[OPE-L:5331] Re: Capital, revenue and the TP

Eduardo Maldonado Filho (eduardo@orion.ufrgs.br)
Wed, 9 Jul 1997 13:34:07 -0700 (PDT)

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This is a reply to Jerry's [OPE-L: 5326] - and also a comments to Fred's
[OPE-L: 5314]. Jerry argues that there is is no relationship between the
phenomena of release and tying up of capital and the transformation
problem. It seems to me advisable, first of all, to review the arguments
that Jerry and Fred raised on this subject and, after that, to answer
Jerry's questions.


1. Andrew argued, in [OPE-L: 4700], that revenue can be greater than
surplus-value and Fred in [OPE-L: 4762], in a response to Andrew's post,
argued that "since revenue is defined as ALL OR PART of this specific
surplus-value, revenue CANNOT BE GREATER than this specific surplus-value.
A part cannot be greater than the whole."

2. Andrew, in [OPE-L:5261], replied to Fred's argument, by quoting Marx,
that "if x+a is required in order to continue with the same mode of life,
either his expenditure must be restricted or else a portion of income =a
that was previously accumulated must now be spent as revenue" (Capital, vol
3, p. 206, Vintage Ed.). That is, Andrew has shown that Marx himself argues
that revenue can be greater than surplus-value.This has become a thread
called "x+a=revenue"
in this list.

3. In [OPE-L:5291], stimulated by Jerry's post [OPE-L: 5262], I got into
this debate. I argued that, in my opinion, Andrew is quite right: revenue
can be greater than surplus-value. More precisely, I argued that capital
which is released from the circuit of industrial capital in period t can be
converted into revenue in period t+1 and, as a consequence, "capitalist's
revenue in period t+1 will be greater than the surplus-value produced in
that same period." Moreover, I also stated that the release of capital and
its conversion into revenue, in Steedman's numerical example, created the
ILLUSION that Marx's method of transforming values into prices of
production was logically inconsistent. (I will come back to this issue
later on).

4. In [OPE-L:5293], Jerry commented on my post and highlighted a few other
passages from the TSV, Part II, Section 3c (from which I had extracted some
quotes of Marx supporting my argument). Jerry correctly pointed out that
"the 'riddle' concerns *diffrential rent* and the division of the
surplus-product between *capitalists and landlords* (see p. 452). Thus the
transformations concern "*rent in kind* in so far as it is diffrential
rent" (p. 452):
(i) "the transformation of the surplus-produce into rent, and not into
profit; and
(ii) "the transformation of a *portion* of the product whicg was
previously allocated for the replacement of the value of the constant
capital into surplus-product and thus into rent" (pp. 452-53).

My intention in presenting those quotation of Marx was to support
Andrew's argument that for Marx revenue can be greater than surplus-value.
Marx's analysis shows that rent can be formed not only by the
transformation of a part of surplus-value into rent, but also how capital
which is released is turned into surplus-product, but it, instead to be
appropriated by the capitalist, falls into the landlords' hands. By taking
into account the release of capital he is able to solve the following

Jerry argues that there is no relationship between the analysis of the
release and
tying-up of capital with the transformation problem and the falling rate of
profit argument. In my opinion these phenomena are quite important for the
understanding of both topics, as Marx points out (see OPE-L:5326]) "the
phenomenon of the conversion of capital into revenue should be noted,
because it creates the ILLUSION that the amount of profit grows (or in the
opposite case decreases) independently of the amount of surplus-value. We
have seen that, under certain circumstances, a piece of rent can be
explained by this phenomenon (TSV, Part III, pp. 345-46). [BTW, note 101
refers to the
"Theories of Surplus-Value, Part II, pp. 454-58" which is precisely related
with the issue how capital released is turned into rent]. (I will come back
to this issue below).

5. Fred, in [OPE-L:5314], commented on Andrew's quotation of Marx (point 2)
as follows:
"in this passage revenue seems to be implicitly defined as money spent by
capitalist to purchase consumer goods, whether or not this money is
surplus-value. If the price of capitalist consumer goods increases, then
the surplus-value produced in period t will not be sufficient to purchase
all the consumer goods produced in period t. So, if all the consumer goods
are to be purchased, additional money, beyond the surplus-value of this
period, must come from somewhere. This concept of revenue can be expressed
algebraically as:

(3) Rev(t) = S(t) + M(t),

where M(t) is the additional money necessary to maintain capitalist
consumption." ... "In this more general sense, revenue can of course [be]
greater than surplus-value."

I would like to make the following comments on Fred's argument:
(a) I don't see any difference between Marx's definition of revenue in
Chapter 24, section 3, Vol. 1 of Capital and this "more general concept of
According to Marx (see Capital, vol. 1, p. 738, Vintage Ed.) "One part of
the surplus-value is consumed by the capitalist as revenue [and in note 21,
Ben Fowkes states that "the word revenue is used in a double sense: first
to designate
surplus-value ...and second, to designate the part of that fruit (i.e.,
surplus-value, EMF) which is periodically consumed by the capitalist, or
addeded to his private consumption-fund], the other part is employed as
i.e., it is accumulated." That is, REVENUE, in both cases, are defined "as
money spent by capitalists to purchase consumer goods". So, I don't see
that there is any conceitual difference between them (i.e., one concept
being more general than the other);
(b) The difference, in my opinion, is related with the fact that in the
second case capitalist's purchase of consumer goods is greater than the
surplus-value. How is it possible for the capitalist to spent more money
(value) than the amount of his surplus-value? One possibility is to
introduce credit relations in the analysis, in this way the counterpart of
this excess consumption is the debt that the capitalist incurrs. But this
will not help us to explain how
the revenue can greater than the surplus-value. [This is the reason why, in
my response to Paul C., I stated that: "I do not think that the
introduction of credit relations helps to understand the issue we are
discussing: can revenue be greater than surplus-value?"]
Another possibility is for the capitalist to use his own capital to keep
up, or to increase, his consumption. This, according to Marx, counts as "a
robbery commited against the accumulation of capital" (but, as Paul C.
[OPE-L:5309] has pointed out, such a robbery, at least in the UK, is
forbbiden by law.)
Finally, another possibility is for the CAPITAL WHICH IS RELEASED FROM THE
which is not generally acknowledged in most analysis, that play an
important role in explaining the ILLUSIONS THAT THE AMOUT OF PROFIT GROWS
(c) The main issue in relation to equation (3), therefore, is not related
with any change concerning the generality of the concept of revenue, but
rather it is related with the question: From where does this additional
money [i.e., value], M(t), come from? My argument is, precisely, that
capital which is released from the circuit of capital can be converted into
revenue, explaining how revenue can thus be greater than surplus-value.

6. Summing up: if one is analyzing the reproduction process, assuming (for
example) that the scale of production remains constant and that the price
of the MP declines, then it follows that a part of constant capital is
released. This capital which is set free can thus be converted, in the next
reproduction period, in to revenue. So, REVENUE CAN BE GREATER THAN


1) According to Marx (Capital, vol 3, Vintage Ed., P. 206), by release of
capital "we simply mean that a part of the product's total value which
previously had to be transformed back into either constant or variable
capital becomes superfluous for the continuation of production on the old
scale and is now available for other purposes."
"By the tying-up of capital we mean that, out of the total value of the
product, a certain additional portion must be transformed back into the
elements of constant or variable capital, if production is to continue on
its old scale" (Ibid. p. 206).

Thus release and tying-up of capital has a "permanent" character. When this
is not the case - that is, when there occurs a TEMPORARY release or tying
up of capital Marx uses the expression TEMPORARY RELEASE or TEMPORARY
TYING-UP of capital. This is the case, for example, in Marx analysis of the
of capital and the additional capital which is necessary for the continuity
of the production process. Part of the capital advanced is released only
during certain period of time, thus Marx says that there is a temporary
release of capital. However, if the circulation time declines due to some
structural cause (say, improvement in the transportation system) then there
occurs a (defintitive) release of capital.

2) Given the above, let me comment on Jerry's comments of my post [OPE-L:
5308]. I quoted Marx as follows:

"Let us [now] consider the manufacturer. Let us assume that he has laid out
$100 in cotton twist and made a profit of $20. The product therefore
amounts to $120. It is assumed that $80 out of the outlay of $100 has been
paid for cotton. If the price of cotton falls by half, he will now need to
spend only $40 on the cotton and $20 for the rest, that is $60 in all
(instead of $100) and the profit will be $20 as previously, the total
product will amount to $80 (if he does not increase the scale of his
"Thus it is not the fact that the farmer replaces HIS SEED CORN IN KIND
which is the key, for the manufacturer buys his cotton and does not replace
it out of his own product. What this phenomenon amounts to is this:
same amount of capital is laid out in the reproduction process as
previously, then it is the same as if additional capital had been employed
on the old scale of production.)

3) Jerry then quotes the continuation of this paragraph:

> "This is therefore a kind of accumulation which arises from the increased
> productivity of those branches of industry which supply the productive
> ingredients of capital.

My reply

I read these two foregoing sentence as follows: if the price of cotton
falls and if the capitalist advance the same amount of money capital in the
process then the result is the same as if the capitalist had invested and
additional capital to expand its scale of production. In other word, the
capital which
is released can be converted into revenue or, alternatively, it can be used
as capital to expand the scale of production. This expansion of the scale
of production, on its part, is "therefore a kind of accumulation which
arises from the increased productivity of those branches of industry which
supply the productive ingredients of capital".

4) Jerry continues to quote Marx:
RAW MATERIALS RISE. The capital released in this way in one or several
>seasons is, therefore, to a certain extent, reserve capital for the other
>seasons. For instance, the manufacturer whose [fixed capital] turns over
>once every twelve years, must arrange things in such a way that he can
>continue to produce -- at least *on the same scale* throughout the twelve
>years. One has therefore to take into account that the *prices* [of the
>raw materials] he has to *replace* FLUCTUATE AND EVEN THEMSELVES OUT TO A
>CERTAIN EXTENT OVER A LONG PERIOD OF YEARS" (Ibid, capitalization added
>for emphasis).

Eduardo's reply

As I read it, Marx is here discussion another possibility, namely that the
decline in the price of the MP is temporary (i.e., due to seasons). In this
case, the release of capital is only temporay. Thus, I do not agree with
interpretation that *what Marx is getting at* with this whole discussion
concerns only *SEASONAL VARIATIONS* in the prices of raw materials." If
price of cotton declines as a result of the increase in the productivity of
labor of this industry, then the release of capital is not only temporary,
but becomes permanent. In this case, if the capital set free is used in the
reproduction process then the scale of production will increase (as
explained above).

Jerry let me askyou the following questions: do you think that there can
only occurs a temporary release of capital? Or you also acknowledege that
capital can be "permenently" released from the reproduction process? If the
capital which is released is retained within the reproduction process, what
will be the consequence? If
the capital which is released is converted into revenue (i.e., leaves the
circuit of capital), what will be the consequence?

5) Jerry continues

> [Three paragraphs later Marx explains that: "The phenomenon of the
> conversion of capital into revenue should be noted, because it creates
> *illusion* that the amount of profit grows (or in the opposite case
> decreases) independently of the amount of surplus-value. We have seen
> that, under certain circumstances, a piece of rent can be explained by
> this phenomenon" (Ibid, pp. 345-6). Then he writes: "In the way mentioned
> above (that is, if the remaining 20 quarters worth $20 {$ sign
> substituted for pound sign, JL} are not used immediately to extend the
> scale of production, i.e. if they are not accumulated, a money capital of
> $20 is set free. This is an example of how *redundant money capital* can
> be extracted from the reproduction process although the aggregate value
> of commodities remains the same, namely, by a portion of the capital
> which existed previously in the form of fixed (constant) capital being
> converted into money capital" (Ibid, p. 346)].

Eduardo's reply

These quotations just reinforce, in my opinion, my interpretation of Marx's
analysis of the release and tying-up of capital.


1. Jerry then asks me:
> Now, my question for you is ... : of what relevance is the above,
especially since it
> concerns *SEASONAL VARIATIONS* in the prices of raw materials, to the
> issue of understanding Marx's concept of revenue in the *transformation
>of value into prices of production*?

As I explained above, I do not agree with you that Marx's analysis of the
release and tying-up of capital only "concerns seasonal variations in the
price of raw materials".

2. The analysis of the phenomena of the release and tying-up of capital is
related, according to Marx, with the reproduction process of capital.
Therefore, it does not is DIRECTLY related with the transformation value
into prices of production. In my opinion, this explains why Marx has dealt
with this issue in Chapter 9 of vol 3 abstracting from the reproduction
process. However, the release and tying-up of capital INDIRECTLY affect the
trasformation process. In Marx words:
"In so far as these fluctuations in value [i.e., "the value of or other
portion of constant capital"] led to the tying-up or the release of
capital, both the rate of profit and the profit itself could be affected by
this indirect route. However, this was true only for capital aleady
invested, not of new capital investment; and moreover the expansion or
contraction of profit itself was always dependent on the extent to which
more or less labour could be set in motion with the same capital, as a
result of these price fluctuations, i.e., the extent to which a greater or
lesser amount of surplus-value could be produced with the same capital, at
the same rate of surplus-value. Far from contradicting the general law or
forming an exception to it, this apparent exception was in actual fact
only a special case of the general law's application" (Capital, Vol. 3,
Chapter 8, p. 242-43, Vintage Ed.)

3.However, the discussion of the transformation of values into prices of
production has been done within the framework of simple reproduction. In
this context, we have that competition causes the the individual values of
the commodities to change from one period to another and, as consequences
of these changes, the phenomena of release and tying-up of capital is
implied. In other words, the release and tying-up of capital (which is
associated with the reproduction process) is necessarily interrelated with
the transformation problem.

4. Finally, Jerry says that
> Nonetheless, I would like to see a further discussion of the "release and
> tying-up of capital" even though (or perhaps because) it does not relate
> directly to the transformation.

Eduardo comments

I agree with you that we should to discuss more the release and tying-up of
capital issue and also, I think, the related issues of revaluation and
devaluation of capital (which is important, in my opinion, for the thread
on the depreciation which has been discussed in this list). But I do not
understand your comment that you want to discuss that issue (perhaps)
because it does not relate directly to the transformation. I am curious to
why this is the case.