And this is by no means assured under capitalism.

A further preliminary condition of equilibrium has to be fulfilled before the dual flow of commodities and purchasing power between the departments can even be examined. The sum total of output of both departments must be equal to, not smaller or larger than, the total demand generated by expanded reproduction. Under simple reproduction this may be expressed as follows:

I = Ic+IIc

II = IIv+Is+IIv+IIs

Under expanded reproduction this becomes:

  I = Ic+AIc+IIc+AIIc

II = Iv+AIv+(Is–AIc–AIv)+IIv+AIIv+(IIs–AIIc–AIIv)

The value and mass of the means of production produced must be equal to the value and mass of the means of production used up in both departments during the current production period (plus, under conditions of expanded reproduction, the value of the additional means of production needed in both departments). The value and mass of the consumer goods produced must be equal to the demand for consumer goods (wages+profits spent on unproductive consumption) in both departments.

4. THE SIGNIFICANCE OF MARX’S REPRODUCTION SCHEMAS

The so-called ‘conditions of proportionality’ in a two-department system (where the total mass of commodities is classified into a department I of means of production and a department II of consumer goods) were formulated by Marx himself. In the case of simple reproduction they are:

Iv+Is = IIc

Otto Bauer and Bukharin derived from this a similar formula for expanded reproduction, which, although present in Volume 2, was not explicitly formulated by Marx:21

Iv+Isα+Isγ = IIc+IIsβ22

In conformity with the dual nature of the reproduction schemas, these conditions of proportionality simultaneously have two meanings:

(a) The exchange-value of the goods sold by department I to department II must be equal to the value of the goods sold by department II to department I (otherwise, there would emerge an unsaleable surplus in at least one of the two departments).

(b) The specific use-value of the commodities produced in both departments must correspond to their mutual needs. For instance, the purchasing power in the hands of the workers producing producer goods must encounter on the market not only ‘commodities’, but actual consumer goods equivalent to that sum of wages. (Under capitalism, workers are not supposed to spend their money on any commodities other than consumer goods.)

The commodity, non-barter nature of the reproduction schemas further implies a dual flow between the two departments. When department I sells raw materials and equipment to department II (to replace the value of IIc used up in the previous production cycle), commodities flow from department I to department II, while money flows from department II to department I. It has to be determined where that money initially came from. Conversely, when department II sells consumer goods to the workers of department I, to enable them to reproduce their labour-power, commodities flow from II to I, while money flows from I to II.

From a purely technical point of view, there is nothing extraordinary or magical in this two-department schema. It is just the most elementary conceptual tool – an extreme simplification intended to bring out the underlying assumptions of equilibrium (or equilibrated, proportionate growth) under conditions of commodity production. For exchange to occur, there must exist at least two private capitals independent of each other. With these conceptual tools, it would be easy to draw up a three-department model (e.g. with gold as department III), or a four-department one (with both gold and luxury goods as additional departments – the difference between the two being that, while luxury goods are, like weapons, useless from the point of view of reproduction, gold does not enter into the reproduction process but mediates it, assisting the circulation of commodities for expanded reproduction). We could then move on to a five-department model (dividing department I into means of production producing means of production and means of production producing consumer goods) or a seven-department one (further dividing both sub-departments of department I into raw materials and machinery). Step by step, we would approach an inter-branch model reflecting the actual structure of a modern capitalist industrialized economy.23

A certain number of conditions of physical interdependence would have to be established among all these branches (they are clarified by Leontiev’s input-output tables, based on either stable or changing technology). These would then have to be supplemented by a table of value equivalence (value equilibrium), since the only condition for equilibrium is overall realization of value. At this point, there appears an important difference between a two-department schema and a multi-department one. The former necessitates equivalence of exchange-values between the two departments, whereas this is not true of the latter. Department C, for instance (say, raw materials necessary for the production of consumer goods) could have a ‘surplus’ in its interchange with department E (finished mass consumer goods in a nine-department schema, where F is the luxury goods department and G the gold production one), while it had a ‘deficit’ in its interchange with department B (equipment for the production of producer goods, including raw materials).24 In such a case, the system would still attain equilibrium provided that all the ‘surpluses’ and ‘deficits’ cancelled one another out for each department (i.e. were inter-related in a definitely proportionate and not arbitrary manner), and provided that each department realized the total value of the commodities produced within it and disposed of sufficient purchasing power to acquire the necessary objective elements of expanded reproduction (which would have to be supplied with their specific use-values by the current production of departments A to E).

However, the picture changes once we consider the two-department schema not as a simple conceptual or analytical tool, but as a model corresponding to a social structure. It then becomes clear that the choice of these two departments as basic sub-divisions of the mass of commodities produced is not at all an arbitrary one, but corresponds to the essential character of human production in general – not merely its specific expression under capitalist relations of production. Man cannot survive without establishing a material metabolism with nature. And he cannot realize that metabolism without using tools. His material production will, therefore, always consist of at least tools and means of subsistence. The two departments of Marx’s reproduction schemas are nothing other than the specific capitalist form of this general division of human production, in so far as they (1) take the generalized form of commodities, and (2) assume that the workers (direct producers) do not and cannot purchase that part of the commodity mountain which consists of tools and raw materials.25

Reverting to the two-department schema presented in Capital Volume 2, we can now outline the dual flow of commodities and money between the two departments, both in the case of simple reproduction and in that of expanded reproduction.

1. Simple reproduction. In department I, the workers buy commodities from department II to the equivalent of their wages, and the capitalists to the equivalent of their profits. Both these flows are continuous (workers and capitalists alike have to eat every day) regardless of whether department I commodities have already been sold.