The capitalists of Department II, however, get poor reward for this Christian virtue. In spite of their abstinence, they are not only unable to expand their reproduction, but they are no longer even in the position to resume their production on its former scale. Even if the corresponding ‘commodity value’ is transferred from IIg to IIc, it is not only the value but its actual and concrete form which matters. As the new part of the product of I now consists of money which cannot be used as a means of production, Department II, in spite of its abstinence, cannot renew its constant material capital on the old scale. As our diagram presupposes simple reproduction, its condition are thus violated in two directions: surplus value is being hoarded, and the constant capital shows a deficit. Marx’s own results, then, prove that the production of gold cannot possibly find a place in either of the two departments of his diagram; the whole diagram is upset as soon as the first act of exchange between Departments I and II has been completed. As Engels remarks in his footnote, ‘the analysis of the exchange of newly produced gold within the constant capital of Department I is not contained in the MS.’[94] Besides, the inconsistency would then only have been greater. The point of view we advocate is confirmed by Marx himself when he gives an exhaustive answer to the question, as striking as it is brief: ‘Money in itself is not an element of actual reproduction.’[95]
There is another important reason why we should put the production of money in a third and separate department of social production as a whole: Marx’s diagram of simple reproduction is valid as the starting-point and foundation of the reproductive process not only for capitalism but also, mutatis mutandis, for every regulated and planned economic order, for instance a socialist one. However, the production of money, just like the commodity-form of the products, becomes obsolete when private ownership of the means of production is abolished. It constitutes the ‘illegitimate’ liabilities, the faux frais of the anarchic economy under capitalism, a peculiar burden for a society based upon private enterprise, which implies the annual expenditure of a considerable amount of labour on the manufacture of products which are neither means of production nor yet consumer goods. This peculiar expenditure of labour by a society producing under capitalism will vanish in a socially planned economy. It is most adequately demonstrated by means of a separate department within the process of reproducing social capital. It is quite immaterial in this connection whether we picture a country which produces its own gold or a country which imports gold from abroad. The same expenditure of social labour which in the first case is necessary for the direct production of gold, is required in the second case to effect the exchange transactions.
These observations show that the problem of the reproduction of total capital is not so crude as it often appears to those who approach it merely from the point of view of crises. The central problem might be formulated as follows: how is it possible that, in an unplanned economy, the aggregate production of innumerable individual capitalists can satisfy all the needs of society? One answer that suggests itself points to the continual fluctuations in the level of production in accordance with the fluctuating demand, i.e. the periodical changes in the market. This point of view, which regards the aggregate product of society as an undifferentiated mass of commodities, and treats social demand in an equally absurd way, overlooks the most important element, the differentia specifica of the capitalist mode of production. We have seen that the problem of capitalist reproduction contains quite a number of precisely defined relations referring to specific capitalist categories and also, mutatis mutandis, to the general categories of human labour. The real problem consists in their inherent tendencies towards both conflict and harmony. Marx’s diagram is the scientific formulation of the problem.
Inquiry must now be made into the implications of this diagram analytic of the process of production. Has it any real bearing on the problems of actual life? According to the diagram, circulation absorbs the entire social product; all consumers’ needs are satisfied, and reproduction takes place without friction. The circulation of money succeeds the circulation of commodities, completing the cycle of social capital. But what is the position in real life? The relations outlined in the diagram lay down a precise first principle for the division of social labour in a planned production—always providing a system of simple reproduction, i.e. no changes in the volume of production. But no such planned organisation of the total process exists in a capitalist economy, and things do not run smoothly, along a mathematical formula, as suggested by the diagram. On the contrary, the course of reproduction shows continual deviations from the proportions of the diagram which become manifest (a) in the fluctuations of prices from day to day; (b) in the continual fluctuations of profits; (c) in the ceaseless flow of capital from one branch of production to another, and finally in the periodical and cyclical swings of reproduction between over-production and crisis.
And yet, apart from all these deviations, the diagram presents a socially necessary average level in which all these movements must centre, to which they are always striving to return, once they have left it. That is why the fluctuating movements of the individual capitalists do not degenerate into chaos but are reduced to a certain order which ensures the prolonged existence of society in spite of its lack of a plan.
In comparison, the similarities and the profound discrepancies between Marx’s diagram of reproduction and Quesnay’s Tableau Économique strike us at once. These two diagrams, the beginning and end of the period of classical economics, are the only attempts to describe an apparent chaos in precise terms, a chaos created by the interrelated movements of capitalist production and consumption, and by the disparity of innumerable private producers and consumers. Both writers reduce this chaotic jumble of individual capitals to a few broadly conceived rules which serve, as it were, as moorings for the development of capitalist society, in spite of its chaos. They both achieve a synthesis between the two aspects which are the basis of the whole movement of social capital: that circulation is at one and the same time a capitalist process of producing and appropriating surplus value, and also a social process of producing and consuming material goods necessary to civilised human existence. Both show the circulation of commodities to act as a mediator for the social process as a whole, and both conceive of the circulation of money as a subsidiary phenomenon, an external and superficial expression of the various stages within the circulation of commodities.
It is socially necessary labour which creates value. This inspired fundamental law of Marx’s theory of value which provided the solution of the money problem, amongst others, further led him first to distinguish and then to integrate those two aspects in the total reproductive process: the aspect of value and that of actual material connections. Secondly, Marx’s diagram is based upon the precise distinction between constant and variable capital which alone reveals the internal mechanisms of the production of surplus value and brings it, as a value-relationship, into precise relation with the two material categories of production: that of producer and consumer goods.
After Quesnay, some classical economists, Adam Smith and Ricardo in particular, came fairly close to this point of view. Ricardo’s contribution, his precise elaboration of the theory of value, has even been frequently confused with that of Marx. On the basis of his own theory of value, Ricardo saw that Smith’s method of resolving the price of all commodities into v + s—a theory which wrought so much havoc in the analysis of reproduction—is wrong; but he was not much interested in Smith’s mistake, nor indeed very enthusiastic about the problem of reproduction as a whole. His analysis, in fact, represents a certain decline after that of Adam Smith, just as Smith had partly retrogressed as against the Physiocrats. If Ricardo expounded the fundamental value categories of bourgeois economy—wages, surplus value and capital—much more precisely and consistently than his predecessors, he also treated them more rigidly. Adam Smith had shown infinitely more understanding for the living connections, the broad movements of the whole. In consequence he did not mind giving two, or, as in the case of the problem of value, even three or four different answers to the same question. Though he contradicts himself quite cheerfully in the various parts of his analysis, these very contradictions are ever stimulating him to renewed effort, they make him approach the problem as a whole from an ever different point of view, and so to grasp its dynamics. Ultimately, it was the limitation of their bourgeois mentalities which doomed both Smith and Ricardo to failure. A proper understanding of the fundamental categories of capitalist production, of value and surplus value as living dynamics of the social process demands the understanding of this process in its historical development and of the categories themselves as historically conditioned forms of the general relations of labour. This means that only a socialist can really solve the problem of the reproduction of capital. Between the Tableau Économique and the diagram of reproduction in the second volume of Capital there lies the prosperity and decline of bourgeois economics, both in time and in substance.