IV. Exchange within Department II.
                               Necessities of Life and Articles of Luxury

   Of the value of the commodity-product of department II there still remain to be studied the constituents v plus s. This analysis has nothing to do with the most important question which occupies our attention here, namely to what extent the division of the value of every individual capitalist commodity-product into c + v + s — even if brought about by different forms of appearance — applies also to the value of the total annual product. This question finds its answers on the one hand in the exchange of I(v + s) for IIc, and on the other hand in the investigation, to be made later, of the reproduction of I in the annual product of I. Since II(v + s) exists in the bodily form of articles of consumption; since the variable capital advanced to the labourers in payment of their labour-power must generally speaking be spent by them for articles of consumption; and since the s-portion of the value of commodities, on the assumption of simple reproduction, is practically spent as revenue for articles of consumption, it is prima facie evident that the labourers II buy back, with the wages received from the capitalists II, a portion of their own product, corresponding to the amount of the money-value received as wages. Thereby the capitalist class II reconverts the money-capital advanced by it in the payment of labour-power into the form of money. It is quite the same as if it had paid the labourers in mere value tokens. As soon as the labourers would realise these value tokens by the purchase of a part of the commodities produced by them but belonging to the capitalists, these tokens would return into the hands of the capitalists. Only, these tokens do not merely represent value but possess it, in golden or silver embodiment. We shall analyse in greater detail later on this sort of reflux of variable capital advanced in the form of money by means of a process in which the working-class appears as the purchaser and the capitalist class as the seller. Here however a different point is at issue, which must be discussed in connection with this return of the variable capital to its point of departure.

   Category II of the annual production of commodities consists of a great variety of branches of production, which may, however, be divided into two great sub-divisions by their products.

   a) Articles of consumption, which enter into the consumption of the working-class, and, to the extent that they are necessities of life — even if frequently different in quality and value from those of the labourers — also form a portion of the consumption of the capitalist class. For our purposes we may call this entire sub-division consumer necessities, regardless of whether such a product as tobacco is really a consumer necessity from the physiological point of view. It suffices that it is habitually such.

   b) Articles of luxury, which enter into the consumption of only the capitalist class and can therefore be exchanged only for spent surplus-value, which never falls to the share of the labourer.

   As far as the first category is concerned it is obvious that the variable capital advanced in the production of the commodities belonging in it must flow back in money-form directly to that portion of the capitalist class II (i.e., the capitalists IIa) who have produced these necessities of life. They sell them to their own labourers to the amount of the variable capital paid to them in wages. This reflux is direct so far as this entire sub-division a of capitalist class I is concerned, no matter how numerous the transactions may be between the capitalists of the various pertinent branches of industry, by means of which the returning variable capital is distributed pro rata. These are processes of circulation, whose means of circulation are supplied directly by the money expended by the labourers. It is different, however, with sub-division IIb. The entire portion of the value produced in this sub-division, IIb(v + s), exists in the bodily form of articles of luxury, i.e., articles which the labouring class can buy no more than it can buy commodity-value I existing in the form of means of production, notwithstanding the fact that both the articles of luxury and the means of production are the products of these labourers.

   Hence the reflux by which the variable capital advanced in this subdivision returns to the capitalist producers in its money-form cannot be direct but must be mediated, as in the case of Iv.

   Let us assume for instance that v = 500 and s = 500, as they did in the case of the entire class II; but that the variable capital and the corresponding surplus-value are distributed as follows:

   Sub-division a, Necessities of Life: v = 400; s = 400; hence a quantity of commodities in consumer necessities of the value of 400 v + 400s = 800, or IIa (400v + 400s).

   Sub-division b, Articles of Luxury: of the value of 100 v + l00 s = 200, or IIb (L00v + 100s).

   The labourers of IIb have received 100 in money as payment for their labour-power, or say £100. With this money they buy articles of consumption from capitalists IIa to the same amount. This class of capitalists buys with the same money £100 worth of the IIb commodities, and in this way the variable capital of capitalists IIb flows back to them in the form of money.

   In IIa there are available once more 400v in money, in the hands of the capitalists, obtained by exchange with their own labourers. Besides, a fourth of the part of the product representing surplus-value has been transferred to the labourers of IIb, and in exchange IIb (100v) have been received in the form of articles of luxury.

   Now, assuming that the capitalists of IIa and IIb divide the expenditure of their revenue in the same proportion between necessities of life and luxuries — three-fifths for necessities for instance and two-fifths for luxuries — the capitalists of sub-class IIa will spend three-fifths of their revenue from surplus-value, amounting to 400s, or 240, for their own products, necessities of life, and two-fifths, or 160, for articles of luxury. The capitalists of sub-class IIb will divide their surplus-value of 100s in the same way: three-fifths, or 60, for necessities, and two-fifths, or 40, for articles of luxury, the latter being produced and exchanged in their own sub-class.

   The 160 in articles of luxury received by (IIa)s pass into the hands of the IIa capitalists in the following manner: As we have seen, 100 of the (IIa) 400s were exchanged in the form of necessities of life for an equal amount of (IIb)v, which exists as articles of luxury, and another 60, consisting of necessities of life, for (IIb) 60s, consisting of luxuries. The total calculation then stands as follows:

                     IIa: 400v + 400s; IIb: 100v + 100s

   1) 400v (a) are consumed by the labourers of IIa, a part of whose product (necessities of life) they form. The labourers buy them from the capitalist producers of their own sub-division. These capitalists thereby recover £400 in money, which is the value of their variable capital of 400 paid by them to these same labourers as wages. They can now once more buy labour-power with it.

   2) A part of the 400s (a), equal to the 100v (b), one-fourth of the surplus-value (a), is realised in luxuries in the following way: The labourers (b) received from the capitalists of their sub-division (b) £100 in wages. With this amount they buy one-fourth of the surplus-value (a), i.e., commodities consisting of necessities of life. With this money the capitalists of (a) buy articles of luxury to the same amount, which equals 100v (b), or one half of the entire output of luxuries. In this way the b capitalists get back their variable capital in the form of money and are enabled to resume reproduction by again purchasing labour-power, since the entire constant capital of the whole category II has already been replaced by the exchange of I(v + s) for IIc. The labour-power of the luxury workers is therefore saleable anew only because the part of their own product created as an equivalent for their wages is drawn by capitalists IIa into their consumption-fund, is turned into money. (The same applies to the sale of the labour-power of I, since the II for which I(v + s) is exchanged, consists of both articles of luxury and necessities of life, and that which is renewed by means of I(v + s) constitutes the means of production of both luxuries and necessities.)

   3) We now come to the exchange between a and b, which is merely exchange between the capitalists of the two sub-divisions. So far we have disposed of the variable capital (400v) and part of the surplus-value (100s) in a, and the variable capital (100v) in b. We have furthermore assumed that the average proportion of the expenditure of the capitalist revenue was in both classes two-fifths for luxuries and three-fifths for necessities. Apart from the 100 already expended for luxuries, the entire subdivision a still has to be allotted 60 for luxuries, and b has proportionately to be allotted 40.

   (IIa)s is then divided into 240 for necessities and 160 for luxuries, or 240 + 160 = 400, (IIa).

   (IIb)s is divided into 60 for necessities and 40 for luxuries; 60 + 40 = 100, (IIb). The last 40 are consumed by this class out of its own product (two-fifths of its surplus-value); the 60 in necessities are obtained by this class through the exchange of 60 of its surplus-value for 60, (a).

   We have, then, for the entire capitalist class II the following (v plus s in sub-division [a] consisting of necessities, in [b] of luxuries): IIa (400v + 400s) + IIb (100v + 100s) = 1,000; by this movement there is thus realised: 500v (a + b) [realised in 400v (a) and 100s (a)] + 500s (a + b) [realised in 300s (a) + 100v (b) + 100s (b)] =1,000. For a and b, each considered by itself, we obtain the following realisation:

               a) v / ( 400v(a) ) + s / (240s(a) + 100s(a) + 60s(b)) = 800

               b) v / ( 100s(a) ) + s / (60s(a) + 40s(a) + ...) = (200 / 1000)

   If, for the sake of simplicity, we assume the same proportion between the variable and constant capital (which, by the way, is not at all necessary), we obtain for 400v (a) a constant capital of 1,600, and for 100v (b) a constant capital of 400. We then have the following two subdivisions, a and b, in II:

                              IIa) 1,600c + 400v + 400s = 2,400
                              IIb) 400c + 100v + 100s = 600

adding up to

2,000c + 500v + 500s = 3,000

   Accordingly, 1,600 of the 2,000 IIc in articles of consumption, which are exchanged for 2,000 I(v + s), are exchanged for means of production of necessities of life and 400 for means of production of luxurites.

   The 2,000 I(v + s) would therefore break up into (800v + 800s) I for a, equal to 1,600 means of production of necessities of life, and (200v + 200s) I for b, equal to 400 means of production of luxuries.

   A considerable part of the instruments of labour as such, as well as of the raw and auxiliary materials, etc., is the same for both departments. But so far as the exchange of the various portions of value of the total product I(v + s) is concerned, such a division would be wholly immaterial. Both the above 800v of I and the 200v of I are realised because the wages are spent for articles of consumption 1,000 IIc; hence the money-capital advanced for this purpose is distributed evenly on its return among the capitalist producers of I, their advanced variable capital is replaced pro rata in money. On the other hand, so far as the realisation of the 1,000 Is is concerned, the capitalists will here likewise draw uniformly (in proportion to the magnitude of their s) 600 IIa and 400 IIb in means of consumption out of the entire second half of IIc, equal to 1,000; consequently those who replace the constant capital of IIa will draw.

   480 (three-fifths) out of 600c (IIa) and 320 (two-fifths) out of 400c (IIb), a total of 800; those who replace the constant capital of IIb will draw.

120 (three-fifths) out of 600c (IIa) and 80 (two-fifths) out of 400c (IIb), which equals 200. Grand total, 1,000.

   What is arbitrary here is the ratio of the variable to the constant capital of both I and II and so is the identity of this ratio for I and II and their sub-divisions. As for this identity, it has been assumed here merely for the sake of simplification, and it would not alter in any way the conditions of the problem and its solution if we were to assume different proportions. However, the necessary result of all this, on the assumption of simple reproduction, is the following.

   1) That the new value created by the labour of one year (divisible into v + s) in the bodily form of means of production is equal to the value of the constant capital c contained in the value of the product created by the other part of the annual labour and reproduced in the form of articles of consumption. If it were smaller than IIc, it would be impossible for II to replace its constant capital entirely; if it were greater, a surplus would remain unused. In either case, the assumption of simple reproduction would be violated.

   2) That in the case of annual product which is reproduced in the form of articles of consumption, the variable capital v advanced in the form of money can be realised by its recipients, inasmuch as they are labourers producing luxuries, only in that portion of the necessities of life which embodies for their capitalist producers prima facie their surplus-value; hence that v, laid out in the production of luxuries, is equal in value to a corresponding portion of s produced in the form of necessities of life, and hence must be smaller than the whole of this s, namely (IIa)s, and that the variable capital advanced by the capitalist producers of luxuries returns to them in the form of money only by means of the realisation of that v in this portion of s. This phenomenon is quite analogous to the realisation of I(v + s) in IIc, except that in the second case (IIb)v realizes itself in a part of (IIa)s of the same value. These proportions remain qualitatively determinant in every distribution of the total annual product, since it actually enters into the process of the annual reproduction brought about by circulation. I(v + s) can be realised only in IIc, just as IIc can only be renewed in function as a component part of productive capital by means of this realisation; in the same way, (IIb)v can be realised only in a portion of (IIa)s and (IIb)v can only thus be reconverted into the form of money-capital. It goes without saying that this applies only to the extent that it all is really a result of the process of reproduction itself, i.e., to the extent that the capitalists of IIb, for instance, do not obtain money-capital for v on credit from others. Quantitatively however the exchanges of the various portions of the annual product can take place in the proportions indicated above only so long as the scale and value-relations in production remain stationary and so long as these strict relations are not altered by foreign commerce.

   Now, if we were to say after the manner of Adam Smith that I(v + s) resolve themselves into IIc, and IIc resolves itself into I(v + s), or, as he used to say more frequently and still more absurdly, I(v + s) constitute component parts of the price (or “value in exchange,” as he has it) of II and II constitutes the entire component part of the value of I(v + s), then one could and should likewise say that (IIb)v resolves itself into (IIa)s, or (IIa)s into (IIb)v, or (IIb)v forms a component part of the surplus-value of IIa, and, vice versa, the surplus-value thus resolves itself into wages, or into variable capital, and the variable capital forms a “component part” of the surplus-value. This absurdity is indeed found in Adam Smith, since with him wages are determined by the value of the necessities of life, and these commodity-values in their turn by the value of the wages (variable capital) and surplus-value contained in them. He is so absorbed in the fractional parts into which the value-product of one working-day is divided on the basis of capitalism — namely into v plus s — that he quite forgets that it is immaterial in simple commodity exchange whether the equivalents existing in various bodily forms consist of paid or unpaid labour, since their production costs in either case the same amount of labour; and that it is also immaterial whether the commodity of A is a means of production and that of B an article of consumption and whether one commodity has to serve as a component part of capital after its sale while another passes into the consumption-fund and, secundum Adam, is consumed as revenue. The use to which the individual buyer puts his commodity does not come within the scope of commodity-exchange, the sphere of circulation, and does not affect the value of the commodity. This is in no wise altered by the fact that in the analysis of the circulation of the total annual social product, the definite use for which it is intended, the factor of consumption of the various component parts of that product, must be taken into consideration.

   In the exchange established above of (IIb)v for a portion of (IIa)s of the same value, and in the further exchanges between (IIa), and (IIb), it is by no means assumed that either the individual capitalists of IIa and IIb or their respective totalities divide their surplus-value in the same proportion between necessary articles of consumption and articles of luxury. The one may spend more on this consumption, the other more on that. On the basis of simple reproduction it is merely assumed that a sum of values equal to the entire surplus-value is realised in the consumption-fund. The limits are thus given. Within each department the one may spend more in a, the other in b. But this may compensate itself mutually, so that the capitalist groups of a and b, taken as a whole, each participate in the same proportion in both. The value-relations — the proportional shares of the two kinds of producers, a and b in the total value of product II — consequently also a definite quantitative relation between the branches of production supplying those products — are however necessarily given in each concrete case; only the proportion chosen as an illustration is a hypothetical one. It would not alter the qualitative aspects if another illustration were selected; only the quantitative determinations would be altered. But if on account of any circumstances there arises an actual change in the relative magnitude of a and b, the conditions of simple reproduction would also change accordingly.
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   Since (IIb)v is realised in an equivalent part of (IIa)s, it follows that in proportion as the luxury part of the annual product grows, as therefore an increasing share of the labour-power is absorbed in the production of luxuries, the reconversion of the variable capital advanced in (IIb)v into money-capital functioning anew as the money-form of the variable capital, and thereby the existence and reproduction of the part of the working-class employed in IIb — the supply to them of consumer necessities — depends upon the prodigality of the capitalist class, upon the exchange of a considerable portion of their surplus-value for articles of luxury.

   Every crisis at once lessens the consumption of luxuries. It retards, delays the reconversion of (IIb)v into money-capital, permitting it only partially and thus throwing a certain number of the labourers employed in the production of luxuries out of work, while on the other hand it thus clogs the sale of consumer necessities and reduces it. And this without mentioning the unproductive labourers who are dismissed at the same time, labourers who receive for their services a portion of the capitalists’ luxury expense fund (these labourers are themselves pro tanto luxuries), and who take part to a very considerable extent in the consumption of the necessities of life, etc. The reverse takes place in periods of prosperity, particularly during the times of bogus prosperity, in which the relative value of money, expressed in commodities, decreases also for other reasons (without any actual revolution in values), so that the prices of commodities rise independently of their own values. It is not alone the consumption of necessities of life which increases. The working-class (now actively reinforced by its entire reserve army) also enjoys momentarily articles of luxury ordinarily beyond its reach, and those articles which at other times constitute for the greater part consumer “necessities” only for the capitalist class. This on its part calls forth a rise in prices.

   It is sheer tautology to say that crises are caused by the scarcity of effective consumption, or of effective consumers. The capitalist system does not know any other modes of consumption than effective ones, except that of sub forma pauperis or of the swindler. That commodities are unsaleable means only that no effective purchasers have been found for them, i.e., consumers (since commodities are bought in the final analysis for productive or individual consumption). But if one were to attempt to give this tautology the semblance of a profounder justification by saying that the working-class receives too small a portion of its own product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in consequence, one could only remark that crises are always prepared by precisely a period in which wages rise generally and the working-class actually gets a larger share of that part of the annual product which is intended for consumption. From the point of view of these advocates of sound and “simple” (!) common sense, such a period should rather remove the crisis. It appears, then, that capitalist production comprises conditions independent of good or bad will, conditions which permit the working-class to enjoy that relative prosperity only momentarily, and at that always only as the harbinger of a coming crisis. [Ad notam for possible followers of the Rodbertian theory of crises.—F.E.]

   We saw a while ago that the proportion between the production of consumer necessities and that of luxuries requires the division of II(v + s) between IIa and IIb, and thus of IIc between (IIa)c and (IIb)c. Hence this division affects the character and the quantitative relations of production to their very roots, and is an essential determining factor of its general structure.

   Simple reproduction is essentially directed toward consumption as an end, although the grabbing of surplus-value appears as the compelling motive of the individual capitalists; but surplus-value, whatever its relative magnitude may be, is after all supposed to serve here only for the individual consumption of the capitalist.

   As simple reproduction is a part, and the most important one at that, of all annual reproduction on an extended scale, this motive remains as an accompaniment of and contrast to the self-enrichment motive as such. In reality the matter is more complicated, because partners in the loot — the surplus-value of the capitalist — figure as consumers independent of him.