The dual function of the ‘industrial reserve army of labour’, both as regulator of wages (assuring that the rate of surplus-value remains above a certain level) and as material precondition of expanded reproduction, should not be overlooked. If ‘traditional’ means of increasing or maintaining that ‘reserve army’ are drying up (where, for example, independent peasants, handicraftsmen and shop-keepers have declined as a proportion of the total active population, or where substitution of machines for men in industry is slowing down), then new sources can always be tapped through sweeping transformation of housewives into wage-labourers; mass immigration of labour; extensive re-deployment of student youth onto the labour market, and so on.15

Marx’s giant step forward in economic analysis may be gauged by the fact that, until this very day, most academic economists have still not fully grasped this basic innovation of his schemas of reproduction. They have broken up the totality of the process of reproduction of capital, based upon this ‘unity of opposites’, into a disconnected dichotomy. On the one hand, analysis centres on physical coefficients (especially at the level of inter-branch exchanges, as in Leontiev’s input-output tables and all their derivations), i.e. it deals with use-values. On the other hand, as in the case of Keynesian and post-Keynesian treatises16, the study focuses on money flows, income flows, that is to say on exchange-values largely disembodied from the commodities in the production of which they originated. Income theories are thereby more and more disconnected from production theories, and if the mediation of the ‘production function’ is employed at all, it remains largely inoperative, being considered at the micro-economic level rather than the macro-economic one.

Above all, the constant combination and intertwining of the two – the obvious fact that incomes are generated in the production of commodities with a given use-value, corresponding to the structure of socially recognized needs, and that disequilibrium is unavoidable without a structure of income congruent with that of value produced – this has not even been posed, still less tackled by traditional academic theory (with the marginal exception of certain students of the trade cycle and the theory of crisis). The technique of aggregation introduced by Keynes has, if anything, made matters even more confused by operating with undifferentiated money flows. For it evacuates the problem (not to mention its solution) of whether a given national income has a specific structure of demand (for consumer goods, for producer goods producing producer goods, for producer goods producing consumer goods, for luxury goods, for weapons and other commodities bought only by the state, etc.) which corresponds exactly to the specific structure of the total commodity-value created in the process of production.

In fact, most of the relevant academic theory (and not a little post-Marxian Marxist theory as well) for a long time assumed some kind of Say’s law to be operative.17 That is to say, it took for granted that a given value-structure of output is correlated with a congruent incomes structure (structure of purchasing power) through the normal operation of market forces. One of Marx’s major purposes in Volume 2 of Capital is to show that this is not so: that such congruence depends upon certain exact proportions and structures, both of exchange-values and of use-values; that, for instance, wages never buy machines under capitalism; and that these exact proportions are extremely difficult to realize in the actual practice of capitalism.

It is thus all the more surprising that Joan Robinson reproaches Marx for having ‘failed to realize how much the orthodox theory stands and falls with Say’s Law and set himself the task of discovering a theory of crises which would apply to a world in which Say’s Law was fulfilled, as well as the theory which arises when Say’s Law is exploded’ 18 Would it not be more correct to state that Robinson herself, following Keynes’s concept of ‘effective demand’, fails to realize how much Marx’s theory of the commodity as a unity-and-contradiction of use-value and exchange-value not only underpins his concept of the necessary fluctuation of supply and demand at a macro-economic level, but actually intertwines it with his theory of income distribution (demand distribution) in capitalist society? Under capitalism, income distribution has a class structure determined by the very structure of the mode of production, and governed in the medium term by the class interests of the capitalists. Any increase in ‘effective demand’ which, instead of increasing the rate of profit, causes it to decline will never lead to a ‘boom’ under capitalism. That basic truth was well understood by Ricardo as well as Marx – though it is not by many latter-day Keynesians.

We said earlier that one of the basic functions of the reproduction schemas is to demonstrate that growth (i.e. the very existence of capitalism) is at least possible under the capitalist mode of production. Given the extremely anarchic nature of the organization of production (under laissez-faire capitalism on the home market, under monopoly capitalism on the world market), and given the very nature of competition, this is by no means as obvious as it sounds. The reproduction schemas locate the combination of value and use-value structures of the total commodity package within which growth can occur. But Marx never sought to prove that these proportions are automatically and constantly guaranteed by the ‘invisible hand’ of market forces. On the contrary, he insisted again and again19 that these proportions are difficult to realize and impossible permanently to retain, and that they are automatically upset by those same forces that bring them occasionally into being. In other words, the reproduction schemas show that equilibrium, not to speak of equilibrated growth, is the exception and not the rule under capitalism: that disproportions are far more frequent than proportionality, and that growth, being essentially uneven, inevitably produces the breakdown of growth – contracted reproduction or crisis.

When we say that Marx’s reproduction schemas summarize the turnover of capital and commodities as a dual movement, we mean that they are based upon a combined dual flow – a flow of value produced in the process of production, and a flow of money (money revenue and money capital) unleashed in the process of circulation in order to realize the value of the commodities produced. The schemas are evidently not based upon barter: department I does not ‘exchange’ goods with department II simply according to ‘mutual need’. Before the capitalists or employed workers of department I can obtain the goods they need, they must prove themselves to have sufficient purchasing power to buy them from department II at their value.20 Furthermore, the difficulty cannot be solved by some legerdemain such as the sudden introduction ex nihilo of additional sources of purchasing power. If new sources of money do appear – and we shall see that they play a key role in Marx’s schemas – they must be organically connected with the problem under examination. In other words, it has to be demonstrated that they are necessarily coexistent with the process of production and circulation of commodities under the capitalist mode of production.

The dual nature of the reproduction schemas, reflecting the dual nature of the commodity and commodity production in general, in no way circumvents or contradicts the operation of the law of value – a law which establishes, among other things, that the quantity and quality of value produced, both that of each individual commodity and that of the total sum of commodities, is independent of their use-value. Use-value is a necessary precondition of commodity-value. A good which nobody wants to buy because it fulfils no need cannot be sold, and therefore has no exchange-value. Labour expended in its production is socially wasted, not socially necessary labour. Similarly, a certain use-value structure of total output – a given quantity of x raw materials, y pieces of equipment and z types of consumer goods – is a material and social precondition of the successful accomplishment of (simple or expanded) reproduction. But the use-value of these commodities will only be realized if their market prices can be matched, that is, if they can be bought. (Millions can – and do! – starve under capitalism, even though all the food they need is there, because they lack the purchasing power to buy it. Of course they would also starve if the food were really lacking, but, although this does happen occasionally, it is a much rarer occurrence.) Moreover, the system will be in equilibrium (i.e. expanded reproduction will be possible in value terms) only if these commodities are broadly speaking sold at their value, that is to say, if the surplus-value produced by the working class is realized in the form of profit.