 549 buy any commodity. The difference is only that I does not act as a seller, but as a buyer, in that case. The gold pro- ducers of I can always get rid of their product, for it is always in a form which may be directly exchanged.
Take it that some producer of yarn has paid 5 v to his laborers, who create for him in return — aside from a sur- plus-product— yarn to the amount of 5. The laborers buy values worth 5 from II c, and II c buys with the same 5 in money yarn from I, and this 5 in money flows back to the producer of yarn. Now we had assumed that I g (meaning the producer of gold) advanced to his laborers 5 v in money which had previously belonged to the circula- tion. The laborers spend it for articles of consumption, but only 2 of the 5 return from II to I g. However, I g can begin his process of reproduction anew, just as well as the producer of yarn. For his laborers have supplied him with 5 in gold, 2 of which he sold, and 3 of which he still has, so that he has but to coin it, 49 or exchange it for bank notes, in order that his entire variable capital may be im- mediately in his hands, without the intervention of II.
Even this very first process of annual reproduction has wrought a change in the quantity of money actually or virtually in circulation. We assumed that II c bought 2 v from I g for material, and that I g invested 3 in II as the money-form of its variable capital. In other words, 3 of the amount of money supplied by the new gold production remained within department II and did not return to I. According to our assumption II has satisfied its needs for gold material. The 3 remain in its hands as a hoard of gold. Since they cannot constitute any elements of its con- stant capital, and since II had previously enough money- capital for the purchase of labor-power; since, furthermore, these additional 3 g, with the exception of the element making good the loss through depreciation, have no func- tion to perform within II c, for a portion of which they 49 "A considerable quantity of gold bullion...is taken by the gold diggers directly to the Mint in San Francisco." — Reports of H. M. Secretaries of Embassy and Legation. 1879. Part III, p. 337.
550 Capital.
were exchanged (they could only serve to cover a shortage in the element making good loss through depreciation, in the case that section 1 of department II should be smaller than section 2 of department II, which would be accidental); and since, on the other hand, the entire commodity-pro- duct of II c, with the exception of the element making up for depreciation, must be exchanged for means of pro- duction of I (v-fs); therefore this money must be en- tirely transferred from II c to II s, no matter whether it exists in necessities of life or articles of luxury, and vice versa, a corresponding value of commodities must be trans- ferred from lis to II c. Result: A portion of the surplus- value is accumulated as a hoard of money.
In the second year of reproduction, when the same pro- portion of annually produced gold continues to be used as material, 2 will again flow back to I g, and 3 will be re- produced in its natural form, that is to say, it will be set aside in department II as a hoard, etc.
With reference to the variable capital in general, it may be said that the capitalist of I g must continually advance money for the purchase of labor-power, the same as every other capitalist. But so far as these wages are concerned, it is not he, but his laborers who buy from II. He can never appear as a buyer, transferring gold to II, without the initiative of II. But to the extent that II buys material from him for the purpose of converting its constant capital II c into a gold supply, a portion of the v of I g flows back to it from II in the same way that it does to other capitalists of I. And so far as this is not the case, he reproduces his v in gold direct from his product. But to the extent that the v advanced by him in money does not flow back to him from II, a portion of the existing medium of circulation (received from I and not returned to it) is converted by II into a hoard and a portion of its surplus-value is not con- verted into articles of consumption. Since new gold mines are continually opened or old ones re-opened, a certain proportion of the money invested by I g in v is always money existing previously to the new gold production, and passing from I g by way of its laborers into II, where it be- Simple Reproduction. 551 cnnes an element in the formation of a hoard, or as much of it as is not returned from II to I g.