The Accumulation of Capital

by Rosa Luxemburg

If, by way of answer, we are referred to the process of hoarding attendant upon the gradual renewal of the constant capital by the individual capitalists at various times, the connection between these two points remains obscure. As long as B, B´ and B´´, etc., buy producer goods from their colleagues A, A´ and A´´ in order to renew their constant capital that has in fact been used up, the limits of simple reproduction are not transcended, and the whole thing has nothing to do with our problem. The moment the producer goods purchased by B, B´, B´´, etc., serve to increase their constant capital, however, for purposes of accumulation, a number of new questions clamour for attention. First and foremost where do the B’s get the cash to buy an additional product from the A’s? The only way they could have made their money is by sale of their own surplus product. Before they can acquire new means of production for expanding their enterprises, before they appear as buyers, that is to say, of the surplus product that is to be accumulated, they must first have disposed of their own surplus product—in a word, B, B´, B´´, etc., must have been vendors themselves. But who could have bought their surplus product? It is obvious that the difficulty is simply shifted from the A’s to the B’s without having been mastered.

At one stage of the analysis it really does seem for a time as if a solution were found at last. After a short digression, Marx returns to the main line of his investigation in the following words:

‘In the present case, this surplus-product consists at the outset of means of production used in the creation of means of production. It is not until it reaches the hands of B, B´, B´´, etc., (I), that this surplus-product serves as an additional constant capital. But it is virtually that even in the hands of the accumulators of hoards, the capitalists A, A´, A´´, (I), before it is sold. If we consider merely the volume of values of the reproduction on the part of I, then we are still moving within the limits of simple reproduction, for no additional capital has been set in motion for the purpose of creating this virtual additional capital (the surplus-product), nor has any greater amount of surplus-labour been performed than that done on the basis of simple reproduction. The difference is here only one of the form of the surplus-labour performed, of the concrete nature of its particularly useful service. It is expended in means of production for Department Ic instead of IIc, in means of production of means of production instead of means of production of articles of consumption. In the case of simple reproduction it had been assumed that the entire surplus-value was spent as revenue in the commodities of II. Hence it consisted only of such means of production as restore the constant capital of IIc in its natural form. In order that the transition from simple to expanded reproduction may take place, the production in Department I must be enabled to create fewer elements for the constant capital of II and more for that of I.... Considering the matter merely from the point of view of the volume of values, it follows, then, that the material requirements of expanded reproduction are produced within simple reproduction. It is simply a question of the expenditure of the surplus-labour of the working class of I for the production of means of production, the creation of virtual additional capital of I. The virtual additional money-capital, created on the part of A, A´, A´´, by the successive sale of their surplus-product, which was formed without any capitalist expenditure of money, is in this case simply the money-form of the additional means of production made by I.’[118]

On this interpretation, the difficulty seems to dissolve into thin air at our touch. Accumulation requires no new sources of money at all. Before, when the capitalists themselves consumed their surplus value, they had to have a corresponding money reserve in hand, the analysis of simple reproduction already having proved that the capitalist class must itself put into circulation the money needed for the realisation of their surplus value. Now, instead of consumer goods, the capitalist class, or rather B, B´, and B´´, buy an equivalent amount of means of production in order to expand their production. In this way, money to the same value is accumulated in the hands of the other capitalist group, viz. A, A´, A´´, etc.

‘This hoarding ... does not in any way imply an addition to the wealth in precious metals, but only a change of function on the part of money previously circulating. A while ago it served as a medium of circulation, now it serves as a hoard, as a virtual additional money-capital in process of formation.’[119]

And that is that! Yet this way out of the difficulty is open to us only on one condition, and that is not far to seek: Marx here takes accumulation in its first rudiments, in statu nascendi, as it begins to evolve from simple reproduction. In respect of the amount of value, production is not yet enlarged, it has only been rearranged so that its material elements are grouped in a different way. That the sources of money also seem adequate is therefore not surprising. This solution, however, is only true for one specific moment, the period of transition from simple reproduction to enlarged reproduction—in short, a moment that has no reference to reality and can only be conceived speculatively. Once accumulation has been established for some time, when increasing amounts of value are thrown upon the market in every period of production, buyers for these additional values cannot fail to become a problem. And on this point the proffered solution breaks down. For that matter, it was never more than a seeming solution, not a real one. On closer scrutiny, it fails us even at the precise instant it appears to have smoothed the way for us. For if we take accumulation just at the very moment of its emergence from simple reproduction, the prime condition it demands is a decrease in the consumption of the capitalist class. No sooner have we discovered a way to expand reproduction with the means of circulation already at hand, than we find previous consumers trickling away at the same rate. What, then, is the good of expanding production; who is there able to buy from B, B´ and B´´ this increased amount of products which they could turn out only by denying themselves the money they need for buying new means of production from A, A´ and A´´?

That solution, we see, was a mere illusion—the difficulty still persists. Marx himself at once re-opens the question where B, B´ and B´´ get the money to buy the surplus product of A, A´ and A´´.

‘To the extent that the products created by B, B´, B´´, etc., (I) re-enter in their natural form into their own process, it goes without saying that a corresponding portion of their own surplus-product is transferred directly (without any intervention of circulation) to their productive capital and becomes an element of additional constant capital. To the same extent they do not help to convert any surplus-product of A, A´, A´´ etc., (I) into money. Aside from this, where does the money come from? We know that they have formed their hoard in the same way as A, A´, etc., by the sale of their respective surplus-products. Now they have arrived at the point where their accumulated hoard of virtual money-capital is to enter effectually upon its function as additional money-capital. But this is merely turning around in a circle. The question still remains: Where does the money come from, which the various B’s (I) withdrew from the circulation and accumulated?’[120]

His prompt reply again seems surprisingly simple: ‘Now we know from the analysis of simple reproduction, that the capitalists of I and II must have a certain amount of ready money in their hands, in order to be able to dispose of their surplus-products. In that case, the money which served only for the spending of revenue in articles of consumption returned to the capitalists in the same measure in which they advanced it for the purpose of disposing of their commodities. Here the same money reappears, but in a different function. The A’s and B’s supply one another alternately with the money for converting their surplus-product into virtual additional capital, and throw the newly formed money-capital alternately into circulation as a medium of purchase.’[121]

That is harking back to simple reproduction all over again. It is quite true, of course, that the capitalists A and the capitalists B are constantly accumulating a hoard of money bit by bit so as to be able to renew their constant (fixed) capital from time to time, and in this way they really are assisting one another in realising their products. Yet this accumulating hoard does not drop from the clouds—it is simply a natural precipitation of the fixed capital that is (in terms of value) continually being transferred in instalments to the products which are then one by one realised in the process of sale. Owing to its very nature, the accumulated hoard can only cover the renewal of the old capital; there cannot possibly be enough to serve further for purchasing additional constant capital. That means that we are still within the limits of simple reproduction. Perhaps, though, that part of the medium of circulation which hitherto served the capitalists for their personal consumption, and is now to be capitalised, becomes a new source of additional money? For that to be true, however, we should have to be back at the unique and fleeting moment that has no more than theoretical existence—the period of transition from simple to enlarged reproduction. Beyond this gap accumulation cannot proceed—we are in truth going round in circles.