Theories of Surplus Value, Marx 1861-3

[Chapter XVII] Ricardo’s Theory of Accumulation and a Critique of it. (The Very Nature of Capital Leads to Crises)

[1. Adam Smith’s and Ricardo’s Error in Failing to Take into Consideration Constant Capital. Reproduction of the Different Parts of Constant Capital]

First we shall compare Ricardo’s propositions, which are widely scattered over the whole of his work.

“All the productions of a country are consumed; but it makes the greatest difference imaginable whether they are consumed by those who reproduce, or by those who do not reproduce another value. When we say that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to capital, is consumed by productive instead of unproductive labourers.” (This is the same distinction as Adam Smith makes.) “There can be no greater error than in supposing that capital is increased by non-consumption. If the price of labour should rise so high, that notwithstanding the increase of capital, no more could be employed, I should say that such increase of capital would be still unproductively consumed” (l.c., p. 163, note).

Here, therefore—as with Adam Smith and others—[it is] only [a question] of whether [the products] are consumed by workers or not. But it is at the same time also a question of the industrial consumption of the commodities which form constant capital, and are consumed as instruments of labour or materials of labour, or are consumed in such a way that through this consumption they are transformed into instruments of labour or materials of labour. The conception that accumulation of capital is identical with conversion of revenue into wages, in other words, that it is synonymous with accumulation of variable capital—is one-sided, that is, incorrect. This leads to a wrong approach to the whole question of accumulation.

Above all it is necessary to have a clear understanding of the reproduction of constant capital. We are considering the annual reproduction here, taking the year as the time measure of the process of reproduction.

A large part of the constant capital—the fixed capital—enters into the annual process of labour without entering into the annual process of the creation of value. It is not consumed and, therefore, does not need to be reproduced. Because it enters into the production process and remains in contact with living labour it is kept in existence—and along with its use-value, also its exchange-value. The greater this part of capital is in a particular country in one year, the greater, relatively, will be its purely formal reproduction (preservation) in the following year, providing that the production process is renewed, continued and kept flowing, even if only on the same scale. Repairs and so on, which are necessary to maintain the fixed capital, are reckoned as part of its original labour costs. This has nothing in common with preservation in the sense used above.

A second part of the constant capital is consumed annually in the production of commodities and must therefore also be reproduced. This includes the whole of that part of fixed capital which enters annually into the process of creating value, as well as the whole of that part of constant capital which consists of circulating capital, raw materials and auxiliary materials.

As regards this second part of constant capital, the following distinctions must be made: ||695| A large part of what appears as constant capital—instruments and materials of labour—in one sphere of production, is simultaneously the product of another, parallel sphere of production. For example, yarn which forms part of the constant capital of the weaver, is the product of the spinner, and may still have been in the process of becoming yarn on the previous day. When we use the term simultaneous here, we mean produced during the same year. The same commodities in different phases pass through various spheres of production in the course of the same year. They emerge as products from one sphere and enter another as commodities constituting constant capital. And as constant capital they are all consumed during the year; whether only their value enters into the commodity, as in the case of fixed capital, or their use-value too, as with circulating capital. While the commodity produced in one sphere of production enters into another, to be consumed there as constant capital—in addition to the same commodity entering a succession of spheres of production—the various elements or the various phases of this commodity are being produced simultaneously, side by side. In the course of the same year, it is continuously consumed as constant capital in one sphere and in another parallel sphere it is produced as a commodity. The same commodities which are thus consumed as constant capital in the course of the year are also, in the same way continuously being produced during the same year. A machine is wearing out in sphere A. It is simultaneously being produced in sphere B. The constant capital that is consumed during a year in those spheres of production which produce the means of subsistence, is simultaneously being produced in other spheres of production, so that during the course of the year or by the end of the year it is renewed in kind. Both of them, the means of subsistence as well as this part of the constant capital, are the products of new labour employed during the year.

In the spheres producing the means of subsistence, as I have shown earlier, that portion of the value of the product which replaces the constant capital in these spheres, forms the revenue of the producers of this constant capital.

But there is also a further portion of the constant capital which is consumed annually, without entering as a component part into the spheres of production which produce the means of subsistence (consumption goods). Therefore, it cannot be replaced [by products] from these spheres. We mean instruments of labour, raw materials and auxiliary materials, i.e., that portion of constant capital which is itself consumed industrially in the creation or production, of constant capital, that is to say, machinery, raw materials and auxiliary materials. This part, as we have seen, is replaced in kind either directly out of the product of these spheres of production themselves—as in the case of seeds, livestock and to a certain extent coal—or through the exchange of a portion of the products of the various spheres of production manufacturing constant capital. In this case capital is exchanged for capital.

The existence and consumption of this portion of constant capital increases not only the mass of products, but also the value of the annual product. The portion of the value of the annual product which equals the value of this section of the consumed constant capital, buys back in kind or withdraws from the annual product that part of it, which must replace in kind the constant capital that is consumed. For example, the value of the seed sown determines the portion of the value of the harvest (and thus the quantity of corn) which must be returned to the land, to production, as constant capital. This portion would not be reproduced without the labour newly added during the course of the year; but it is in fact produced by the labour of the year before, or past labour and—in so far as the productivity of labour remains unchanged—the value which it adds to the annual product is not the result of this year’s labour, but of that of the previous year. The greater, proportionately, is the constant capital employed in a country, the greater will also be the part of the constant capital which is consumed in the production of the constant capital, and which not only expresses itself in a greater quantity of products, but also raises the value of this quantity of products. This value, therefore, is the result not only of the current year’s labour, but equally the result of the labour of the previous year, of past labour, although without the immediate labour of the current year it would not reappear, any more than would the product of which it forms a part. If this portion [of constant capital] grows, not only does the annual mass of products grow, but also their value, even if the annual labour remains the same. This growth is one form of the accumulation of capital, which it is essential to understand. And nothing could be further removed from such an understanding than Ricardo’s proposition:

“The labour of a million of men in manufactures, will always produce the same value, but will not always produce the same riches” (l.c., p. 320).

These million men—with a given working-day—will not only produce very different quantities of commodities depending on the productivity of labour, but the value of these quantities of commodities will be very different, according to whether they are produced with much or little constant capital, that is, whether much or little value originating in the past labour of previous years is added to them.

[2. Value of the Constant Capital and Value of the Product]

For the sake of simplicity, when we speak of the reproduction of constant capital we shall in the first place assume that the productivity of labour, and consequently the method of production, remain the same. At a given level of production, the constant capital which has to be replaced is a definite quantity in kind. If productivity remains the same, then the value ||696| of this quantity also remains constant. If there are changes in the productivity of labour which make it possible to reproduce the same quantity, at greater or less cost, with more or less labour, then similarly changes will occur in the value of the constant capital, which will affect the surplus-product after deduction of the constant capital.

For example, supposing 20 quarters [of wheat] at £ 3, totalling £ 60, were required for sowing. If a third less labour is used to reproduce a quarter it would now cost only £2. 20 quarters have to be deducted from the product, for the sowing, as before; but their share in the value of the whole product only amounts to £40. The replacement of the same constant capital thus requires a smaller portion of value, a smaller share in kind out of the total product, although, as previously, 20 quarters have to be returned to the land as seed.

If the constant capital consumed annually by one nation were £ 10 million and that consumed by another were only 1 million and the annual labour of 1 million men amounted to £ 100 million, then the value of the product of the first nation would be 110 and of the second only 101 million. It would be, moreover, not only possible, but certain, that the individual commodity of nation I would be cheaper than of nation II, because the latter would produce a much smaller quantity of commodities with the same amount of labour, much smaller than the difference between 10 and 1. It is true that a greater portion of the value of the product goes to the replacement of capital in nation I as compared with nation II, and therefore also a greater portion of the total product. But the total product is also much greater.

In the case of factory-made commodities, it is known that a million (workers) in England produce not only a much greater product but also a product of much greater value than in Russia for example, although the individual commodity is much cheaper. In the case of agriculture, however, the same relation between capitalistically developed and relatively undeveloped nations does not appear to exist. The product of the more backward nation is cheaper than that of the capitalistically developed nation, in terms of its money price. And yet the product of the developed nation appears to be produced by much less (annual) labour than that of the backward one. In England, for example, less than one-third (of the workers) are employed in agriculture, while in Russia it is four-fifths; in the former ⁵/₁₅, in the latter ¹²/₁₅. These figures are not to be taken literally. In England, for instance, a large number of people in non-agricultural occupations—in engineering, trade, transport etc.—are engaged in the production and distribution of elements of agricultural production, but this is not the case in Russia. The proportion of persons engaged in agriculture cannot therefore be directly determined by the number of individuals immediately employed in agriculture. In countries with a capitalist mode of production, many people participate indirectly in agricultural production, who in less developed countries are directly included in it. The difference therefore appears to be greater than it is. For the civilisation of the country as a whole, however, this difference is very important, even in so far as it only means that a large section of the workers involved in agriculture do not participate in it directly; they are thus saved from the narrow parochialism of country life and belong to the industrial population.

But let us leave aside this point for the moment and also the fact that most agricultural peoples are forced, to sell their product below its value whereas in countries with advanced capitalist production the agricultural product rises to its value. At any rate, a portion of the value of the constant capital enters into the value of the product of the English farmer, which does not enter into the product of the Russian farmer. Let us assume that this portion of value is equal to a day’s labour of 10 men, and that one English worker sets this constant capital in motion. I am speaking of that part of the constant capital of the agricultural product, which is not replaced by new labour, such as is the case, for example, with agricultural implements. If five Russian workers were required in order to produce the same product which one Englishman produces with the help of the constant capital, and if the constant capital used by the Russian were equal to one (day’s labour), then the English product would be equal to 10+1=11 working-days, and that of the Russian would be 5+1=6. If the Russian soil were so much more fertile than the English, that without the application of any constant capital or with a constant capital that was one-tenth the size, it could produce as much corn as the Englishmen with a constant capital ten times as great, then the values of the same quantities of English and Russian corn would compare as 11:6. If the quarter of Russian corn were sold at £ 2, then the English would be sold at £3²/₃, for 2:3²/₃ = 6:11. The money price and the value of the English corn would thus be much higher than that of the Russian, but nevertheless, the English corn would be produced with less labour, since the past labour, which reappears in the quantity as well as in the value of product, costs no additional new labour. This would always be the case, if the Englishman uses less immediate labour than the Russian, but the greater constant capital which he uses—and which costs him nothing, although it has cost something and must be paid for—does not raise the productivity of labour to such an extent that it compensates for the natural fertility of the Russian soil. The money prices of agricultural products can, therefore, be higher in countries of capitalist production than in ||697| less developed countries, although in fact they cost less labour. They contain more immediate and past labour, but this past labour costs nothing. The product would be cheaper if the difference in natural fertility did not intervene. This would also explain the higher money price of the labourer’s wage.

Up to now we have only spoken of the reproduction of the capital involved. The labourer replaces his wage with a surplus-product or surplus-value, which forms the profit (including rent) of the capitalist. He replaces that part of the annual product which serves him anew as wages. The capitalist has consumed his profit during the course of the year, but the labourer has created a portion of the product which can again be consumed as profit. That part of the constant capital which is consumed in the production of the means of subsistence, is replaced by constant capital which has been produced by new labour, during the course of the year. The producers of this new portion of constant capital realise their revenue (profit and wages) in that part of the means of subsistence which is equal to the value of the constant capital consumed in their production. Finally, the constant capital which is consumed in the production of constant capital, in the production of machinery, raw materials and auxiliary materials, is replaced in kind or through the exchange of capital, out of the total product of the various spheres of production which produce constant capital.

[3. Necessary Conditions for the Accumulation of Capital. Amortisation of Fixed Capital and Its Role in the Process of Accumulation]

What then is the position with regard to the increase of capital, its accumulation as distinct from reproduction, the transformation of revenue into capital?

In order to simplify the question, it is assumed that the productivity of labour remains the same, that no changes occur in the method of production, that therefore the same quantity of labour is required to produce the same quantity of commodities, and consequently that the increase in capital costs the same amount of labour as the production of capital of the same size cost the previous year.

A portion of the surplus-value must be transformed into capital, instead of being consumed as revenue. It must be converted partly into constant and partly into variable capital. And the proportion in which it is divided into these two different parts of capital, depends on the given organic composition of the capital, since the method of production remains unaltered and also the proportional value of both parts. The higher the development of production, the greater will be that part of surplus-value which is transformed into constant capital, compared with that part of the surplus-value which is transformed into variable capital.

To begin with, a portion of the surplus-value (and the corresponding surplus-product in the form of means of subsistence) has to be transformed into variable capital, that is to say, new labour has to be bought with it. This is only possible if the number of labourers grows or if the labour-time during which they work, is prolonged. The latter takes place, for instance, when a part of the labouring population was only employed for half or two-thirds [of the normal time], or also, when for longer or shorter periods, the working-day is absolutely prolonged, this however, must be paid for. But that cannot be regarded as a method of accumulation which can be continuously used. The labouring population can increase, when previously unproductive labourers are turned into productive ones, or sections of the population who did not work previously, such as women and children, or paupers, are drawn into the production process. We leave this latter point out of account here. Finally, together with the growth of the population in general, the labouring population can grow absolutely. If accumulation is to be a steady, continuous process, then this absolute growth in population—although it may be decreasing in relation to the capital employed—is a necessary condition. An increasing population appears to be the basis of accumulation as a continuous process. But this presupposes an average wage which permits not only reproduction of the labouring population but also its constant growth. Capitalist production provides for unexpected contingencies by overworking one section of the labouring population and keeping the other as a ready reserve army consisting of partially or entirely pauperised people.

What then is the position with regard to the other portion of the surplus-value which has to be converted into constant capital? In order to simplify this question, we shall leave out of account foreign trade and consider a self-sufficing nation. Let us take an example. Let us assume that the surplus-value produced by a linen weaver amounts to £ 10,000, and that he wants to convert into capital one half of it, i.e., £ 5,000. Let one-fifth of this be laid out in wages in accordance with the organic composition [of capital] in mechanised weaving. In this case we are disregarding the turnover of capital, which may perhaps enable him to carry on with an amount sufficient for five weeks, after which he would sell [his product] and so receive back from circulation the capital for the payment of wages. We are assuming that in the course of the year he will gradually lay out in wages (for 20 men) £1,000 which he must hold in reserve with his banker. Then £ 4,000 are to be converted into constant capital. Firstly he must purchase as much yarn as 20 men can weave during the year. (The turnover of the circulating part of capital is disregarded throughout.) Further, he must increase the number of looms in his factory, and perhaps install an additional steam-engine or enlarge the existing one, etc. But in order to purchase all these things, he must find yarn, looms etc. available on the market. He must convert his £ 4,000 into yarn, looms, coal etc., ||698| i.e., he must buy them. In order to buy them, they must be available. Since we have assumed that the reproduction of the old capital has taken place under the old conditions, the spinner of yarn has spent the whole of his capital in order to supply the amount of yarn required by the weavers during the previous year. How then is he to satisfy the additional demand by an additional supply of yarn?

The position of the manufacturer of machines, who supplies looms etc. is just the same. He has produced only sufficient new looms in order to cover the average consumption in weaving. But the weaver who is keen on accumulation, orders yarn for £ 3,000 and for £ 1,000 looms, coal (since the position of the coal producer is the same), etc. Or in fact, he gives £ 3,000 to the spinner, and £ 1,000 to the machinery manufacturer and the coal merchant, etc., so that they will transform this money into yarn, looms and coal for him. He would thus have to wait until this process is completed before he could begin with his accumulation—his production of new linen. This would be interruption number I.

But now the owner of the spinning-mill finds himself in the same position with the £ 3,000 as the weaver with the 4,000, only he deducts his profit right away. He can find an additional number of spinners, but he needs flax, spindles, coal, etc. Similarly the coal producer [needs] new machinery or implements apart from the additional workers. And the owner of the engineering works who is supposed to supply the new looms, spindles, etc. [needs] iron and so forth, apart from additional labourers. But the position of the flax-grower is the worst of all, since he can supply the additional quantity of flax only in the following year.

So that accumulation can be a continuous process and the weaver able to transform a portion of his profit into constant capital every year, without long-winded complications and interruptions, he must find an additional quantity of yarn, looms, etc. available on the market. He [the weaver], the spinner, the producer of coal, etc. require additional workers, only if they are able to obtain flax, spindles and machines on the market.

A part of the constant capital which is calculated to be used up annually and enters as wear and tear into the value of the product, is in fact not used up. Take, for example, a machine which lasts twelve years and costs £ 12,000; its average wear and tear, which has to be charged each year, amounts to £ 1,000. Thus, since £ 1,000 is incorporated into the product each year, the value of £ 12,000 will have been reproduced at the end of the twelve years and a new, machine of the same kind can be bought for this price. The repairs and patching up which are required during the twelve years are reckoned as part of the production costs of the machine and have nothing to do with the question under discussion. In fact, however, reality differs from this calculation of averages. The machine may perhaps run more smoothly in the second year than in the first. And yet after twelve years it is no longer usable. It is the same as with an animal whose average life is ten years, but this does not mean that it dies by one-tenth each year, although at the end of ten years it must be replaced by a new individual. Naturally, during the course of a particular year, a certain quantity of machinery etc. always reaches the stage when it must actually be replaced by new machines. Each year, therefore, a certain quantity of old machinery etc. has in fact to be replaced in kind by new machines etc. And the average annual production of machinery etc. corresponds with this. The value with which they are to be paid for, lies ready; it is derived from the [proceeds of the] commodities, according to the reproduction period of the machines. But the fact remains, that although a large part of the value of the annual product, of the value which is paid for it each year, is needed to replace, for example, the old machines after twelve years, it is by no means actually required to replace one-twelfth in kind each year, and in fact this would not be feasible. This fund may be used partly for wages or for the purchase of raw material, before the commodity, which is constantly thrown into circulation but does not immediately return from circulation, is sold and paid for. This cannot, however, be the case throughout the whole year, since the commodities which complete their turnover during the year realise their whole value, and must therefore replace the wages, raw material and used up machinery contained in them, as well as pay surplus-value.

Hence where much constant capital, and therefore also much fixed capital, is employed, that part of the value of the product which replaces the wear and tear of the fixed capital, provides an accumulation fund, which can be invested by the person controlling it, as new fixed capital (or also circulating capital), without any deduction whatsoever having to be made from the surplus-value for this part of the accumulation (see McCulloch). This accumulation fund does not exist at levels of production and in nations where there is not much fixed capital. This is an important point, It is a fund for the continuous introduction of improvements, expansions etc.

[4. The Connection Between Different Branches of Production in the Process of Accumulation. The Direct Transformation of a Part of Surplus-Value into Constant Capital—a Characteristic Peculiar to Accumulation in Agriculture and the Machine-building Industry]

But the point we want to make here is the following: Even if the total capital employed in machine-building were only large enough to replace the annual wear and tear of machinery, it would produce much more machinery each year than required, since in part the wear and tear merely exists nominally, and in reality it only has to be replaced in kind after a certain number of years. The capital thus employed, therefore yields annually a mass of machinery which is available for new capital investments and anticipates these new capital investments. For example, the factory of the machine-builder begins production, say, this year. He supplies £ 12,000 worth of machinery during the year. If he were merely to replace the machinery produced by him, he would only have to produce machinery worth £ 1,000 in each of the eleven following years and even this annual production would not be annually consumed. An even smaller part of his production would be used, if he invested the whole of his capital. A continuous expansion of production in the branches of industry which use these machines is required in order to keep his capital employed and merely to reproduce it annually ||699|. (An even greater expansion is required if he himself accumulates.)

Thus even the mere reproduction of the capital invested in this sphere requires continuous accumulation in the remaining spheres of production. But because of this, one of the elements of continuous accumulation is always available on the market. Here, in one sphere of production—even if only the existing capital is reproduced in this sphere—exists a continuous supply of commodities for accumulation, for new, additional industrial consumption in other spheres.

As regards the £ 5,000 profit or surplus-value which is to be transformed into capital, for instance by the weaver, there are two Possibilities—always assuming that he finds available on the market the labour which he must buy with part of the £ 5,000, i.e., £ 1,000 in order to transform the £ 5,000 into capital according to the conditions prevailing in his sphere of production. This part [of the capitalised surplus-value] is transformed into variable capital and is laid out in wages. But in order to employ this labour, he requires yarn, additional auxiliary materials and additional machinery <unless the working-day is prolonged. In that case the machinery is merely used up faster, its reproduction period is curtailed, but at the same time more surplus-value is produced; and though the value of the machine has to be distributed over the commodities produced during a shorter period far more commodities are being produced, so that despite this more rapid depreciation of the machine, a smaller portion of machine value enters into the value or price of the individual commodity. In this case, no new capital has to be laid out directly in machinery. It is only necessary to replace the value of the machinery a little more rapidly. But additional capital must be laid out for auxiliary materials.> Either the weaver finds these, his conditions of production, on the market: then the purchase of these commodities only differs from that of other commodities by the fact that he buys commodities for industrial consumption instead of for individual consumption. Or he does not find these conditions of production on the market: then he must order them (as for instance machines of a new design), just as he has to order articles for his private consumption which are not readily available on the market. If the raw material (flax) were only produced to order <as, for instance, indigo, jute etc. are produced by the Indian Ryots to orders and with advances from English merchants>, then the linen weaver could not accumulate in his own business during that year. On the other hand, assuming, that the spinner converts the £ 5,000 into capital and that the weaver does not accumulate, then the spun yarn— although all the conditions for its production were in supply on the market—will be unsaleable and the £ 5,000 have in fact been transformed into yarn but not into capital.

(Credit, which does not concern us further here, is the means whereby accumulated capital is not just used in that sphere in which it is created, but wherever it has the best chance of being turned to good account. Every capitalist will however prefer to invest his accumulation as far as possible in his own sphere of production. If he invests it in another, then he becomes a moneyed capitalist and instead of profit he draws only interest— unless he goes in for speculative transactions. We are, however, concerned with average accumulation here and only [assume] for the sake of illustration that it is invested in a particular sphere.)

If, on the other hand, the flax-grower had expanded his production, that is to say, had accumulated, and the spinner and weaver and machine-builder, etc. had not done so, then he would have superfluous flax in store and would probably produce less in the following year.

The question has now to be formulated thus: assuming general accumulation, in other words, assuming that capital is accumulated to some extent in all branches of production—this is in fact a condition of capitalist production and is just as much the urge of the capitalist as a capitalist, as the urge of the hoarder is the piling up of money (it is also a necessity if capitalist production is to go ahead)—what are the conditions of this general accumulation, what does it amount to? Or, since the linen weaver may be taken to represent the capitalist in general, what are the conditions in which he can uninterruptedly reconvert the £ 5,000 surplus-value into capital and steadily continue the process of accumulation year in, year out? The accumulation of the £ 5,000 means nothing but the transformation of this money, this amount of value, into capital. The conditions for the accumulation of capital are thus the very same as those for its original production or for reproduction in general.

These conditions, however, were: that labour was bought with one part of the money, and with the other, commodities—raw material, machinery, etc.—which could be consumed industrially by this labour. <Some commodities can only be consumed industrially, such as machinery, raw material, semi-finished goods; others, such as houses, horses, wheat (from which brandy or starch etc. is made), can be consumed industrially or individually.> These commodities can only be purchased, if they are available on the ||700| market as commodities—in the intermediate stage when production is completed and consumption has not as yet begun, in the hands of the seller, in the stage of circulation—or if they can be made to order (produced to order, as is the case with the construction of new factories etc.). Commodities were available—this was presupposed in the production and reproduction of capital—as a result of the division of labour carried out in capitalist production on a social scale (distribution of labour and capital between the different spheres of production); as a result of parallel production and reproduction which takes place simultaneously over the whole field. This was the condition of the market, of the production and the reproduction of capital. The greater the capital, the more developed the productivity of labour and the scale of capitalist production in general, the greater is also the volume of commodities found on the market, in circulation, in transition between production and consumption (individual and industrial), and the greater the certainty that each particular capital will find its conditions for reproduction readily available on the market. This is all the more the case, since it is in the nature of capitalist production that: 1. each particular capital operates on a scale which is not determined by individual demand (orders etc., private needs), but by the endeavour to realise as much labour and therefore as much surplus-labour as possible and to produce the largest possible quantity of commodities with a given capital; 2. each individual capital strives to capture the largest possible share of the market and to supplant its competitors and exclude them from the market—competition of capitals.

<The greater the development of the means of communication, the more can the stocks on the market be reduced.

“There will, indeed, where production and consumption are comparatively great, naturally be, at any given moment, a comparatively great surplus in the intermediate state, in the market, on its way from having been produced to the hands of the consumer; unless indeed the quickness with which things are sold off should have increased so as to counteract what would else have been the consequence of the increased production.” (An Inquiry into those Principles, respecting the Nature of Demand and the Necessity of Consumption, lately advocated by Mr. Malthus, London, 1821, pp. 6-7.)>

The accumulation of new capital can therefore proceed only under the same conditions as the reproduction of already existing capital.

The weaver can reconvert the £ 5,000 surplus-value into capital, if besides labour for £1,000 he finds yarn etc. ready on the market or is able to obtain it to order; this presupposes the production of a surplus-product consisting of commodities which enter into his constant capital, particularly of those which require a longer period of production and whose volume cannot be increased rapidly, or cannot be increased at all during the course of the year, such as raw material, for example flax.

Just as the production and reproduction of existing capital in one sphere presupposes parallel production and reproduction in other spheres, so accumulation or the formation of additional capital in one branch of production presupposes simultaneous or parallel creation of additional products in other branches of production. Thus the scale of production in all spheres which supply constant capital must grow simultaneously (in accordance with the average participation—determined by the demand—of each particular sphere in the general growth of production) and all spheres which do not produce finished products for individual consumption, supply constant capital. Of the greatest importance, is the increase in machinery (tools), raw material, and auxiliary material, for, if these preconditions are present, all other industries into which they enter, whether they produce semifinished or finished goods, only need to set in motion more labour.

It seems therefore, that for accumulation to take place, continuous surplus production in all spheres is necessary.

This will have to be more closely defined.

Then there is the second essential question:

The [part of] the surplus-value [or] in this case the part of profit (including rent; if the landlord wants to accumulate, to transform rent into capital, it is always the industrial capitalist who gets hold of the surplus-value; this applies even when the worker transforms a portion of his revenue into capital), which is reconverted into capital, consists only of labour newly added during ||701| the past year. The question is, whether this new capital is entirely expended on wages, i.e., exchanged only against new labour.

The following speakes for this: All value is originally derived from labour. All constant capital is originally just as much the product of labour as is variable capital. And here we seem to encounter again the direct genesis of capital from labour.

An argument against it is: Can one suppose that the formation of additional capital takes place under worse conditions of production than the reproduction of the old capital? Does a reversion to a lower level of production occur? This would have to be the case if the new value [were] spent only on immediate labour, which, without fixed capital etc., would thus also first have to produce this fixed capital, just as originally, labour had first to create its constant capital. This is sheer nonsense. But this is the assumption made by Ricardo, etc. This needs to be examined more closely.

The first question is this:

Can the capitalist transform a part of the surplus-value into capital by employing it directly as capital instead of selling the surplus-value, or rather the surplus-product in which it is expressed? An affirmative answer to this question would already imply that the whole of the surplus-value to be transformed into capital is not transformed into variable capital, or is not laid out in wages.

With that part of the agricultural produce which consists of corn or livestock, this is clear from the outset. Some of the corn which belongs to that part of the harvest representing the surplus-product or the surplus-value of the farmer (similarly some of the livestock), instead of being sold, can at once serve again as means of production, as seed or draught animals. The same applies to that part of the manure produced on the land itself, which at the same time exists as commodity on the market, that is to say, can be sold. This part of the surplus-product which falls to the share of the farmer as surplus-value, as profit, can be at once transformed by him into means of production within his own branch of production, it is thus directly converted into capital. This part is not expended on wages; it is not transformed into variable capital. It is withdrawn from individual consumption without being consumed productively in the sense used by Smith and Ricardo. It is consumed industrially, but as raw material, not as means of subsistence either of productive or of unproductive workers. Corn, however, serves not only as means of subsistence for productive worker etc., but also as auxiliary material for livestock, as raw material for spirits, starch etc. Livestock (for fattening or draught animals) in turn serves not only as means of subsistence, but its fur, hide, fat, bones, horns etc. supply raw materials for a large number of industries, and it also provides motive power, partly for agriculture itself and partly for the transport industry.

In all industries, in which the period of reproduction extends over more than a year, as is the case with a major part of livestock, timber etc., but whose products at the same time have to be continuously reproduced, thus requiring the application of a certain amount of labour, accumulation and reproduction coincide in so far as the newly-added labour, which includes not only paid but also unpaid labour, must be accumulated in kind, until the product is ready for sale. (We are not speaking here of the accumulation of the profit which according to the general rate of profit is added [to the capital] each year—this is not real accumulation, but only a method of accounting. We are concerned here with the accumulation of the total labour which is repeated in the course of several years, during which not only paid, but also unpaid labour is accumulated in kind and at once reconverted into capital. The accumulation of profit is in such cases however independent of the quantity of newly-added labour.)

The position is the same with commercial crops (whether they provide raw materials or auxiliary materials). Their seeds and that part of them which can be used again as manure etc., represent a portion of the total product. Even if this were unsaleable, it would not alter the fact that as soon as it becomes a means of production again, it forms a part of the total value and as ||702| such constitutes constant capital for new production.

This settles one major point—the question of raw materials and means of subsistence (food), in so far as they are actually agricultural products. Here therefore, accumulation coincides directly with reproduction on a larger scale, so that a part of the surplus-product serves again as a means of production in its own sphere, without being exchanged for wages or other commodities.

The second important question relates to machinery. Not the machines which produce commodities, but the machines which produce machines, the constant capital of the machine producing industry. Given this machinery, the extractive industries require nothing but labour in order to provide the raw material, iron etc. for the production of containers and machines. And with the latter are produced the machines for working up the raw materials themselves. The difficulty here is not to get entangled in a vicious circle of presuppositions. For, in order to produce more machinery, more material is required (iron etc., coal etc.) and in order to produce this, more machinery is required. Whether we assume that industrialists who build machine-building machines and industrialists who manufacture machines (with the machine-building machines) are in one and the same category, does not alter the situation. This much is clear: One part of the surplus-product is embodied in machine-building machines (at least it is up to the manufacturers of machines to see that this happens). These need not be sold but can re-enter the new production in kind, as constant capital. This is therefore a second category of surplus-product which enters directly (or through exchange within the same sphere of production) as constant capital into the new production (accumulation), without having gone through the process of first being transformed into variable capital.

The question whether a part of the surplus-value can be directly transformed into constant capital, resolves, in the first place, into the question whether a part of the surplus-product, in which the surplus-value is expressed, can directly re-enter its own sphere of production as a means of production, without first having been alienated.

The general law is as follows:

Where a part of the product, and therefore also of the surplus-product (i.e., the use-value in which the surplus-value is expressed) can re-enter as a means of production—as instrument of labour or material of labour—into the sphere of production from which it came, directly, without an intermediary phase, accumulation within this sphere of production can and must take place in such a way that a part of the surplus-product, instead of being sold, is as a means of production re-incorporated into the reproduction process directly (or through exchange with other specialists in the same sphere of production who are similarly accumulating), so that accumulation and reproduction on a larger scale coincide here directly. They must coincide everywhere, but not in this direct manner.

This also applies to a part of the auxiliary materials. For example to the coal produced in a year. A part of the surplus-product can itself be used to produce more coal and can therefore be used up again directly by its producer, without any intermediary phase, as constant capital for production on a larger scale.

In industrial areas there are machine-builders who build whole factories for the manufacturers. Let us assume one-tenth is surplus-product or unpaid labour. Whether this tenth, the surplus-product, consists of factory buildings which are built for a third party and are sold to them, or of factory buildings which the producer builds for himself—sells to himself—clearly makes no difference. The only thing that matters here is whether the kind of use-value in which the surplus-labour is expressed, can re-enter as means of production into the sphere of production ||703| of the capitalist to whom the surplus-product belongs. This is yet another example of how important is the analysis of use-value for the determination of economic phenomena.

Here, therefore, we already have a considerable portion of the surplus-product, and therefore of the surplus-value, which can and must be transformed directly into constant capital, in order to be accumulated as capital and without which no accumulation of capital can take place at all.

Secondly, we have seen that where capitalist production is developed, that is, where the productivity of labour, the constant capital and particularly that part of constant capital which consists of fixed capital are developed, the mere reproduction of fixed capital in all spheres and the parallel reproduction of the existing capital which produces fixed capital, forms an accumulation fund, that is to say, provides machinery, i.e., constant capital, for production on an extended scale.

Thirdly: There remains the question: Can a part of the surplus-product be re-transformed into capital (that is constant capital) through an (intermediary) exchange between the producer, for example of machinery, implements of labour etc. and the producer of raw material, iron, coal, metals, timber etc., that is, through the exchange of various components of constant capital? If, for example, the manufacturer of iron, coal, timber, etc., buys machinery or tools from the machine-builder and the machine-builder buys metal, timber, coal etc. from the primary producer, then they replace or form new constant capital through this exchange of the reciprocal component parts of their constant capital. The question here is: to what extent is the sur plus-product converted in this way?

[5. The Transformation of Capitalised Surplus-Value into Constant and Variable Capital]

We saw earlier, that in the simple reproduction of the advanced capital, the portion of the constant capital which is used up in the reproduction of constant capital is replaced either directly in kind or through exchange between the producers of constant capital—an exchange of capital against capital and not of revenue against revenue or revenue against capital. Moreover, the constant capital which is used up or consumed industrially in the production of consumable goods—commodities which enter into individual consumption—is replaced by new products of the same kind, which are the result of newly-added labour, and therefore resolve into revenue (wages and profit). Accordingly, therefore, in the spheres which produce consumable goods, the portion of the total product, which is equal to the portion of their value which replaces their constant capital, represents the revenue of the producers of constant capital; while, on the other hand, in the spheres which produce constant capital, the part of the total product which represents newly-added labour and therefore forms the revenue of the producers of this constant capital, represents the constant capital (replacement capital) of the producers of the means of subsistence. This presupposes, therefore, that the producers of constant capital exchange their surplus-product (which means here, the excess of their product over that part of it which is equal to their constant capital) against means of subsistence, and consume its value individually. This surplus-product, however, consists of:

1. wages (or the reproduced fund for wages), and this portion must continue to be allocated (by the capitalist) for paying out wages, that is, for individual consumption (and assuming a minimum wage, the worker too can only convert the wages he receives, into means of subsistence);

2. the profit of the capitalist (including rent). If this portion is large enough, it can be consumed partly individually and partly industrially, And in this latter case, an exchange of products takes place between the producers of constant capital; this is, however, no longer an exchange of the portion of their products representing their constant capital which has to be mutually replaced between them, but is an exchange of a part of their surplus-product, revenue (newly-added labour) which is directly transformed into constant capital, thus increasing the amount of constant capital and expanding the scale of reproduction.

In this case, too, therefore a part of the existing surplus-product, that is, of the labour which has been newly added during the year, is transformed directly into constant capital, without first having been converted into variable capital. This demonstrates again that the industrial consumption of the surplus-product—or accumulation—is by no means identical with the conversion of the entire surplus-product into wages paid to productive workers.

It is quite possible that the manufacturer of machines sells (part of) his commodity to the producer, say, of cloth. The latter pays him in money. With this money he purchases iron, coal etc. instead of means of subsistence. But when one considers the process as a whole, it is evident that the producers of means of subsistence cannot purchase any replacement machinery or replacement raw materials, unless the producers of the replacements of constant capital buy their means of subsistence from them, in other words, unless this circulation is fundamentally an exchange between means of subsistence and constant capital. The separation of the acts of buying and selling can of course cause considerable disturbances and complications in this compensatory process.

||704| If a country cannot itself produce the amount of machinery required for the accumulation of capital, then it buys it from abroad. The same happens if it cannot itself produce a sufficient quantity of means of subsistence (for wages) and the raw material. As soon as international trade intervenes, it becomes quite obvious that a part of the surplus-product of a country—in so far as it is intended for accumulation—is not transformed into wages, but directly into constant capital. But then there may remain the notion that over there, in the foreign country, the money thus laid out is spent entirely on wages. We have seen that, even leaving foreign trade out of account, this is not so and cannot be so.

The proportion in which the surplus-product is divided between variable and constant capital, depends on the average composition of capital, and the more developed capitalist production is, the smaller, relatively, will be the part which is directly laid out in wages. The idea that, because the surplus-product is solely the product of the labour newly added during the year, it can therefore only be converted into variable capital, i.e., only be laid out in wages, corresponds altogether to the false conception that because the product is only the result, or the materialisation, of labour, its value is resolved only into revenue—wages, profit, and rent—the false conception of Smith and Ricardo.

A large part of constant capital, namely, the fixed capital, may enter directly into the process of the production of means of subsistence, raw materials etc., or it may serve either to shorten the circulation process, like railways, roads, navigation, telegraphs etc, or to store and accumulate stocks of commodities like docks, warehouses etc., alternatively it may increase the yield only after a long period of reproduction, as for instance levelling operations, drainage etc. The direct consequences for the reproduction of the means of subsistence etc. will be very different according to whether a greater or smaller part of the surplus-product is converted into one of these types of fixed capital.

[6. Crises (Introductory Remarks)]

If expanded production of constant capital is assumed—that is greater production than is required for the replacement of the former capital and therefore also for the production of the former quantity of means of subsistence—expanded production or accumulation in the spheres using the machinery, raw materials etc. encounters no further difficulties. If sufficient additional labour is available, they [the manufacturers] will find on the market all the means for the formation of new capital, for the transformation of their additional money into new capital.

But the whole process of accumulation in the first place resolves itself into production on an expanding scale, which on the one hand corresponds to the natural growth of the population, and on the other hand, forms an inherent basis for the phenomena which appear during crises. The criterion of this expansion of production is capital itself, the existing level of the conditions of production and the unlimited desire of the capitalists to enrich themselves and to enlarge their capital, but by no means consumption, which from the outset is inhibited, since the majority of the population, the working people, can only expand their consumption within very narrow limits, whereas the demand for labour, although it grows absolutely, decreases relatively, to the same extent as capitalism develops. Moreover, all equalisations are accidental and although the proportion of capital employed in individual spheres is equalised by a continuous process, the continuity of this process itself equally presupposes the constant disproportion which it has continuously, often violently, to even out.

Here we need only consider the forms which capital passes through in the various stages of its development. The real conditions within which the actual process of production takes place are therefore not analysed. It is assumed throughout, that the commodity is sold at its value. We do not examine the competition of capitals, nor the credit system, nor the actual composition of society, which by no means consists only of two classes, workers and industrial capitalists, and where therefore consumers and producers are not identical categories. The first category, that of the consumers (whose revenues are in part not primary, but secondary, derived from profit and wages), is much broader than the second category [producers], and therefore the way in which they spend their revenue, and the very size of the revenue give rise to very considerable modifications in the economy and particularly in the circulation and reproduction process of capital. Nevertheless, just as the examination of money— both in so far as it represents a form altogether different from the natural form of commodities, and also in its form as means of payment—has shown that it contained the possibility of crises; the examination of the general nature of capital, even without going further into the actual relations which all constitute prerequisites for the real process of production, reveals this still more clearly.

||705| The conception (which really belongs to [James] Mill), adopted by Ricardo from the tedious Say (and to which we shall return when we discuss that miserable individual), that overproduction is not possible or at least that no general glut of the market is possible, is based on the proposition that products are exchanged against products, or as Mill put it, on the “metaphysical equilibrium of sellers and buyers”, and this led to [the conclusion] that demand is determined only by production, or also that demand and supply are identical. The same proposition exists also in the form, which Ricardo liked particularly, that any amount of capital can be employed productively in any country.

“M. Say,” writes Ricardo in Chapter XXI (“Effects of Accumulation on Profits and Interest”), “has…most satisfactorily shewn, that there is no amount of capital which may not be employed in a country, because demand is only limited by production. No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. It is not to he supposed that he should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view, namely, the possession of other goods; and, therefore, it is not probable that he will continually” (the point in question here is not eternal life) “produce a commodity for which there is no demand.” ([David Ricardo, On the Principles of Political Economy, and Taxation, London, 1821,] pp. 339-40.)

Ricardo, who always strives to be consistent, discovers that his authority, Say, is playing a trick on him here. He makes the following comment in a footnote to this passage:

“Is the following quite consistent with M. Say’s principle? “The more disposable capitals are abundant in proportion to the extent of employment for them, the more will the rate of interest on loans of capital fall.’ (Say, Vol. II, p. 108.) If capital to any extent can be employed by a country, how can it be said to be abundant, compared with the extent of employment for it?” ([Ricardo], l.c., p. 340, note.)

Since Ricardo cites Say, we shall criticise Say’s theories later, when we deal with this humbug himself.

Meanwhile we just note here: In reproduction, just as in the accumulation of capital, it is not only a question of replacing the same quantity of use-values of which capital consists, on the former scale or on an enlarged scale (in the case of accumulation), but of replacing the value of the capital advanced along with the usual rate of profit (surplus-value). If, therefore, through any circumstance or combination of circumstances, the market-prices of the commodities (of all or most of them, it makes no difference) fall far below their cost-prices, then reproduction of capital is curtailed as far as possible. Accumulation, however, stagnates even more. Surplus-value amassed in the form of money (gold or notes) could only be transformed into capital at a loss. It therefore lies idle as a hoard in the banks or in the form of credit money, which in essence makes no difference at all. The same hold up could occur for the opposite reasons, if the real prerequisites of reproduction were missing (for instance if grain became more expensive or because not enough constant capital had been accumulated in kind). There occurs a stoppage in reproduction, and thus in the flow of circulation. Purchase and sale get bogged down and unemployed capital appears in the form of idle money. The same phenomenon (and this usually precedes crises) can appear when additional capital is produced at a very rapid rate and its reconversion into productive capital increases the demand for all the elements of the latter to such an extent that actual production cannot keep pace with it; this brings about a rise in the prices of all commodities, which enter into the formation of capital. In this case the rate of interest falls sharply, however much the profit may rise and this fall in the rate of interest then leads to the most risky speculative ventures. The interruption of the reproduction process leads to the decrease in variable capital, to a fall in wages and in the quantity of labour employed. This in turn reacts anew on prices and leads to their further fall.

It must never be forgotten, that in capitalist production what matters is not the immediate use-value but the exchange-value and, in particular, the expansion of surplus-value. This is the driving motive of capitalist production, and it is a pretty conception that—in order to reason away the contradictions of capitalist production—abstracts from its very basis and depicts it as a production aiming at the direct satisfaction of the consumption of the producers.

Further: since the circulation process of capital is not completed in one day but extends over a fairly long period until the capital returns to its original form, since this period coincides with the period within which market-prices ||706| equalise with cost-prices, and great upheavals and changes take place in the market in the course of this period, since great changes take place in the productivity of labour and therefore also in the real value of commodities, it is quite clear, that between the starting-point, the prerequisite capital, and the time of its return at the end of one of these periods, great catastrophes must occur and elements of crisis must have gathered and develop, and these cannot in any way be dismissed by the pitiful proposition that products exchange for products. The comparison of value in one period with the value of the same commodities in a later period is no scholastic illusion, as Mr. Bailey maintains, but rather forms the fundamental principle of the circulation process of capital.

When speaking of the destruction of capital through crises, one must distinguish between two factors.

In so far as the reproduction process is checked and the labour-process is restricted or in some instances is completely stopped, real capital is destroyed. Machinery which is not used is not capital. Labour which is not exploited is equivalent to lost production. Raw material which lies unused is no capital. Buildings (also newly built machinery) which are either unused or remain unfinished, commodities which rot in warehouses— all this is destruction of capital. All this means that the process of reproduction is checked and that the existing means of production are not really used as means of production, are not put into operation. Thus their use-value and their exchange-value go to the devil.

Secondly, however, the destruction of capital through crises means the depreciation of values which prevents them from later renewing their reproduction process as capital on the same scale. This is the ruinous effect of the fall in the prices of commodities. It does not cause the destruction of any use-values. What one loses, the other gains. Values used as capital are prevented from acting again as capital in the hands of the same person. The old capitalists go bankrupt. If the value of the commodities from whose sale a capitalist reproduces his capital was equal to £ 12,000, of which say £ 2,000 were profit, and their price falls to £ 6,000, then the capitalist can neither meet his contracted obligations nor, even if he had none, could he, with the £ 6,000 restart his business on the former scale, for the commodity prices have risen once more to the level of their cost-prices. In this way, £ 6,000 has been destroyed, although the buyer of these commodities, because he has acquired them at half their cost-price, can go ahead very well once business livens up again, and may even have made a profit. A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction. This is also the period during which moneyed interest enriches itself at the cost of industrial interest. As regards the fall in the purely nominal capital, State bonds, shares etc.—in so far as it does not lead to the bankruptcy of the state or of the share company, or to the complete stoppage of reproduction through undermining the credit of the industrial capitalists who hold such securities—it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.

[7. Absurd Denial of the Over-production of Commodities, Accompanied by a Recognition of the Over-abundance of Capital]

To the best of his knowledge, Ricardo is always consistent. For him, therefore, the statement that no over-production (of commodities) is possible, is synonymous with the statement that no plethora or over-abundance of capital is possible.*

“There cannot, then, be accumulated in a country any amount of capital which cannot be employed productively, until wages rise so high in consequence of the rise of necessaries, and so little consequently remains for the profits of stock, that the motive for accumulation ceases” ( [Ricardo], l.c., p. 340). “It follows then … that there is no limit to demand—no limit to the employment of capital while it yields any profit, and that however abundant capital may become, there is no other adequate reason for a fall of profit but a rise of wages, and further it may be added, that the only adequate and permanent cause for the rise of wages is the increasing difficulty of providing food and necessaries ||707| for the increasing number of workmen” (l.c., pp. 347-48).

What then would Ricardo have said to the stupidity of his successors, who deny over-production in one form (as a general glut of commodities in the market) and who, not only admit its existence in another form, as over-production of capital, plethora of capital, over-abundance of capital, but actually turn it into an essential point in their doctrine?

Not a single responsible economist of the post-Ricardian period denies the plethora of capital. On the contrary, all of them regard it as the cause of crises (in so far as they do not explain the latter by factors relating to credit). Therefore, they all admit over—production in one form but deny its existence in another. The only remaining question thus is: what is the relation between these two forms of over-production, i.e., between the form in which it is denied and the form in which it is asserted?

Ricardo himself did not actually know anything of crises, of general crises of the world market, arising out of the production process itself. He could explain that the crises which occurred between 1800 and 1815, were caused by the rise in the price of corn due to poor harvests, by the devaluation of paper currency, the depreciation of colonial products etc., because, in consequence of the continental blockade, the market was forcibly contracted for political and not economic reasons. He was also able to explain the crises after 1815, partly by a bad year and a shortage of corn, and partly by the fall in corn prices, because those causes which, according to his own theory, had forced up the price of corn during the war when England was cut off from the continent, had ceased to operate; partly by the transition from war to peace which brought about “sudden changes in the channels of trade” [l.c., p. 307). (See Chapter XIX—“On Sudden Changes in the Channels of Trade”—of his Principles.)

Later historical phenomena, especially the almost regular periodicity of crises on the world market, no longer permitted Ricardo’s successors to deny the facts or to interpret them as accidental. Instead—apart from those who explain everything by credit, but then have to admit that they themselves are forced to presuppose the over-abundance of capital—they invented the nice distinction between over-abundance of capital and overproduction. Against the latter, they arm themselves with the phrases and good reasons used by Ricardo and Adam Smith, while by means of the over-abundance of capital they attempt to explain phenomena that they are otherwise unable to explain. Wilson, for example; explains certain crises by the overabundance of fixed capital, while he explains others by the overabundance of circulating capital. The over-abundance of capital itself is affirmed by the best economists (such as Fullarton), and has already become a matter of course to such an extent, that it can even be found in the learned Roscher’s compendium as a self-evident fact.

The question is, therefore, what is the over-abundance of capital and how does it differ from over-production?

(In all fairness however, it must be said, that other economists, such as Ure, Corbet etc., declare over-production to be the usual condition in large-scale industry, so far as the home country is concerned and that it thus only leads to crises under certain circumstances, in which the foreign market also contracts.)

According to the same economists, capital is equivalent to money or commodities. Over-production of capital is thus overproduction of money or of commodities. And yet these two phenomena are supposed to have nothing in common with each other, Even the over-production of money [is of] no [avail], since money for them is a commodity, so that the entire phenomenon resolves into one of over-production of commodities which they admit under one name and deny under another. Moreover, the statement that there is over-production of fixed capital or of circulating capital, is based on the fact that commodities are here no longer considered in this simple form, but in their designation as capital. This, however, is an admission that in capitalist ||708| production and its phenomena—e.g., over-production—it is a question not only of the simple relationship in which the product appears, is designated, as commodity, but of its designation within the social framework, it thereby becomes something more than, and also different from, a commodity.

Altogether, the phrase over-abundance of capital instead of over-production of commodities in so far as it is not merely a prevaricating expression, or unscrupulous thoughtlessness, which admits the existence and necessity of a particular phenomenon when it is called A, but denies it as soon as it is called B, in fact therefore showing scruples and doubts only about the name of the phenomenon and not the phenomenon itself; or in so far as it is not merely an attempt to avoid the difficulty of explaining the phenomenon, by denying it in one form (under one name) in which it contradicts existing prejudices and admitting it in a form only in which it becomes meaningless—apart from these aspects, the transition from the phrase “over-production of commodities” to the phrase “over-abundance of capital” is indeed an advance. In what does this consist? In [expressing the fact], that the producers confront one another not purely as owners of commodities, but as capitalists.

[8. Ricardo’s Denial of General Over-production. Possibility of a Crisis Inherent in the Inner Contradictions of Commodity and Money]

A few more passages from Ricardo:

“One would be led to think.., that Adam Smith concluded we were under some necessity” (this is indeed the case) “of producing a surplus of corn, woollen goods, and hardware, and that the capital which produced them could not he otherwise employed. It is, however, always a matter of choice in what way a capital shall he employed, and therefore there can never, for any length of time, be a surplus of any commodity; for if there were, it would fall below its natural price, and capital would be removed to some more profitable employment” (l.c., pp. 341-42, note).

“Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected.”

(That is to say, money is merely a means of circulation, and exchange-value itself is merely a fleeting aspect of the exchange of product against product—which is wrong.)

“Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with […] all commodities” (l.c., pp. 341-42).

“Whether these increased productions, and consequent demand which they occasion, shall or shall not lower profits, depends solely on the rise of wages; and the rise of wages, excepting for a limited period, on the facility of producing the food and necessaries of the labourer” (l.c., p. 343).

“When merchants engage their capitals in foreign trade, or in the carrying trade, it is always from choice, and never from necessity: it is because in that trade their profits will be somewhat greater than in the home trade” (l.c., p. 344).

So far as crises are concerned, all those writers who describe the real movement of prices, or all experts, who write in the actual situation of a crisis, have been right in ignoring the allegedly theoretical twaddle and in contenting themselves with the idea that what may be true in abstract theory—namely, that no gluts of the market and so forth are possible—is, nevertheless, wrong in practice. The constant recurrence of crises has in fact reduced the rigmarole of Say and others to a phraseology which is now only used in times of prosperity but is cast aside in times of crises.

||709| In the crises of the world market, the contradictions and antagonisms of bourgeois production are strikingly revealed. Instead of investigating the nature of the conflicting elements which errupt in the catastrophe, the apologists content themselves with denying the catastrophe itself and insisting, in the face of their regular and periodic recurrence, that if production were carried on according to the textbooks, crises would never occur. Thus the apologetics consist in the falsification of the simplest economic relations, and particularly in clinging to the concept of unity in the face of contradiction.

If, for example, purchase and sale—or the metamorphosis of commodities—represent the unity of two processes, or rather the movement of one process through two opposite phases, and thus essentially the unity of the two phases, the movement is essentially just as much the separation of these two phases and their becoming independent of each other. Since, however, they belong together, the independence of the two correlated aspects can only show itself forcibly, as a destructive process. It is just the crisis in which they assert their unity, the unity of the different aspects. The independence which these two linked and complimentary phases assume in relation to each other is forcibly destroyed. Thus the crisis manifests the unity of the two phases that have become independent of each other. There would be no crisis without this inner unity of factors that are apparently indifferent to each other. But no, says the apologetic economist. Because there is this unity, there can be no crises. Which in turn means nothing but that the unity of contradictory factors excludes contradiction.

In order to prove that capitalist production cannot lead to general crises, all its conditions and distinct forms, all its principles and specific features—in short capitalist production itself—are denied. In fact it is demonstrated that if the capitalist mode of production had not developed in a specific way and become a unique form of social production, but were a mode of production dating back to the most rudimentary stages, then its peculiar contradictions and conflicts and hence also their eruption in crises would not exist.

Following Say, Ricardo writes: “Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected” (l.c., p. 341).

Here, therefore, firstly commodity, in which the contradiction between exchange-value and use-value exists, becomes mere product (use-value) and therefore the exchange of commodities is transformed into mere barter of products, of simple use-values. This is a return not only to the time before capitalist production, but even to the time before there was simple commodity production; and the most complicated phenomenon of capitalist production—the world market crisis—is flatly denied, by denying the first condition of capitalist production, namely, that the product must be a commodity and therefore express itself as money and undergo the process of metamorphosis. Instead of speaking of wage-labour, the term “services” is used. This word again omits the specific characteristic of wage-labour and of its use—namely, that it increases the value of the commodities against which it is exchanged, that it creates surplus-value—and in doing so, it disregards the specific relationship through which money and commodities are transformed into capital. “Service” is labour seen only as use-value (which is a side issue in capitalist production) just as the term “productions” fails to express the essence of commodity and its inherent contradiction. It is quite consistent that money is then regarded merely as an intermediary in the exchange of products, and not as an essential and necessary form of existence of the commodity which must manifest itself as exchange-value, as general social labour. Since the transformation of the commodity into mere use-value (product) obliterates the essence of ||710| exchange-value, it is just as easy to deny, or rather it is necessary to deny, that money is an essential aspect of the commodity and that in the process of metamorphosis it is independent of the original form of the commodity.

Crises are thus reasoned out of existence here by forgetting or denying the first elements of capitalist production: the existence of the product as a commodity, the duplication of the commodity in commodity and money, the consequent separation which takes place in the exchange of commodities and finally the relation of money or commodities to wage-labour.

Incidentally, those economists are no better, who (like John Stuart Mill) want to explain the crises by these simple possibilities of crisis contained in the metamorphosis of commodities—such as the separation between purchase and sale. These factors which explain the possibility of crises, by no means explain their actual occurrence. They do not explain why the phases of the process come into such conflict that their inner unity can only assert itself through a crisis, through a violent process. This separation appears in the crisis; it is the elementary form of the crisis. To explain the crisis on the basis of this, its elementary form, is to explain the existence of the crisis by describing its most abstract form, that is to say, to explain the crisis by the crisis.

Ricardo says: “No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some person. It is not to be supposed that be should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view, namely, the possession of other goods; and, therefore, it is not probable that he will continually produce a commodity for which there is no demand” [l.c., pp. 339-40].

This is the childish babble of a Say, but it is not worthy of Ricardo. In the first place, no capitalist produces in order to consume his product. And when speaking of capitalist production, it is right to say that: “no man produces with a view to consume his own product”, even if he uses portions of his product for industrial consumption. But here the point in question is private consumption. Previously it was forgotten that the product is a commodity. Now even the social division of labour is forgotten. In a situation where men produce for themselves, there are indeed no crises, but neither is there capitalist production. Nor have we ever heard that the ancients, with their slave production ever knew crises, although individual producers among the ancients too, did go bankrupt. The first part of the alternative is nonsense. The second as well. A man who has produced, does not have the choice of selling or not selling. He must sell. In the crisis there arises the very situation in which he cannot sell or can only sell below the cost-price or must even sell at a positive loss. What difference does it make, therefore, to him or to us that he has produced in order to sell? The very question we want to solve is what has thwarted this good intention of his?

Further:

he “never sells, but with an intention to purchase some other commodity, which may he immediately useful to him, or which may contribute to future production” (l.c., p. 339).

What a cosy description of bourgeois conditions! Ricardo even forgets that a person may sell in order to pay, and that these forced sales play a very significant role in the crises. The capitalist’s immediate object in selling, is to turn his commodity, or rather his commodity capital, back into money capital, and thereby to realise his profit. Consumption—revenue—is by no means the guiding motive in this process, although it is for the person who only sells commodities in order to transform them into means of subsistence. But this is not capitalist production, in which revenue appears as the result and not as the determining purpose. Everyone sells first of all in order to sell, that is to say, in order to transform commodities into money.

||711| During the crisis, a man may be very pleased, if he has sold his commodities without immediately thinking of a purchase. On the other hand, if the value that has been realised is again to be used as capital, it must go through the process of reproduction, that is, it must be exchanged for labour and commodities. But the crisis is precisely the phase of disturbance and interruption of the process of reproduction. And this disturbance cannot be explained by the fact that it does not occur in those times when there is no crisis. There is no doubt that no one “will continually produce a commodity for which there is no demand” (l.c., p. 340), but no one is talking about such an absurd hypothesis. Nor has it anything to do with the problem. The immediate purpose of capitalist production is not “the possession of other goods”, but the appropriation of value, of money, of abstract wealth.

Ricardo’s statements here are also based on James Mills’s proposition on the “metaphysical equilibrium of purchases and sales”, which I examined previously—an equilibrium which sees only the unity, but not the separation in the processes of purchase and sale, Hence also Ricardo’s assertion (following James Mill):

“Too much of a particular commodity may he produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities” (l.c., pp. 341-42).

Money is not only “the medium by which the exchange is effected” (l.c., p. 341), but at the same time the medium by which the exchange of product with product is divided into two acts, which are independent of each other, and separate in time and space. With Ricardo, however, this false conception of money is due to the fact that he concentrates exclusively on the quantitative determination of exchange-value, namely, that it is equal to a definite quantity of labour-time, forgetting on the other hand the qualitative characteristic, that individual labour must present itself as abstract, general social labour only through its alienation.*

That only particular commodities, and not all kinds of commodities, can form “a glut in the market” and that therefore over-production can always only be partial, is a poor way out. In the first place, if we consider only the nature of the commodity, there is nothing to prevent all commodities from being superabundant on the market, and therefore all falling below their price. We are here only concerned with the factor of crisis. That is all commodities, apart from money [may be superabundant]. [The proposition] the commodity must be converted into money, only means that: all commodities must do so. And just as the difficulty of undergoing this metamorphosis exists for an individual commodity, so it can exist for all commodities. The general nature of the metamorphosis of commodities—which includes the separation of purchase and sale just as it does their unity—instead of excluding the possibility of a general glut, on the contrary, contains the possibility of a general glut.

Ricardo’s and similar types of reasoning are moreover based not only on the relation of purchase and sale, but also on that of demand and supply, which we have to examine only when considering the competition of capitals. As Mill says purchase is sale etc., therefore demand is supply and supply demand. But they also fall apart and can become independent of each other. At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.

If the relation of demand and supply is taken in a wider and more concrete sense, then it comprises the relation of production and consumption as well. Here again, the unity of these two phases, which does exist and which forcibly asserts itself during the crisis, must be seen as opposed to the separation and antagonism of these two phases, separation and antagonism which exist just as much, and are moreover typical of bourgeois production.

With regard to the contradiction between partial and universal over-production, in so far as the existence of the former is affirmed in order to evade the latter, the following observation may be made:

Firstly: Crises are usually preceded by a general inflation in prices of all articles of capitalist production. All of them therefore participate in the subsequent crash and at their former prices they cause a glut in the market. The market can absorb a larger volume of commodities at falling prices, at prices which have fallen below their cost-prices, than it could absorb at their former prices. The excess of commodities is always relative; in other words it is an excess at particular prices. The prices at which the commodities are then absorbed are ruinous for the producer or merchant.

||712| Secondly:

For a crisis (and therefore also for over-production) to be general, it suffices for it to affect the principal commercial goods.

[9. Ricardo’s Wrong Conception of the Relation Between Production and Consumption under the Conditions of Capitalism]

Let us take a closer look at how Ricardo seeks to deny the possibility of a general glut in the market:

“Too much of a particular commodity may he produced, of which there may he such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities; the demand for corn is limited by the mouths which are to eat it, for shoes and coats by the persons who are to wear them; but though a community, or a part of a community, may have as much corn, and as many hats and shoes, as it is able or may wish to consume, the same cannot be said of every commodity produced by nature or by art. Some would consume more wine, if they had the ability to procure it. Others having enough of wine, would wish to increase the quantity or improve the quality of their furniture. Others might wish to ornament their grounds, or to enlarge their houses. The wish to do all or some of these is implanted in every man’s breast; nothing is required but the means, and nothing can afford the means, but an increase of production” (l.c., pp. 341-42).

Could there be a more childish argument? It runs like this: more of a particular commodity may be produced than can be consumed of it; but this cannot apply to all commodities at the same time. Because the needs, which the commodities satisfy, have no limits and all these needs are not satisfied at the same time. On the contrary. The fulfilment of one need makes another, so to speak, latent. Thus nothing is required, but the means to satisfy these wants, and these means can only be provided through an increase in production. Hence no general overproduction is possible.

What is the purpose of all this? In periods of over-production, a large part of the nation (especially the working class) is less well provided than ever with corn, shoes etc., not to speak of wine and furniture. If over-production could only occur when all the members of a nation had satisfied even their most urgent needs, there could never, in the history of bourgeois society up to now, have been a state of general over-production or even of partial over-production. When, for instance, the market is glutted by shoes or calicoes or wines or colonial products, does this perhaps mean that four-sixths of the nation have more than satisfied their needs in shoes, calicoes etc.? What after all has over-production to do with absolute needs? It is only concerned with demand that is backed by ability to pay. It is not a question of absolute over-production—over-production as such in relation to the absolute need or the desire to possess commodities. In this sense there is neither partial nor general over-production; and the one is not opposed to the other.

But—Ricardo will say—when there are a lot of people who want shoes and calicoes, why do they not obtain the means to acquire them, by producing something which will enable them to buy shoes and calicoes? Would it not be even simpler to say: Why do they not produce shoes and calicoes for themselves? An even stranger aspect of over-production is that the workers, the actual producers of the very commodities which glut the market, are in need of these commodities. It cannot be said here that they should produce things in order to obtain them, for they have produced them and yet they have not got them. Nor can it be said that a particular commodity gluts the market, because no one is in want of it. If, therefore, it is even impossible to explain that partial over-production arises because the demand for the commodities that glut the market has been more than satisfied, it is quite impossible to explain away universal over-production by declaring that needs, unsatisfied needs, exist for many of the commodities which are on the market.

Let us keep to the example of the weaver of calico. So long as reproduction continued uninterruptedly—and therefore also the phase of this reproduction in which the product existing as a saleable commodity, the calico, was reconverted into money, at its value—so long, shall we say, the workers who produced the calico, also consumed a part of it, and with the expansion of reproduction, that is to say, with accumulation, they were consuming more of it, or also more workers were employed in the production of calico, who also consumed part of it.

[10. Crisis, Which Was a Contingency, Becomes a Certainty. The Crisis as the Manifestation of All the Contradictions of Bourgeois Economy]

Now before we proceed further, the following must be said:

The possibility of crisis, which became apparent in the simple metamorphosis of the commodity, is once more demonstrated, and further developed, by the disjunction between the (direct) process of production and the process of circulation. As soon as these processes do not merge smoothly into one another ||713| but become independent of one another, the crisis is there.

The possibility of crisis is indicated in the metamorphosis of the commodity like this:

Firstly, the commodity which actually exists as use-value, and nominally, in its price, as exchange-value, must be transformed into money. C-M. If this difficulty, the sale, is solved then the purchase, M-C, presents no difficulty, since money is directly exchangeable for everything else. The use-value of the commodity, the usefulness of the labour contained in it, must be assumed from the start, otherwise it is no commodity at all. It is further assumed that the individual value of the commodity is equal to its social value, that is to say, that the labour-time materialised in it is equal to the socially necessary labour-time for the production of this commodity. The possibility of a crisis, in so far as it shows itself in the simple form of metamorphosis, thus only arises from the fact that the differences in form—the phases—which it passes through in the course of its progress, are in the first place necessarily complimentary and secondly, despite this intrinsic and necessary correlation, they are distinct parts and forms of the process, independent of each other diverging in time and space, separable and separated from each other. The possibility of crisis therefore lies solely in the separation of sale from purchase. It is thus only in the form of commodity that the commodity has to pass through this difficulty here. As soon as it assumes the form of money it has got over this difficulty. Subsequently however this too resolves into the separation of sale and purchase. If the commodity could not be withdrawn from circulation in the form of money or its retransformation into commodity could not be postponed—as with direct barter—if purchase and sale coincided, then the possibility of crisis would, under the assumptions made, disappear. For it is assumed that the commodity represents use-value for other owners of commodities. In the form of direct barter, the commodity is not exchangeable only if it has no use-value or when there are no other use-values on the other side which can be exchanged for it; therefore, only under these two conditions: either if one side has produced useless things or if the other side has nothing useful to exchange as an equivalent for the first use-value. In both cases, however, no exchange whatsoever would take place. But in so far as exchange did take place, its phases would not be separated. The buyer would be seller and the seller buyer. The critical stage, which arises from the form of the exchange—in so far as it is circulation—would therefore cease to exist, and if we say that the simple form of metamorphosis comprises the possibility of crisis, we only say that in this form itself lies the possibility of the rupture and separation of essentially complimentary phases.

But this applies also to the content. In direct barter, the bulk of production is intended by the producer to satisfy his own needs, or, where the division of labour is more developed, to satisfy the needs of his fellow producers, needs that are known to him. What is exchanged as a commodity is the surplus and it is unimportant whether this surplus is exchanged or not. In commodity production the conversion of the product into money, the sale, is a conditio sine qua non. Direct production for personal needs does not take place. Crisis results from the impossibility to sell. The difficulty of transforming the commodity—the particular product of individual labour—into its opposite, money, i.e., abstract general social labour, lies in the fact that money is not the particular product of individual labour, and that the person who has effected a sale, who therefore has commodities in the form of money, is not compelled to buy again at once, to transform the money again into a particular product of individual labour. In barter this contradiction does not exist: no one can be a seller without being a buyer or a buyer without being a seller. The difficulty of the seller—on the assumption that his commodity has use-value—only stems from the ease with which the buyer can defer the retransformation of money into commodity. The difficulty of converting the commodity into money, of selling it, only arises from the fact that the commodity must be turned into money but the money need not be immediately turned into commodity, and therefore sale and purchase can be separated. We have said that this form contains the possibility of crisis, that is to say, the possibility that elements which are correlated, which are inseparable, are separated and consequently are forcibly reunited, their coherence is violently asserted against their mutual independence. ||714| Crisis is nothing but the forcible assertion of the unity of phases of the production process which have become independent of each other.

The general, abstract possibility of crisis denotes no more than the most abstract form of crisis, without content, without a compelling motivating factor. Sale and purchase may fall apart. They thus represent potential crisis and their coincidence always remains a critical factor for the commodity. The transition from one to the other may, however, proceed smoothly, The most abstract form of crisis (and therefore the formal possibility of crisis) is thus the metamorphosis of the commodity itself; the contradiction of exchange-value and use-value, and furthermore of money and commodity, comprised within the unity of the commodity, exists in metamorphosis only as an involved movement. The factors which turn this possibility of crisis into [an actual] crisis are not contained in this form itself; it only implies that the framework for a crisis exists.

And in a consideration of the bourgeois economy, that is the important thing. The world trade crises must be regarded as the real concentration and forcible adjustment of all the contradictions of bourgeois economy. The individual factors, which are condensed in these crises, must therefore emerge and must be described in each sphere of the bourgeois economy and the further we advance in our examination of the latter, the more aspects of this conflict must be traced on the one hand, and on the other hand it must be shown that its more abstract forms are recurring and are contained in the more concrete forms.

It can therefore be said that the crisis in its first form is the metamorphosis of the commodity itself, the falling asunder of purchase and sale.

The crisis in its second form is the function of money as a means of payment, in which money has two different functions and figures in two different phases, divided from each other in time. Both these forms are as yet quite abstract, although the second is more concrete than the first.

To begin with therefore, in considering the reproduction process of capital (which coincides with its circulation) it is necessary to prove that the above forms are simply repeated, or rather, that only here they receive a content, a basis on which to manifest themselves.

Let us look at the movement of capital from the moment in which it leaves the production process as a commodity in order once again to emerge from it as a commodity. If we abstract here from all the other factors determining its content, then the total commodity capital and each individual commodity of which it is made up, must go through the process C—M—C, the metamorphosis of the commodity. The general possibility of crisis, which is contained in this form—the falling apart of purchase and sale—is thus contained in the movement of capital, in so far as the latter is also commodity and nothing but commodity. From the interconnection of the metamorphoses of commodities it follows, moreover, that one commodity is transformed into money because another is retransformed from the form of money into commodity. Furthermore, the separation of purchase and sale appears here in such a way that the transformation of one capital from the form commodity into the form money, must correspond to the retransformation of the other capital from the form money into the form commodity. The first metamorphosis of one capital must correspond to the second metamorphosis of the other; one capital leaves the production process as the other capital returns into the production process. This intertwining and coalescence of the processes of reproduction or circulation of different capitals is on the one hand necessitated by the division of labour, on the other hand it is accidental; and thus the definition of the content of crisis is already fuller.

Secondly, however, with regard to the possibility of crisis arising from the form of money as means of payment, it appears that capital may provide a much more concrete basis for turning this possibility into reality. For example, the weaver must pay for the whole of the constant capital whose elements have been produced by the spinner, the flax-grower, the machine-builder, the iron and timber manufacturer, the producer of coal etc. In so far as these latter produce constant capital that only enters into the production of constant capital, without entering into the cloth, the final commodity, they replace each other’s means of production through the exchange of capital. Supposing the ||715| weaver now sells the cloth for £ 1,000 to the merchant but in return for a bill of exchange so that money figures as means of payment. The weaver for his part hands over the bill of exchange to the banker, to whom he may thus be repaying a debt or, on the other hand, the banker may negotiate the bill for him. The flax-grower has sold to the spinner in return for a bill of exchange, the spinner to the weaver, ditto the machine manufacturer to the weaver, ditto the iron and timber manufacturer to the machine manufacturer, ditto the coal producer to the spinner, weaver, machine manufacturer, iron and timber supplier. Besides, the iron, coal, timber and flax producers have paid one another with bills of exchange. Now if the merchant does not pay, then the weaver cannot pay his bill of exchange to the banker.

The flax-grower has drawn on the spinner, the machine manufacturer on the weaver and the spinner. The spinner cannot pay because the weaver cannot pay, neither of them pay the machine manufacturer, and the latter does not pay the iron, timber or coal supplier. And all of these in turn, as they cannot realise the value of their commodities, cannot replace that portion of value which is to replace their constant capital. Thus the general crisis comes into being. This is nothing other than the possibility of crisis described when dealing with money as a means of payment; but here—in capitalist production—we can already see the connection between the mutual claims and obligations, the sales and purchases, through which the possibility can develop into actuality.

In any case: If purchase and sale do not get bogged down, and therefore do not require forcible adjustment—and, on the other hand, money as means of payment functions in such a way that claims are mutually settled, and thus the contradiction inherent in money as a means of payment is not realised—if therefore neither of these two abstract forms of crisis become real, no crisis exists. No crisis can exist unless sale and purchase are separated from one another and come into conflict, or the contradictions contained in money as a means of payment actually come into play; crisis, therefore, cannot exist without manifesting itself at the same time in its simple form, as the contradiction between sale and purchase and the contradiction of money as a means-of payment. But these are merely forms, general possibilities of crisis, and hence also forms, abstract forms, of actual crisis. In them, the nature of crisis appears in its simplest forms, and, in so far as this form is itself the simplest content of crisis, in its simplest content. But the content is not yet substantiated. Simple circulation of money and even the circulation of money as a means of payment—and both come into being long before capitalist production, while there are no crises—are possible and actually take place without crises. These forms alone, therefore, do not explain why their crucial aspect becomes prominent and why the potential contradiction contained in them becomes a real contradiction.

This shows how insipid the economists are who, when they are no longer able to explain away the phenomenon of overproduction and crises, are content to say that these forms contain the possibility of crises, that it is therefore accidental whether or not crises occur and consequently their occurrence is itself merely a matter of chance.

The contradictions inherent in the circulation of commodities, which are further developed in the circulation of money—and thus, also, the possibilities of crisis—reproduce themselves, automatically, in capital, since developed circulation of commodities and of money, in fact, only takes place on the basis of capital.

But now the further development of the potential crisis has to be traced—the real crisis can only be educed from the real movement of capitalist production, competition and credit—in so far as crisis arises out of the special aspects of capital which are peculiar to it as capital, and not merely comprised in its existence as commodity and money.

||716| The mere (direct) production process of capital in itself, cannot add anything new in this context. In order to exist at all, its conditions are presupposed. The first section dealing with capital—the direct process of production—does not contribute any new element of crisis. Although it does contain such an element, because the production process implies appropriation and hence production of surplus-value. But this cannot be shown when dealing with the production process itself, for the latter is not concerned with the realisation either of the reproduced value or of the surplus-value.

This can only emerge in the circulation process which is in itself also a process of reproduction.

Furthermore it is necessary to describe the circulation or reproduction process before dealing with the already existing capital—capital and profit—since we have to explain, not only how capital produces, but also how capital is produced. But the actual movement starts from the existing capital—i.e., the actual movement denotes developed capitalist production, which starts from and presupposes its own basis. The process of reproduction and the predisposition to crisis which is further developed in it, are therefore only partially described under this heading and require further elaboration in the chapter on “Capital and Profit”.

The circulation process as a whole or the reproduction process of capital as a whole is the unity of its production phase and its circulation phase, so that it comprises both these processes or phases. Therein lies a further developed possibility or abstract form of crisis. The economists who deny crises consequently assert only the unity of these two phases. If they were only separate, without being a unity, then their unity could not be established by force and there could be no crisis. If they were only a unity without being separate, then no violent separation would be possible implying a crisis. Crisis is the forcible establishment of unity between elements that have become independent and the enforced separation from one another of elements which are essentially one. |716||

[11. On the Forms of Crisis]

||770a| Supplement to page 716.

Therefore:

1. The general possibility of crisis is given in the process of metamorphosis of capital itself, and in two ways: in so far as money functions as means of circulation, [the possibility of crisis lies in] the separation of purchase and sale; and in so far as money functions as means of payment, it has two different aspects, it acts as measure of value and as realisation of value. These two aspects [may] become separated. If in the interval between them the value has changed, if the commodity at the moment of its sale is not worth what it was worth at the moment when money was acting as a measure of value and therefore as a measure of the reciprocal obligations, then the obligation cannot be met from the proceeds of the sale of the commodity, and therefore the whole series of transactions which retrogressively depend on this one transaction, cannot be settled. If even for only a limited period of time the commodity cannot be sold then, although its value has not altered, money cannot function as means of payment, since it must function as such in a definite given period of time. But as the same sum of money acts for a whole series of reciprocal transactions and obligations here, inability to pay occurs not only at one, but at many points, hence a crisis arises.

These are the formal possibilities of crisis. The form mentioned first is possible without the latter—that is to say, crises are possible without credit, without money functioning as a means of payment. But the second form is not possible without the first— that is to say, without the separation between purchase and sale. But in the latter case, the crisis occurs not only because the commodity is unsaleable, but because it is not saleable within a particular period of time, and the crisis arises and derives its character not only from the unsaleability of the commodity, but from the non-fulfilment of a whole series of payments which depend on the sale of this particular commodity within this particular period of time. This is the characteristic form of money crises.

If the crisis appears, therefore, because purchase and sale become separated, it becomes a money crisis, as ‘soon as money has developed as means of payment, and this second form of crisis follows as a matter of course, when the first occurs. In investigating why the general possibility of crisis turns into a real crisis, in investigating the conditions of crisis, it is therefore quite superfluous to concern oneself with the forms of crisis which arise out of the development of money as means of payment. This is precisely why economists like to suggest that this obvious form is the cause of crises. (In so far as the development of money as means of payment is linked with the development of credit and of excess credit the causes of the latter have to be examined, but this is not yet the place to do it.)

2. In so far as crises arise from changes in prices and revolutions in prices, which do not coincide with changes in the values of commodities, they naturally cannot be investigated during the examination of capital in general, in which the prices of commodities are assumed to be identical with the values of commodities.

3. The general possibility of crisis is the formal metamorphosis of capital itself, the separation, in time and space, of purchase and sale. But this is never the cause of the crisis. For it is nothing but the most general form of crisis, i.e., the crisis itself in its most generalised expression. But it cannot be said that the abstract form of crisis is the cause of crisis. If one asks what its cause is, one wants to know why its abstract form, the form of its possibility, turns from possibility into actuality.

4. The general conditions of crises, in so far as they are independent of price fluctuations (whether these are linked with the credit system or not) as distinct from fluctuations in value, must be explicable from the general conditions of capitalist production. |770a||

||716| (A crisis can arise: 1, in the course of the reconversion [of money] into productive capital; 2. through changes in the value of the elements of productive capital, particularly of raw material, for example when there is a decrease in the quantity of cotton harvested. Its value will thus rise. We are not as yet concerned with prices here but with values.) |716||

||770a| First Phase. The reconversion of money into capital. A definite level of production or reproduction is assumed. Fixed capital can be regarded here as given, as remaining unchanged and not entering into the process of the creation of value. Since the reproduction of raw material is not dependent solely on the labour employed on it, but on the productivity of this labour which is bound up with natural conditions, it is possible for the volume, ||XIV-771a| the amount of the product of the same quantity of labour, to fall (as a result of bad harvests). The value of the raw material therefore rises; its volume decreases, in other words the proportions in which the money has to be reconverted into the various component parts of capital in order to continue production on the former scale, are upset. More must be expended on raw material, less remains for labour, and it is not possible to absorb the same quantity of labour as before. Firstly this is physically impossible, because of the deficiency in raw material. Secondly, it is impossible because a greater portion of the value of the product has to be converted into raw material, thus leaving less for conversion into variable capital. Reproduction cannot be repeated on the same scale. A part of fixed capital stands idle and a part of the workers is thrown out on the streets. The rate of profit falls because the value of constant capital has risen as against that of variable capital and less variable capital is employed. The fixed charges—interest, rent—which were based on the anticipation of a constant rate of profit and exploitation of labour, remain the same and in part cannot be paid. Hence crisis. Crisis of labour and crisis of capital. This is therefore a disturbance in the reproduction process due to the increase in the value of that part of constant capital which has to be replaced out of the value of the product. Moreover, although the rate of profit is decreasing, there is a rise in the price of the product. If this product enters into other spheres of production as a means of production, the rise in its price will result in the same disturbance in reproduction in these spheres. If it enters into general consumption as a means of subsistence, it either enters also into the consumption of the workers or not. If it does so, then its effects will be the same as those of a disturbance in variable capital, of which we shall speak later. But in so far as it enters into general consumption it may result (if its consumption is not reduced) in a diminished demand for other products and consequently prevent their reconversion into money at their value, thus disturbing the other aspect of their reproduction— not the reconversion of money into productive capital but the reconversion of commodities into money. In any case, the volume of profits and the volume of wages is reduced in this branch of production thereby reducing a part of the necessary returns from the sale of commodities from other branches of production.

Such a shortage of raw material may, however, occur not only because of the influence of harvests or of the natural productivity of the labour which supplies the raw material. For if an excessive portion of the surplus-value, of the additional capital, is laid out in machinery etc, in a particular branch of production, then, although the raw material would have been sufficient for the old level of production, it will be insufficient for the new. This therefore arises from the disproportionate conversion of additional capital into its various elements. It is a case of over-production of fixed capital and gives rise to exactly the same phenomena as occur in the first case. (See the previous page.) |XIV-771a||

||XIV-861a| […][a]

Or they [the crises] are due to an over-production of fixed capital and therefore a relative under-production of circulating capital.

Since fixed capital, like circulating, consists of commodities, it is quite ridiculous that the same economists who admit the over-production of fixed capital, deny the over-production of commodities.

5. Crises arising from disturbances in the first phase of reproduction: that is to say, interrupted conversion of commodities into money or interruption of sale. In the case of crises of the first sort [which result from the rise in the price of raw materials] the crisis arises from interruptions in the flowing back of the elements of productive capital. |XIV-861a||

[12. Contradictions Between Production and Consumption under Conditions of Capitalism. Over-production of the Principal Consumer Goods Becomes General Over-production]

||XIII-716| Before embarking on an investigation of the new forms of crisis, we shall resume our consideration of Ricardo and the above example. |716||

||716| So long as the owner of the weaving-mill reproduces and accumulates, his workers, too, purchase a part of his product, they spend a part of their wages on calico. Because he produces, they have the means to purchase a part of his product and thus to some extent give him the means to sell it. The worker can only buy—he can represent a demand only for—commodities which enter into individual consumption, for he does not himself turn his labour to account nor does he himself possess the means to do so—the instruments of labour and materials of labour. This already, therefore, excludes the majority of producers, the workers themselves, as consumers, buyers [of many commodities], where capitalist production prevails. They buy no raw material and no instruments of labour; they buy only means of subsistence, commodities which enter directly into individual consumption. Hence nothing is more ridiculous than to speak of the identity of producers and consumers, since for an extraordinarily large number of branches of production—all those that do not supply articles for direct consumption—the mass of those who participate in production are entirely excluded from the purchase of their own products. They are never direct consumers or buyers of this large part of their own products, although they pay a portion of the value of these products in the articles of consumption that they buy. This also shows the ambiguity of the word consumer and how wrong it is to identify it with the word buyer. As regards industrial consumption, it is precisely the workers who consume machinery and raw material, using them up in the labour-process. But they do not use them up for themselves and they are therefore not buyers of them. Machinery and raw material are for them neither use-values nor commodities, but objective conditions of a process of which they themselves are the subjective conditions.

||717| It may, however, be said that their’ employer represents them in the purchase of means of production and raw materials. But he represents them under different conditions from those in which they would represent themselves on the market. He must sell a quantity of commodities which represents surplus-value, unpaid labour. They [the workers] would only have to sell the quantity of commodities which would reproduce the value advanced in production—the value of the means of production, the raw materials and the wages. He therefore requires a wider market than they would require. It depends, moreover, on him and not on them, whether he considers the conditions of the market sufficiently favourable to begin reproduction.

They are therefore producers without being consumers—even when no interruption of the reproduction process takes place—in relation to all articles which have to be consumed not individually but industrially.

Thus nothing is more absurd as a means of denying crises, than the assertion that the consumers (buyers) and producers (sellers) are identical in capitalist production. They are entirely distinct categories. In so far as the reproduction process takes place, this identity can be asserted only for one out of 3,000 producers, namely, the capitalist. On the other hand, it is equally wrong to say that the consumers are producers. The landlord does not produce (rent), and yet he consumes. The same applies to all monied interests.

The apologetic phrases used to deny crises are important in so far as they always prove the opposite of what they are meant to prove. In order to deny crises, they assert unity where there is conflict and contradiction. They are therefore important in so far as one can say they prove that there would be no crises if the contradictions which they have erased in their imagination, did not exist in fact. But in reality crises exist because these contradictions exist. Every reason which they put forward against crisis is an exorcised contradiction, and, therefore, a real contradiction, which can cause crises. The desire to convince oneself of the non-existence of contradictions, is at the same time the expression of a pious wish that the contradictions, which are really present, should not exist.

What the workers in fact produce, is surplus-value. So long as they produce it, they are able to consume. As soon as they cease [to produce it], their consumption ceases, because their production ceases. But that they are able to consume is by no means due to their having produced an equivalent for their consumption. On the contrary, as soon as they produce merely such an equivalent, their consumption ceases, they have no equivalent to consume. Their work is either stopped or curtailed, or at all events their wages are reduced. In the latter case—if the level of production remains the same—they do not consume an equivalent of what they produce. But they lack these means not because they do not produce enough, but because they receive too little of their product for themselves.

By reducing these relations simply to those of consumer and producer, one leaves out of account that the wage-labourer who produces and the capitalist who produces are two producers of a completely different kind, quite apart from the fact that some consumers do not produce at all. Once again, a contradiction is denied, by abstracting from a contradiction which really exists in production. The mere relationship of wage-labourer and capitalist implies:

1. that the majority of the producers (the workers) are nonconsumers (non-buyers) of a very large part of their product, namely, of the means of production and the raw material;

2. that the majority of the producers, the workers, can consume an equivalent for their product only so long as they produce more than this equivalent, that is, so long as they produce surplus-value or surplus-product. They must always be over-producers, produce over and above their needs, in order to be able to be consumers or buyers within the ||718| limits of their needs.

As regards this class of producers, the unity between production and consumption is, at any rate prima facie, false.

When Ricardo says that the only limit to demand is production itself, and that this is limited by capital, then this means, in fact, when stripped of false assumptions, nothing more than that capitalist production finds its measure only in capital; in this context, however, the term capital also includes the labour-power which is incorporated in (bought by) capital as one of its conditions of production. The question is whether capital as such is also the limit for consumption. At any rate, it is so in a negative sense, that is, more cannot be consumed than is produced. But the question is, whether this applies in a positive sense too, whether—on the basis of capitalist production—as much can and must be consumed as is produced. Ricardo’s proposition, when correctly analysed, says the very opposite of what it is meant to say—namely, that production takes place without regard to the existing limits to consumption, but is limited only by capital itself. And this is indeed characteristic of this mode of production.

Thus according to the assumption, the market is glutted, for instance with cotton cloth, so that part of it remains unsold or all of it, or it can only be sold well below its price. (For the time being, we shall call it value, because while we are considering circulation or the reproduction process, we are still concerned with value and not yet with cost-price, even less with market-price.)

It goes without saying that, in the whole of this observation. it is not denied that too much may be produced in individual spheres and therefore too little in others; partial crises can thus arise from disproportionate production (proportionate production is, however, always only the result of disproportionate production on the basis of competition) and a general form of this disproportionate production may be over-production of fixed capital, or on the other hand, over-production of circulating capital.* Just as it is a condition for the sale of commodities at their value, that they contain only the socially necessary labour-time, so it is for an entire sphere of production of capital, that only the necessary part of the total labour-time of society is used in the particular sphere, only the labour-time which is required for the satisfaction of social need (demand). If more is used, then, even if each individual commodity only contains the necessary labour-time, the total contains more than the socially necessary labour-time; in the same way, although the individual commodity has use-value, the total sum of commodities loses some of its use-value under the conditions assumed.

However, we are not speaking of crisis here in so far as it arises from disproportionate production, that is to say, the disproportion in the distribution of social labour between the individual spheres of production. This can only be dealt with in connection with the competition of capitals. In that context it has already been stated that the rise or fall of market-value which is caused by this disproportion, results in the withdrawal of capital from one branch of production and its transfer to another, the migration of capital from one branch of production to another. This equalisation itself however already implies as a precondition the opposite of equalisation and may therefore comprise crisis; the crisis itself may be a form of equalisation. Ricardo etc. admit this form of crisis.

When considering the production process we saw that the whole aim of capitalist production is appropriation of the greatest possible amount of surplus-labour, in other words, the realisation of the greatest possible amount of immediate labour-time with the given capital, be it through the prolongation of the labour-day or the reduction of the necessary labour-time, through the development of the productive power of labour by means of cooperation, division of labour, machinery etc., in short, large-scale production, i.e., mass production. It is thus in the nature of capitalist production, to produce without regard to the limits of the market.

During the examination of reproduction, it is, in the first place, assumed that the method of production remains the same and it remains the same, moreover, for a period while production expands. The volume of commodities produced is increased in this case, because more capital is employed and not because capital is employed more productively. But the mere quantitative increase in ||719| capital at the same time implies that its productive power grows. If its quantitative increase is the result of the development of productive power, then the latter in turn develops on the assumption of a broader, extended capitalist basis. Reciprocal interaction takes place in this case. Reproduction on an extended basis, accumulation, even if originally it appears only as a quantitative expansion of production—the use of more capital under the same conditions of production—at a certain point, therefore, always represents also a qualitative expansion in the form of greater productivity of the conditions under which reproduction is carried out. Consequently the volume of products increases not only in simple proportion to the growth of capital in expanded reproduction—accumulation.

Now let us return to our example of calico.

The stagnation in the market, which is glutted with cotton cloth, hampers the reproduction process of the weaver. This disturbance first affects his workers. Thus they are now to a smaller extent, or not at all, consumers of his commodity—cotton cloth—and of other commodities which entered into their consumption. It is true, that they need cotton cloth, but they cannot buy it because they have not the means, and they have not the means because they cannot continue to produce and they cannot continue to produce because too much has been produced, too much cotton cloth is already on the market. Neither Ricardo’s advice “to increase their production”, nor his alternative “to produce something else” can help them. They now form a part of the temporary surplus population, of the surplus production of workers, in this case of cotton producers, because there is a surplus production of cotton fabrics on the market.

But apart from the workers who are directly employed by the capital invested in cotton weaving, a large number of other producers are hit by this interruption in the reproduction process of cotton: spinners, cotton-growers, engineers (producers of spindles, looms etc.), iron and coal producers and so on. Reproduction in all these spheres would also be impeded because the reproduction of cotton cloth is a condition for their own reproduction. This would happen even if they had not over-produced in their own spheres, that is to say, had not produced beyond the limit set and justified by the cotton industry when it was working smoothly. All these industries have this in common, that their revenue (wages and profit, in so far as the latter is consumed as revenue and not accumulated) is not consumed by them in their own product but in the product of other spheres, which produce articles of consumption, calico among others. Thus the consumption of and the demand for calico fall just because there is too much of it on the market. But this also applies to all other commodities on which, as articles of consumption, the revenue of these indirect producers of cotton is spent. Their means for buying calico and other articles of consumption shrink, contract, because there is too much calico on the market. This also affects other commodities (articles of consumption). They are now, all of a sudden, relatively over-produced, because the means with which to buy them and therefore the demand for them, have contracted. Even if there has been no over-production in these spheres, now they are over-producing.

If over-production has taken place not only in cotton, but also in linen, silk and woollen fabrics, then it can be understood how over-production in these few, but leading articles, calls forth a more or less general (relative) over-production on the whole market. On the one hand there is a superabundance of all the means of reproduction and a superabundance of all kinds of unsold commodities on the market. On the other hand bankrupt capitalists and destitute, starving workers.

This however is a two-edged argument. If it is easily understood how over-production of some leading articles of consumption must bring in its wake the phenomenon of a more or less general over-production, it is by no means clear how over-production of these articles can arise. For the phenomenon of general over-production is derived from the interdependence not only of the workers directly employed in these industries, but of all branches of industries which produce the elements of their products, the various stages of their constant capital. In the latter branches of industry, over-production is an effect. But whence does it come in the former? For the latter [branches of industry] continue to produce so long as the former go on producing, and along with this continued production, a general growth in revenue, and therefore in their own consumption, seems assured. |719||

[13. The Expansion of the Market Does Not Keep in Step with the Expansion of Production. The Ricardian Conception That an Unlimited Expansion of Consumption and of the Internal Market Is Possible]

||720| If one were to answer the question by pointing out that the constantly expanding production <it expands annually for two reasons; firstly because the capital invested in production is continually growing; secondly because the capital is constantly used more productively; in the course of reproduction and accumulation, small improvements are continuously building up, which eventually alter the whole level of production. There is a piling up of improvements, a cumulative development of productive powers.> requires a constantly expanding market and that production expands more rapidly than the market, then one would merely have used different terms to express the phenomenon which has to be explained—concrete terms instead of abstract terms. The market expands more slowly than production; or in the cycle through which capital passes during its reproduction—a cycle in which it is not simply reproduced but reproduced on an extended scale, in which it describes not a circle but a spiral—there comes a moment at which the market manifests itself as too narrow for production. This occurs at the end of the cycle. But it merely means: the market is glutted. Over-production is manifest. If the expansion of the market had kept pace with the expansion of production there would be no glut of the market, no over-production.

However, the mere admission that the market must expand with production, is, on the other hand, again an admission of the possibility of over-production, for the market is limited externally in the geographical sense, the internal market is limited as compared with a market that is both internal and external, the latter in turn is limited as compared with the world market, which however is, in turn, limited at each moment of time, [though] in itself capable of expansion. The admission that the market must expand if there is to be no over-production, is therefore also an admission that there can be over-production. For it is then possible—since market and production are two independent factors—that the expansion of one does not correspond with the expansion of the other; that the limits of the market are not extended rapidly enough for production, or that new markets— new extensions of the market—may be rapidly outpaced by production, so that the expanded market becomes just as much a barrier as the narrower market was formerly.

Ricardo is therefore consistent in denying the necessity of an expansion of the market simultaneously with the expansion of production and growth of capital. All the available capital in a country can also be advantageously employed in that country. Hence he polemises against Adam Smith, who on the one hand put forward his (Ricardo’s) view and, with his usual rational instinct, contradicted it as well. Adam Smith did not yet know the phenomenon of over-production, and crises resulting from over-production. What he knew were only credit and money crises, which automatically appear, along with the credit and banking system. In fact he sees in the accumulation of capital an unqualified increase in the general wealth and well-being of the nation. On the other hand, he regards the mere fact that the internal market develops into an external, colonial and world market, as proof of a so-to-speak relative (potential) over-production in the internal market. It is worth quoting Ricardo’s polemic against him at this point:

“When merchants engage their capitals in foreign trade, or in the carrying trade, it is always from choice, and never from necessity: it is because in that trade their profits will he somewhat greater than in the home trade.

“Adam Smith has justly observed ‘that the desire of food is limited in every man by the narrow capacity of the human stomach’,”

“ ‘but the desire of the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary.”

“Nature” (Ricardo continues) “then has necessarily limited the amount of capital which can at any […] time be profitably engaged in agriculture,”

“but she has placed no limits” (as if nature had anything to do with the matter) “to the amount of capital that may be employed in procuring ‘the conveniences and ornaments’ of life. To procure these gratifications in the greatest abundance is the object in view, and it is only because foreign trade, or the carrying trade, will accomplish it better, that men engage in them in preference to manufacturing the commodities required, or a substitute for them, at home. If, however, from peculiar circumstances, we were precluded from engaging capital in foreign trade, or in the carrying trade, we should, though with less advantage, employ it at home; and while there is no limit to the desire of ‘conveniences, ornaments of building, dress, equipage, ||721| and household furniture,’ there can be no limit to the capital that may be employed in procuring them, except that which bounds our power to maintain the workmen who are to produce them.

“Adam Smith, however, speaks of the carrying trade as one, not of choice, but of necessity; as if the capital engaged in it would be inert if not so employed, as if the capital in the home trade could overflow, if not confined to a limited amount. He says, ‘when the capital stock of any country is increased to such a degree, that it cannot be all employed in supplying the consumption, and supporting the productive labour of that particular country’,” (this passage is printed in italics by Ricardo himself> “ ‘the surplus part of it naturally disgorges itself into the carrying trade, and is employed in performing the same offices to other countries’.

“But could not this portion of the productive labour of Great Britain be employed in preparing some other sort of goods, with which something more in demand at home might be purchased? And if it could not, might we not employ this productive labour, though with less advantage, in making those goods in demand at home, or at least some substitute for them? If we wanted velvets, might we not attempt to make velvets; and if we could not succeed, might we not make more cloth, or some other object desirable to us?

“We manufacture commodities, and with them buy goods abroad, because we can obtain a greater quantity” <the qualitative difference does not exist!> “than we could make at home. Deprive us of this trade, and we immediately manufacture again for ourselves. But this opinion of Adam Smith is at variance with all his general doctrines on this subject.” <Ricardo now cites Smith:> “ If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with same part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country being always in proportion to the capital which employs it’,” <in very different proportion> (this sentence too is emphasised by Ricardo) “ ‘will not thereby be diminished, but only left to find out the way in which it can be employed with the greatest advantage.’

“Again. ‘Those, therefore, who have the command of more food than they themselves can consume, are always willing to exchange the surplus, or, what is the same thing, the price of it, for gratifications of another kind. What is over and above satisfying the limited desire, is given for the amusement of those desires which cannot be satisfied, but seem to be altogether endless. The poor, in order to obtain food, exert themselves to gratify those fancies of the rich; and to obtain it more certainly, they vie with one another in the cheapness and perfection of their work. The number of workmen increases with the increasing quantity of food, or with the growing improvement and cultivation of the lands; and as the nature of their business admits of the utmost subdivisions of labours, the quantity of materials which they can work up increases in a much greater proportion than their numbers. Hence arises a demand for every sort of material which human invention can employ, either usefully or ornamentally, in building, dress, equipage, or household furniture; for the fossils and minerals contained in the bowels of the earth, the precious metals, and the precious stones.’

“It follows then from these admissions, that there is no limit to demand— no limit to the employment of capital while it yields any profit, and that however abundant capital may become, there is no other adequate reason for a fall of profit but a rise of wages, and further it may be added, that the only adequate and permanent cause for the rise of wages is the increasing difficulty of providing food and necessaries for the increasing number of workmen” (l.c., pp. 344-48).

[14. The Contradiction Between the Impetuous Development of the Productive Powers and the Limitations of Consumption Leads to Over-production. The Theory of the Impossibility of General Over-production Is Essentially Apologetic in Tendency]

The word over-production in itself leads to error. So long as the most urgent needs of a large part of society are not satisfied, or only the most immediate needs are satisfied, there can of course be absolutely no talk of an over-production of products— in the sense that the amount of products is excessive in relation to the need for them. On the contrary, it must be said that on the basis of capitalist production, there is constant under-production in this sense. The limits to production are set by the profit of the capitalist and in no way by the needs of the producers. But over-production of products and over-production of commodities are two entirely different things. If Ricardo thinks that the commodity form makes no difference to the product, and furthermore, that commodity circulation differs only formally from barter, that in this context the exchange-value is only a fleeting form of the exchange of things, and that money is therefore merely a formal means of circulation—then this in fact is in line with his presupposition that the bourgeois mode of production is the absolute mode of production, hence it is a mode of production without any definite specific characteristics, its distinctive traits are merely formal. He cannot therefore admit that the bourgeois mode of production contains within itself a barrier to the free development of the productive forces, a barrier which comes to the surface in crises and, in particular, in over-production—the basic phenomenon in crises.

||722| Ricardo saw from the passages of Adam Smith, which he quotes, approves, and therefore also repeats, that the limitless “desire” for all kinds of use-values is always satisfied on the basis of a state of affairs in which the mass of producers remains more or less restricted to necessities—”food” and other “necessaries”—that consequently this great majority of producers remains more or less excluded from the consumption of wealth— in so far as wealth goes beyond the bounds of the necessary means of subsistence.

This was indeed also the case, and to an even higher degree, in the ancient mode of production which depended on slavery. But the ancients never thought of transforming the surplus-product into capital. Or at least only to a very limited extent. (The fact that the hoarding of treasure in the narrow sense was widespread among them shows how much surplus-product lay completely idle.) They used a large part of the surplus-product for unproductive expenditure on art, religious works and public works. Still less was their production directed to the release and development of the material productive forces—division of labour, machinery, the application of the powers of nature and science to private production. In fact, by and large, they never went beyond handicraft labour. The wealth which they produced for private consumption was therefore relatively small and only appears great because it was amassed in the hands of a few persons, who, incidentally, did not know what to do with it. Although, therefore, there was no over-production among the ancients, there was over-consumption by the rich, which in the final periods of Rome and Greece turned into mad extravagance. The few trading peoples among them lived partly at the expense of all these essentially poor nations. It is the unconditional development of the productive forces and therefore mass production on the basis of a mass of producers who are confined within the bounds of the necessary means of subsistence on the one hand and, on the other, the barrier set up by the capitalists’ profit, which [forms] the basis of modern over-production.

All the objections which Ricardo and others raise against overproduction etc. rest on the fact that they regard bourgeois production either as a mode of production in which no distinction exists between purchase and sale—direct barter—or as social production, implying that society, as if according to a plan, distributes its means of production and productive forces in the degree and measure which is required for the fulfilment of the various social needs, so that each sphere of production receives the quota of social capital required to satisfy the corresponding need. This fiction arises entirely from the inability to grasp the specific form of bourgeois production and this inability in turn arises from the obsession that bourgeois production is production as such, just like a man who believes in a particular religion and sees it as the religion, and everything outside of it only as false religions.

On the contrary, the question that has to be answered is: since, on the basis of capitalist production, everyone works for himself and a particular labour must at the same time appear as its opposite, as abstract general labour and in this form as social labour—how is it possible to achieve the necessary balance and interdependence of the various spheres of production, their dimensions and the proportions between them, except through the constant neutralisation of a constant disharmony? This is admitted by those who speak of adjustments through competition, for these adjustments always presuppose that there is something to adjust, and therefore that harmony is always only a result of the movement which neutralises the existing disharmony.

That is why Ricardo admits that a glut of certain commodities is possible. What is supposed to be impossible is only a simultaneous general glut of the market. The possibility of overproduction in any particular sphere of production is therefore not denied. It is the simultaneity of this phenomenon for all spheres of production which is said to be impossible and therefore makes impossible [general] over-production and thus a general glut of the market, (This expression must always be taken cum grano salis, since in times of general over-production, the over-production in some spheres is always only the result, the consequence, of over-production in the leading articles of commerce; [it is] always only relative, i.e., over-production because over-production exists in other spheres.)

Apologetics turns this into its very opposite. [There is only] over-production in the leading articles of commerce, in which alone, active over-production shows itself—these are on the whole articles which can only be produced on a mass scale and by factory methods (also in agriculture), because over-production exists in those articles in which relative or passive overproduction manifests itself. According to this, over-production only exists because over-production is not universal. The relativity of over-production—that actual over-production in a few spheres calls forth over-production in others—is expressed in this way: There is no universal over-production, because if overproduction were universal, all spheres of production would retain the same relation to one another; therefore universal overproduction is proportional production which excludes over-production. And this is supposed to be an argument against universal over-production. ||723| For, since universal over-production in the absolute sense would not be over-production but only a greater than usual development of the productive forces in all spheres of production, it is alleged that actual over-production, which is precisely not this non-existent, self-abrogating overproduction, does not exist—although it only exists because it is not this.

If this miserable sophistry is more closely examined, it amounts to this: Suppose, that there is over-production in iron, cotton goods, linen, silk, woollen cloth etc.; then it cannot be said, for example, that too little coal has been produced and that this is the reason for the above over-production. For that over-production of iron etc. involves an exactly similar over-production of coal, as, say, the over-production of woven cloth does of yarn. <Over-production of yarn as compared with cloth, iron as compared with machinery, etc. could occur. This would always be a relative over-production of constant capital.> There cannot, therefore, be any question of the under-production of those articles whose over-production is implied because they enter as an element, raw material, auxiliary material or means of production, into those articles (the “particular commodity of which too much may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it” [l.c., pp. 341-42], whose positive over-production is precisely the fact to be explained. Rather, it is a question of other articles which belong directly to [other] spheres of production and [can] neither [be] subsumed under the leading articles of commerce which, according to the assumption, have been over-produced, nor be attributed to spheres in which, because they supply the intermediate product for the leading articles of commerce, production must have reached at least the same level as in the final phases of the product—although there is nothing to prevent production in those spheres from having gone even further ahead thus causing an over-production within the over-production. For example, although sufficient coal must have been produced in order to keep going all those industries into which coal enters as necessary condition of production, and therefore the over-production of coal is implied in the over-production of iron, yarn etc. (even if coal was produced only in proportion to the production of iron and yarn [etc.]), it is also possible that more coal was produced than was required even for the over-production of iron, yarn etc. This is not only possible, but very probable. For the production of coal and yarn and of all other spheres of production which produce only the conditions or earlier phases of a product to be completed in another sphere, is governed not by the immediate demand, by the immediate production or reproduction, but by the degree, measure, proportion in which these are expanding. And it is self-evident that in this calculation, the target may well be overshot. Thus not enough has been produced of other articles such as, for example, pianos, precious stones etc., they have been under-produced. <There are, however, also cases where the over-production of non-leading articles is not the result of overproduction, but where, on the contrary, under-production is the cause of over-production, as for instance when there has been a failure in the grain crop or the cotton crop.>

The absurdity of this statement becomes particularly marked if it is applied to the international scene, as it has been by Say and others after him. For instance, that England has not over-produced but Italy has under-produced. There would have been no over-production, if in the first place Italy had enough capital to replace the English capital exported to Italy in the form of commodities; and secondly if Italy had invested this capital in such a way that it produced those particular articles which are required by English capital—partly in order to replace itself and partly in order to replace the revenue yielded by it. Thus the fact of the actually existing over-production in England—in relation to the actual production in Italy—would not have existed, but only the fact of imaginary under-production in Italy; imaginary because it ||724| presupposes a capital in Italy and a development of the productive forces that do not exist there, and secondly because it makes the equally utopian assumption, that this capital which does not exist in Italy, has been employed in exactly the way required to make English supply and Italian demand, English and Italian production, complementary to each other. In other words, this means nothing but: there would be no overproduction, if demand and supply corresponded to each other, if the capital were distributed in such proportions in all spheres of production, that the production of one article involved the consumption of the other, and thus its own consumption. There would be no over-production, if there were no over-production. Since, however, capitalist production can allow itself free rein only in certain spheres, under certain conditions, there could be no capitalist production at all if it had to develop simultaneously and evenly in all spheres. Because absolute over-production takes place in certain spheres, relative over-production occurs also in the spheres where there has been no over-production.

This explanation of over-production in one field by underproduction in another field therefore means merely that if production were proportionate, there would be no over-production. The same could be said if demand and supply corresponded to each other, or if all spheres provided equal opportunities for capitalist production and its expansion—division of labour, machinery, export to distant markets etc., mass production, i.e., if all countries which traded with one another possessed the same capacity for production (and indeed for different and complementary production). Thus over-production takes place because all these pious wishes are not fulfilled. Or, in even more abstract form: There would be no over-production in one place, if overproduction took place to the same extent everywhere. But there is not enough capital to over-produce so universally, and therefore there is partial over-production.

Let us examine this fantasy more closely:

It is admitted that there can be over-production in each particular industry. The only circumstance which could prevent over production in all industries simultaneously is, according to the assertions made, the fact that commodity exchanges against commodity—i.e., recourse is taken to the supposed conditions of barter. But this loop-hole is blocked by the very fact that trade [under capitalist conditions] is not barter, and that therefore the seller of a commodity is not necessarily at the same time the buyer of another. This whole subterfuge then rests on abstracting from money and from the fact that we are not concerned with the exchange of products, but with the circulation of commodities, an essential part of which is the separation of purchase and sale.

<The circulation of capital contains within itself the possibilities of interruptions. In the reconversion of money into its conditions of production, for example, it is not only a question of transforming money into the same use-values (in kind), but for the repetition of the reproduction process [it is] essential that these use-values can again be obtained at their old value (at a lower value would of course be even better). A very significant part of these elements of reproduction, which consists of raw materials, can however rise in price for two reasons. Firstly, if the instruments of production increase more rapidly than the amount of raw materials that can be provided at the given time. Secondly, as a result of the variable character of the harvests. That is why weather conditions, as Tooke rightly observes, play such an important part in modern industry. (The same applies to the means of subsistence in relation to wages.) The reconversion of money into commodity can thus come up against difficulties and can create the possibilities of crisis, just as well as can the conversion of commodity into money. When one examines simple circulation—not the circulation of capital—these difficulties do not arise.> (There are, besides, a large number of other factors, conditions, possibilities of crises, which can only be examined when considering the concrete conditions, particularly the competition of capitals and credit.)

||725| The over-production of commodities is denied but the over-production of capital is admitted. Capital itself however consists of commodities or, in so far as it consists of money, it must be reconverted into commodities of one kind or another, in order to be able to function as capital. What then does overproduction of capital mean? Over-production of value destined to produce surplus-value or, if one considers the material content, over-production of commodities destined for reproduction—that is, reproduction on too large a scale, which is the same as over-production pure and simple.

Defined more closely, this means nothing more than that too much has been produced for the purpose of enrichment, or that too great a part of the product is intended not for consumption as revenue, but for making more money (for accumulation): not to satisfy the personal needs of its owner, but to give him money, abstract social riches and capital, more power over the labour of others, i.e., to increase this power. This is what one side says. (Ricardo denies it.) And the other side, how does it explain the over-production of commodities? By saying that production is not sufficiently diversified, that certain articles of consumption have not been produced in sufficiently large quantities. That it is not a matter of industrial consumption is obvious, for the manufacturer who over-produces linen, thereby necessarily increases his demand for yarn, machinery, labour etc. It is therefore a question of personal consumption. Too much linen has been produced, but perhaps too few oranges. Previously the existence of money was denied, in order to show [that there was no] separation between sale and purchase. Here the existence of capital is denied, in order to transform the capitalists into people who carry out the simple operation C—M—C and who produce for individual consumption and not as capitalists with the aim of enrichment, i.e., the reconversion of part of the surplus-value into capital. But the statement that there is too much capital, after all means merely that too little is consumed as revenue, and that more cannot be consumed in the given conditions. (Sismondi.) Why does the producer of linen demand from the producer of corn, that he should consume more linen, or the latter demand that the linen manufacturer should consume more corn? Why does the man who produces linen not himself convert a larger part of his revenue (surplus-value) into linen and the farmer into corn? So far as each individual is concerned, it will be admitted that his desire for capitalisation (apart from the limits of his needs) prevents him from doing this. But for all of them collectively, this is not admitted.

(We are entirely leaving out of account here that element of crises which arises from the fact that commodities are reproduced more cheaply than they were produced. Hence the depreciation of the commodities on the market.)

In world market crises, all the contradictions of bourgeois production erupt collectively; in particular crises (particular in their content and in extent) the eruptions are only sporadical, isolated and one-sided.

Over-production is specifically conditioned by the general law of the production of capital: to produce to the limit set by the productive forces, that is to say, to exploit the maximum amount of labour with the given amount of capital, without any consideration for the actual limits of the market or the needs backed by the ability to pay; and this is carried out through continuous expansion of reproduction and accumulation, and therefore constant reconversion of revenue into capital, while ||726| on the other hand, the mass of the producers remain tied to the average level of needs, and must remain tied to it according to the nature of capitalist production.

[15. Ricardo’s Views on the Different Types of Accumulation of Capital and on the Economic Consequences of Accumulation]

In Chapter VIII, “On Taxes”, Ricardo says:

“When the annual productions of a country more than replace its annual consumption, it is said to increase its capital; when its annual consumption is not at least replaced by its annual production, it is said to diminish its capital. Capital may therefore be increased by an increased production, or by a diminished unproductive consumption” (l.c., pp. 162-63).

By “unproductive consumption” Ricardo means here, as he says in the note on p. 163, consumption by unproductive workers, “…by those who do not reproduce another value”. By increase in the annual production, therefore, is meant increase in the annual industrial consumption. This can be increased by the direct expansion of it, while non-industrial consumption remains constant or even grows, or by reducing non-industrial consumption.

‘When we say,” writes Ricardo in the same note, “that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to capital, is consumed by productive instead of unproductive labourers” [l.c., p. 163, note].

I have shown that the conversion of revenue into capital is by no means synonymous with the conversion of revenue into variable capital or with its expenditure on wages. Ricardo however thinks so. In the same note he says:

“If the price of labour should rise so high, that notwithstanding the increase of capital, no more could be employed, I should say that such increase of capital would be still unproductively note consumed” [l.c., p. 163, note].

It is therefore not the consumption of revenue by productive workers, which makes this consumption “productive”, but its consumption by workers who produce surplus-value. According to this, capital increases only when it commands more labour.

Chapter VII “On Foreign Trade”.

“There are two ways in which capital may be accumulated: it may be saved either in consequence of increased revenue, or of diminished consumption. If my profits are raised from £ 1,000 to £ 1,200 while my expenditure continues the same, I accumulate annually £ 200 more than I did before, If I save £ 200 out of my expenditure, while my profits continue the same, the same effect will be produced; £ 200 per annum will be added to my capital” (l.c., p. 135).

“If, by the introduction of machinery, the generality of the commodities on which revenue was expended fell 20 per cent in value, I should be enabled to save as effectually as if my revenue had been raised 20 per cent; but in one case the rate of profits is stationary, in the other it is raised 20 per cent.—If, by the introduction of cheap foreign goods, I can save 20 per cent from my expenditure, the effect will he precisely the same as if machinery had lowered the expense of their production, but profits would not be raised” (l.c., p. 136).

(That is to say, they would not be raised if the cheaper goods entered neither into the variable nor the constant capital.)

Thus with the same expenditure of revenue accumulation is the result of the rise in the rate of profit <but accumulation depends not only on the rate of profit but on the amount of profit>; with a constant rate of profit accumulation is the result of decreasing expenditure, which is however assumed by Ricardo to occur because of the reduced price (whether this is brought about by machinery or foreign trade) of “commodities on which revenue was expended”.

Chapter XX “Value and Riches, their Distinctive Properties”.

“The wealth” (Ricardo takes this to mean use-values) “of a country may be increased in two ways: it may be increased by employing a greater portion of revenue in the maintenance of productive labour,—which will not only add to the quantity, but to the value of the mass of commodities; or it may be increased, without employing any additional quantity of labour, by making the same quantity more productive,—which will add to the abundance, but not to the value of commodities.

“In the first case, a country would not only become rich, but the value of its riches would increase. It would become rich by parsimony; by diminishing its expenditure on objects of luxury and enjoyment; and employing those savings in reproduction.

||727| “In the second case, there will not necessarily he either any diminished expenditure on luxuries and enjoyments, or any increased quantity of productive labour employed, but with the same labour more would be produced; wealth would increase, but not value. Of these two modes of increasing wealth, the last must be preferred, since it produces the same effect without the privation and diminution of enjoyments, which can never fail to accompany the first mode. Capital is that part of the wealth of a country which is employed with a view to future production, and may be increased in the same manner as wealth. An additional capital will be equally efficacious in the production of future wealth, whether it be obtained from improvements in skill and machinery, or from using more revenue reproductively; for wealth always depends on the quantity of commodities produced, without any regard to the facility with which the instruments employed in production may have been procured. A certain quantity of clothes and provisions will maintain and employ the same number of men, and will therefore procure the same quantity of work to be done, whether they he produced by the labour of 100 or 200 men; but they will he of twice the value if 200 have been employed on their production” (l.c., pp. 327-28).

Ricardo’s first proposition was:

Accumulation grows, if the rate of profit rises, while expenditure remains the same

or when the rate of profit remains the same, if expenditure (in terms of value) decreases, because the commodities on which the revenue is expended become cheaper.

Now he puts forward another antithetical proposition.

Accumulation grows, capital is accumulated in amount and value, if a larger part of the revenue is withdrawn from individual consumption and directed to industrial consumption, if more productive labour is set in motion with the portion of revenue thus saved. In this case accumulation is brought about by parsimony.

Or expenditure remains the same, and no additional productive labour is employed; but the same labour produces more, its productive power is raised. The elements which make up the productive capital, raw materials, machinery etc. <previously it was the commodities upon which revenue is expended; now it is the commodities employed as means of production> are produced with the same labour in greater quantities, better and therefore cheaper. In this case, accumulation depends neither on a rising rate of profit, nor on a greater portion of revenue being converted into capital as a result of parsimony, nor on a smaller portion of the revenue being spent unproductively as a result of a reduction in the price of those commodities on which revenue is expended. It depends here on labour becoming more productive in the spheres of production which produce the elements of capital itself, thus lowering the price of the commodities which enter into the production process as raw materials, instruments etc.

If the productive power of labour has been increased through greater production of fixed capital in proportion to variable capital, then not only the amount, but also the value of reproduction will rise, since a part of the value of the fixed capital enters into the annual reproduction. This can occur simultaneously with the growth of the population and with an increase in the number of workers employed, although the number of workers steadily declines relatively, in proportion to the constant capital which they set in motion. There is therefore a growth, not only of wealth, but of value, and a larger quantity of living labour is set in motion, although the labour has become more productive and the quantity of labour in proportion to the quantity of commodities produced, has decreased. Finally, variable and constant capital can grow in equal degree with the natural, annual increase in population while the productivity of labour remains the same. In this case, too, capital will accumulate in volume and in value. These last points are all disregarded by Ricardo.

In the same chapter Ricardo says:

“The labour of a million men in manufactures, will always produce the same value, but will not always produce the same riches”.

(This is quite wrong. The value of the product of a million men does not depend solely on their labour but also on the value of the capital with which they work; it will thus vary considerably, according to the amount of the already produced productive forces with which they work.)

“By the invention of machinery, by improvements in skill, by a better division of labour, or by the discovery of new markets, where more advantageous exchanges may be made, a million of men may produce double, or treble the amount of riches, of ‘necessaries, conveniences, and amusements,’ in one state of society, that they could produce in another, but they will not on that account add any thing to value”

(they certainly will, since their past ||728| labour enters into the new reproduction to a much greater extent),

“for every thing rises or falls in value, in proportion to the facility or difficulty of producing it, or, in other words, in proportion to the quantity of labour employed on its production.”

(Each individual commodity may become cheaper but the value of the increased total mass of commodities [will] rise.)

“Suppose with a given capital the labour of a certain number of men produced 1,000 pair of stockings, and that by inventions in machinery, the same number of men can produce 2,000 pair, or that they can continue to produce 1,000 pair, and can produce besides[b] 500 hats; then the value of the 2,000 pair of stockings or of the 1,000 pair of stockings, and 500 hats, will be neither more nor less than that of the 1,000 pair of stockings before the introduction of machinery; for they will be the produce of the same quantity of labour.”

(N.B. provided the newly introduced machinery costs nothing.)

“But the value of the general mass of commodities will nevertheless be diminished; for, although the value of the increased quantity produced, in consequence of the improvement, will be the same exactly as the value would have been of the less quantity that would have been produced, had no improvement taken place, an effect is also produced on the portion of goods still unconsumed, which were manufactured previously to the improvement; the value of those goods will be reduced, inasmuch as they must fall to the level, quantity for quantity, of the goods produced under all the advantages of the improvement: and the society will, notwithstanding the increased quantity of commodities, notwithstanding its augmented riches, and its augmented means of enjoyment, have a less amount of value. By constantly increasing the facility of production, we constantly diminish the value of some of the commodities before produced, though by the same means we not only add to the national riches, but also to the power of future production” (l.c., pp. 320-22).

Ricardo says here that the continuous development of the productive forces diminishes the value of the commodities produced under less favourable conditions, whether they are still on the market, or functioning as capital in the production process. But, although the value of one part of the commodities will be reduced, it does not by any means follow from this that “the value of the general mass of commodities will […] be diminished”. This would be the only effect if, firstly, the value of the machinery and commodities that have been newly added as a result of the improvements, is smaller than the loss in value suffered by previously existing goods of the same kind; secondly, if one leaves out of account the fact that with the development of the productive forces, the number of spheres of production is also steadily increasing, thus creating possibilities for capital investment which previously did not exist at all. Production not only becomes cheaper in the course of the development, but it is also diversified.

Chapter IX, “Taxes on Raw Produce”.

“With respect to the third objection against taxes on raw produce, namely, that the raising wages, and lowering profits, is a discouragement to accumulation, and acts in the same way as a natural poverty of soil; I have endeavoured to shew in another part of this work that savings may be as effectually made from expenditure as from production; from a reduction in the value of commodities, as from a rise in the rate of profits. By increasing my profits from £ 1,000 to £ 1,200, whilst prices continue the same, my power of increasing my capital by savings is increased, but it is not increased so much as it would be if my profits continued as before, whilst commodities were so lowered in price, that £ 800 would procure[c] me as much as £ 1,000 purchased before” (l.c., pp. 183-84).

The total value of the product (or rather that part of the product which is divided between capitalist and worker) can decrease, without causing a fall in the net income, in terms of the mass of value it represents. (It may even rise proportionally.) This is dealt with in

Chapter XXXII, “Mr. Malthus’s Opinions on Rent”.

“The whole argument however of Mr. Malthus, is built on an infirm basis: it supposes, because the gross income of the country is diminished, that, therefore, the net income must also he diminished, in the same proportion. It has been one of the objects of his work to shew, that with every fall in the real value of necessaries, the wages of labour would fall, and that the profits of stock would rise—in other words, that of any given annual value a less portion would be paid to the labouring class, and a larger portion to those whose funds employed this class. Suppose the value of the commodities produced in a particular manufacture to be £ 1,000, and to be divided between the master and his labourers, in the proportion of £ 800 to labourers, and £ 200 to the master; ||729| if the value of these commodities should fall to £ 900, and £100 be saved from the wages of labour, in consequence of the fall of necessaries, the net income of the masters would be in no degree impaired, and, therefore, he could with just as much facility pay the same amount of taxes, after, as before the reduction of price” (l.c., pp. 511-12).

Chapter V, “On Wages”.

“Notwithstanding the tendency of wages to conform to their natural rate, their market rate may, in an improving society, for an indefinite period, be constantly above it; for no sooner may the impulse, which an increased capital gives to a new demand for labour be obeyed, than another increase of capital may produce the same effect; and thus, if the increase of capital be gradual and constant, the demand for labour may give a continued stimulus to an increase of people” (l.c., p. 88).

From the capitalist standpoint, everything is seen upside down. The number of the labouring population and the degree of the productivity of labour determine both the reproduction of capital and the reproduction of the population. Here, on the contrary, it appears that capital determines [the size] of the population.

Chapter IX, “Taxes on Raw Produce”.

“An accumulation of capital naturally produces an increased competition among the employers of labour, and a consequent rise in its price” (l.c., p. 178).

This depends on the proportion in which the various component parts of capital grow as a result of accumulation. Capital can be accumulated and the demand for labour can decrease absolutely or relatively.

According to Ricardo’s theory of rent, the rate of profit has a tendency to fall, as a result of the accumulation of capital and the growth of the population, because the necessary means of subsistence rise in value, or agriculture becomes less productive. Consequently accumulation has the tendency to check accumulation, and the law of the falling rate of profit—since agriculture becomes relatively less productive as industry develops—hangs ominously over bourgeois production. On the other hand, Adam Smith regarded the falling rate of profit with satisfaction. Holland is his model. It compels most capitalists, except the largest ones, to employ their capital in industry, instead of living on interest and is thus a spur to production. The dread of this pernicious tendency assumes tragic-comic forms among Ricardo’s disciples.

Let us here compare the passages in which Ricardo refers to this subject:

Chapter V, “On Wages”.

“In different stages of society, the accumulation of capital, or of the means of employing labour, is more or less rapid, and must in all cases depend on the productive powers of labour. The productive powers of labour are generally greatest when there is an abundance of fertile land: at such periods accumulation is often so rapid, that labourers cannot be supplied with the same rapidity as capital” (l.c., p. 92).

“It has been calculated, that under favourable circumstances population may be doubled in twenty-five years; but under the same favourable circum-stances, the whole capital of a country might possibly be doubled in a shorter period. In that case, wages during the whole period would have a tendency to rise, because the demand for labour would increase still faster than the supply.

“In new settlements, where the arts and knowledge of countries far advanced in refinement are introduced, it is probable that capital has a tendency to increase faster than mankind: and if the deficiency of labourers were not supplied by more populous countries, this tendency would very much raise the price of labour. In proportion as these countries become populous, and land of a worse quality is taken into cultivation, the tendency to an increase of capital diminishes; for the surplus produce remaining, after satisfying the wants of the existing population, must necessarily be in proportion to the facility of production, viz., to the smaller number of persons employed in production. Although, then, it is probable, that under the most favourable circumstances, the power of production is still greater than that of population, it will not long continue so; for the land being limited in quantity, and differing in quality, with every increased portion of capital employed on it, there will be a decreased rate of production, whilst the power of population continues always the same” (l.c., pp. 92-93).

(The latter statement is a parson’s fabrication. The power of population decreases with the power of production.)

First it should be noted here that Ricardo admits that “the accumulation of capital … must in all cases depend on the productive powers of labour”, labour therefore is primary and not capital.

Further, according to Ricardo, it would appear that in countries which have been settled for a long time and are industrially developed, more people are engaged in agriculture than are in the colonies—while in fact it is the other way about. In proportion to the output ||730| , England, for example, uses fewer agricultural labourers than any other country, new or old, although a larger section of the non-agricultural population participates indirectly in agricultural production. But even this is by no means equal to the proportion of the population directly engaged in agriculture in the less developed countries. Supposing even that in England grain is dearer, and the costs of production are higher. More capital is employed. More past labour, even though less living labour is used in agricultural production. But the reproduction of this capital, although its value is reproduced in the product, costs less labour because of the already existing technical basis of production.

Chapter VI, “On Profits”.

First, however, a few observations. [The amount of] surplus-value, as we saw, depends not only on the rate of surplus-value but on the number of workers simultaneously employed, that is to say, on the size of the variable capital.

Accumulation for its part is not directly determined by the rate of sur plus-value, but by the ratio of surplus-value to the total capital outlay, that is, by the rate of profit, and even more by the total amount of profit. This, as we have seen, is for the total capital of society identical with the aggregate amount of surplus-value, but for individual capitals employed in the different branches of production, it may differ considerably from the amount of surplus-value produced by them. If we consider the accumulation of capital as a whole, then profit equals surplus-value and the rate of profit equals surplus-value divided by capital or rather surplus-value reckoned on a capital of £100.

If the rate of profit (per cent) is given, then the total amount of profit depends on the size of the capital advanced, and therefore accumulation too in so far as it is determined by profit.

If the total sum of capital is given then the total amount of profit depends on the rate of profit.

A small capital with a higher rate of profit may therefore yield more profit than a larger capital with a lower rate of profit.

Let us suppose:

	1
Capital	Rate of Profit	Total Profit
£	per cent	£
100	10	10
100×2 = 200	¹⁰/₂ or 5	10
100×3 = 300	¹⁰/₂ or 5	15
100×1¹/₂ = 150	5	7¹/₂
	2
100	10	10
2×100 = 200	¹⁰/_(2¹/₂) = 4	8
2¹/₂×100 = 250	4	10
3×100 = 300	4	12
	3
500	10	50
5,000	1	50
3,000	1	30
10,000	1	100

If the multiplier of the capital and the divisor of the rate of profit are the same, that is to say, if the size of the capital increases in the same proportion as the rate of profit falls, then the total profit remains unchanged. 100 at 10 per cent amounts to 10, and 2×100 at ¹⁰/₂ or 5 per cent also amounts to 10. In other words, the amount of profit remains unchanged if the rate of profit falls in the same proportion in which capital accumulates (grows).

If the rate of profit falls more rapidly than the capital grows, then the amount of profit decreases. 500 at 10 per cent yields a total profit of 50. But six times as much, 6×500 or 3,000 at ¹⁰/₁₀ per cent or 1 per cent yields only 30.

Finally, if capital grows faster than the rate of profit falls, the amount of profit increases in spite of the falling rate of profit. Thus 100 at 10 per cent profit yields a profit of 10. But 300 (3×100) at 4 per cent (i.e., where the rate of profit has fallen by 60 per cent) yields a total profit of 12.

Now to the passages from Ricardo:

Chapter VI, “On Profits”.

“The natural tendency of profits then is to fall; for, in the progress of society and wealth, the additional quantity of food required is obtained by the sacrifice of more and more labour. This tendency, this gravitation as it were of profits, is happily checked at repeated intervals by the improvements in machinery, connected with the production of necessaries, as welt as by discoveries in the science of agriculture which enable us to relinquish a portion of labour before required, and ||731| therefore to lower the price of the prime necessary of the labourer. The rise in the price of necessaries and in the wages of labour is however limited; for as soon as wages should be equal … to £ 720, the whole receipts of the farmer, there must be on end of accumulation; for no capital can then yield any profit whatever, and no additional labour can be demanded, and consequently population will have reached its highest point. Long indeed before this period the very low rate of profits will have arrested all accumulation, and almost the whole produce of the country, after paying the labourers, will be the property of the owners of land and the receivers of tithes and taxes” (l.c., pp. 120-21).

This, as Ricardo sees it, is the bourgeois “Twilight of the Gods”—the Day of Judgement.

“Long before this state of prices was become permanent, there would be no motive for accumulation; for no one accumulates but with a view to make his accumulation productive, and […] consequently such a state of prices never could take place. The farmer and manufacturer can no more live without profit, than the labourer without wages. Their motive for accumulation will diminish with every diminution of profit, and will cease altogether when their profits are so low as not to afford them on adequate compensation for their trouble, and the risk which they must necessarily encounter in employing their capital productively” (l.c., p. 123).

“I must again observe, that the rate of profits would fall much more rapidly … for the value of the produce being what I have stated it under the circumstances supposed, the value of the farmer’s stock would be greatly increased from its necessarily consisting of many of the commodities which had risen in value. Before corn could rise from £ 4 to £ 12, his capital would probably be doubled in exchangeable value, and be worth £ 6,000 instead of £ 3,000. If then his profit were £ 180, or 6 per cent on his original capital, profits would not at that time be really at a higher rate than 3 per cent; for £ 6,000 at 3 per cent gives £ 180; and on those terms only could a new farmer with £ 6 000 money in his pocket enter into the farming business” (l.c., p. 124).

“We should also expect that, however the rate of the profits of stock might diminish in consequence of the accumulation of capital on the land, and the rise of wages, yet that the aggregate amount of profits would increase.

Thus supposing that: with repeated accumulations of £ 100,000, the rate of profit should fall from 20 to 19, to 18, to 17 per cent, a constantly diminishing rate, we should expect that the whole amount of profits received by those successive owners of capital would be always progressive; that it would be greater when the capital was £ 200,000, than when £ 100,000, still greater when £ 300,000; and so on, increasing, though at a diminishing rate, with every increase of capital. This progression however is only true for a certain time: thus 19 per cent on £ 200,000 is more than 20 on £ 100,000; again 18 per cent on £ 300,000 is more than 19 per cent on £ 200,000; but after capital has accumulated to a large amount, and profits have fallen, the further accumulation diminishes the aggregate of profits. Thus suppose the accumulation ‘should he £ 1,000,000, and the profits 7 per cent the whole amount of profits will be £ 70,000; now if an addition of £ 100,000 capital he made to the million, and profits should fall to 6 per cent, £ 66,000 or a diminution of £ 4,000 will be received by the owners of stock, although the whole amount of stock will be increased from £ 1,000,000 to £ 1,100,000.

“There can, however, be no accumulation of capital, so long as stock yields any profit at all, without its yielding not only an increase of produce, but on increase of value. By employing £ 100,000 additional capital, no part of the former capital will be rendered less productive. The produce of the land and labour of the country must increase, and its value will be raised, not only by the value of the addition which is made to the former quantity of productions but by the new value which is given to the whole produce of the land, by the increased difficulty of producing the last portion of it. When the accumulation of capital, however, becomes very great, notwithstanding this increased value, it will be so distributed that a less value than before will be appropriated to profits, while that which is devoted to rent and wages will be increased” (l.c., pp. 124-26).

“Although a greater value is produced, a greater proportion of what remains of that value, after paying rent, is consumed by the producers, and it is this, and this alone, which regulates profits. Whilst the land yields abundantly, wages may temporarily rise, and the producers may consume more than their accustomed proportion; but the stimulus which will thus be given to population, will speedily reduce the labourers to their usual consumption. But when poor lands are taken into cultivation, or when more capital and labour are expended on the old land, with a less return of produce, the effect must be permanent” (l.c., p. 127).

||732| “The effects then of accumulation will he different in different countries, and will depend chiefly on the fertility of the land. However extensive a country may be where the land is of a poor quality, and where the importation of food is prohibited, the most moderate accumulations of capital will be attended with great reductions in the rate of profit, and a rapid rise in rent; and on the contrary a small but fertile country, particularly if it freely permits the importation of food, may accumulate a large stock of capital without any great diminution in the rate of profits, or any great increase in the rent of land” (l.c., pp. 128-29).

[It can] also [happen] as a result of taxation that “sufficient surplus produce may not be left to stimulate the exertions of those who usually augment by their savings the capital of the State” (Chapter XII on “Land-Tax”, p. 206).

<Chapter XXI, “Effects of Accumulation on Profits and Interest”,> “There is only one case, and that will he temporary, in which the accumulation of capital with a low price of food may be attended with a fall of profits; and that is, when the funds for the maintenance of labour increase much more rapidly than population;—wages will then be high, and profits low. If every man were to forego the use of luxuries, and he intent only on accumulation, a quantity of necessaries might he produced, for which there could not be any immediate consumption. Of commodities so limited in number, there might undoubtedly be a universal glut, and consequently there might neither be demand for an additional quantity of such commodities, nor profits on the employment of more capital. If men ceased to consume, they would cease to produce” (l.c., p. 343).

Thus Ricardo on accumulation and the law of the falling rate of profit.

* A distinction must he made here. When Adam Smith explains the fall in the rate of profit from an over-abundance of capital, an accumulation of capital, he is speaking of a permanent effect and this is wrong. As against this, the transitory over-abundance of capital, over-production and crises are something different. Permanent crises do not exist.

* ||718| (That Ricardo (regards) money merely as means of circulation is synonymous with his regarding exchange-value as a merely transient form, and altogether as something purely formal in bourgeois or capitalist production, which is consequently for him not a specific definite mode of production, but simply the mode of production.) |718||

[a] In the manuscript, the upper left-hand corner of this page has been torn away. Consequently, out of the first nine lines of the text, only the right ends of six lines have been preserved. This does not make it possible to reproduce the complete text here, but it does permit us to surmise that Marx speaks here of crises which arise “out of [the] revolution in the value of the variable capital”. The “increased price of the necessary means of subsistence” caused, for example, by a poor harvest, leads to a rise in costs for those workers who “are set in motion by variable capital”. “At the same time, this rise” causes a fall in the demand for “all other commodities that do not enter into the consumption” of the workers. It is therefore impossible “to sell the commodities at their value; the first phase in their reproduction”, the transformation of the commodity into money is interrupted. The increased price of the means of subsistence thus leads to “crisis in other branches” of production.

The two last lines of the damaged part of the page seem to summarise this train of thought, by saying that crises can arise as a result of increased prices of raw materials, “whether these raw materials enter as raw materials into constant capital or as means of subsistence” into the consumption of the workers.—Ed.

* ||720| (When spinning-machines were invented, there was over-production of yarn in relation to weaving. This disproportion disappeared when mechanical looms were introduced into weaving.) |720||

[b] In the manuscript: “besides produce”.—Ed.

[c] In the manuscript: “produce”.—Ed.