Economic Theory Volume 2: The system of economic relations as a whole 0710009488

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Economic Theory VOLUME TWO The system of economic relations as a whole

DAVID P. LEVINE Assistant Professor Department of Economics, Yale University

ROUTLEDGE & KEGAN PAUL LONDON, BOSTON AND HENLEY

First published in 1981 by Routledge & Kegan Paul Ltd 39 Store Street, London WC1E 7DD, 9 Park Street, Boston, Mass. 02108, USA and Broadway House, Newtown Road, Henley-on-Thames, Oxon RG9 1LN Set in Plantin by Saildean Ltd, Surrey and printed in Great Britain by Biddles Ltd, Guildford, Surrey Copyright © David P. Levine 1981 No part of this book may be reproduced in any form without permission from the publisher, except for the quotation of brief passages in criticism Library of Congress Cataloging in Publication Data Levine, David P, 1948The system of economic relations as a whole. (Economic theory; v. 2) Includes bibliographical references and index. I. Economics. 2. Marxian economics. I. Title. II. Senes: Levine, David P., 1948-. Economic theory; v. 2. HB171.L64 vol. 2 330.1s [330] 81-8597 ISBN 0-7100-0948-8

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Contents

Preface

ix

Acknowledgments

xi Part One: Introduction

Chapter 1: The conception of the system of economic relations I Economic structure and economic process II The theoretical treatment of accumulation

3 3 9

Part Two: The aggregate circulation Preface to Part Two Chapter 2: The particularization of capitals and the market I The particularization of capitals 1 The self-subsistent cycle of wealth 2 The intrinsic unity of capital 3 The real particularity of capital 4 The measurement of capital II The market III The monetary circulation 1 The source of money 2 Credit 3 Interest and profit 4 The financial circulation IV The self-realization of capital v

27 31 31 31 33 38 46 50 57 57 64 71 73 74

Contents Chapter 3: The general structure of the accumulation process I Commodity price 1 Cost and price 2 The components of cost 3 The component parts of price II The growth of the capital of the firm III The growth of the market 1 Supply and demand for commodities 2 Aggregate demand and market expansion 3 The component parts of the growth of the market of the firm IV Capital accumulation 1 Simple self-replicating growth 2 The latent structure of the market

77 77 77 78 84 86

94 94 97 104 106 106 112

Part Three: Private accumulation and the growth of social wealth Preface to Part Three Chapter 4: The logic of capitalist expansion I Accelerating accumulation 1 Productivity-limited growth 2 Market-limited growth II Orientations of the firm to the market 1 The marketing of the product 2 The work of market creation (a) The development of the structure of consumption (b) The development of the structure of production 3 The intensive development of the market 4 Price determination within an industry III Capital accumulation and market development Chapter 5: The structures of expansion I The capital structure 1 The building of the capital structure 2 The maintenance of the capital structure 3 The symbiosis between new and established commodities 4 The realization of the growth potential of the capital structure vi

119 121 121 121

130 134 134 137 137 145

154 165 175 179 179 179 189 193

198

Contents

II

The market 1 The capital structure and the market 2 The dual determination of price 3 The growth potential of the market 4 The structure of systemic growth

Chapter 6: The modalities of the growth process I The temporal structure of investment II The bunching of investment III The structure of the financial circulation

203 203 204 215 228 234 234 243 255

Part Four: The self-ordering market Chapter 7: The social purpose of the market Introduction I II Systems of need and forms of life III Private enterprise and economic life Forms of reciprocity and the constitution of relative social position 2 Income from property and hierarchies of wealth

275 275 278 286

Notes

306

Index

311

1

Vll

286 291

Preface

The preface to the first volume of this work, out of some peculiar logic all its own, transformed itself into an essay on method. Sensing this, or perhaps noticing that its length exceeded the proper limits of a preface, the editor turned it into a prologue. On reflection, it seems that the preface, now a prologue, should have been chapter 1. Turning it into a chapter would have confused the numbering of the remaining chapters, and this undoubtedly discouraged the editor from taking so drastic a step. In the end, the essay seems well contented as a pro¬ logue, but the change still leaves the work without a proper preface. It may be too late now to try to rectify this failing, but the reader deserves to be provided with some informal comment indicating something about why the book was written, and what the author thinks about it. My original intention was to write an introduction to Marxian economics aimed at an audience without much background, but with some dedication to thinking through difficult conceptual problems, once they were explained in a simple and straightforward manner. The reader who has gotten this far by working his way through Volume One will no doubt be justified in finding this somewhat amusing. I am not, however, under any illusion that the material in these volumes is either simple or straightforward. Dissatisfaction with the theory, which I had intended only to present and explain, developed rapidly, and soon overwhelmed the project. I became convinced that Marxian ideas were not sufficiently coherent and decisive to be presented in this manner. Also, I discovered that many IX

Preface

of the most basic notions became quite problematic, once subject to careful scrutiny (even, as in this case, sympathetic scrutiny). My task now became one of reconstruction, rather than exposition. In order to reconstruct a theory, you must first dig out its foundations in order to have a good look at the entire structure. Having attacked the foundations, you must rebuild from the bottom up. At each stage, it is necessary to decide whether a piece of the new structure can or cannot be formed out of a corresponding piece of the old (at least in those cases in which there exist corresponding elements in the old structure). There is always a temptation to borrow in this way, because it is easier to put together a pre-fabricated idea, than to construct a new one for the specific purpose at hand. But, when you take the easy way out, you also risk introducing the structural defects of the old into the new. No doubt this has happened at points (use of the idea of a labor process in Volume One now strikes me as such a point). Furthermore, basic ideas in social science are in any case rarely new, and my work bears the mark of the classical theory (and especially its Marxian variant) very clearly. Indeed, my approach could rightly be thought of as classical. Nonetheless, I see it as very much a modern assault on the issues first clearly identified by Adam Smith and Karl Marx, rather than a truly classical theory. In any case, the difficulty associated with the redefinition of the project away from exposition, and in the direction of a fresh attempt at theorizing, seemed to have relegated the virtue of simplicity to the status of a secondary concern. I am still convinced that a rigorous argument cannot be made straightforward (especially at a time when scientists are rarely trained to think abstractly about their subjectmatter). However, I have also come to feel that simplicity of exposition and explanation could have been joined to rigor in a more satisfactory way. The exposition in both volumes could certainly be clearer than it is without loss of meaning, and I regret any unnecessary difficulties which I have thrown in the path of the dedicated reader. If we are to make any progress toward a systematic understanding of economic affairs, we must open our minds to new ideas, and subject our ideas to the test of reasoned argument. I hope that I have done all of these things in this work, that it will be of use to others who share these objectives, and that they will point out the places where I have closed my mind, or based my ideas on unreasonable argument, or upon no argument at all. x

Acknowledgments

I am greatly indebted to Rona Wilensky for working with me in the preparation of the final draft of the present volume. Her criticisms of my earlier formulations, and suggestions for revision affected the whole of the exposition which, in its present form, incorporates many of her contributions. The development of my ideas over the past several years has benefited considerably from numerous discussions with Duncan Foley and David Weiman, particularly regarding issues related to the treatment of monetary circulation, but also bearing upon the way in which certain of the basic ideas presented here have been formulated. I am very much indebted to them both for this, and have freely appropriated ideas which came out of those discussions. Chapter 6 borrows heavily from work which I have done jointly with Nai Pew Ong, and yet hardly captures the extent to which discussions we have had over the past years have contributed to the formulation of the ideas in this book. This holds equally for Carol Heim, who seemed never to tire of forcing me to acknowledge confusions of formulation in earlier draffs. I would like to thank Nina Shapiro for her detailed criticisms of an earlier draft of the entire manuscript. Michael Bernstein, Donald Harris and Ross Thomson contributed ideas to particular sections, and I am grateful for their efforts. The final chapter in this volume incorporates ideas which devel¬ oped out of discussions with Lynn Levine. As it stands, it is both the end of a project, and the first formulation of ideas which we hope to develop in joint work over the next several years. xi

PART ONE

Introduction

CHAPTER ONE

The conception of the system of economic relations

I Economic structure and economic process The object of the present volume is to develop a conception of the structure of economic relations taken as a whole. The determinacy of this structure derives from its connection to the idea of wealth, and specifically to the idea of a process through which wealth sustains and expands itself. In this sense, capital (the process of the ongoing self-expansion of value) is the animating principle of the structure of economic relations constituted as an organic whole. Capital builds a system of economic relations which sustains it, and then subsists within that system as a component, and determining, element. The conception considers both the system of relations and the subsistence of capital within it. Since capital subsists within this structure, which is of its own making, it is also determined by that structure. The process of determination within a structure, built through the interaction of its elements, is a process of self-determination. This self-determination of capital within a structure of wealth developed explicitly as the arena for the realization of capital is its particularization. Particularization, as we will see, connotes the fixing of capital to a location in economic space and time. This particularization also dilferentiates capitals according to their locations, and establishes them as distinguishable temporal and spatial unities. Such unities endure through time, and trace out spatially and temporally specific paths. Such paths are the life processes, the biographies, of particular firms or units of capital. 3

Introduction

Thus, a system of particular capitals lives within a structure of economic relations which is engendered by their own interactions. The interplay between the particularization of capital, and the structure as a whole, sets in motion a determinate process of economic growth and development. The conception of the essential logic of this process is the primary objective of the analytical treatment of the economic totality. Thus, in Part Two below, we consider the particularization of capitals and the nature of the market structure within which they subsist, and, in Part Three, we consider the form of movement of the system of capitals taken as a whole. The system of economic relations is a unity of movement and structure. Since the principle which governs the building of the structure of economic relations is that of expansion, that structure must embody the idea of expansion as one of its determining principles. The market organized by the principle of value expansion is not simply a structure which grows; it is a structure whose integrity is predicated on its growth, a structure which exists and endures only so long as it grows and develops. We will term such an organism, which unites structure and process according to the principle of growth, a structure of expansion. The changes which such a structure undergoes are brought about by the working out of its own internal processes. In this sense, change in the structure is a determinant of its nature. Since such development gives form to the economic structure, a logical and coherent conception of the economy could not be articulated by abstracting from such change. This unity of development and structure is a central theme of the theory of the economic system.* It is for this reason that the idea of equilibrium has no proper role to play in the theoretical treatment of the system of economic organization rooted in capital. The idea of an equilibrium (no matter * ‘Capitalism, then, is by its nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the data of economic action.... The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumer goods, the new methods of production and transportation, the new markets, and the new forms of industrial organization that capitalist enterprise creates.... This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.’ J. A. Schumpeter, Capitalism, Socialism and Democracy (New York: Harper & Row, 1942), pp. 82-3. 4

The conception of the system of economic relations

what the specific terms of its construction) is antithetical to the idea of capital as the organizing principle of the market. Within an equilib¬ rium system, capitals would not survive. The determination of a price at the equilibrium state of the system, and the associated idea that prices are involved in the equilibrating process of a system of allocation, is equivalent to the determination of price upon the basis of its conformity to a fixed structure. The fixing of the economic structure is logically equivalent to its removal from the context of temporally determined economic processes. Equilib¬ rium determination is determination outside of time. The idea of time connotes an ordered sequence of events. This sequence is a process of repeated displacement within which each event is defined by its relation to events displaced by it, and others by which it will itself be displaced. Time, then, is not a framework within which events take place; it is a logical unity of events. Different sequences of events determine different temporal flows. The structure of physical (or ‘clock’) time is no less a structure of events (no matter how elementary those events may be) than is economic time. To the extent that economic and physical time are distinct, economic events may be thought of as taking place within, but not constituting, physical time precisely because of their indiffer¬ ence to physical time. The idea of time, then, is connected to the idea of process. A conception which incorporates the temporal determination of econo¬ mic activity is a conception of the economy as a process. A conception (e.g. of equilibrium) which seeks to determine economic activity outside of time is a conception of the economy as a state. Process and state are not two aspects of an empirically existing economic structure; they are radically different structures. What is distinctive about determination within a state is that the structure of economic relations, which defines the state, cannot be accounted for. Needs, technology, resources, etc. must all be given for the system of prices to be determinate. As a result of the necessity that the structure of the economic relations be given, changes in that structure cannot be the proper concern of economic analysis. Economic development may provide a changing framework for the determination of prices, but the development process is not determined. A theory of economic development is necessarily one of the determination of economic relations within a process and not a state. The limitations of the equilibrium method of determination cannot 5

Introduction

be overcome by connecting the equilibrium state to an equilibrating process. The failure of an economy to be directly in equilibrium does not mean that it can be thought to be either in a disequilibrium state or in an equilibrating process. The idea of disequilibrium dynamics links process to state in such a way as to maintain the primacy of the state over the process. The process is defined first by its deviation from the state, then by its striving to reestablish the reality (to realize) the state. This method, in effect, determines what is in time (the process) by what is outside of time (the state). As a result, no real determinacy can be attributed to the economy existing in time. If economic theory is to take up the task of conceptualizing the determination of the structure of economic relations (and especially its process of development), it cannot subordinate process to equilibrium. Instead, the effort must be made to articulate the determination of economic relations within a process. Relations are determined within a process by the sequence itself, and by their location within it. The current structure (including magnitude) of economic relations is directly the product of the preceding structure, and the source of the subsequent structure. As such, it is determined by its antecedents, and by its mission, which is to give birth to its successors. In economics, this sequential determin¬ ation is by no means simple. The current structure is formed both by the future and the past. Purposes and expectations associated with realizing in the future a potential created in the past determine the structure of economic relations in the present. Economic time flows forward, and yet the past is as much a product of the future as the future is a product of the past. This complex temporal determination is of central importance to the articulation of the economic process as one of development. Determination of a structure of relations within a sequence is only meaningful if the intrinsic logic (the organizing principle) of the sequence is known. This logic unites the sequence considered as a whole, and accounts for the specific mode of interrelation of the elements, or moments, of the sequence. The power of the future to act in the present, and in that way to realize itself as a form of development suggested by, and latent within the present, provides a construction of time peculiarly appropriate to the investigation of the system of economic relations rooted in capital. As we will see, the inclusion of money as the proper measure of value plays an essential part in establishing the analysis within time. 6

The conception of the system of economic relations

In economic theory, primary importance must be attached to articulating the principle which animates the sequence of economic structures, and the logic of the progression from element to element. Specification of the form and magnitude of the individual elements of the sequence, taken in their particularity (e.g. this particular price), is not properly within the scope of the theory. In this respect, a theory of the economy as a process would appear to provide less determinacy than the theory of the economy as an equilibrium state. In equilibrium, we know the magnitudes of all relevant economic variables. Indeed, the seeming power of the equilibrium method is based upon its claim to provide precisely this kind of specific determination. Such apparent determinacy is purchased, however, at a considerable price. As we have seen, in order for this determination to be effective, the economy must be taken out of the temporal flow. This removal out of time makes the structure eternal, and the magnitudes of its elements determinable. Within a temporal process, by contrast, the magnitudes of individual relations are essentially ephemeral. It is not the particular element or moment which sustains itself, but the process. In economics, it is the structure of expansion which alone endures. Because this structure is a process, it sustains itself through time. In this sense, it gives coherence to the temporal flow as an economic flow. It is, therefore, determinate. By contrast, the magnitudes which are the object of determination within a state of equilibrium are atemporal. Viewed in time, these magnitudes are essentially ephemeral. The equilibrium method provides a rigorous determination of the ephemeral. The failure of the classical theory to conceptualize the determination of economic relations within a process helps to account for a series of faulty theoretical constructions which, taken as a group, have had the power to vitiate the classical approach as a viable way of conceptualiz¬ ing economic life. The subordination of process to state in the classical theory is logically connected to the idea that the active interrelation of property owners, which constitutes the market, is determined externally by the exigencies of a primordial material condition. This subordination is manifested with special force in the theoretical treatment of value as a relation which is quantitatively distinct, both in its magnitude and in its measure, from price. In particular, the opposition between natural and market price establishes an opposition between a price determined by conditions of production 7

Introduction

and aggregate distribution, and the price determined by the condition of private property, and the active interrelation of property owners. The market is the structure of commodity circulation taken as a whole. Market price expresses the laws of commodity circulation viewed as a real process. Market price is the price which is directly determined by the system of economic relations as a whole. It is the real price since it is determined within a process.* The classical theory of price abstracts from this process and articulates its immanent result as an atemporal state. The determinacy of this state is argued to be independent of the primary determining conditions of market interaction (e.g. private ownership). The determination of price in accordance with primordial conditions given independently of private ownership entails the determination of price in an atemporal state, and the implied determination of the economic process as a structure of interaction governed by the work of realizing that predetermined state. The idea that value is a logically prior reality which determines price is an instance of the idea that what is outside of time (the state) determines what is within time (the process). For the purpose of the analysis of the structure of economic relations rooted in capital, this method is essentially faulty. For capitalist economic organization only that which is in time is relevant, since the whole of the determination of the process comes out of the process itself. Indeed, capital is, in its life process, a determinate structuring of the temporal flow, and not an event taking place within an already determined temporal dimension. The determination of economic relations within a process vitiates the idea that market price is determined by natural price, and that the measure of value must be different from that of price. Along every relevant dimension of theory, the conception of the system of economic relations as a process is decisive. Throughout the argument presented in the following chapters, our purpose is to demonstrate the power of this method, not as a way of concretizing the equilibrium notion to incorporate aspects of economic reality * The idea of market price connotes the process and structure of the determination of price. Only within the classical theory does this necessarily connote a price determined by supply and demand, or by the condition of market clearance. The ideas of market price and market clearing price are not logically equivalent once we move outside of the classical method and classical construction. 8

The conception of the system of economic relations

which it necessarily excludes, but as an alternative to which we must appeal if economic theory is to be given a definite content.

II The theoretical treatment of accumulation Capital accumulation is the characteristic life-process of a modem economy. Within modem economics there are many theories of capital accumulation. Yet, it is precisely this multiplicity of theories which expresses most forcefully the incapacity of economic analysis, as presently constituted, to conceptualize economic growth as an objectively determined and theoretically intelligible process. Unable to grasp the inner logic of capitalist expansion, economic thought must deny that expansion is subject to objectively given and logically necessary laws. This, it needs to be emphasized, is not the failure of the particular models of growth, but the failure of the conception of economic life out of which they emerge. This failure marks the inability of modem theory to pose for itself the substantive theoretical problems. The absence of a unified theory of accumulation results from the inability, on the part of economic analysis, to discover, within the notion of capital, that incessant drive for expansion which is its defining feature. For orthodox economics expansion is not implied in the idea of capital, but relates to capital as an external feature. As a result, the increase of capital becomes an accidental attribute rather than an activity logically implied within the capital relation. The absence of a true theory of accumulation follows directly from this failure to account for expansion in terms of objectively necessary laws, and the associated appeal to accidents of nature and the whims of individual consumers. It is precisely those objective laws which spring out of the inner logic of bourgeois economy that can alone provide the subject-matter of the theory of accumulation. In their absence, an un¬ bridgeable gap must intervene between the conception of growth, made up of a set of distinct models, and the real expansion of capital which is grasped in those models only by accident. Where the concep¬ tion of capital accumulation is devoid of that objective necessity which determines the real process of growth, the conception can hardly be considered to provide that process with a theoretical account. The absence of a theoretical standpoint is most clearly evident with regard to the modem, neo-classical, analysis. Capital is understood as ‘deferred consumption’ which forms the starting point of a goaldetermined process with an end given externally in the acquisition of

9

Introduction

consumable objects in the future. For modern economics the formation of capital, and therefore its increase over time, is fixed on one side by individual need conceived upon the basis of subjective preference, and on the other by the given productivity of ‘round-about methods of production.’ Capital accumulation is not a process of stfZ/'-expansion, but of adjustment to externally fixed and given conditions: of preference and technique. From this standpoint there is no theory of capital accumulation which specifies the exigencies of the ongoing growth process, but only the isolation of an equilibrium state which expresses the reconciliation of independently given conditions. Capital formation is, then, an event which ‘happens to’ capital, rather than the process by which capital achieves its full realization via its own expansion. The model of accumulation into which this conception is forma¬ lized entails nothing more than the quantitative path of expansion followed by an economy which is subject to the individual preferences and conditions of technology specified at the outset. Since expansion is not to be considered an objective, law-governed process, the specification of that process is not a theory of growth, which grasps in a rigorous and systematic way the necessary conditions and character¬ istics of growth, but an arbitrary model of expansion which grasps economic growth as subject not to law but to caprice. Accidents of technique and the caprice of individual preferences together exhaust the content of the modern ‘theory of economic growth.’ For modern economics, capital formation is an accident which occurs at the whim of the system of intrinsically unrelated individuals. By contrast, classical thought locates the origin of capital accumulation directly in the inner nature of capital, and not in the caprice of subjective preference. The state of expansion is implied in the idea of bourgeois economy, and is to that extent necessary to capital. To be sure, classical thinking is not concerned to account for this peculiar feature of modem economic life. Nonetheless, by locating expansion within the nature of ‘civilized society,’ classical thought makes perfectly clear that capital expansion is an objective process indepen¬ dent of the isolated economic actor and his personal desires. To the extent that the relations of bourgeois society are accountable only to nature, the theoretical aspirations of classical economics remain tied to the force of its concept of nature. And yet, unknown to classical thought, its concept of nature is a complex and intrinsically 10

The conception of the system of economic relations

contradictory one. On one side, nature represents the social world taken as self-subsistent, objective, and therefore as a real totality whose relations are in its nature, and therefore in itself.* It is by rooting itself in nature that the expansion process adopts the form of necessity rather than accident. Expansion is a process governed by objective laws, in this case the laws of nature. Yet, while the natural determination of capital represents, for classical political economy, a principle of its intrinsic or selfdetermination, that natural determination at the same time signifies the fixing of capital within a natural state. This natural state entails a set of conditions which are provided by nature and which govern the growth process of capital. Classical political economy thus collapses the nature of capital into a natural state which determines capital, so that nature appears at once to be the system of inner determinations of capital, and simultaneously an external natural sphere within which capital is determined but which is intrinsically indifferent to capital. What is rooted in the nature of capital comes to be, for classical thought, the effect of situating capital in a natural state. And this location of capital and its process within a state of nature removes the nature of capital from within capital to an external sphere which is, by the fact of that removal, outside of the field of vision of economic theory. The situation of capital within a state of nature constitutes the system of social relations as mere forms of appearance of an arena - nature - within which their reality is located. When expansion is rooted in the nature of capital, its reality is posited by capital itself. However, when this nature is expanded into a natural state the increase of capital must seek its realization outside of capital, in nature. It is this contradiction which provides the framework for the classical theory of accumulation. Capital, in its process of expansion, conforms to its inner nature, so that it would be illogical to attribute expansion to any externally fixed condition outside of the process of capital itself. For classical thought, limitless expansion is the defining feature of bourgeois economy. This expansion rests upon a series of specific conditions which make it both * ‘For what each thing is when fully developed, we call its nature whether we are speaking of a man, a horse, or a family. Besides, the final cause and the end of a thing is the best, and to be self-sufficing is the end and the best.’ Aristotle, Politico, in The Works of Aristotle, ed. by J. A. Smith and W. D. Ross (Oxford: Oxford University Press, 1921) vol. X, p. 1252.

11

Introduction

possible and necessary. The ability of capital to maintain itself through expansion depends upon the origin and reproduction of those conditions. In particular, the condition of the fertility of the earth provides the source of the surplus product required for the continuous increase of production. This is a particular condition in the absence of which accumulation is inconceivable. This is also the only truly definitive condition recognized by classical thought, which considers its fulfillment to be synonymous with expansion itself. So long as the conditions for growth have their source within the reproduction cycle of capital, they are posited by and within its total self-renewing process. They are, then, within the nature of capital, emerging out of its process. However, once these conditions are established as natural to capital, they appear also as the conditions provided to capital by nature, not by the nature of capital, but by an external natural sphere. In this case, as we shall see further on, the necessary conditions required by the accumulation of capital appear as externally fixed barriers to expansion. The primary concern of the classical theories of accumulation is to articulate the determinants of the expansion process of capitalist economy. These determinants operate on two levels. First, it is necessary to consider the concrete conditions which sustain the growth process. These conditions also determine its form and pace. Productivity is just such a determinant. Second, determination of the expansion process in this first sense leads classical theory to consider the global limits which bound the process as such. The investigation of global limits places the viability of the process itself at issue, and not just its form and rate. Thest two issues are evidently linked. Those forces which give a determinate form to the expansion process can also work to under¬ mine the continuation of that process. Within the classical theory, such determinants express themselves through their effects on distribution. The analysis of distribution is a central concern of classical theory precisely because of its connection to the determina¬ tion of the viability of bourgeois economy. Within Ricardian economics the proportion of the shares of capital and labor in the net product is immediately the measure of accumulation so that the relation of expansion to distribution is a self-relation of capital: the effect of accumulation upon continued accumulation. The measure of distribution, the rate of profit, is a measure not of welfare, either absolute or relative, but of growth. Due 12

The conception of the system of economic relations

to the assumptions peculiar to the classical conception, the rate of profit measures simultaneously the rate of expansion of capital and the relative shares in the net product accruing to capital and labor. Furthermore, the uniformity of profit rates implied by the classical conception of competition of capitals provides, in the average rate of profit, a direct measure of the rate of increase of capital as a whole. Having assumed that capital is composed exclusively of a wages fund, it follows that the rate of profit, or proportion of total profits to capital advanced, is also the ratio of total profits to wages. Since a fixed proportion of profit is taken to be consumed, the rate of capital accumulation bears a simple relation to the rate of profit being a proportion of the latter fixed by the ratio of capitalist’s investment to total profits. Formally: a = (1 -b)£= (l-bjp where p, R, a, W, and b stand respectively for the overall profit rate, total profits, the rate of expansion of the total capital, the wages bill, and the proportion of profits consumed. The origin of Ricardo’s preoccupation with the relation of distribution to accumulation lies in this relation of the distribution of income to the rate of accumulation from which it is evident that the ratio of profits to wages and the rate of accumulation are two expressions for the same relation. The relation of accumulation to the distribution of the net product between capital and labor is the relation of accumulation to itself, and measures the impact of expansion upon what is, for Ricardo, the sine qua non of continued expansion. As capital accumulates it brings about a shift in the relation of profits to wages thereby altering the rate of profit and with it the rate of accumulation. If the growth of capital brings about a decline in the relative share of capital due, for example, to diminishing fertility of the soil and the attendant increase in the cost of labor, then the expansion of capital erodes the basis of continued expansion. The natural condition of capital - continuous expansion - comes into explicit opposition to capital taken in its natural state, which limits growth to the confines of available fertile soil. The failure of classical political economy lies not in its conception of capital as possessing specific features in its nature, but in its conception of those features as nature-given, and therefore irreducible 13

Introduction

premises outside of the field of investigation of economic science. This leads Ricardo into a contradiction. Capital, as self-expanding value, has its increase in its nature. Economics does not investigate this fact of nature, but only its quantitative implication and limit. Ricardo discovers, however, that as capital realizes its nature in expansion it is deprived, by nature, of the capacity to expand. In other words, while it is in the nature of capital that it accumulate, accumulation is stifled by the natural state within which capital is conceived to grow. What is necessary by its nature becomes, for capital, a condition excluded by nature. By conceiving of capital as a purely natural relation, Ricardo seeks to absorb into nature those elements of the capital relation which stand opposed to the state of nature. Ricardo equates the reproduction process of capital with the self-reproduction of nature. Once produc¬ tion is conceived to take place within nature, it becomes the process of self-renewal and self-transformation of nature. To such a nature, the expansion of capital is a matter of complete indifference. Growth is not a natural law but the result of a natural caprice. Since the production process as a natural interchange is not governed by any law of expansion, it has no rate of growth measurable in a single magnitude. It is only the sphere of nature as the sphere of the activity of capital which must reveal its inner law in an overall rate of increase. To measure the rate of expansion of capital in nature requires a specific deformation both of nature and of capital which establishes their equivalence and equates their processes of self-renewal. The result of this deformation is the ‘corn model.’ In the com model, the expansion of capital appears to be determinate as an immediate natural magnitude given by the producti¬ vity of the earth. The interaction of labor and nature absorbs the former into the latter. The consumption of corn on the part of labor appears as no more than the prelude to the consumption of labor on the part of corn in its production process. Corn produces labor together with which it produces more corn. Labor adopts the status of an intermediate product in the self-renewing natural process. Just as labor consumes the products of the earth, it does so only as an element of nature, which is also consumed by nature in the real total process of its self-subsistence. Expansion results when the productivity of nature is such that the consumption of corn on the part of labor is exceeded by the production of corn in the consumption of corn and labor. In this case the endowment of corn, when acted upon by the earth and by 14

The conception of the system of economic relations

labor, grows, through the continuous re-investment of the corn produced within each natural cycle. The rate of expansion of capital is a relation of two naturally given productivities: the productivity of labor into corn and the productivity of corn into labor. Formally: p = (X-wL)/wL or = — - 1 where w

jc

=

X/L,

X is the output of com, L the input of labor, and w the corn consumed

per unit of labor (the wage). If the unit of labor is capable of producing more corn than is required in the production of a unit of labor (x> w), then the naturally given relations of productivity (taken together with the presupposition that reinvestment of the surplusproduct is the natural end of production) determine a positive rate of expansion. The category into which the theory of accumulation is resolved is fertility. The input of corn into labor is no more than an intermediate step in the reproduction of corn, so that it is the single fertility of the soil which grounds the expansion of capital. And yet, the condition that the ratio of the two fertilities exceed unity, while necessary to the idea of expansion, remains arbitrary, having no basis within the conditions posited. This primary requisite of growth remains an accident of nature. Here the confusion of the natural process with the expansion process of capital is most apparent. The expansion of capital transposed into a natural sphere is a process whose existence is altogether arbitrary. Just as capital formation is, within modern economics, the accidental result of individual whim, in the Ricardian theory the expansion of capital is the result of the caprice of nature. Since capital expands only within a natural sphere, and since that natural sphere possesses no intrinsic law of expansion, capital is also deprived of its natural tendency. Since the conditions of expansion are not posited within the process of expansion, but appear only as accidents of nature, there is no reason for expansion. A positive rate of growth results where the fertility of the soil is a certain magnitude. This is, however, even according to Ricardo, only a temporary, fleeting, condition. The termination of economic expan¬ sion in the stationary state is no more than the realization within classical political economy of this transitory character of economic growth once called upon to ground itself in a sphere of natural relations. Capital must expand, and yet it cannot. 15

Introduction

At the same time that Ricardo grasps accumulation as an accident of nature, he also takes unlimited expansion to be the natural state of the modem economy. In order to resolve this contradiction, Ricardo divides its terms, and attempts, by isolating them, to suppress their intrinsic opposition. As an innate condition, expansion of capital is more accidental than is the acceleration of a mass in a gravitational field. The contradiction between the necessity of expansion and the impossibility of expansion is resolved by Ricardo when he grants to capital its illimitability once set loose from its natural ground and, at the same time, locates the limit to capital expansion in a nature which is not of capital, but outside of capital. Thus, in his repudiation of the possibility of a general glut, Ricardo proceeds via explicit abstraction from the natural impediments to expansion, and concludes that growth is unlimited. Then, when he takes up the problem of the rate of profit, Ricardo relocates capital within the natural sphere and considers it to confront absolute limits to its increase. Ricardo evades the underlying issue when he first grasps the necessity of unlimited expansion by ignoring the natural barrier to continued growth and then treats growth as accidental and limited in itself by situating capitalist production within a self-reproducing natural process. It is precisely this method which excludes any resolution of the contradictions of the classical theory of accumulation. There can be no theory of capital accumulation where there is no conception of the unlimited and universal character of capital. Where capital is not conceived in its universality, unlimited expansion appears only as an external condition to which capital is, in itself, indifferent. In order to generate a process of growth it becomes, in this case, necessary to bring into play a series of arbitrary assumptions (regarding the fertility of the earth or the preferences of individuals). By contrast, where capital is constituted from the outset as self-expanding value, its universality provides the basis for the whole of the conception of the economy as a self-determining process. It is the task of the theory of accumulation to specify the conditions within which capital expansion takes place, and which make up the process of accumulation taken concretely. Classical thought takes the illimitability of capital as axiomatic, and considers the limiting conditions of expansion as exclusively extrinsic boundaries which are, for the growth of capital, arbitrary. Classical political economy loses sight of the impossibility of realizing the universality of capital outside of the framework of specific and determinate conditions. By 16

The conception of the system of economic relations

failing to concretize the capital relation within a system of specific conditions which at once determine and restrict capital while simultaneously, through that determination, realizing the illimitability of capital, classical thought forces the moments of universality and particularity into an opposition within which each is excluded by its opposite. Capital, as the unlimited expansion of value, can only be realized within a sphere of determinate, therefore limiting relations. And these relations only serve to realize the universality of the capital relation where they owe their determinateness to capital and its total process, appearing, that is, as particular relations of capital. When such limiting conditions are posited by the total process of capitalist production and expansion, they are limitations which are no longer foreign to capital, but which exist already implicit within the elementary notion of unlimited expansion. The latter contains latent within it the conditions which realize its universality only by limiting that universality. For classical political economy, the universality of the value relation, as expressed in the circuit of capital, stands opposed to the specification of that relation as one constrained to realize itself within a specific set of conditions: on one side the abstract conception of expanded reproduction without limit, and on the other the idea of a natural sphere with strict limitations. The reality of bourgeois economy is in its total process of expansion, and yet the realization of bourgeois economy remains always an accident of an external nature. Value advanced in the form of money to the acquisition of a return (more value or more money) is capital. The substance - value - which forms the starting point also forms the endpoint or goal. The former is distinct from the latter only in quantity, and this difference - the surplus value - through its own investment as capital forms the basis of an endless, continuous, expansion. But, the full expansion of capital is not posited by the mere formula of self-expanding value (MoneyCommodities-More Money). In order for the expansion of capital to take place, a series of specific conditions must be fulfilled. The increment to capital together with the original investment must be produced, realized in exchange, and reproduced on an expanded scale. But, for this production and reproduction to be achieved in a continuous manner, that achievement cannot be left to the activity of factors which are arbitrary with regard to the ongoing reproduction process. The necessity of expansion cannot emerge where the 17

Introduction

necessary conditions of expansion are left to chance. The production and realization of capital must be posited within the ongoing process of expansion itself. Once this is done the determinents of capitalist expansion appear as the results of the expansion process, and not as barriers which are created externally to impede, or even extinguish that process. Capital, existent as a connected process driven by its own force, unites within itself the different moments of a total process, a system of interconnected circuits. The materials requisite for the production of capital appear on the market as the products of capital, whose market is generated by the accumulation of capital as a total process. This market is, at the same time, the source of the realization of the commodity products of capitalist production and of the realization of the products of particular production processes as capital. The system of exchanges implied in the idea of the accumulation of capital is both presupposed by. capital’s expansion process, and created within that process. If we consider the activity of capital within the accumulation process concretely, then the purchase, on the part of capital, of the material prerequisites for production creates a market for the products of that productive activity. Production as a continuous, repeating process is the activity which creates the market within which the expanded reproduction of capital realizes itself. This is a movement first subject to systematic analysis by Marx. Classical political economy leaves aside all consideration of the system of exchanges required in the expansion of the total capital, seeing the latter as given immediately by the production of a surplus-product. Thus, for Ricardo, the impediment to the expansion of capital has to do only with the direct production process taken without regard to value or to the system of exchanges. Barriers to capitalist expansion are solely connected to the production of a surplus-value and to the conditions of the immediate production process taken as a natural interchange (ultimately the production of a material surplus-product). Ricardo denies at every point the necessity of a system of exchanges fixed quantitatively and qualitatively. As we have seen there are, for Ricardo, no such fixed conditions which determine the process of capital accumulation and which must be fulfilled by and within that process. There are, rather, only the abstract conditions bound up with the simple notions of self-expanding value, and particularly with the notion of the production of commodities. Since, furthermore, there can be no limit implied by the simple notion of self-expansion taken 18

The conception of the system of economic relations

in the abstract, all limits are connected not to capital itself, but to the external environment within which capital seeks out its conditions of growth; within production taken outside of the sphere of capitalist production and constituted as a natural interchange. The theory of accumulation cannot be satisfied to remain fixed at this abstract and inadequate level. Barred access to the concrete conditions within which the course of expansion is determined, the theory of capital accumulation degenerates inevitably into a series of arbitrary judgements connected to a purely formal analysis. Where the system of relations within which the realization of capital is effected is excluded from the theory, the specification of the accumulation process can only proceed by reference to external, and hence arbitrary, conditions. This inadequacy is manifest, it should be noted, regardless of whether the determination of the expansion process refers to an external natural substance - the fertility of the earth - or to an externally presupposed social condition - e.g. the ‘class struggle.’ Restricted to the confines of this method of analysis the theory of economic growth gives way to a complex of models of economic expansion applicable under arbitrarily given or ‘historically’ fixed conditions. Within the accumulation process, the objective conditions of production appear as elements of capital and not as natural substances. Nature can impose no absolute limit upon capital to the extent that nature ceases to present itself as an absolute, given and irreducible condition. Where the natural process is no longer allowed to either obscure or replace the process of capital the expansion of the latter is constituted, for the first time, in a fully adequate form. Absence of dependence upon the fertility of an external sphere of nature leads directly into self-subsistence formed of a dependence only upon the fertility of capital itself. The fertility of capital, far from a fixed and limited condition, is a continually changing and developing element itself determined within the total process of capitalist expansion. These are precisely the terms in which Marx poses the problem of capital accumulation, and they serve to sharply differentiate his conception from that of his classical predecessors. It is, in particular, the conception of what Marx terms ‘constant’ capital which displaces the terms of the analysis from a natural process whose objective conditions are fixed within the fertility of the soil, to the selfsubsistent process of capital, whose objective conditions emerge as products of that process itself. The material requisites for continuing 19

Introduction

production, once established as constant capital, are ‘produced means of production’ generated by and within the process of capital accumulation. By conceiving capital as the basis for its own expansion, Marx eliminates from the analysis of accumulation any natural conditions, given outside of the growth process, which could provide for that process a limit and determination. Viewed on this abstract level, the accumulation of capital does, indeed, appear as a process without limit. The elementary notion of capital as self-expanding value, and of commodity production as a process of production by means of commodities, entails the idea of immanent barriers to capitalist expansion only latently. Abstraction from the concrete conditions of capitalist production is necessary for the development of the general conception of capital in its full universality. It is this conception which allows for the derivation of the concrete conditions of the self-realization of capital as intrinsic conditions implied in the idea of capital, and not as extrinsic and arbitrary (natural) conditions. The abstraction which allows for the general conception of capital is not however adequate to the full theoretical treatment of the system of capitalist production and of the concrete relations by which that system is determined. The concrete relations, already latent within the abstract conception, must be made explicit in order that the conception of capital may be made fully determinate. It is only possible to grasp the universal character of capital as an objectively existing, real process, by drawing clearly the distinction between the elementary conditions involved in the conception of capital in general, and the concrete conditions made explicit in the conception of the total process of capital’s self-development. This distinction is equally lost where the two moments are directly equated, as in classical political economy, or where the difference between them, while explicitly articulated, is considered to be only formal, having nothing to do with the inner nature of capital and with the determination of its process of self-renewal. This constitution of the distinction between capital in general and the system of particular capitals through which capitalist expansion is realized as a purely formal one represents the debilitating tendency within the Marxian theory of accumulation. Where classical political economy can see no distinction between the abstract conception of capital in general, and the concrete analysis 20

The conception of the system of economic relations

of the total process of capital’s self-realization, Marx draws out the essential features of that distinction, particularly emphasizing its importance in principle. Yet, once having grasped the accumulation of capital as a process of self-expansion, Marx proceeds to withdraw from that total process the specification which distinguishes it from the general conception, thereby effectively equating the one with the other, and simultaneously obliterating the general features of capital and its concrete conditions of self-subsistence. Thus, for the quantitative determination of the rate of expansion, Marx refers to conditions presumed to be fully developed within the treatment of the immediate production of commodities and capital, where production is considered in abstraction from all particularity of product and concrete conditions of its subsistence. As a result, the value relations appear to be fully determined without regard to the totality of relations of capital, by the labor requirements defined in production; while the profit and price relations appear as nothing more than ‘mystifications’ of these conditions already fully developed independently of the conception of the price system and the market. The rate of profit is determinate as a relation of ‘labor-values’ given in production, connecting the labor-value of capital invested to the surplus-labor, rather than the profit to the cost of the capital investment. Formally, allowing R and C to stand respectively for the surplus-labor, and the labor-value of the constant capital: P=-*-

C+wL

=

g X+l

where e is the rate of surplus-value (R/wL) and X the organic composition of capital (C/wL). The rate of profit (p) is the rate of surplus-value, presumed to be fully determined within the immediate production process, but altered to take account of the relation of constant capital to labor. To be sure, this alteration is of primary importance, and its inclusion serves notice of a fundamental rupture between Marxian and classical economic analysis. At the same time, the inclusion of the relation of constant capital, particularly in the form of fixed capital, is never fully integrated into the theory of capital accumulation. What we have, in¬ stead, is an essentially formal difference which takes on a determinate 21

Introduction

part in the conception of capital accumulation only through the notion of a falling tendency of the rate of profit. This tendency, it needs to be emphasized, has no substantial dependence upon the system of relations of capitalist production as a whole: the system of relative prices, the relation of profits to wages, the competition of capitals, the expansion of the market, etc. The framework for this theory is exclusively one of labor-value, and of the imposition of a valuation in labor time upon the system of price relations. The prices are determined jointly by the prevailing technical interlinkages, and the rate of profit, both given already in the value relations. The technology is expressed in the determination of labor-value, while the rate of profit is determined by the value of labor-power together with the organic composition of capital. The system of prices and their process of formation only provide the ‘phenomenal’ form for a content already fully developed and indepen¬ dently determined. This results not simply in a theory of accumulation incapable of establishing its own validity, but equally in a deformation of the conception of value. The latter must be fully determined within the general conception of commodity production, therefore independently of the system of relations of capital taken as a totality. This prior abstract determination of value is then required to bear the burden of the full determination of the rate of profit and the system of commodity prices. In this case, the value relation, in order that it grasp directly the self-expansion of capital as a whole, must contain immediately within it the determination of the relation of profits to wages, the price of commodities, and the rate of profit. This is only possible where these relations are constituted as the results of a purely technical force - labor time viewed as technical condition - together with the direct counterposition of social classes in the formation of the wage-profit relation. Both the valuation of the product and its distribution are given independently of the market so that the market is made into the mode of appearance of these conditions and cannot be considered in any substantive way to be the arena of their full self-determination. Within the Marxian theory, expansion of capital is determined by technology and by the direct confrontation of classes, rather than by the inner workings of its own process. All specifically economic relations become either the mode of expression of technical condi¬ tions, or the means by which the interaction of social classes is 22

The conception of the system of economic relations

expressed at the level of the market. The self-expansion of capital ceases to constitute the realization of the real potential of social wealth, and appears instead as the effect of the impress of an historically given and specific social reality upon the means of production. In particular, it is the appropriation of the means of production by a distinct class which makes them capital, so that accumulation appears as immediately the activity of that class. The universality of value as foundation for the total process of capitalist expansion is replaced by the activity of class interest. Capital can no longer be grasped as a real requisite of production, as the living unity of the process of commodity production, made subordinate to the objective of unlimited multiplication and expansion. Instead, capital is made into that extrinsic relation which accounts for the subordination of a technically defined production process to the objective of expansion. On one side, the conditions of production are taken to be given, either by an irreducible technical sphere or by the formative activity of the class interest of a capitalist class. The latter defines the means of production in their specificity as capital by appropriating them and then subordinating them to its interest, where that interest is given together with the class relation itself. On the other side, the wage is also determined by an immediate confrontation of classes taken as directly existent and irreducible. The resulting determination of the rate of profit is no longer a self-determination, but the expression of a reality which is externally imposed upon it. Once again the growth of capital ceases to be its process of self-expansion. In effect the level of analysis of capital as a whole disappears in its subordination to the direct production of capital. The constitution of the relations of the total capital and its self-renewal as mere forms of appearance of a reality already given within the most elementary of value relations results in the exclusion of the process of self-expansion of capital as a whole, and therefore in the exclusion of the idea of a self-determining total process. The reality of such a process is lost, and with it the concept of capital as a self-determining relation. As a result, the determination of the capital relation and its conditions of expansion fall once again outside of the process of capital, in order to be posited by an abstractly fixed force. This is precisely the procedure of classical political economy, which finds in nature a force which determines the growth process of capital. The object of Marxist theory is the systematic analysis of the 23

Introduction

capital relation and its total process of self-expansion. The latter is grasped both as a process of self-determination and as a process of self-limitation, as a process of universalization which exhausts itself in impediments which it has itself created. The theory of accumulation presented originally at the end of the first volume of Capital, and subsequently, in a somewhat altered but substantively identical form, in the third volume claims to have discovered within capital the effective determinants of its expansion. However, the critical examin¬ ation of this theory, and particularly of the conceptual weaknesses of the treatment of prices and profits, reveals that this is not the conclusion of the theory, but only the first announcement of the program for that theory.

24

PART TWO

The aggregate circulation

Preface to Part Two

We begin our analysis with the unit of capital considered in abstraction from the concrete conditions within the market which give it form, and which give direction to its growth process. Our purpose is to introduce the idea of particularization of capitals with respect to time and place. This idea connects the general objective of the firm (to expand its capital) with the particular activities required to accomplish that goal, and it does so in such a way as to assure that pursuit of limitless expansion on the part of the firm takes place within conditions which provide determinate limits. Particularization with respect to time implies irreversibility of economic processes, and excludes those conditions characterized in traditional theory by the idea of perfectly competitive markets. It also undermines the idea of an average (or uniform) rate of profit, while focusing attention upon the distinctive accumulation strategies of particular firms. These implications are drawn out in chapters 4 and 5. In chapter 2, the elementary conception of particularization is introduced, and its implications will be drawn out step by step as the argument progresses. The first implication of particularization is for the conception of the market, which is also introduced in chapter 2. The purpose of this abstract treatment of the market is to highlight two points: (1) the way in which the structure of the market is affected by its incorporation of units of capital particularized in time and space, and (2) the way in which the use of wealth as means of production facilitates, but also limits, the use of wealth to directly satisfy needs. These ideas allow us 27

The aggregate circulation

to articulate the structure of the market by specifying its composing elements: the markets for means of production, for means of consumption, and for labor. The idea of an aggregate economy is essentially one of the structural interaction of individual economic agents (units of capital, consumers, owners of labor etc.). In section III of chapter 2, we argue that the monetary circulation provides a real, tangible form for the aggregate circulation. This argument echoes the keynesian idea that macroeconomics and the theory of the monetary circulation are two ways of articulating a single subject-matter. Money arises within the aggregate circulation, and with specific reference to it. Here we consider the way in which money emerges within circulation, and especially its relation to the particularization of capitals. The analysis emphasizes the inconsistency of basing the aggregate circulation on a produced money commodity. The specific treatment of the monetary circulation focuses not only on the idea of an aggregate economy, but also on the implications of money for the specification of the temporal structure of economic processes. Economic processes, within a monetary economy, are distinctive in that the future can have a real force to exert over decisions made in the present, in particular that the future is not only determined by the past, but is also one of the determinants of its own past. The idea of credit plays an important part here. The treatment of temporal structure provides one of the theoretical foundations for a conception of economic development. The concepts of the particularization of capitals, and of money, make it possible, even inevitable, that economic processes will incorporate the aspect of structural development. Chapter 3 introduces and analyses the basic concepts which are used to characterize the growth process: price and cost, gross profit margin, rate of accumulation, aggregate demand, and rate of aggregate market growth. Our purpose is to counterpose the accumulation process of the particular capital to the growth process of the market taken as a whole. The mutual dependence and opposition between private accumulation and the growth of social wealth is the central dynamic principle in the process of capitalist growth and develop¬ ment. At the end of chapter 3, we introduce the idea of market-limited growth, and the central proposition that the market system engen¬ dered by the growth of particular capitals, limits and determines their growth processes. This proposition sets the basis for the argument that quantitative economic expansion takes place through structural 28

Preface to Part Two

development brought about by the efforts on the part of particular firms to break the limits to their growth processes created by the joint effect of those processes. The reader who has come to expect a theoretical argument to begin with the statement of a set of assumptions, may find the mode of presentation of ideas employed here difficult to follow. While reduction of the argument to assumptions and theorems does a certain violence to the integrity of the method, a step in that direction may help to build a bridge for those trained in the more traditional forms of analysis. For this purpose, it may be helpful to isolate certain of the basic propositions developed in the analysis which are crucial for its major conclusions. For the reader who finds the language of assumptions and conclusions congenial, the following may be thought of as fundamental conditions for deduction of the primary results concerning capitalist expansion: (1) The accumulation of capital takes place within units of capital, or firms. The overriding objective, which determines the outcome of decisions made within the firm, is that of its survival and growth. The firm does not aim at some ‘normal’ rate of expansion, but is concerned to grow as rapidly as possible so long as that is consistent with the preservation of its integrity in the long run. In this sense, we will speak of the accumulation of capital as an end in itself. (2) Firms interrelate both with other firms, and with consumers, through exchange (i.e. in markets). While it is not essential to much of the analysis that the firm itself be privately owned, it is necessary that the firm own its means of production (and, more generally, its ‘internal resources’). The form of exchange is that of commodities for money. We assume that accumulation takes place within a monetary economy, that banks issue money (so that money is non-produced), and that the issuing of money conforms in method and magnitude with the requirement that the flow of money support the accumulation process at a rate determined by the growth strategies of firms. (3) We argue that consumption patterns have a rigidity based upon their social determination. As a result of this, the scope for substitution at a point in time is sharply restricted. Change in modes of consumption takes place over time, but does not support the idea of a demand curve. Thus, while consumer demand plays a primary role in our analysis, that role is independent of the specification of preference orderings. 29

The aggregate circulation

(4) We assume that markets are organized in such a way as to sustain the firm over the long run, and not equilibrate supply and demand in the short run. This makes it less important that we specify a demand curve in the short run. Prices are set by firms, but not without regard to market conditions. From the point of view of efficient allocation, such markets operate very imperfectly. But, from the point of view of long-run growth and development, they are very well-adapted. (5) Investment, and the rate of accumulation of firms, determine the scale of the market, and the rate of overall market growth. Since accumulation is an end in itself, savings decisions of income recipients do not play an active part in determining either the pace of economic growth, or the scale of the market. Both of these derive from the joint impact of the particular investment strategies of firms. (6) The temporal flow is one-directional, and irreversible. A continuously changing economic situation implies that observed changes cannot be directly attributed to choices between contempor¬ aneously defined alternatives. Thus, in particular, changes in methods of production cannot express shifts among contemporaneous alterna¬ tives, but the transition from old to new technology.

30

CHAPTER TWO

The particularization of capitals and the market

I The particularization of capitals 1 The self-subsistent cycle of wealth

At the starting point of the theoretical treatment of economic life, wealth presents itself as a seemingly inert mass of useful property. The object of the science of wealth is to grasp that total motion which this mass of wealth represents as a single, limited moment. In its scientific treatment, wealth ceases to be the fixed mass of objects of need, and appears instead as the periodic cycle which throws out a mass of commodities at one point, as its characteristic substantiation and product, only in order, at another point, to consume its own substance as the means to unlimited growth. Just as nature can only evolve by consuming its own products, so the economy can grow and develop only by consuming its own substance. In this respect, the process of immanent development is inherently one of self¬ subsistence. From the standpoint of a particular species, its own natural subsistence is an external relation by which the species sustains itself through consuming that which exists outside (e.g. another species). But, viewed from the standpoint of nature as an integrated totality, the consumption of one of its elements by another is internal. To the extent that this consumption sustains not only the particular species, but thereby also the system as a whole, that consumption exemplifies the manner in which nature sustains itself as a system by subsisting upon itself. 31

The aggregate circulation

Such self-subsistence is equally characteristic of social, and particu¬ larly economic, life. Economic reproduction is a process of the production of wealth, in the form of particular commodities, by means of the consumption of wealth, which is equivalently the consumption of those same commodity products. From the standpoint of the particular producer, production is the consumption of commodities acquired from outside, in this case via exchange. Similarly, consump¬ tion by the individual consumer is his subsistence upon materials which he does not himself provide. Yet, these same acts of consump¬ tion, viewed from the standpoint of the economic system as a whole, reveal their true destination as the elements of the self-subsistence of the system of economic relations. Society is truly wealthy not by its mere possession of wealth, but only when it sustains its wealthiness by producing and reproducing wealth.1 Real wealth is a process which subordinates its elements (the system of commodities) to an endless and connected movement. Wealth existing within this process of self-movement is capital, and the movement which is immanent to wealth is the circuit of capital.2 The continuation of the circuit requires that certain concrete conditions (implied by the idea of self-expansion) be fulfilled. In particular, it is essential that specified commodity inputs (including labor) be transformed into commodity products, and that the commodity products be subsequently transformed into money (i.e. via exchange) in a proportion such as to make possible both the continuation and increase of production. The concrete conditions which capital must fulfill in order to expand include the differentiation of the capital into its component parts, and the attendant constitution of the capital circuit as a unity of mutually dependent and yet distinct circuits. The investigation of the circuit of capital reveals the intrinsic necessity of the decomposition of the capital into fixed and circulating capital, and of the decomposition of the value returned into capital advanced and its increment.3 At this stage in the analysis, it becomes evident that the movement of capital is a complex process combining the interrelated but separate movements of its composing elements. The circuit of capital, which is its life process, is the unity of the circuits of capital. This unity is substantiated in the unit of capital, or firm, whose integrity is that of the inner unity of the distinct elements and movements which, taken together, make up the growth process of the capital. 32

The particularization of capitals and the market 2 The intrinsic unity of capital

In the first instance, the unit of capital is synonymous with a certain sum of value acting as capital. Whatever else it may be, capital is always a fund of value existing at one or another phase of its circuit. Capital is, therefore, also the sum total of the values existing at each different phase of a given circuit at a single point in time. The quantitative contribution made by the value existing at any particular point in the cycle is independent of the specificity of its form (e.g. money or commodity capital), and depends simply on its magnitude. The sum of these values is the amount of capital, and the relation of the value invested to its owner (however the owner is specified) make the component parts parts of one capital. This aspect of the unity of the capital is nothing more than its existence as so much self-expanding value. As value, it involves a relation of property, and the integrity of the capital first derives from the unifying force of proprietorship.* But, this unity of the compon¬ ent parts of the capital is nothing more than the generalization of, and logical precondition for, the real integration of the value invested as capital into a living structure. This living structure is based upon the interdependence of the composing elements of the capital, and realizes the larger purpose which orders their particular life cycles. Concrete¬ ly, the unit of capital orders its life in accordance with a process of the construction of an integrated structure of commodity production and sale. The capital constitutes itself as a unit to the degree that its composing circuits are incapable of any independent subsistence, and presuppose their full integration into the circuit of the whole capital as the necessary condition for their own motion. In particular, the circulating and fixed capital are mutually dependent, each providing the basis for the productive life of the other. This result follows from the original mode by which the capital is divided into its component * It is not implied by this that the capital in its entirety be owned by a single person, but that, from the standpoint of ownership, all of the components be considered as a single unit. Ownership may be collective in that more than one individual may participate in the ownership of a single unit of property. In this case, the proprietor of the producing apparatus is a collective or corporate entity. Indeed, the conception of the system of particular capitals does not exclude various forms of collective or state ownership of capital which are wholly independent of proprietorship on the part of individual citizens.

33

The aggregate circulation parts. It is precisely to the extent that the division of the capital is intrinsically implied in its characteristic life cycle, that the unity of the composing elements is represented not only formally, as the sum of their respective values, but also substantially, as a complex producing and marketing structure. The capital is, then, a single movement brought about by the interplay of the distinctive motions of its separate elements. The unit of capital articulates or represents the integrating principle (i.e. self-expansion) of the elements of the capital which are stratified contemporaneously in accordance with the differentiation required by the production and realization of value and surplus value. This integrating principle also asserts the unity of the periodic advance and return of value. The real integrity of the capital excludes any increase of the capital resulting from the addition to it of an externally given sum of value. Rather, the increment must be differentiated from the capital advanced as a result of its own activity. The unity of the value advanced and value returned is, therefore, not simply that of the summation of two quantities of value, but of the integrity of a single process (of self-expansion) which underlies that summation. The immanent distinction between these two aspects of the unity of the capital has its economic and juridical realization with the develop¬ ment of corporate capital. The corporation is the legal proprietor over the producing and marketing apparatus, which ceases to be the legal property of any identifiable individual property owner (any particular person), but is instead the property of the capital. The capital takes on its own independent legal persona. The capital existing as a producing and marketing structure is now owned by capital existing as corporate entity. This relation is, in effect, the self-ownership of capital, since the owning entity (the corporation) and the property (the producing and marketing structure) are both capital. In capitalist economy, this development displaces to a degree, but does not eliminate, the ownership of the capital on the part of certain identifiable persons. Indeed, the constitution of the corporation as so much private property is a defining characteristic of private enterprise as a system of economic organization. Private ownership of the capital is now, however, mediated by the capital’s self-ownership in such a way as to make the formal unity of the capital as so much owned value one step removed from the life of the capital as a producing and marketing structure. Even within capitalist economy, however, the owners of the capital

34

The particularization of capitals and the market

cease to have any direct claim to, or responsibility for, the productive and commodity capital. Ownership of the unit of capital and ownership of its capital are distinguished. The owner of the unit of capital is a shareholder in the flow of value acting as capital, and holds nothing more than a claim over a proportional part of the capital value and its increment. The condition of self-ownership on the part of capital has its analogue in the process of capitalist commodity production. In the case of commodity production under capitalism, the owner of the producing apparatus does not himself consume its elements. Instead, he merely represents the economic and juridical starting point for the mutual consumption of labor and of the means of production. The capitalist owns the capital. He does not by so doing, however, establish the basis for his own consumption of his capital. Instead, his property remains capital only so long as he refrains from consuming it. Nonetheless, the productive consumption of the capital is necessary to its continued existence as capital. Instead of consuming the capital, the owner merely makes possible its self-consumption. The labor, by bringing the productive apparatus to life, sets in motion the process of the productive consumption of the capital (i.e. the process of laboring for capital). Consumption on the part of capital is, in this sense, wholly internal to it. This condition of capital’s productive consumption is also a condition which appears in the constitution of the unit of capital or firm. Corporate capital is not only a unit of self-consumption of capital, but also of self-ownership. This dual removal of capital from its determination on the part of the particular property owner acting as such underlies the development of capital’s objectivity as a social-economic institution: the corporation. When the juridical owners of the capital retain the formal rights of proprietorship (as under capitalism), those rights (and obligations) are associated not with the productive capital as such, but with the unit of capital viewed formally as so much value in motion. The significance of ownership over the firm is connected not to its day to day functioning, as a producing and marketing structure, but to its success in constituting itself as a source of expanded value. So long as the corporation is successful in its objective of self-expansion, its owners play a passive role. So far as the corporation fails in this objective, the owners may take on the active role of insisting upon the subordination of the corporation to the object of expansion. The juridical owners, 35

The aggregate circulation

and the condition of juridical ownership, establish limits within which the corporation exercises its discretion over its capital investment. And, since these limits are those of the expansion of capital investment, the condition of juridical ownership constrains the corporation to maintain private accumulation as its immanent pur¬ pose. While the purpose of private accumulation is immanent to capital, the assertion of this purpose upon the basis of private ownership of capital is essentially formal. The specific corporate form under capitalism is a mode of asserting the rule of private accumulation as a limit to decision-making on the part of those directly responsible for determining the way in which the value invested is put to use. This rule of private accumulation could be instituted in other ways which would not entail private ownership; but, alternative modes of asserting the social purpose of accumulation would need to replicate, to a large degree, the passivity of the juridical owners in the face of an objective structure of accumulation. Historically, accumulation first appears as the private end of the individual wealth-owner. This condition ties accumulation to the private purpose of building a structure of social status defined upon the basis of wealthiness. The growth of social wealth is an accidental by-product of the pursuit of purely private ends. As capital develops, however, its connection to personal aggrandizement is gradually attenuated. The corporation expresses this process by which private accumulation is distinguished from personal aggrandizement. The corporation’s purposes are those of capital, and not of capital’s owners. Ultimately, accumulation in and through a structure of particular capitals (private accumulation) is a public and social objective. What is distinctive about capitalism, as an historically limited stage of the development of capital, is the suppression of the social aspect of the process, which does not make that social aspect disappear, but only makes it become implicit or latent. This result is tied to private ownership of capital (i.e. of the unit of capital). Such ownership makes capital into an engine of private gain, rather than explicitly a structure of expansion of a component part of social wealth. Capital is a social being sui generis. It is the social force by which the system of property ownership manifests and establishes its self¬ organization and self-determination. The unit of capital constitutes the principle of the self-ordering and self-development of the market 36

The particularization of capitals and the market

as a constituent element of the market. But it does so without sacrificing the real objective inner determination of capital as such. This result is logically connected to the establishment of the firm as a unit of the self-production and self-ownership of value acting as capital. Under capitalism, the corporate form, which separates the owner¬ ship of the capital from the ownership of its commodity components, permits the capital to become a commodity which may be bought and sold. This buying and selling of capital is not, however, the buying and selling of the means of production, materials, commodity products, etc. Instead, the purchaser of capital acquires a share in the life cycle of value acting as capital. Because such a share is not a direct claim over the wealth currently existing as capital, but only over a part of its self-generated increment, the money used to acquire shares of capital is capital to its owner, who, in effect, advances it as the means to the acquisition of a net return. The return on the shares of the capital is that part of the increment to the total capital investment which is allocated to the ultimate owner of the value acting as capital. This return is the dividend of the stockholder. The shares in the capital are themselves commodities which appear, at first, to be derivative, even representative, of the productive capital itself. In this sense, even though the shares are not produced (have no determinable cost of production), they are rooted in the conditions of capitalist circulation, including conditions of commodity production. Nonetheless, the link which binds the nonproduced shares of capital with the cycle of production and exchange of the capital investment itself is by no means direct. The distinction between the ownership of the capital on the part of the shareholders, and its self-ownership as a corporate entity may develop into a real opposition. The issuing and valuation of shares has no immediate and certain connection to the production and realization of value and surplus value. Instead, the determinate relation between the two must be subject to a continual mediation in the form of an adjustment between the valuation of the shares in the capital, and its real productivity. It is this process of mediation which also limits the issuing of shares. Even though shares are issued rather than produced, there are determinable limits to their supply having to do with the relation which must be sustained between the supply of shares, their price, and the return to the shareholders.

37

The aggregate circulation 3 The real particularity of capital

When we consider the unity of capital, we consider the capital under its aspect of being so much property, or wealth. Since the constitution of wealth can only be in and through the system of wealth, the integrity of capital already presupposes its subsistence within a system of property relations. As the elements of a single value sum, and as participants in a unified process of expansion, the components of the capital inherently constitute a single unit of wealth which, as such, stands opposed to, and distinguished among, many such units. This condition of the unit of capital establishes from the outset the possibility of many capitals opposing each other as distinguishable units, while sharing in common their status as units of wealth. It is the constitution of capital as a unit of wealth in motion which defines its generality as so much value, and the generality of its objective as the expansion of value. But, so far as this generality is made the purpose of a finite and identifiable mass of wealth acting as a single entity, it cannot sustain its identity with wealth as such. The massing of value into a unit of wealth in motion constitutes a particularization of the value on a formal level (under capitalism on the level of ownership over the value in motion). In considering the particularization of capitals, it is therefore evident that no absolute barrier (e.g. of a physical or legal character) can be presumed to obstruct the development of capital into a system of distinguished and separate units. Such an absolute barrier would be equivalent to the identification of wealth (or property) with its particular manifestation (e.g. in the hands of some individual proprietor). This direct identification of wealth with its particular unit conflicts with the inherent universality and illimitability of wealth as a social force. The potential for the multiplication of capitals is directly implied in the constitution of the unit of capital in relation to a determinate and finite mass of wealth. This idea imposes itself historically upon the theory and practice of capitalist economy as the presumptive claim to ‘free mobility’ which capital adopts as its birth right. Within the ongoing reproduction of the totality of economic relations, this free mobility constitutes itself as a complex concrete condition which requires a manifold system of restraints and impediments to the flow of value. Nonetheless, however the limits to capital’s free movement may be defined, it is clear that 38

The particularization of capitals and the market

the very existence of capital banishes any permanent fixity to its association with particular productive ventures (e.g. any requirement that profit be reinvested in some given sphere), and also any immediate identification of the unit of capital with the totality of capital as a producing system. The inherent character of capital requires that the multiplication of capitals always remain as a real potential. To void this potential by insisting upon the submergence of its results into a single monolithic entity (e.g. the ‘aggregate capital’), is to void the specificity of capital as a social reality, and thus the idea of the limitless potential of wealth. The condition that capital is a unit of wealth in motion directly implies the possibility that capital develop as a system of particular capitals. The real, concrete process of that development is not, however, directly given in the abstract conception of wealth. The necessity for a further specification of the implied relationship is firmly grasped by Adam Smith, who grounds the particularization of private producers not in the idea of wealth as such, but in the division of labor.* When Smith connects private ownership to the division of labor, he establishes a foundation for conceiving the production system as a whole upon the basis of the interaction of private, independent producers. The resulting structure provides the framework for a theoretical treatment of exchange. Smith’s unification of private ownership with division of labor has, however, the peculiar feature of suppressing the capitalist character of production in favor of ‘simple commodity economy’ composed of petty producers who own their own means of production. Production, within such a system, presupposes only the unification of the means of production with the direct laboring of their proprietor. It would appear that the resulting particularization of private producers has nothing specifically to do with capital, but is directly deducible from * Smith recognizes the limitations of this standpoint, and goes on to consider the ‘origins’ of the division of labor. For Smith the division of labor originates in the market, and develops with the growth of the market. The particularization of production is, then, no primordial natural or technical condition. On the contrary, it flows out of the social interaction characteristic of the market. To be sure, for Smith this social interaction is presumed to originate in a ‘propensity’ of human nature. Nonetheless, the argument put forward successfully undermines any notion of primordiality of the system of particular productions, implicitly constituting that particularization as a proper subject of analysis rather than as an independent datum. While Smith is not successful in consummating such an analysis, he does establish its necessity. 39

The aggregate circulation

the condition of division of labor. And, indeed, it is by no means evident that the particularization of capitals may be deduced from a primordial social division of labor however defined. Not only is it possible, as both Smith and Marx assert, to encompass the division of labor within a single unit of capital (the ‘division of labor’ within the production process of the commodity), but, so far as the system of commodity products is concerned, it cannot be assumed that capital distributes itself in accordance with a prior differentiation of commo¬ dities. Indeed, if in fact the particular commodity has any claim over capital, it is only over a part of the total capital, never over the exclusive attention of its particular unit. The particular firm is free to undertake the production of a multiplicity of commodities, and even to define its own particularity independently of any existing commo¬ dities (e.g. by developing new commodities). And, what is true of the particular firm must also hold as a condition of the system as a whole which exhibits a degree of freedom from any given or existing structure of interdependence of production and consumption. It is necessary, then, to consider the particularization of capitals to be logically (and also historically) prior to any treatment of the particularization of production. It is the activity of capital which creates the modern production system, molding production into a form adequate to its objective of limitless development, rather than adapting its own growth to an historically given, and logically a priori, complex of particular production activities. Since it is ultimately the activity of, and interaction among, the particular capitals which leads to the development of the manifold system of commodity pro¬ ductions, it is necessary, so far as the theoretical treatment of economic life is concerned, to develop a logical account for the parti¬ cularization of production which is based in the general properties of capital. This, theoretically necessary, procedure is exactly the reverse of that method whose employment dominates economic analysis. The derivation of an exchange system normally proceeds upon the assumption of a given system of production.4 Distribution of the product, and exchange of commodities, are taken to be formal conditions having to do with extrinsic arrangements by which that system effects is renewal as a technically specified order of material interactions. From this standpoint, the capitalist character of produc¬ tion has to do not with production itself, but with the manner by which historically specific and contingent social relations effect the 40

The particularization of capitals and the market

continued provision of the material subsistence which grounds the social order. Such a conception cannot, however, be reconciled with the real inner dynamic force of social production rooted in capital. For capital, the reproduction of the material life of the species is nothing more than a by-product of the pursuit of capital’s own peculiar objective. To consider such reproduction as fixed vis-a-vis the economic order based in capital is tantamount to obliterating its central dynamic: the limitless multiplication and expansion of wealth. The condition which underlies the particularization of capital is not its immediate situation within a given social division of labor, but its prior integrity as a unit of value expansion. The particularization of capital develops originally out of the inherent limitations defined by the life cycle of the capital, and which make impossible any direct identification of the particular unit of property with capital in its entirety. These limitations have both a quantitative and qualitative character. The firm is limited quantitatively by the amount of value which it represents, and qualitatively by the particular mode of utilization of that value undertaken in the pursuit of its self-expansion. The quantitative bounds of the capital develop out of its existence as a unit of property or sum of value. No matter how rapid its growth, no matter how great its magnitude, the firm can never represent the wealth of society in its entirety. As we have already seen, the existence of the firm as a particular proprietor directly implies that the capital of the firm is not synonymous with the wealth of society, but is only a limited part of that wealth. The existence of the firm implies, then, the existence of the requisite condition for the constitution of other firms, and of a system of firms. The wealth of society, existing outside of the particular firm, always represents a pool of value with the potential to form itself into many particular capitals. As a unit of capital, the firm represents a growing sum of value. While the value represented by the firm is expanding, at any given point of time, and during any given period of time, that value sum remains bounded, and limits the capacity of the firm to take advantage of the available opportunities for productive investment and growth. This quantitative limit, which is implied in the constitution of the firm, takes on a number of concrete forms whose analysis is essential to the theory of accumulation. The growth of the firm finds its original limit in the amount of capital-value which the firms owns. While investment on the part of the firm is never limited to its existing 41

The aggregate circulation value, it is always limited by that existing value. The mass of value already accumulated limits the activity of the firm, placing bounds upon its ability to multiply and intensify its productive life. The existing capital-value of the firm also provides the basis for the generation of surplus-value, and it is the amount of surplus-value, or profit, produced in any given period which limits the growth of the capital which can be effected during that period. Further, both the quantity of capital invested and its productivity (profitability) limit the access on the part of the firm to funds (e.g. loans) made available out of the general wealth of society. Thus, while the quantitative mass of the capital invested does not in and of itself fully determine the limits within which the expansion of the firm takes place, it does establish an effective upper bound. This quantitative limit of the capital-value available for investment becomes a qualitative limit when investment forms the value into a complex producing and marketing structure. In order for the firm to pursue its end of limitless growth, it must fix a part of its value into the form of a productive apparatus capable of (1) producing a given product or set of products, and (2) doing so upon the basis of an existing technology embodied in the prevailing specification of the necessary means of production. Once the capital has adopted the form of a productive apparatus, it is, for a period of greater or lesser duration, constrained to produce a fixed set of commodities upon the basis of a method of production derived from the state of the technology prevailing at that moment in the flow of economic time at which the investment occurs. In effect, the particularization of the capital into a given productive apparatus (plant and equipment) fixes the capital temporally by freezing a part of its value into a form which is appropriate to the economic conditions prevailing at a given point in time. For as long a period as the capital-value cannot be retrieved from its embodiment into a given producing and marketing apparatus, it remains particular¬ ized and limited. In so far as the subsequent liberation of the invested capital, achieved through its embodiment into a commodity product and then into money revenue, is a momentary prelude to its reinvestment as productive capital, the capital-value experiences a sequence of particularizations. This sequence of particularizations of capital-value marks its specificity to an irreversible flow of economic time. Capital is no longer simply value in motion, but value whose forward motion (i.e. self-expansion) requires that it embody the 42

The particularization of capitals and the market

inherent potential of the economic conditions within which it subsists by freezing those conditions for a period of time of greater or lesser duration. In effect, the value invested takes on a temporal determina¬ tion. And, while the flow of economic time moves forward, negating the conditions which stimulated or dictated the form of capital investment at one moment, the particular capital investment remains behind, unable to catch up until it has exhausted the potential of its existing form to generate value and surplus-value. Furthermore, the stimulus which sets in motion the flow of economic time is the particularization of capital itself. Each act of particularization defines, upon the basis of the required components of the capital circuit, a series of determinate needs whose satisfaction is the work of other capitals and their particularization. When, for example, a capital particularizes itself into an apparatus for the production of cotton textiles, it engenders demand for cotton and for the means of production required to produce textiles. Similarly, the production of cotton and of textile machinery engenders an associated system of needs (including the need for cotton textiles) which can also be satisfied by capital investment. The particularization of capital sets in motion a dynamic which simultaneously justifies that particulariza¬ tion and, by moving forward upon its basis, leaves it behind. The inherent dynamic of production rooted in capital places a temporal limit upon the qualitative and quantitative adequacy of the existing productive apparatus to the end of capitalist commodity production. Thus, precisely by doing what is required in order for it to pursue its object of limitless expansion (the particularization of its value into a fixed form), the capital restricts its own expansion within strictly defined boundaries (given in the structure of the capital investment itself). As we will see in the course of our analysis of the accumulation process, these boundaries take on a number of specific forms including: the productive potential and potential profitability of the technology adopted by the firm at a given point in time, the use-value or set of use-values which the capital is capable of producing, therefore the markets to which it has access, and so on. These sharp limitations within which the capital is constrained to pursue its general objective form the necessary basis (both historically and logically) for the particularization of capital into a system of independent capitals, and for the ensuing confrontation of particular capital with particular capital. It is, then, neither the purely formal condition of proprietorship taken in the abstract, nor the division of 43

The aggregate circulation

labor taken as an analytically primordial condition, which account for the distribution of productions among a system of private producers; it is instead: (1) the innate drive of capital towards unlimited expansion connected to (2) the necessary limiting conditions which capital must fulfill if it is to pursue this end. The boundaries which the firm defines for itself as the means to its expansion are not, ipso facto, boundaries of capital. The limits which govern production on the part of the firm may be overcome through (1) the growth of the firm or the formation on its part of new capital, and (2) the constitution of the wealth of society existing outside of the firm into a multiplicity of other capitals. Considered dynamically, capital overcomes the self-defined limits of its existing state both by the formation of new capital and by the formation of new capitals. The inherent limits of the particular capital investment of the firm confront the firm in the external form of other particular capitals. The system of firms represents, to the particular firm, its own inability to identify its particular existence immediately with that of capital as a whole. The system of particular capitals stands as a rebuke to the aspirations of each of its members, and as a goad to an ever intensified effort on their parts. The limits which define the particularity of the firm, precisely because they grow out of its striving toward limitless growth, can never be accepted by the firm as absolute. Thus, while the system of firms is the only arena within which the individual firm may strive to realize its objective, the drive on the part of the firm to realize that objective is inevitably a drive to undermine the existing complex of economic relations which makes possible the growth of each particular capital only by restricting it to a limited sphere. The specificity of the firm is determined in accordance with the object of its life-process. This object is, by definition, the survival of the firm as a unit of capital investment. But, the pursuit of this general objective, which is common to all firms so far as they seek to exist as units of capital, entails the pursuit of a complex of specific ends defined by the particularization of capital into a producing apparatus of a given specification. It is at this level that the interplay between the particularity of the firm and the generality of its objective becomes the dominating force in the development of capital. The limitless expansion of value on the part of the firm becomes the striving of the particular capital to shed its particularity, and to do so through the repeated formation of its value into a particularized producing structure. 44

The particularization of capitals and the market

The particularization of capital is the basis for the confrontation of capital with capital, both in the form of the reciprocal purchase and sale of commodity capital, and in the form of the competition of capitals. The conception of the structure of the market, and of the forms of interaction of its elements is grounded in the conception of the laws by which capital establishes itself as a complex of interacting private producers. The ensuing confrontation of capital with capital is itself an active force in the growth of the system of relations as a whole. The fixing of capital-value into the form of a producing and marketing apparatus particularizes the capital along two dimensions: (1) The particularization of capital is a temporal specification of the capital investment to a moment in an irreversible flow of economic time. (2) The particularization of capital restricts it, at any given point in time, to its identification with a given segment of a total producing structure made up of a system of distinct and opposed capitals. The particularization of capital is equivalent to its placement in space and time. This placement is essential to any conception of capital as a real structure persisting through an ongoing process. It would be incorrect, however, to attempt to situate capital within a geometric or geographic structuring of space, or within a process structured by calendar or clock time. The particularization of capital is within economic space and to a point in the flow of economic time. This specification of the distinctive determination of economic space and economic time is the process of the particularization of capitals. The idea of economic space connotes a contemporaneous structure of interdependence sustained amongst the determinate elements of an economic system. Interdependence of production and consumption is characteristic of an economy. As a structure, the relations of economic interchange which realize this interdependence, connect the elements more or less directly, just as a greater or lesser amount of physical space may separate (and therefore also connect) disparate objects in space. While the idea of spatial particularization connotes location in a structure, the idea of temporal particularization connotes location in a process. The unity of sequence and structure constitutes a determinate economic system. The importance of particularization to a conception of the economy cannot, then, be overemphasized. On a logical plane, it is synonymous with the idea of determinacy as the relation of the elements of a structure to the totality. 45

The aggregate circulation

It is the force of this determination which is excluded when the real particularity of capitals is either wholly suppressed (as in Ricardo), or made to appear as purely a matter of form (as in Marx). For both Ricardo and Marx, the laws which govern the development of capital are substantially independent of the intrinsic determination of the firm as a self-sustaining entity. Since the self-expansion of capital is considered without regard to its concrete context, the growth of the particular capital is taken to be represented immediately in the growth of capital as a whole. The limitations placed upon the expansion of capital by the intrinsic force of its particularization are left aside, and the fact that the system of capitals represents for the firm that external barrier to its growth which is also the external manifestation of its own intrinsic limits is effectively suppressed. From this standpoint, it would not be possible to consider the interaction of capital with capital, and of the particular capital with the system as a whole, to be an active force. And yet, it is precisely the force of this interaction which constitutes the general principle governing the determinate forms of capitalist development.

4 The measurement of capital

The capital is measured first by the quantity of value which it represents. This measure leaves aside the differentiation of the component parts of the capital, and makes the contribution of each purely formal. The measurement of capital as a sum of value is not, however, sufficient to provide for it a full quantitative cnaracterization. The quantity of capital varies with its movement through the circuit. This variation in value is the original object of the circuit, and it establishes from the outset the inadequacy of any measure of capital as a fixed quantity. While the quantity of value existing as capital is the logical starting point for the measurement of capital, the variation implied by the existence of the value as capital requires a differentia¬ tion between the elementary measure of commodity value, and the measure of value acting as capital. Quantitatively, capital is a relation of two interdependent magni¬ tudes - value advanced and value returned. The difference between these two magnitudes is the increment to the capital: the surplus-value or profit. The adequate, or intrinsic, measure of capital is the relation of this increment to the capital advanced. This relation is the rate of self-expansion of value, or rate of profit. If M represents the value 46

The particularization of capitals and the market

advanced as capital, and A/'the value returned, then the rate of profit (P), or rate of return, is = M' - M _ AM , M M

The rate of profit is the proportional rate of change of the value through its life process.* The rate of profit grasps, in a single magnitude, the variability of value which makes it capital. Capital exists as a given quantity of value for only such a period as is required for capital to increase itself. The determination, both quantitative and qualitative, of the rate of profit is the concrete determination of the capacity of capital to sustain itself by maintaining a continual growth in the magnitude of its value. The increment to the capital is inherently an outgrowth of the activity of the capital itself. As such, the profit emanates out of the life process of capital as it experiences the entire complex of phases of its cycle. It is not the mere advancement of value in its directly universal form (money) which engenders profit, but the advancement of capital in the form of a producing and marketing structure. The generation of profit requires that the value advanced successfully negotiate its passage through the determinate phases of the capital circuit, including the phases of production and commodity capital. The increment to the capital is the outgrowth of the totality of its circuit, and bears the mark of the specific moments of that circuit. Since the specificity of the circuit is the manifest form of the particularity of the capital, the rate of profit has a specificity to the conditions of the particularization of capital. The particularization of capital is, of course, nothing more than the means by which the firm pursues its general objective of self¬ expansion. Since the rate of profit measures the degree to which the firm succeeds in this objective, that rate is also the quantitative manifestation of the qualitative particularization of capital. Corre¬ sponding to the particular producer is a particular profit rate determined by the extent to which the translation of capital-value into a determinate producing and marketing structure facilitates or impedes its growth and development. Capitals, then, are differentiated not only qualitatively, by the

* This is to be distinguished from the rate of growth of the capital. For the latter see, below, chapter 3.

47

The aggregate circulation

specific form of their capital investments and specific commodity products, but also quantitatively, by the degree to which they are able to realize themselves as capital. Indeed, quantitative profitability is the object of the qualitative particularization of capitals. Furthermore, the quantitative difference between particular producers, associated with the effort on the part of each to elevate his own profitability, is an essential part of the ultimate objective of all capitalist commodity production. The qualitative and quantitative particularization of capitals always develop together. Within the classical conception of Smith and Ricardo, the value advanced is composed exclusively of wages paid out in the acquisition of labor time. This standpoint has specific implications for the treatment of profit. Where the value of the product is the direct result of laboring, the surplus-value, or profit, represents the difference between the value paid in the purchase of labor, and the value produced by that labor. Given these conditions, the rate of self¬ expansion of value is the ratio of surplus-value to the wage. This ratio is equivalent to the relation termed by Marx the rate of surplus-value. On the assumption that the wages bill exhausts the capital investment, the formal equivalence between the rate of surplus-value and the rate of profit is assured. So long as the abstraction of laboring is as¬ sumed to occur without capital investment in means of product¬ ion, the exchange of commodities in accordance with proportions of embodied labor time also follows from the equation of capital with the wages bill. This makes it possible to find in labor time a consistent measure of the value both of the wage and the surplusproduct. However, once it is acknowledged that labor alone is inadequate for the production of commodities, the equivalence of the rate of profit with the rate of surplus-value breaks down. Marx considers the resulting opposition, and its characteristic mode of development, to be at the core of the conception of the system of capitalist production as a whole. Where the preconditions of commodity production include the unification of labor with the means of labor existing as so much capital-value, the capital advanced is no longer exhausted by the wages bill, but includes, and may well be dominated or replaced by, the value expended in the acquisition of the fixed capital and materials of labor. So far as capital itself is concerned, the capital-value advanced, taken in toto, represents the necessary condition for the 48

The particularization of capitals and the market

production of commodities and the generation of profit. In this respect, the profit is not only the increment of the total capital, it is also the product of the total capital. Since the commodity product can only be produced by the mutual consumption of labor and the means of production, the profit which is produced with the product¬ ion of the commodity is the product of the whole capital. Profit is the return to the total of the value which must be advanced to the production of the commodities within which the profit is embodied. It is this condition which forces Marx to distinguish between the rate of profit and the rate of surplus-value, and to do so not because of any mere misconception on the part of the capital¬ ist, but because of the real exigencies of capitalist commodity production. At the same time, however, Marx’s claim that labor produces value implies that the problem of profit on capital is essentially formal, and has nothing to do with the laws which govern the production of capital and its increment. As a result, for Marx, the rate of surplus-value remains the proper measure of the rate of expansion of value. Thus, the calculation of profit in relation to the total capital invested is simultaneously (1) necessary, in that it is implied in the nature of capitalist commodity production, and (2) false, in that it mystifies the reality of the production of surplus-value which is quantitatively independent of the magnitude of the capital advanced. The necessity for this opposition rests on the presumption that labor alone produces value, and that there therefore exists a quantita¬ tive equivalence between labor time expended and value produced. The conditions implied in making this claim consistent with the calculation of profit on capital provide the framework for the Marxian analysis of the price system. Once it is fully grasped, however, that it is not labor per se which produces value and surplus-value, but only labor existing within and as a part of capital, the measurement of surplus-value against the total capital ceases to be an obfuscation. The production of commodities, and therefore of value, is incon¬ ceivable in the absence of the mutual consumption of labor, the materials of labor, and the means of production. Each element within production represents the precondition for the productive life of the others, while no element can be equated with, and thereby reduced to, one of the remaining components. Since the production of commodi¬ ties takes the joint activity of all the components of capital as its 49

The aggregate circulation

absolute precondition, the commodity-product and its value are substantively produced by the total capital advanced. Those elements which are intrinsically necessary to production are also accountable for, and therefore produce, the product. The rate of profit is, then, the real measure of the rate of self-expansion of value, since it directly counterposes the value produced to the necessary conditions of its production. This calcula¬ tion of the rate of profit, far from mystifying the inner reality of the production of capital, flows directly out of the conception of the circuit of capital. It is this truth which Marx himself asserts in opposition to classical political economy when he analyzes cost-price and profit.5 When the capitalist calculates his return in proportion to the whole of his invested capital, he operates under no illusion. On the contrary, by so doing he merely accepts the real intrinsic measure of his capital as a living force. The Marxian insistence that the rate of profit is nothing more than a ‘mystified form’ of the rate of surplus-value drains the rate of profit, and indeed the conditions implied in the calculation of profit on capital, of any force within the system of economic relations. The real force underlying the movement of that system is, then, not to be found within the system itself, but outside, in the prior determination of the production, by labor, of surplus-value. This contention undermines essentially the theoretical investigation of the laws of capitalist expansion, in that it denies to that system any real determinacy.

II The market The immersion of the unit of capital within a complex of particular capitals is implied in the process of its own particularization. This particularization establishes an opposition between capital existing within the firm, and capital existing as a total structure of production and exchange which subsumes the particular producer as one of its elements. The value which forms itself into the capital of the firm is a limited part of the wealth of society. Social wealth has, on its side, an intrinsic structure defined by the divisions and interrela¬ tions among its elements; especially the particular producers and con¬ sumers. The complex of private producers and consumers, together with the overt interactions by which they sustain one another, constitutes the 50

The particularization of capitals and the market

market system.* The market is synonymous, then, with the system of mutual dependence of production and consumption taken as a whole, so far as that system is sustained by the exchange of private property. In order that the market be considered as an organic structure, rather than as a purely contingent conjuncture, the interaction of its elements must spring of necessity from their own inner constitution. The private producers and consumers must be driven, by the exigencies of their own privacy and particularity, to seek each other out as the means to their renewal as independent proprietors. The particularity of the commodity producers and consumers must be defined with reference to the external conditions of the total producing system, even though that producing system is, for the individual commodity owners, nothing more than the means to their private ends. On one side, the market defines the particularity of its composing elements as elements of its own organic body. Considered upon this basis, the structure of the whole is the dominant force which decides the fate of its parts in accordance with the rule of their participation in its ongoing life cycle. Thus, the life or death of the firm depends exclusively upon its ability to discover and to occupy a position whose subsistence within the market is synonymous with that of the market itself. The firm sustains itself by producing a commodity whose consumption is an integral element of the reproduction and growth of the total system of production and consumption. This system appears, on one side, as an integrated structure of needs. The firm must produce a commodity the need for which is represented in this structure. By definition, to do so is to assure the marketability of the firm’s product. In this respect, the structure of the market, considered as a complex of needs, reflects itself in a structure of producing units each of which survives by particularizing its productive activity in accordance with the system as a whole. At the same time, however, the market, which establishes within its own structure the basis for the particularization of its members, is nothing more than the net result of their determinate interactions. Except for the autonomous decisions of the independent proprietors of wealth, the market would not emerge. The market is, in this * The market is defined in this way, to be equivalent to the system of economic relations as a whole, in order to avoid the idea that the market is a spatial and temporal conjuncture of otherwise isolated economic agents (e.g. a market place).

51

The aggregate circulation

respect, nothing more than the sum total of private interactions, even though these interactions are also determined in such a way as to assure their conformity with the structure as a whole. For the emergence of a market system, it is required that autonomous decisions made by the owners of wealth conform to the requirements of the total producing and consuming structure which their interaction generates. For this result to be assured, it is necessary that the organic structure of the whole have a force immanent within each of its elements such as to make their independent, private self-determination simultaneously their subordination to the objective laws of the reproduction and development of the market system. Since the structure of production and exchange must relate to the particular producers and consumers as both their origin and product, it is necessary to consider simultaneously the development of the firm and of the market. The particularization of capital develops out of the limits within which the endless expansion of value must be pursued concretely as an interconnected cycle of commodity production and exchange. Capitals must produce a limited range of specified commodity products, and they must do so upon the basis of a productive apparatus which is, at any given point in time, strictly limited by the mass of previously accumulated capital, the prevailing technology, and the capacity of the particular unit of capital to exploit the potential for growth and development latent within the existing structure of production and consumption. The particularization of capital is, then, a condition which manifests itself within the commodity product. As the product of the consumption of a qualitatively and quantitatively determinate capital investment, the commodity is the external representative of a particular capital; and as a socially specified utility, the commodity links the capital which it represents to a particular need or set of needs. The circulation of its product in the market confirms the generative power of the particular capital, while returning the means both to continue production and to overcome the limitations of capital’s existing productive forms. This circulation requires that capital find a consumer for its product. This externalization of the product of the particular capital provides the money necessary for the acquisition of the means to the renewal and expansion of production. This moment of the circuit of the particular capital cannot be accomplished exclusively 52

The particularization of capitals and the market

upon the basis of conditions internal to it, since the required exchange necessitates an opposition of individual exchangers constituted as independent one of the other. The market interactions implied in the circuit of particular capitals have the following distinct forms: (1) The sale of the commodity product which, in general, places money in the hands of the producer, and the commodity in the hands of its direct consumer (although various forms of commercial intermediation may further separate the produc¬ tion from the consumption of the commodity). (2) The purchase of the commodities whose consumption is required for continued commodity production, which places money in the hands of the suppliers of the requisites of production. Since the circuit of capital incorporates both the purchase of commodities with money and the sale of commodities for money, it represents elements of market supply and demand simultaneously. The demand for commodities which results from the requirement of the circulation of the particular capital is demand for the commodity requirements of capitalist production. Thus, capital directly engenders a market for productive inputs needed for continuing circulation. This market makes possible the realization of commodity capital for those producers whose products can act as means of production. In this case both the product, and the revenue which is created by its sale, remain elements of a capital circuit (although they move from one capital to another). Insofar as a part of the value flowing through the capital circuit moves entirely outside of the system of circulating capitals, a pool of purchasing power is generated by capital which is not destined to turn itself into the means to the expanded reproduction of capital. The creation of such a flow is not directly the object of the capital circuit, and in this sense it might be thought of as a by-product of a process having an altogether different purpose. Capital is a source of wealth. Indeed, in modern society it is the preeminent source of wealth. But, it is not exclusively a source of wealth for capital. The division of the flow of wealth between that part which remains within the system of capitals, and that part which moves outside corresponds to the capacity of wealth to sustain itself as a social force, while sustaining the needy individual as a social 53

The aggregate circulation

product. Social wealth is divided between that part which directly satisfies particular needs - wealth acting as means of consumption - and that part which contributes to the reproduction and expansion of the structure of wealth as a whole - wealth acting as capital. This division is governed by laws which express the immanent determination of the expansion process of social wealth. The growth of the aggregate circulation is determined together with its division into a part which is wholly internal to capital, and a part which moves also outside of capital. This joint determination is not based upon private decisions regarding intertemporal consumption, nor upon the capacity of capital to ‘exploit’ labor. It develops, instead, directly out of the process of the imposition and mutual accommodation between private accumulation and the growth of social wealth. The articulation of the laws which express this determination will be the object of our investigation of the process of capital accumulation. To the extent that we think of the real social purpose of private accumulation as that of providing an ever-widening sphere for the articulation and satisfaction of need on the part of the individual personality, the consumption which transpires outside of the capital circuit must be considered as its ultimate goal. This purpose can never be imposed directly, however, since it reverses the principle according to which the capital circuit is organized. The flow of revenue out of the capital circuit, which society thinks of as the real purpose of circulation, appears to capital as an imposition upon it, and is, in this respect, logically external to the determination of the circuit. This flow of wealth away from capital represents a kind of social levy which is imposed upon capital, and whose imposition plays a decided role in the developmental process of wealth which is rooted in capital. The imposition of this levy takes various forms. In the case of the wage, the flow of revenue away from capital is linked to the cost of a productive input which is not, itself, producible. In the case of income from property other than labor (e.g. interest and dividends), the flow of revenue out of capital is governed by the condition that capital is privately owned, and to that extent must be made to serve the personal needs of its owners. Taxation of a part of the flow of value through the circuit, by contrast, directly expresses the subordin¬ ation of private accumulation to an explicitly public purpose. In each case, the division of the flow of value between that part destined to remain within the system of capitals, and that part destined to flow outside, generates a division within the aggregate circulation (i.e. the 54

The particularization of capitals and the market

market) between a part concerned with the movement of means of production, and a part concerned with the movement of means of consumption. Historically, this division is rooted in the link between income and property which characterizes private enterprise as a social-economic structure. Under private enterprise, capital and labor provide revenues to their owners, which move away from capital, and provide a pool of purchasing power capable of realizing commodity capital in the form of means of consumption. The connection to capital is, however, different in the two cases. While payments to the owners of capital are directly claims over the revenues coming into capital from the sale of its products, payments to labor represent the cost of acquiring a necessary input which capital is incapable of producing for itself. While the imposition of the social levy is an external one, its limits are determined within capital by the rule that the form and magnitude of the levy be consistent with the determination of the accumulation process according to its own laws. Not only, however, does the capital circuit determine the framework and limits governing the formation of a pool of value outside of capital; it also strives to make this pool of purchasing power work as a fuel for its own internal processes. This end is accomplished through the production, by capital, of means of consumption the realization of whose value is also the return to capital of the revenue flowing originally out of capital. The internal structure of the market, which develops upon the basis of correspondence between the market and the capital circuit, is characterized by its division into two basic components: the buying and selling of means of consumption, and the buying and selling of means of production. Under capitalism, where income has its source in property, the market in means of consumption is fueled by revenue generated in a third market, within which labor is bought and sold, and by the constitution of ownership claims over capital which establishes a fourth division of the market, within which such claims are bought and sold. The market in means of production consists of a series of exchanges which transpire exclusively amongst capitals. The purchase and sale of means of production entails the confrontation between money capital on one side, and commodity capital (i.e. the commodity products of capital) on the other. The division of the market which corresponds to these relations between capitals includes all acquisition of productive means, and realization of the capital-value embodied in 55

The aggregate circulation

those productive means for their producer. The exchange of means of production immediately realizes the commodity capital of its producer, while bringing about the transformation of money capital into productive capital for its purchaser. The market for means of production is determined wholly by conditions of the capital circuit, and in this respect it is wholly subsumed by that circuit. The labor market is distinguished from the market in means of production by the fact that the capital circuit is directly represented at only one pole. The labor market consists of money capital, labor, and the sum total of the transactions by which the ownership of the money and labor is transferred. Under capitalism, the labor market is engendered by the circuit of capital as the access, on its part, to the labor required for its continuation. The confrontation here is not between capital and capital, but between capital and laborer (i.e. the owner of labor acting as such), so that while on one side the need fulfilled is for the continuation of the capital circuit, on the other side it is not. For the market interactions among capitals, value flows between particular capitals, and from one form to another for each particular capital, but the commodity embodiments of value remain throughout also forms of capital. This is not the case in the labor market. The money with which capital acquires labor begins as money capital, and ends simply as wages (so much money acting as nothing more than the means to acquire specific means of consumption). In the labor market, the money flows out of the system of circulating capitals. Vv'hat is decisive for the general conception of the system of economic relations is not the purchase and sale of labor, and the associated connection of income to property, but the division of the flow of wealth into that which remains within the system of capitals, and that part which, because it moves outside, must be attracted back in through the provision of commodities capable of satisfying particular needs (i.e. of consumers). Corresponding to this flow of value away from capital, there develops a specific division of the aggregate circulation which corresponds to the return of that value to capital. This third partition of the market is the market in means of consumption. Means of consumption may be defined, upon the basis of the structure of the aggregate market, as those commodities the exchange of which realizes capital-value in money without simultan¬ eously acquiring for capital any productive means. It is not implied in the conception of means of consumption that 56

The particularization of capitals and the market

they be purchased exclusively by the laborers whose sale of their labor provides a pool of purchasing power with the potential of realizing the value of products of capital. In the market for means of consumption, commodity capital confronts money in the hands of individual proprietors not acting as agents of capital. The money which circulates within this market begins as simple purchasing power and becomes money capital. This market excludes the owners of labor acting as such, and is open only to the owners of that part of the money supply not acting as money capital. The manner in which the owners of money originally acquired the purchasing power with which they gain access to the commodity products of capital is not a matter for direct consideration so far as the market in means of consumption is itself concerned. The general conception of the market does not, then, immediately exclude the possibility that the source of the money which purchases the means of consumption from capital be outside of capital. Nor does it immediately exclude the expenditure of the wage on commodities which originate outside of capital. The three markets considered up to this point are all rooted in the capital circuit. Means of production change hands in markets within which there is a direct confrontation of capital with capital (money capital with commodity capital). Labor changes hands in markets within which there is a confrontation of money capital with a commodity required by capital but not produced by capital. Means of consumption change hands in markets within which the confrontation is between commodity capital and purchasing power in the hands of the non-capitalist proprietor. In the first set of markets the flow of money is wholly within the system of capitals. In the last two sets of markets, money flows away from that system, or into it from outside. Given the mutual dependence of these markets, it is necessary that they develop together if the capital circuits are to be sustained. Ill The monetary circulation 1 The source of money

The aggregate circulation is made up of individual (and in this sense isolated) transactions. The whole is not, however, merely the sum of the particular exchanges; it is a structure within which each exchange occupies a determinate location. This determination of the particular exchange in economic space is not a passive specification (as in geometry), but an active interrelation between one transaction and the 57

The aggregate circulation

others with which it is jointly determined. The particular transaction makes up a quantitative portion of the whole; it also provides a specific qualitative contribution. An exchange may realize commodity capital, provide necessary productive inputs, and/or provide the means to the fulfillment of consumer’s need. And in each case, it does so for a determinate pair of producers and consumers. This particular act, then, links into the structure as a whole. The realization of commodity capital makes possible the acquisition of productive means, and vice versa. One exchange makes possible the next. Each exchange thereby sets in motion a sequence of exchanges, just as it has been set in motion by a prior sequence. In this respect, each individual transaction is an active element of the whole: the aggregate circula¬ tion. The flow of money manifests the intrinsic unity of the complex of particular transactions which make up the aggregate circulation. Monetary circulation does not simply facilitate the circulation of commodities, it gives that process a tangible form. Without the flow of money, the aggregate circulation dissipates into a myriad of isolated and accidental transactions. Since monetary circulation is the objec¬ tive, or tangible, presence of the aggregate circulation, it also manifests directly the logical structure of the circulation of wealth. At the same time, however, money is nothing other than the social measure and incarnation of wealth. It is sustained in its relation to the wealth which it represents. Commodity circulation is the ongoing interplay between the particular components of wealth, and the money which both represents and realizes their value. Just as social wealth exhibits its structural integrity as a monetary circulation, money sustains itself by continually giving way to the real wealth which it only represents. Thus, wealth is tied to money, and money to wealth. This connection has a two-fold implication: (1) the aggregate circulation is a monetary circulation, so that any investigation of the structure of the aggregate circulation is an investigation of the flow of money, and (2) the monetary circulation must find its roots in the social structure of wealth. It is necessary, in particular, that the provision of money be accounted for by the internal functioning of the system of economic relations as a whole. This provision of a sum of money capable of effecting the continuing circulation of wealth presents unique problems for the conception of the economic system which arise in the context of the investigation of the economic aggregate. 58

The particularization of capitals and the market The peculiar difficulties posed in the analysis of the monetary circulation derive from the impossibility of discovering within the circuit of capital, as that has been thus far formulated, a source of money which is capable of sustaining the circulation of commodities. Since money does not result from the productive consumption of commodities and labor on the part of capital - it is inherently non-produced - it cannot be thought to be provided to the market in the usual manner.6 The inability of commodity production to provide a real source of money derives from the peculiar relation between the aggregate of wealth and the money commodity. Money is the objective (social) incarnation of value, and is therefore the substantiation of the relation of the particular commodity to the totality of wealth. Money is the value of the particular commodities which it purchases. It does not constitute a sum of value additional to that represented in the wealth which circulates, but only the objectification of the very value represented in that wealth. Money represents value, it is value, but it has no value of its own. Thus, money can never realize a value of its own (since it cannot purchase money). Instead, it realizes itself as value by becoming the value of particular commodities. This explains the inconsistency of considering money to be a produced commodity on a par with the particular components of social wealth. Commodity production is determined upon the basis of the necessity of producing value. Since the production of new value is the sine qua non of this process, it cannot be applied to money. To produce money is to endow it with its own value (give it an intrinsic value). This value would then directly conflict with the necessity of establishing itself as the value of the commodities which it circulates. It is this mode of constituting money through its relations with the system of commodities that requires that money be the subject of a distinct investigation capable of specifying the laws which govern its origin, quantity and flow.* * The classical method of finding the origin of money in a process of commodity production effectively suppresses this set of issues. As a result, the peculiar features of monetary circulation are excluded from any essential role within the aggregate circulation. Subsequent to a brilliant analysis of the nature of money as the universal equivalent, Marx tends to consider the economic flow as if money were simply one more produced commodity. The analysis subsequently developed of the reproduction and expansion of the total capital and of the system of production as a whole is effectively non-monetary.

59

The aggregate circulation The mass of money committed to the commodity circulation, and the manner or route by which it enters the aggregate circulation bear decisively upon the functioning of the system of economic relations as a whole. The point of entry of the money into the system cannot be taken to be fixed independently of the laws which govern the aggregate circulation of wealth.* Money gains its social power directly out of circulation. To be money, it must seek out the value which it will represent (and, in effect, become). Such value may have the form of already existing commodities, in which case the issuing of money confirms the existence of a corresponding quantum of wealth in circulation. Alternatively,

the money

may

be issued as

a

stimulus to the

production of the value which it represents, in which case the issuing of money is confirmation of a value which is latent within the circulation.

Thus, the circulation of commodities engenders the

money which represents the value of those commodities, while the money confirms, and in some cases stimulates the production of, value in the form of particular commodities. The agency which issues the money does nothing more, in effect, than recognizing and certifying an existing reality or potential. This act of recognition realizes, or makes objective, a latent reality; it does not produce that reality. In principle, then, the issuing of money must not be the creation of new value which does not already exist, realized or potentially, within circulation. The necessity that the issuing of money not constitute a creation of new wealth marks the barrier between the source of money and the source of commodities. The source of money, in issuing a note, asserts (i.e. validates) the existence of wealth corresponding to that note. Acceptance of this note in exchanges verifies the claim made by the source of the note. But, this verification is not entirely ex post. The

* The part played by the state in regulating the monetary circulation extends to the control, up to a point, of the issuing of money. It is incorrect, however, to consider the state to be the real origin of money since to do so would be to (1) solve the problem of the origin of money arbitrarily through the invocation of a deus ex machina which would make the laws of the aggregate circulation derivative of state policy, while (2) leaving out of account the general economic laws of monetary circulation. These laws must be investigated on their own terms insofar as monetary policy can only go so far as to regulate their functioning, rather than overthrowing them altogether. The object of the general analysis of monetary circulation is to investigate its specifically economic laws. Such an investigation is logically prior to consideration of the monetary policy of the state. 60

The particularization of capitals and the market

social power of the money is independent of any particular set of exchanges. The money appears to be independently endowed with exchangeability - to be able to purchase commodities because it is money, rather than being money because it can purchase commodities. As we will see, this relative independence allows the money to contribute to the genesis of the wealth whose value it represents. Thus, the issuing of money must accomplish two ends simultan¬ eously: (1) It must validate, or make objective, an already existing potential or reality within circulation; i.e. it must not be the genesis of new wealth. (2) It must provide the currency, ex ante, with a social power which the currency derives, ex post, from circulating. This two-fold condition governs the manner in which money is issued, and the nature of the agency capable of issuing money. We will begin with an investigation of the agency responsible for issuing currency. The extent to which the issuing of money creates a true means of ex¬ change is directly proportional to the ability of the money to act as such, i.e. to circulate. The wider the circle of acceptability of the note, the better does it realize the ideal of the universal equivalent. Our original question can now be posed once again, but this time more concretely. What determines the magnitude of the circle of acceptance of a note which emerges within the process of commodity circulation? The dimensions of this circle, it turns out, will depend essentially upon the nature and magnitude of the wealth held by the source of the money. So long as the source of the money owns wealth, the money issued will, at a minimum, represent a claim over the wealth which it represents. It is not the actual return of the money to claim the property of the source which is crucial, but the possibility of such a return. In this way, the amount of money issued is limited by the wealth of the source of money.* But, what of the nature of that wealth, and the form in which it is held? The first implication of the genesis of money for the wealth which sustains its acceptability is that this wealth must sustain itself throughout the lifetime of the means of exchange which it supports. What is crucial, of course, is not that the wealth held by the issuing agency remain inert (as in the case, for example, of the hoard of gold), but that however its form may change, it continue to constitute an * The fact that the money may return to its source as a claim on it need not imply convertibility in the usual sense, but only that, as a minimum, the issuing agency must itself recognize the money which it issues as means of exchange.

61

The aggregate circulation

undiminished portion of the wealth of society, of the aggregate value. It is not by this implied that that proportion of social wealth be equal in magnitude to the value represented in the money issued, but only that it be sufficient to sustain its acceptability. Thus, the first qualification of the wealth which stands behind the currency is that it be able to sustain itself for the prospective lifetime of the money. However, since by its nature the circulation of money is a process of indefinite duration, this condition is in fact a powerful one. Because money is sustained and strengthened by its repeated consumption in circulation, the success of notes issued in establishing themselves as money is proportional to the magnitude of the circle of exchange which they sustain, and therefore to the length of time during which they continue to act as money. The necessity that the wealth which stands behind the currency sustain itself indefinitely has essential implications for the form which it adopts. The preservation of this wealth must be the preservation not of its useful form, still less of its physical-material structure, but of its value, since it is the value alone which is relevant to the acceptability of the means of exchange. How does this condition affect the issuing agency of the money? If, for example, the commodity owner who issues the money holds his wealth in the form of some particular commodity, or of the means for producing some particular commodity, then the acceptability of the money issued must be contingent upon the fortunes of that particular commodity. If the issue of currency is based, for example, upon the ownership of cotton, or of claims to some part of a cotton crop, then the status of that currency must depend directly upon the vicissitudes of the cotton market. Since wealth is held in the form of a particular use-value, its magnitude will fluctuate with fluctuations in the price of that use-value. Any general sharp decline in the price of cotton will inevitably undermine the currency issued upon the basis of cotton. The difficulties are equally acute for a prospective source of money which seeks to use its wealth to invest in particular productive means. Once again the acceptability of the currency must become contingent upon the vicissitudes of a particular market. In these cases, the universality of the money is undermined by its origin in the process of valuation of a particular commodity. The money appears, for a time, to be the universal equivalent, even acts as such for a period of greater or lesser duration and within a circle of exchanges of wider or narrower dimensions. But, standing behind this appearance is the 62

The particularization of capitals and the market

reality that the money is supported not by wealth as such, but by wealth in a particular, contingent form (e.g. cotton). And this reality makes itself felt when a weakness in the commodity market translates itself into a monetary crisis. This deficiency is overcome to the degree that the agency issuing the money represents not the single product or producing apparatus, but a wide range of products and productive ventures which, in the limit, approaches the replication, on a reduced scale, of the aggregate production. When the currency is based, in this way, upon the aggregate circulation, then its well-being becomes synonymous with that of the system of economic relations as a whole. Indeed, the monetary circulation is, by its nature, a system of relations through which money establishes its correspondence to the system of commodities which makes up the social wealth. However, the replication of the system of production within a single property owning agency (e.g. unit of capital) is precisely that condition which obliterates the particularization of capitals and with it the very rationale for a monetary system. The solution to the problem of the source of money must be found upon the basis of the particularization of productions and of capitals. The implication of this result is that the wealth employed to sustain the currency cannot be wealth directly invested in the acquisition of productive means. In sum, the general defining conditions of the source of money are: (1) It must itself represent social wealth. (2) The wealth which it represents must sustain itself indefinitely. (3) It must use this wealth not directly for the purpose of producing surplus-value, but indirectly as the means of establishing its own claims over social wealth as money. Since the source of money is the mass of private wealth which sustains itself indefinitely, it is capital, and therefore a particular capital. But, as the representative of wealth, which does not encom¬ pass its real circulation (e.g. the moment of production), the source of money cannot be just any particular capital. This particular capital, which is not the result of the particularization of capital in production, is a bank: the depository of wealth.* * In the absence of banks, particular commodities are money, and credit becomes money, but money as such does not exist, i.e. a commodity which is nothing other than the universal equivalent.

63

The aggregate circulation

The need fulfilled by the ‘product’ of the bank is for the universal equivalent. The bank is capable of satisfying that need due to the absence of any strict identification of its capital with the production of particular commodities. The bank must share the emancipation of money from particular products and particular markets. Capital acting as a bank has no direct association with production per se, and the peculiar function of bank capital as intermediary between particular and universal is the expression of the opposition between productive and money capital at this level. The products of private capital lack the universality which is necessary for the foundation of the currency. At the same time, the social wealth which can alone sustain the issuing of currency must inevitably exist in the form of just these products of particular capitals. The full development of a monetary system requires that banks fink their currency to real wealth, and therefore to the products of particular capitals, without in fact holding their wealth in the form of such products. The bank must establish an indirect link to the products of private capitals, which roots its currency in real wealth without restricting it to a particular form. The implication which this has is that the claim held by the bank over the particular capital be not to the particularity of its product, but to its generality, i.e. its value. The product of private capitals is no mere use-value, but value and capital. The circulation of capital invested for productive purposes must generate a value return, and in the money form. The claim held by the bank is to the product of private capital, but in its general form: as money. In effect, the wealth which sustains the money issued by the bank is money itself, not, however, the money directly issued by the bank, but the money generated by the circulation of the particular capital. This peculiar relation by which the bank employs the universal form of wealth to support the issue of the universal equivalent is credit.

2 Credit

The bank accepts a future claim over a fixed part of a particular capital’s revenue, in return for providing to capital the means of exchange required for the continuance of its circuit. It is the task of the recipient of money to transform the means of exchange acquired from the bank into more money through its particular circulation, including the production of commodities. The private claim provided 64

The particularization of capitals and the market

by the particular capital to the bank is not the claim over actual commodities, but over the revenue of its capital investment. The bank mediates between claims over current production and claims over future production. This relation of present wealth to future wealth is credit. Thus, the bank provides money, eternally the claim over current wealth, for a claim over future wealth also in the money form - a future claim over what is eternally the claim over present wealth. The object of the bank in providing this service is the growth of its own capital, and not the consumption either of present or of future wealth. The necessary condition for the circulation of the bank notes as money is that the bank refrain from exercising the claim over current wealth of the money which it issues. The objective foundation for the reliability of the source of money is the condition that its money have, standing behind it, definite claims to money in the future, claims which are made good by the circulation of capital. Thus, standing behind the currency is the circulation of capital, and so long as the circulation continues to flow, this condition is adequate. Once the flow is interrupted, or without it altogether, definite commodities (e.g. gold) may replace capital as the basis of the medium circulation. Banks do not create (in the sense of producing) money, since the money already exists latent within circulation. Instead, the bank issues money. The mode of issuing money is determined by the necesssity that the issuing of money be sharply distinguished from any immediate generation of new value. The bank does not assert its claim over an additional part of social wealth (i.e. by spending its own newly created money on existing wealth); it certifies an existing claim over social wealth. Thus, the issuing of new money is kept subordinate to the creation of room within circulation (and by circulation) for additional money. This implies that the circulation of the money issued by the bank must be wholly outside of the bank. For this relation to function smoothly, the money issued by the bank must contribute to the creation and reproduction of the wealth whose value it represents in order for it to remain money. As soon as it returns to the bank, it ceases to exist. This form of issuance of money allows the aggregate circulation to certify that the money issued by the bank is a representative of the aggregate circulation of social wealth. It is this certification within the real circulation of commodities which estab¬ lishes the claims issued by the bank as money and the bank as a source of money. 65

The aggregate circulation

The unique capacity of the bank to provide a note which represents a claim on social wealth derives from its peculiar relation to the circulation of capital. Only with the full development of capital does it finally become possible to emancipate the currency from the contin¬ gent circumstances of the production and valuation of particular commodities, since it is now possible to ground the medium of circulation in capital. Now, the extent of the lifetime of money is not established by any arbitrary material quality of the substance out of which it is composed, but is an exclusively social function of the potentially limitless lifespan of the capital to which it is linked. When the bank issues notes in exchange for the debt of capital, it simply intermediates in the flow of capital, but this intermediation is the condition sine qua non of the circulation of capital itself. It is up to the bank to assure that its notes are issued in such a way as to provide the basis for the expansion of the circulation, and for its continual renewal. This, in turn, assures the return of the currency, which assures its continuing valuation. And it is up to the circulation of industrial capital to assure the proper utilization of the currency provided by the bank for the expansion of wealth in the myriad of particular forms capable of making good, for the owner of money, its claim to represent social wealth. Only so far as wealth is produced by capital through the employment of money as capital advanced, will the money encounter the commodities which it requires in order to realize itself as the medium of circulation (i.e. by actually circulating the aggregate of commodities). What is the theoretical significance of this structure of the monetary circulation? On a fundamental level, it undermines essentially the idea that the financing of capital investment is limited to the revenue generated by prior capital investment. This idea takes a variety of forms in economic theory all culminating in the claim that the capacity of investment to produce revenues in the present represents the effective limit to formation of new capital. This inherently backward-looking view locks the present into the past, sharply restricting the dynamic of capitalist economies. The genesis of money within the aggregate circulation, however, follows an altogether different logic within which the future potential of investment has the force required to engender the funds required for its financing. This is an inherently forward-looking process, which forms the present in accordance with the realization of a future potential. Money liberates the present from the past, thereby allowing the future to generate 66

The particularization of capitals and the market

itself in the present, and upon the basis of conditions created in the past. The self-generation of financing for investment expresses itself with the greatest force when the prospective entrepreneur sets himself up with money borrowed on his good name and an idea for investment. The reliability of the prospective entrepreneur and the quality of his idea have the force not simply to appropriate a part of a fixed pool of financing, but to stimulate the creation of the requisite finance. This process brings directly into question those ways of thinking which focus attention upon the production of surplus-value as the determinant of the magnitude of investment, and even as its upper limit. The idea, for example, that what is crucial for the process of the ‘original accumulation’* of capital is the source of funds contains precisely this fallacy of reasoning, and completely ignores the capacity of a financial system to generate funds based upon prospects of future revenue. Bank notes circulate insofar as they are socially recognized as real claims over social wealth. Confidence in the bank derives from the idea that the bank is wealthy, and this confidence underwrites the currency of the bank notes.7 This assurance is not, however, purely subjective. On one side the money is accepted as means of exchange because it circulates, but on the other side the money only circulates because it is accepted as means of exchange, and it is so accepted because the agency which issues the notes represents real wealth. The assets of the bank underwrite the confidence of the public in its notes. These assets are themselves forms of credit, claims held by the bank over capital. They are the universal form of particularized wealth which is not money (although they may also be money issued by other banks). Corresponding to the money issued by the bank are bonds held by the bank, which are claims over future money to be acquired by the debtor through the productive employment of the money provided by the bank. The monetary circulation is thus rooted in the system of credit. The circulation of money is the mirror image of the circulation of commodities. In the commodity circulation, value proceeds from the moment of production to that of realization. The genesis of money * This applies, for example, to the idea that the role of slavery in capitalist development was essentially to create the surplus-value required as a pool of funds without which investment in industry would have been impossible, see E. Williams, Capitalism and Slavery (New York: Capricorn Books, 1966).

67

The aggregate circulation

involves the inversion of this relation: The creation of money by bank capital is the genesis of realized value (money) which precedes its production, but which also stimulates and facilitates that production. The bonds held by the bank, as its own means of issuing money, provide the bank with its claim over the ongoing monetary circulation sustained by capital. The money - realized value - provided by the bank is the means by which capital simultaneously realizes a portion of already produced value (since it is used for the acquisition of means of production by the borrower), and establishes the basis for the renewal of the productive foundation upon which capital generates the value equivalent of the money in the form of particular commodity products. It is the unity of opposed movements which sustains the aggregate circulation. Capital is value which engenders value. For the circula¬ tion of the particular capital, value is the precondition and result; it is its money which creates more money. For the aggregate circulation this also holds. Money provides the original means by which capital creates the commodities whose existence sustains the money. If the money is used productively, the value whose realization it represents will be brought into existence. In this case, money is a claim over social wealth which is created prior to the creation of the social wealth which it represents. This temporal structure of the monetary circula¬ tion is manifested by the holding of bonds, which represent claims over future money, as the basis for the current issue of money. Since the bank does not spend, but only advances, the money which it issues, that money acts as capital for it. At the same time, that money does not represent a part of the capital of the bank (indeed, the bank notes represent claims upon the bank). The return on the money advanced does, however, accrue to the bank (indirectly as a return on its assets). It thus contributes to the profitability of banking capital without measuring that profitability. This return, which is not directly a return on a particularized capital investment, is directly a return on money-capital, and indirectly a return to capital particularized as bank-capital. Money advanced as capital without giving up its money-form returns interest rather than profit. This interest is, then, transformed into a component of the profit on the assets of the bank. The credit relation entails the following elements: (1) the money advanced (Af), (2) the return of the money advanced (the payment of the loan), and (3) the surplus-value acquired by the advance of the money (interest). The specific forms which this relation adopts vary 68

The particularization of capitals and the market

with its level of development and with the degree to which its capitalistic character is made manifest. The legitimacy of the idea of credit is always linked to the idea that wealth has an intrinsic productive power, and therefore to capital. Even the most elementary forms of credit contain this link to capital, however implicitly. Thus, the relation of the elementary to the more developed forms is essentially one of making the connection with capital explicit. In the most elementary form, credit is a relation between a given, particular borrower, and a given, particular lender. Formally, the relation appears as follows: M-+M + AM

In this case there is no exchange involved in the transaction. Instead, the money is advanced by the creditor and held or used by the debtor until the loan falls due. At the poir,: in time at which the loan comes due, the debtor returns the money advanced by the creditor, together with the interest (AM) which is agreed upon at the outset of the transaction, and which represents the increment to the money which, by being advanced, acts as capital. The contract involved in the elementary form of credit is that of the payment by the debtor to the creditor of a given sum of money (the loan together with the interest) at a specified point in time. The debt, then, represents a claim over a certain amount of future money. Implicitly, the creditor has purchased a claim over money in the future. This quality of the transaction is suppressed in the elementary form, which represents only the relation of advance to return of value. It becomes explicit, however, when the debt itself circulates as a commodity. In this case, the creditor no longer merely advances money, it actually invests it - in a bond. The relation of creditor to debtor is mediated by a commodity, which is the debt itself, and the debt is no longer a relation of a particular creditor to a particular debtor, but of the particular debtor to whomever owns the bond. Formally, the relationship is now: M-*~B-*~M + AM.

Where (B) stands for the bond acquired as the form of capital investment. When the money advanced takes the form of an investment through the purchase of a bond, the object is clearly not the return of the 69

The aggregate circulation

principle as such (the AT) but the use of the principle as the basis for generating a stream of net return. The capitalistic character of credit underlies its most advanced form, in which the debt actually constitutes itself as an investment, which remains in the form of an investment for an extended period, during which it returns a stream of revenue, rather than the monetary equivalent of the loan. Formally, this most highly developed form of credit, appears as follows: M -*■ B

... m ... m ... M

where m represents the periodic monetary income due to the owner of the bond. The longer the period of time which separates the issuing of the bond from its retirement (the paying off of the debt), the less significant is the face value of the bond to its actual rate of exchange with money. Prior to its maturation, what is acquired in acquisition of the bond is not the amount of the debt which it represents, but a stream of returns. It is, then, from this stream that the price of the bond must be inferred. It is, in other words, the value of the periodic return which is the value of the bond, rather than the value of the debt itself. This result is, of course, characteristic when capital is made into a commodity. When the commodity purchased is capital, that commodity can never be a given sum of money, but a process of circulation of value. This characteristic of the purchase and sale of capital alters the implication of the idea of exchange of equivalents, since the determination of value also depends upon the rate of return. The rate of growth of the value measures its character as capital. The issue at stake in the transaction is not the amount of value acquired as such, but the amount of capital. And the measurement of the quantity of capital depends upon its rate of return, which is the quantitative measure of value acting as capital. In the case of a bond with an indefinite stream of returns, the value is derived from the rate of interest and the magnitude of the periodic return due to the holder of the bond: B = m/\,

where i represents the rate of interest. It is possible for the particular capital to issue bonds in the advanced form, rather than in the elementary form of credit, because capital represents the power to produce and realize a potentially endless stream of wealth. In this sense, the most advanced form of credit rests upon the foundation of the cycle of productive capital. 70

The particularization of capitals and the market 3 Interest and profit

The distinctive forms of capitalist credit derive from the fact that the commodity exchanged is not money, but the value attracting power of money. But this power of money is not simply that through investment it procures a particular profit rate by acting as capital. The money is capital in its directly universal form: a form which results from the absence of a direct link to the circuit of the particular capital so far as that entails the incorporation of specific conditions of production and exchange. This does not imply that value advanced into the system of credit is not particularized, or that it remains effectively capital in general. On the contrary, value advanced as credit adopts that particular form required for it to remain within the credit system. This excludes such value from acquiring profit as its characteristic return. Money can acquire interest precisely insofar as it gives up its claim to profit. In its pure form, the difference between interest and profit relates to different kinds of capital, that invested as money and that invested in the form of a producing structure. Capital invested in a bond remains money, and therefore is always the immediate equivalent of all other quantitatively equal sums of money. This does not exclude restric¬ tions, i.e. particularizations, connected to investment in bonds which are reflected in the specific terms of the loan (e.g. the period of maturity, reliability of the borrower, etc.). These differences underlie differences in rates of interest, and as such represent a degree of particularization of money invested. Nonetheless, the investment remains always (1) in an incipiently liquid form, and (2) an investment in money. Money invested in money is never particularized to a producing structure, and because of this receives a distinct return - in¬ terest. Profit, by contrast, only develops when the capital invested gives up the money form altogether, and by being fixed into a particular form loses its liquidity. Since profit is defined this way, it is inherently particularized. Within the aggregate circulation of capital, money takes on the capacity of procuring surplus-value by acting as capital. This is the value which money has not as the direct means of purchasing particular commodities, but as capital, and it is measured by the rate of interest. Interest shares with dividends this separation from the real intrinsic unity of the capital as a particular producing and marketing structure. Interest and dividends are distinguished by the degree to 71

The aggregate circulation

which the capital investment is separated from such a particulariza¬ tion. Dividends represent a return to the ownership of a particular capital, and are determined, in part, by the conditions of the particularization of that capital - they are shares in the return to the particular capital. The conditions of investment in bonds are in principle independent of the particular capital (except in so far as its creditworthiness affects the rate of interest and reliability of the loan). The creditor has no direct proprietorship over the particular capital, but only over so much money.* His investment is always in money acting as capital without sacrificing its universal form, while the owner of the stock has an investment in the particular capital rather than in money as such. The determination of profit takes place within the process of the particularization of capital into a producing and marketing structure. As we will see, the rate of interest does not play a decisive role in this process, and cannot, therefore, be thought to regulate profitability. This result is attributable to the distinctiveness of the mode of particularization of capital within the system of credit, which separates it from the production and marketing system. Similarly, the determination of interest takes place within the credit structure, and according to its distinctive processes. Since capital particularized into forms other than credit is excluded from this system, it cannot enter directly into the determination of interest rates. A specific link can be forged by dropping the condition of particularization. When capital value is more or less freely mobile from one form of investment to the next, the profitability of the various alternatives must be jointly determined. This joint determina¬ tion is expressed in the idea of an average profit rate. Since credit is also a mode of investment it must, under these conditions, also have its return jointly determined, in this case with the average profit rate. This joint determination is expressed differently in classical and modern economics. In classical economics, the mutual determination of profit and interest is expressed by the idea that the rate of profit regulates the rate of interest (i.e. as its upper bound) since interest is paid out of profit. In modern economics the rate of interest regulates * In the limit, when the debtor fails to generate the means to pay off the loan and/or the interest due, the indirect claim of the creditor over the productive means may translate into an immediate claim. Once again, formal ownership passes over into a real involvement in capital’s life cycle at those points at which the capital fails to fully establish itself as such.

72

The particularization of capitals and the market

the rate of profit since it represents an opportunity cost, and therefore lower limit to profit. Both results are achieved by sacrificing the particularization of capitals, and especially the particularity of value advanced as credit. Where this condition of particularization retains its force, interest and profit must be determined by circumstances specific to the system of credit and the system of production respectively.

4 The financial circulation

The aggregate of commodities, which makes up the wealth of society, duplicates itself as an aggregate of claims over wealth. This mass of claims over wealth constitutes a complex system of monetary circulation and of credit. The object of this system is to make possible the realization of the temporal structure of the circulation of wealth as capital. That temporal structure is characterized by the power of the future acting in the present. The establishing of such a power is the essential basis for a process of immanent development. The organiza¬ tion of the economy according to the principle of the self-development of a structure of wealth requires that the present be capable of emancipating itself from the past in order that it give birth to a new structure in the future. This capability is established by the credit structure. Under capitalism, the credit structure simultaneously realizes an additional principle, that of circulating ownership over capital as a source of private revenue. Since capital is privately owned, it must serve the private needs of its owners acting as individuals. The way in which it provides for such needs is by paying interest and dividends. Since the capital is owned, however, it can be bought and sold. This possibility sets in motion a circulation (a division of the market) which is peculiar to capitalism, and which gives to the growth process of capital certain of its distinguishing features.8 In a capitalist economy, present and future claims over money are inherently of different value.* Money is always latently capital, and * Since money produces interest, ‘aside from its use-value as money, it acquires an additional use-value, namely serving as capital ... In this capacity of potential capital, as means of producing profit, it becomes a commodity, but a commodity sui generis. Or, what amounts to the same thing, capital as capital becomes a commodity.’ K. Marx, Capital (New York: International Publishers, 1967), vol. Ill, p. 338.

73

The aggregate circulation

its capacity to procure for its owner surplus-value is reflected in the differential valuation of present and future monetary holdings according to the prevailing rate of interest. The complex forms in which money may be held in order that it realize the expansion of its value over time, the holding of money as such without claim to its increment, and the transactions by which money holdings move from one form to another, constitute the financial circulation. 9 The financial circulation consists of the buying and selling of ownership over capital in the form of stocks, and of ownership over money acting as capital in the form of bonds, together with the varying holdings of money in the form of deposits in banks. The financial circulation is, therefore, inherently a circulation of non-produced commodities, and is regulated by laws distinct from those which regulate the circulation of produced commodities. The circulation of all produced commodities makes up the real or commodity circulation within which the movement of money effects, stimulates, and is based upon, the entirety of the capital cycle including the moment of commodity production and consumption. The laws of the real circulation are made specific by the conditions of limitless reproducibility and of the pursuit of profit through the particularization of capitals. The laws of the financial circulation are made specific by the non-reproducibility of the commodities circulat¬ ing (stocks and bonds), and by the expectation not of profit but of interest and dividends due to the passive ownership of capital rather than to its active functioning. Money is the only commodity which flows equally through and between the two circulations which together make up the aggregate circulation. The monetary circulation, therefore, encompasses the aggregate circulation so that the laws of the circulation of capital as a whole all must reflect themselves as laws of the monetary flow, which incorporates the laws of the market system.

IV The self-realization of capital In order for capital to expand, it is necessary that the value of which it is composed form itself into a circuit the totality of the moments of which constitutes the movement of capital as its self-expansion. Viewed from the standpoint of capital as a whole, the circuit is composed of a system of interweaving circuits of particular units of capital. Each distinguishable unit consists of a complex of circuits of 74

The particularization of capitals and the market

the component parts of its total capital investment. The system of capitalist production taken as a whole consists of the total complex of capital circuits, so that the unity of capital as a whole is that of the circuit of circuits. Commodity exchanges, which form the necessary points of contact between the individual circuits of particular capitals, are the substantiation of the unity of the aggregate circulation. This unity, then, lives in and through the concrete inner structure of the market. It is in the market that each firm seeks the prerequisites for continued and expanded production in the form of labor, means of production, and demand for its commodity products. The situation of the particular capital within the system of capitalist production and consumption is the condition which makes possible its own subsis¬ tence. The particular capital must, therefore, pursue its own subordin¬ ation to the economic system, just as that system must enforce conformity to its inner structure as the rule of participation within it. Within this system of mutual dependence, no particular capital is capable of realizing its goal of self-expansion without the alienation of its products in the market, and without simultaneously finding in the market the means to continued and expanded production existing in a form quantitatively and qualitatively appropriate to the renewal of its productive activities on an expanded scale. In order for the particular capital to expand, it must produce commodities and, through exchange, alienate those commodities from its circuit. This effects the transformation of capital from the commodity form to the money form and recovers the original outlay (or, in the case of fixed capital, a part of that outlay) together with an increment of profit on capital. Since the sale of the commodity capital transforms the value which it represents within the circuit into money, it realizes commodity value. Since the commodity value so realized is value acting as capital, the sale of the commodity capital is also the realization of capital. But, this realization of capital, while it requires the alienation of the commodities produced by capital, cannot be effected by conditions which develop without regard to the circuit of capital taken as a whole. Were the products of the circuit to be constrained to find the market necessary for their realization as capital outside of the complex of conditions brought to life by the inner force of the system of capitals, then the moment of realization, and with it the expansion of capital, would become purely contingent. The determination of the magnitude of the capital-value, together with the 75

The aggregate circulation

process of its realization, would be thrown outside of the development of capital. As a result of this, the realization of the value of the products of capital would only by accident give rise to the expansion of capital. The full determination of the circular movement of capital must, therefore, be simultaneously the full determination of the market within which alone the subsistence of the circuit is possible. The investigation of the system of capitals, and of the relations of production and exchange which develop within that system, must grasp simultaneously the activity of the particular unit of capital and the generative activity by which the market develops as the arena for the realization of capital’s self-expansion. To the degree that the conditions for the realization of capital (the sale of its products in the market) are posited by and within the activity of capital itself, the determination of the market system is not outside of capital, but within the process of its self-development. The growth of the market and the growth of capital are two aspects of a single connected process. Since the market realization of the products of production as capital (as containing within them both capital-value and its incre¬ ment), is the result of the activity of capital, the marketing of the product is the culminating moment in the life-cycle of the capital. The total process of the self-development of capital must, therefore, be also the process of its self-realization.

76

CHAPTER THREE

The general structure of the accumulation process

I Commodity price 1 Cost and price

The market is the system of internal relations of wealth taken as a whole, and the circuit of capital is the cycle of wealth pursuing its self-development. For the market to fulfill its distinctive function, it is necessary that it be organized in accordance with the requirements of the capital circuit. At the same time, the structure of the circuit of the particular capital must conform with that of the market, which is the medium within which the circuit sustains itself. The two points of the circuit at which the subordination of the firm to the morphology of the market is made explicit are the purchase of the commodities required as productive inputs, and the sale of the commodity products. These are the points of the circuit at which its continuation is predicated upon its immersion within a system of market interac¬ tions. The market transactions by which the particular capital sustains itself include the advance of capital-value to purchase productive means, and the sale of output to realize the value of the commodity capital produced. The quantitative relation between these two points of its cycle forms the basis for the reproduction and the growth of the capital. Once the focus of the analysis is placed directly upon the market relations of the firm, the representation of the firm by its individual commodity product must become the basis for the economic calcula¬ tions relevant to the circuit. Market relations are, by their nature,

The aggregate circulation

relations of individual commodities measured by their exchangevalue, or price. Market transactions counterpoise commodities to money, and commodity owners to the owners of money. The explicit situation of the unit of capital within the market system entails an investigation of the way in which the purchase and sale of particular commodities sustains the ongoing circulation of capital. In particular, this requires a determination of the price of commodities, and of the scale on which they are sold which is consistent with the exigencies of the self-expansion and self-development of wealth constituted as a structure of particular capitals. The advance and return of capital takes place through the sale of the commodity, and upon the basis of the implied quantitative relation between revenue forthcoming from the sale, and the expenses incurred in bringing the commodity to the point of sale. The circuit must develop, then, through the medium of the cost-price relation. In particular, the capital advanced-value returned calculation must be made upon the basis of the relation of cost to price of the individual commodity. At the same time, since the cost-price relation is the medium for the circuit, it is always evaluated upon the basis of its adequacy to the continuing circulation of capital. The calculation of profitability begins with the cost-price relation, while the assessment of the the prevailing cost-price structure with respect to its adequacy to sustain the circuit is always made upon the basis of its implications for profitability. Thus, the direct determination of profitability by the system of price relations is also the indirect determination of prices by their implied structure of profitability. This two-sided relation forms the basis for the concrete determination of the dynamics of the competition and accumulation of capital.

2 The components of cost

In order for the firm to situate itself within the market system, it must first incur the expenses associated with its existence as a productive potential, and with the realization of that potential in a mass of individual commodity products. These expenses, when associated with the individual product, represent its cost to its seller, i.e. the sum of the values of commodities consumed in producing it and bringing it to market. The components of the cost are, in the first instance, the discrete commodities which must be consumed in order that the product 78

The general structure of the accumulation process

emerge at the end point of its participation in the capital circuit. The calculation of cost, however, requires the association of specific commodity inputs with specific commodity products. It is this quality of the cost calculation which distinguishes it from the more general association of value consumed within the circuit and capital advanced. The object of the capital circuit is the production and realization of capital. For this end, the production and realization of individual commodities is only the means. The object of capitalist commodity production can never be the individual commodity as such, but always the mass of commodities, and the individual commodity as the element of an ever-growing sum. Thus, the production and sale of commodity capital, while it subsumes that of the individual commodi¬ ty, cannot be reduced to a sum of individual acts of producing and selling individual commodities. The costs which must be incurred in order to produce and market a continuous stream of commodities differ quantitatively, and in kind, from the costs which must be borne if the entire objective of production is fulfilled by the sale of a single product. In the former case, which alone concerns us, the costs of producing the individual commodity are the costs of producing the stream of commodity products calculated according to the proportion which the individual commodity makes up of the whole of the commodity capital. The starting point, then, is not the summation of the costs originally associated with each unit of product taken independently, but the total cost. And the cost of the individual commodity is derivative of the sum of costs, being a determinate proportion of that sum. Those costs whose incursion establishes a basis for mass production and sale represent, for the commodity product, the capital of the firm constituted as a productive potential. Considered upon the basis of the concrete requirements of commodity production, these costs represent investment in capital equipment capable of producing a stream of commodities whose magnitude is not immediately fixed. The total product of the capital investment is never given in its technical specification, but always depends, given the limits of its productive capacity, upon the economic determination of the degree of capacity utilization and the length of its productive life-time. This indetermin¬ acy results from the establishment of the means of production as a productive potential which is, in principle, indifferent to the particular unit of product. This indifference, together with the indeterminacy of the magnitude of capital’s total product, makes impossible any a priori 79

The aggregate circulation

association of the value represented in the instruments of production with the value of the unit of product. This condition holds in general for those commodities whose consumption within the circuit is associated with the constitution of the unit of capital as a potential for the production and sale of particular commodities. Durable equipment represents the archetype of this classification of costs. The calculation of the periodic depreciation of the fixed capital investment has a relative indepen¬ dence of its utilization (therefore consumption) in the production of the particular commodity product. The value consumed, and reap¬ pearing in the product, has also therefore a relative independence of the unit of product. The element of fixed capital expended which is calculated into the cost of the individual commodity is not the result of the direct consumption of that value in the production of the individual commodity. The association of depreciation with the unit of product must, then, proceed subsequent to its production and sale. While fixed capital is typical of the costs associated with the maintenance of the firm as a productive potential, it does not exhaust that category of costs. Included as well are the whole range of costs associated with marketing the generalized (or ideal) product of the firm, as well as those costs associated with the preservation and development of the integrity of the firm as a particular unit of capital (product development and management). Capitalist commodity production is inherently production for a mass market. The condition of mass production implies a uniformity of product, which makes each unit qualitatively identical. To the extent that this identity develops, certain aspects of marketing the commodity product can, in principle, be separated from its particular unit. Thus, the indifference of the means of production to the individual unit of product reproduces, and is reproduced by, the indifference of the marketing of the product to its individual unit. It is now possible for the firm to market the idea of its product, and the costs (e.g. advertising) incurred in so doing share with fixed capital an independence of the individual unit produced. Fixed capital and the sales effort represent respectively the production and marketing of a generalized, ideal, or potential, product. The institutional integrity of the firm is maintained by its managerial staff whose work is that of directly unifying the various components of the life of the firm as a unit of capital. Management of the unit of capital also involves the incursion of costs and the 80

The general structure of the accumulation process

acquisition of commodities (especially labor) and as such represents a bona fide cost of maintaining the life of the firm as a unit of capital. These are the costs associated directly with integrating the compon¬ ents of the capital and the stages of its circuit, and of subordinating each element, and each phase, to the overriding objective of the life-cycle of capital. In addition to the cost of acquiring the commodities whose consumption directly or indirectly contributes to the production of the commodity capital, the firm incurs costs connected to acquiring the money needed to purchase the productive inputs so far as a sufficient amount of money is not forthcoming from current sales. This cost is the interest due on outside money invested in productive means. The magnitude of this cost will depend upon the extent to which the capital investment of the firm is financed by borrowing. The sum of the expenses incurred in constituting the firm as a producing and marketing potential makes up its overhead costs. It is evident that the calculation of these costs per unit, while necessary to their retrieval through the sale of the product, also has an arbitrary aspect since these costs are indifferent to the individual product. Since, within any given period, these costs are relatively fixed without regard to the scale of production (though they may not be wholly independent of scale), their calculation per unit must be subsequent to the determination of the sum of value returned in the sale of the product. The calculation of unit overhead costs in effect allocates to each unit its proper share of the value of the producing and marketing structure which it represents. The lower is the level of production and sales for any given sum of overheads, the greater is the burden of maintaining the integrity of the unit of capital borne by the individual commodity product. Unit overhead cost is the ratio of the fixed sum of overheads to the total product in the given period. The higher the level of production, the lower this ratio; and the lower the level of production given the productive apparatus, the higher is the unit overhead cost. Overheads would be a sufficient basis for the calculation of unit costs if total cost were independent of the quantity produced. This condition is not, however, consistent with the general character of capitalist commodity production. In order to activate the potential represented by the firm, it is necessary to acquire the labor and materials which make possible the embodiment of the capital into the individual commodities which can alone represent it in the market. 81

The aggregate circulation

While the potential of the firm can never be realized in the individual commodity, neither can it be realized independently of the stream of individual commodities. The costs incurred in the transformation of the firm’s economic potential into a stream of commodity products are the prime costs associated directly with the production of the individual units of product. As such, their mass within any given period is directly proportional to the magnitude of production and sale within that period. The rationale in accordance with which the firm incurs such costs is the direct production of specific products or groups of products. The total expenditure associated with the direct realization of the productive potential of the firm depends upon the degree to which that productive potential is actually utilized in producing commodities. Prime costs, then, being fixed per unit of product, vary directly with the number of units produced. While the opposition between fixed and circulating capital develops upon the basis of the periodic advance and return of capital-value, the distinction between overhead and prime costs is rooted in the manner in which the expenses of production and sale come to be associated with the individual commodity product. The distinction between the component parts of the capital, and the component parts of the cost of the commodity product derives from the opposed bases upon which the two calculations are made. Overhead costs incorporate that part of the fixed capital consumed which is apportioned to the individual commodity. The remaining fixed capital, even though it represents capital value advanced to the production of the commodity, does not enter into the calculation of its cost. In addition to a proportional part of the fixed capital consumed (depreciation), overhead costs include that part of the circulating capital consumed in maintaining the productive potential of the unit of capital, and in marketing the idea of the product. Prime cost includes the part of the circulating capital which is consumed in the direct production and sale of individual commodities. It, thus, includes that part of the labor and materials which activate capital’s productive potential. These costs need not, in principle, be a part of the capital advanced,1 and to this extent the costs of production and sale will exceed the unit capital requirements associated with the commodity. Expenses incurred in the acquisition of labor may be either prime or overhead costs depending upon their manner of association with 82

The general structure of the accumulation process

the unit of output. To the extent that the labor has as its object to activate the producing mechanism, and thereby to effect the transfor¬ mation by that mechanism of the means of labor into the individual product or group of products, it is a component of prime costs. To the extent that the object of the laboring is to maintain the unit of capital as a generalized producing and marketing potential, its wages are a component of overhead costs. The total wages bill, then, divides into two parts, which correspond to the division of costs: the wages proper, and the salaries of managerial and sales personnel (that part of wages which enter into overhead costs). The economic calculation made by the firm in constituting the total cost, and the relation of its component parts to the price of the commodity, has as its purpose that of establishing the conformity of the internal processes of the firm with the external market structure within which it develops. The concern of the firm is with (1) the necessity of the cost, which can only be evaluated by the contribution which it makes to the reproduction and growth of the firm, and (2) the component parts of the cost so far as differences within the sum of expenses bear upon the determination of price and profit. Salaries represent a bona fide cost to the firm so far as they meet the conditions which define the necessary costs of production and sale, specifically that they represent payment for a commodity received whose consumption is required for the continuing flow of value through the capital circuit.* In sum, the component parts of the cost of the commodity to the firm which produces it are the prime costs - wages proper and the materials upon which the labor they hire is set to work - and overheads - depreciation of fixed capital, salaries and the materials consumed in the course of the work of salaried employees. Overhead costs include, in addition to depreciation, the costs of research and development, of marketing and of management. Formally, unit prime costs (^) of commodity i are the sum of the * Salaries evidently meet these conditions in principle. They represent payment for a commodity, labor, whose consumption is necessary in order that the institutional structure of the firm be sustained, and in order that the marketing of the product be assured. For the firm, salaries represent a legitimate part of necessary cost, and not a payment out of net profit. Their inclusion in necessary costs is not a mystification on the part of the firm or the system of firms, but an acknowledgement of the intrinsic necessities of the capital circuit. Analytically, the treatment of salaries as a cost is required if the dynamics of capitalist expansion are to be properly evaluated.

83

The aggregate circulation costs of the various materials and types of labor directly consumed in its production. In principle, different types of labor may have different costs. At present, since the structure of the labor force remains to be determined, it can be taken to be given. It is, then, possible to represent the costs of the various materials and types of labor by a single price, which may be considered the price of a composite of the materials and labor costs. Let p\m and wj represent respectively the price of the composite material and labor, mj and nx respectively the unit requirements of the composite material and labor (i.e. the quantity of material and of labor time required to produce a single unit of the product). Then,