[OPE-L:3600] Re: Re: constant capital and variable capital

From: Ajit Sinha (ajitsinha@lbsnaa.ernet.in)
Date: Sat Aug 05 2000 - 07:39:14 EDT

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Fred B. Moseley wrote:

> Hi Ajit,
> Thanks for your (3592) in response to my earlier post. I think we need to
> return to some fundamental issues before we can deal with constant capital
> and variable capital. So I will briefly summarize the starting point of my
> interpretation of Marx's theory, and you please tell me what you think.


Fred, i have a feeling that this may be a slippery slope of one of those
debates that never gets resolved. I usually prefer to stick to one problem and
thrashing it out. But i could be wrong, so i will go along with you and
respond, albeit briefly, to all the points you have raised.

> Fred:
> 1. The general analytical framework of Marx's theory is the CIRCULATION OF
> CAPITAL, expressed symbolically as M - C - M' (or expanded to include
> production). This is what Marx's theory is all about. This analytical
> framework is introduced in Chapter 4 of Volume 1 ("the general formula for
> capital") and maintained as the focus of Marx's theory throughout. Marx's
> analytical framework is NOT "the production of commodities by means of
> commodities", expressed in physical quantities and input-output matrices.
> (M-C-M') is not just a minor illustration, with no significance for Marx's
> theory and Marx's analytical framework. (M-C-M') IS Marx's analytical
> framework. It is the way that Marx posed and analyzed the main questions
> in his theory.


I think these strong statements could get you in serious trouble. M-C-M' can
also represent the pure mercantilist circuit of buying cheap and selling dear--
profit upon alienation is not ruled out by the circuit itself. And we all know
what Marx thought of such theories. His postulation that equal values exchange
was designed to rule such possibilities out. So your claim that "This is what
Marx's theory is all about" is pretty misleading, to say the least. The idea of
production is not just an incidental elaboration (or as you put it "or expanded
to include production") to this general formula of M-C-M', which is the main
subject matter. Marx introduces M-C-M' at the individual capitalist's level,
and not necessarily at the level of the aggregate capitalist system. If this
was what Marx's theory was all about, then one would have expected that the
most central concern of Marx's theory would be to develop a theory of aggregate
supply of money. Because, according to the formula, the supply of total money
in the economy must increase after every round of circulation. By how much this
supply of money must increase, and where does that increased supply of money
come from should be the logical theoretical concern for anybody claiming that
the explanation of M-C-M' is what my theory is all about. I don't find Marx to
be much concerned about a theory of supply of money in *Capital*. How do you
explain that?

As far as I'm concerned, the introduction of M-C-M' at the individual
capitalist level by Marx plays two roles for his theory. This helps him to
introduce the idea of circularity or spiral motion of capitalist production as
opposed to the idea of linear notion of production which ends with
consumption--it is a similar (but not exactly the same) notion as the title of
Sraffa's book, 'production of commodities by means of commodities'. Secondly,
it is used as a motivational device to introduce the subject matter to the
reader by positing a mystery or a problem at the outset. So the reader by the
end of the chapter six is lured to the main subject matter by such calls as
"Let us therefore, in company with the owner of money and the owner of
labour-power, leave this noisy sphere, where everything takes place on the
surface and in full view of everyone, and follow them into the hidden abode of
production, on whose threshold there hangs the notice 'No admittance except on
business'. Here we shall see, not only how capital produces, but how capital is
itself produced." (Marx). This is a direct refutation of your position, Fred.

> Fred:
> 2. It is clear from the "general formula that capital is defined in terms
> of MONEY, as money that becomes more money. Capital is NOT defined in
> terms of LABOR-VALUES, and especially not in terms of labor-values alone,
> without any relation of money quantities. Of course, all money quantities
> represent labor-values (this is the main conclusion of Part 1 of Volume 1),
> and so do the quantities of money that circulate as capital. But capital
> is defined in terms of money, not in terms of labor-values, unrelated to
> money quantities. The title of Part 2 is "The Transformation MONEY into
> capital" (a phrase that Marx uses repeatedly); it is not "the
> transformation of labor-values into capital."


"The Transformation of money into capital" implies that money is not "capital",
otherwise there would be no need for a transformation. Marx uses the word
"capital" in various senses, but it could be broadly divided into two
categories. One is the metamorphosis of capital. That is capital does not have
one face. It keeps changing throughout from phase to phase. Sometimes it is in
the form of commodities, sometimes it is in the form of money, sometimes it is
in the form of constant capital and variable capital, etc. To say that the
money form of capital is the real form is to simply misunderstand Marx. And
that is because of its second meaning, where capital is used not as a thing but
a relation--the capital-labor relation. That is why production is central to
Marx, not the circulation of money. Circulation of money or M-C-M' circuit also
applies to pure trade, but that is not the central focus of Marx's analysis in
*Capital*. By the way, I have no idea what you mean by "it is not 'the
transformation of labor-values into capital'." Nobody is claiming that Marx is
transforming labor-values into capital. It would be a meaningless thing to say.
All one is saying is that by value of constant and variable capital Marx means
a certain amount of labout-time and not certain amount of money.

> Fred:
> 3. Surplus value is also defined in Chapter 4 in terms of MONEY, as the
> increment of money, dM, that emerges at the end of the circulation of
> capital (pp. 251-52).


Fred, you are reading the motivational chapter and interpreting such statements
as final. My sense is that you are referring to Marx's statement, "...where M'
= M+ dM, ie. the original sum advanced plus an increment. This increment or
excess over the original value I call 'surplus value'." as the definition of
surplus value. But you forget that the very next chapter introduces the
contradictions in this general formula, and then later on it is argued that the
surplus value is not more money but rather the excess of labor-time that
workers perform over and above the labor-time they get in return for their
labor in the production process.

> Fred,
> 4. The main objective of Marx's theory in Volume 1 is to explain the
> determination of dM , or surplus value, for the economy as a whole. The
> main objective is not to explain the determination of surplus-labor-time,
> unrelated to dM.


I don't know where you get this from. As I have said above, the dM for the
whole economy implies that total money in circulation increases after every
circulation process. If this was the *main objective of the theory* then it
should have at least found one chapter to itself. Where does Marx develop a
theory of aggregate money supply in the economy, and how he shows that this
money supply continuously increases?

> Fred:
> Marx's theory of surplus-value, presented in Chapter 7 of Volume 1, is
> expressed in terms of money, that are determined by quantities of
> labor-time.


How is the money price of commodity "determined by quantities of labor-time" is
what I want to know. So why not concentrate on this central theoretical
question? Cheers, ajit sinha

> In the end, 27 shillings is converted into 30 shillings, with
> dM = 3 shillings. This increment of money is what the theory is intended
> to explain. Marx expressed the conclusion of his theory of surplus-value,
> clearly and explicitly in terms of money: "The trick has at last worked:
> MONEY has been transformed into capital" (p. 301)
> 5. Money magnitudes are assumed by Marx to be determined by labor-values,
> in a somewhat complicated way, that I will be happy to discuss later. But
> the point here, to begin with, is that Marx's theory in Volume 1 is NOT
> about the determination OF labor-values, unrelated to money magnitudes.
> Rather, the theory is about the determination of money magnitudes, and
> especially dM, BY labor-values.
> Ajit, what do you have to say about all this? How do you interpret the
> "general formula for capital", the "transformation of money into capital",
> Marx's theory of surplus-value in Chapter 7, etc.?
> Thanks very much for the discussion. This may take a while, but it may
> indeed serve to clarify our differences.
> Comradely,
> Fred
> P.S. I would of course be interested in other people's views on these
> questions.

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