They furnish neither additional raw materials, machines or sources of energy, nor consumer goods capable of feeding an expanded work force. Nevertheless, that part of the national income which buys weapons could not have been spent on additional means of production or wages for additional productive workers. Thus, both because of their specific use-value, and because they are exchanged against the non-accumulated part of surplus-value, weapons do not contribute to expanded reproduction, to capital accumulation, under conditions of ‘full employment’ of social capital.

This does not necessarily imply that weapons production reduces capital accumulation, except in the most general sense that all forms of unproductive expenditure of surplus-value do so. For it to be shown that the appearance or expansion of an arms sector has actually reduced expanded reproduction, it would have to be demonstrated that it has appeared (or expanded) at the expense of the sector of means of production. If it has simply replaced luxury production, then, all other things being equal, neither the scope nor the potential rhythm of capital accumulation will have been changed.

But what if the weapons sector has appeared (or expanded) at the expense of the sector producing consumer goods for the workers, still assuming ‘full employment’ of capital? There are again two distinct possibilities to be considered. Where this substitution leads to a decline in the physical or moral working capacity of the labour force, the rate of capital accumulation will fall in consequence, perhaps even, after a certain time, to the extent of contracted reproduction.71 But where this substitution leaves unchanged the capacity or willingness of the workers to accept the current ‘norm’ of social labour in the process of production, such a shift of resources from department II to department III would imply a rise in the average social rate of surplus-value. The same value product would then be produced with the same labour-power, but at the cost of less variable capital. The working class would simply receive a smaller share of the existing national income. Whether this would leave the rate of accumulation unaltered, or whether it would actually lead to a higher level of capital accumulation or expanded reproduction, would then depend on the way in which this rise in the rate and mass of surplus-value influenced the division of surplus-value between the unproductively consumed portion (in which is included the weapons sector) and the accumulated part.72

At this point, we must abandon the initial supposition of ‘full employment of capital’ and examine the actual function of expanding arms production under conditions of long-term plethora of capital. The situation is by no means artificial or introduced purely for the sake of argument. On the contrary, it was already prevalent during the first massive arms drive in the history of capitalism, which took place during the two decades preceding the First World War.73 It was even more marked in the thirties, during the second period of massive rearmament, starting with Japan’s ‘Manchurian Incident’ and German policy after Hitler came to power, and becoming generalized after 1936. Such plethora of capital remained more than ever the rule in the phase of permanent arming which has lasted now for more than thirty years and shows no signs of coming to an end – quite the contrary.74 It is thus entirely appropriate to investigate the effect upon capital accumulation of an armaments sector developing under conditions of large-scale plethora of capital.

Over-production of capital signifies, on the value side, the emergence of large sums of capital which have to be hoarded in savings accounts, or used for purchasing bonds and government securities, where they beget only the average rate of interest rather than the average rate of profit. On the use-value side, it is expressed in sizeable stocks of unused raw materials and productive capacity in plant, as well as in large reserves of unemployed workers. If, as a result of the appearance and expansion of a significant arms sector in the economy, money (or quasimoney) capital is productively reinvested, then the production of value and surplus-value increases. We know already that the manufacture of arms is productive of value and surplus-value. Hence, in the immediate sense, capital grows richer because more workers are exploited in the production of greater surplus-value.

Since department II does not contribute to the creation of the material elements of expanded reproduction, its expansion cannot directly ensure a higher level of capital accumulation, But it can do so indirectly. For as additional workers are employed, the wages bill increases, leading to rising output and sale of consumer goods. Similarly, the consumption of additional raw materials in the weapons industry stimulates the production of mines and other centres of department I which had previously contracted their output. Material production will rise in all sectors of the economy, thereby augmenting the material elements of expanded reproduction, provided that reserves of ‘productive factors’ are available (which follows from the initial hypothesis of ‘under-employment of capital’) and/or provided that at least part of the additional surplus-value is not absorbed by the armaments sector or other unproductive departments, but remains available for capital accumulation.

These conditions apply with even greater force if the processes described are accompanied by a changed distribution of the national income between wages and surplus-value, that is to say, if rearmament is financed to some extent at the expense of the working class through a rise in the rate of surplus-value. The resultant combination would then be ‘ideal’ for the accumulation of capital: at one and the same time, there would occur an expansion of the mass of workers employed and exploited (i.e. an expansion of the value product, the mass of surplus-value, and market demand); an increase in the rate of surplus-value and (probably) the rate of profit; and a rise in the rate of accumulation (i.e. an increase of investment in the productive sector, over and above the growth in arms spending).75

Needless to say, this provides no ‘long-term solution’ to the problems of capitalist equilibrium, since the very ‘success’ of the operation inevitably reproduces the initial contradictions. Increased capital accumulation leads to a rise in the organic composition of capital, which in turn begins to depress the rate of profit. The higher level of employment (made possible by the absorption of part of the unemployed in the army or the state apparatus – a normal feature of a substantial rise in military spending) reduces the industrial reserve army of labour and thereby, except under a fascist-type dictatorship, tends to make it more difficult to neutralize the effects of the rising organic composition of capital by driving up further the rate of surplus-value. A decline in the rate of profit depresses productive investment and leads to both a crisis of over-production and a fall in the rate of capital accumulation; when that rate actually becomes ‘negative’, a process of devalorization of capital begins, which is the normal function of a crisis of over-production.

To counter this new crisis of capital accumulation through an intensification of armaments production, where a sizeable sector already exists in the economy, would modify the basic proportions both of the division of surplus-value between its accumulated and consumed portions, and of the allocation of productive resources between departments I and II, on the one hand, and department III, on the other. Whatever effect upon the process of expanded reproduction was initially obtained would be increasingly neutralized. Moreover, such a high rate of taxation of profits and wages would be necessary that, except under very special political conditions, the basic social classes (although not that sector of capitalists directly engaged in weapons production and procurement) would revolt against further development of the arms industry. Such an expansion is thus no cure-all for the ills of capitalist over-accumulation and over-production. But it can trigger off shorter or longer periods of economic upturn as long as those preconditions indicated above are satisfied.

9. HOW CAN COMMERCIAL AND FINANCIAL CAPITAL PARTICIPATE IN THE DISTRIBUTION OF SOCIAL SURPLUS-VALUE?

The distinction between productive and unproductive labour partially dovetails with the distinction between two general sectors of capital: capital invested in commodity production (be it in industry, agriculture, transport or productive branches of the so-called service industries) and capital invested elsewhere (i.e.