[OPE-L:5309] Re: x+a=revenue

Paul Cockshott (wpc@cs.strath.ac.uk)
Wed, 25 Jun 1997 01:52:34 -0700 (PDT)

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> Paul, it is not clear to me why do you think that capital which released
> from the circuit of industrial capital, if it is converted into revenue,
> "would have a company director jailed for fraud." I see this matter as
> follows. If the director happens to be the owner of the company, I don't
> see why this would be a fraud. Even if you are considering a joint-stock
> company, the conversion of capital previously tied-up to the circuit of
> capital into (say) dividends - which would then distribute this capital
> released among the stockholders - does not seem to me also to constitute
> fraud
> (at least, in legal terms). The conversion of capital into revenue may be
> seen as a "fraud" against capital accumulation, or in Marx words: "In so
> far, therefore, as his [i.e.,capitalist] actions are a mere function of
> capital ... his own private consumption counts as a robbery committed
> against the accumulation of capital..."(Capital, vol. I, Vintage Edition,
> p. 739). But this does not seem to be your argument.
I am not sure about the situation in other countries, but in
UK company law a director has an obligation to preserve and expand
the capital value of the company. If some inputs become available
at a lower price, that is irrelevant, their obligation is to
use the capital productively in some other area of their business.

The situation with a sole proprietor trading under their own
account is different, but for a limited liability company this provision
is a necessary consequence of the limitation of liability. In the
absence of it, a firm could acquire inputs on credit whilst paying out
its own capital as directors fees and end up unable to satisfy its
This is in fact the classic form of fraudulent company management.
A limited liability company has obligations not only to its owners
but also to its commercial creditors.

> As far as your second comment - "Consuming your seed corn does not
> it into revenue, it merely indicates that your consumption exceeds your
> revenue" - I would like to ask you how capitalist's consumption can
> revenue without incurring in debt? I do not think that the introduction
> credit relations helps to understand the issue we are discussing: can
> revenue be greater than surplus-value? Could you please clarify your
> argument further?
I was using the metaphor of seed corn for capital in general. What people
in the discussion have been calling a release of capital is, from an
accounting point of view merely a change in the form of the capital
from stock of work in progress to cash in hand. The cash in hand still
constitutes part of the capital of the company. Should the firm
pay this out in directors fees, then its accounts, when properly
audited, will show a loss rather than a profit.

>From an accounting viewpoint, the example quoted by Marx is
not germane, since accounting is concerned only with the value
of the capital stock not its physical form.