Therefore, even simple reproduction requires the prior existence of money capital and money reserves (for revenue expenditure) in the hands of the capitalist class over and above the value of productive capital.26 With the money received from the sale of their commodities, the capitalists of department II buy from department I the means of production needed to reconstitute their own constant capital used up during the production process. This money returning to department I, after mediating the purchase-and-sale of means of production within that department, reconstitutes the initial money capital and money-revenue reserve with which the whole turnover process can recommence. Similarly, within department II the capitalists sell consumer goods to their own workers and thereby immediately reconstitute their own variable capital. They sell consumer and luxury goods to all industrialists active within that department, thus realizing the surplus-value contained in the sum total of consumer goods produced.

2. Expanded reproduction. Workers and capitalists of department I buy consumer goods from department II to a total value of Iv+Isα. With this money, capitalists of department II buy means of production from department I in order to reconstitute their own constant capital used up during the production process.27 Now, capitalists of department I have the necessary means (if required, by drawing further on a reserve of money capital) to mediate the circulation of c within their own department and to hire additional workers, who will buy additional consumer goods (to the equivalent of Isγ) from department II. The capitalists of department II thereby acquire the purchasing power to buy from department I the additional means of production necessary for their own expanded reproduction (IIsβ = AIIc), while the sale of consumer goods to workers and capitalists within department II operates as described above. Finally, with the further means obtained by the sale of AIIc to department II, the capitalists of department I can complete their own expanded reproduction, mediating the sale of AIc within their department (as well as the purchase of the equivalent of AIv from department II, if this has not been fully covered in the first stage of circulation).

5. USE AND MISUSE OF THE REPRODUCTION SCHEMAS

Marx’s reproduction schemas have been used and abused in a number of ways during the past seventy years, ever since their analytical usefulness began to strike the imagination of followers and opponents alike. We have already indicated one of the most paradoxical forms of abuse of the schemas, namely, utilization of them as ‘proof’ that capitalism could grow harmoniously and unrestrictedly ‘if only’ the correct ‘proportions’ between the departments (the ‘conditions of equilibrium’) were maintained. The authors responsible for this aberration overlooked the basic assumption made by Marx: that the very structure of the capitalist mode of production, as well as its laws of motion, imply that the ‘conditions of equilibrium’ are inevitably destroyed; that ‘equilibrium’ and ‘harmonious growth’ are marginal exceptions to (or long-term averages of) normal conditions of disequilibrium (‘overshooting’ between the two departments) and uneven growth. We have dwelt on this problem elsewhere and shall not repeat the argumentation here. Suffice it to say that, under capitalism, both the dynamics of value determination and the non-determination of consumer expenditure make it impossible to maintain exact proportions between the two departments in such a way as to allow harmonious growth.

The very nature of expanded reproduction – capitalist reproduction – under capitalism implies that production takes place not only on a broader scale, but also under changed technological conditions. Constant revolutions in the technique and cost of production are a basic characteristic of the system which Marx underlined much more sharply than any of his contemporaries (including the admirers and sycophants of capitalism). But these constant revolutions entail that the value of commodities as a social datum is subject to periodic change. It follows that values at input level do not automatically determine values at output level. Only after a certain interval will it be shown whether a fraction of the ‘inputs’ have been socially wasted. Neither the subjective will of ‘monopolies’ or ‘the state’, nor the cleverness of neo-Keynesian planners, can prevent the assertion of the law of value where private property and competition hold sway. Nothing can stop these long-term shifts in commodity values from leading to a redistribution of living labour inputs among different branches of production (and, ultimately, a redistribution of means of production as well).

Similarly, the avoidance of crises of over-production requires proportionality not only between departments, but also between output and ‘final consumption’ (i.e. consumption by the mass of wage and salary earners, above all in modern industrialized societies, where they generally form with their families more than 80 per cent of the total number of consumers). But this is impossible for two reasons. In the first place, the one freedom which cannot normally be taken away from the workers is the freedom to spend their wages as they wish – and there is no way in which it can be forecast with complete accuracy how they will do this (even if a prediction is 95 per cent correct, that could still leave a 5 per cent surplus of unsaleable consumer goods, which is enough to start an avalanche). Secondly, the laws of motion of capitalism have the inherent tendency to develop the capacity of production (including the production of consumer goods) beyond the limits within which the mode of production confines the purchasing power of those condemned to sell their labour-power. Thus, disproportion is intrinsic to the system itself.28 However, it is not enough for a Marxist theory of the trade cycle and of crisis to demonstrate the reality of that inherent disproportion (which is, after all, almost a truism, given the regular recurrence of crises of over-production for more than 150 years!); it must also discover the precise mechanisms which relate that periodic disequilibrium to the basic laws of motion of capitalism.

In the Soviet Union and other countries where capitalism has been overthrown, Marx’s reproduction schemas have been widely used as instruments of ‘socialist planning’. We do not deny that, by analogy, these schemas may be useful tools for studying specific problems of inter-department structure and dynamics in all kinds of society. But it has first to be clearly understood what is being done in such a case. For, we repeat, the schemas refer to commodity production and to dual flows of commodities and money incomes. To extend their use to societies which have transcended generalized commodity production, where the means of production are, in their essential mass,29 use-values distributed by the state (the planning authorities) according to a plan, rather than commodities sold on the basis of their ‘value’ – this leads to an accumulation of paradoxes, of which the authors are generally not even conscious.

A good example is provided by the late Maurice Dobb. In the fifties, he participated in a ‘great debate’ among Soviet and East European economists revolving around Stalin’s so-called ‘law of the priority development of the means of production under socialism’ and the establishment of an optimum rate of growth for both departments.30 Forgetting that what was involved in Marx’s reproduction schemas was value calculation of commodities, Dobb ‘proved’ that an increased rate of growth of consumer goods in the future was ‘impossible’ unless the present rate of growth of department I was higher than that of department II.