If real wages do not follow their necessary progression, equilibrium is possible only if a third department, for unproductive consumption of surplus-value, develops parallel with Departments I and II.
1. AN ILLUSTRATION WITH A SIMPLE MODEL OF ACCUMULATION
The relation between the two departments of production can be expressed in terms of physical quantities:
Constant capital inputs are given directly in capital goods units e, direct labor inputs in hours h; outputs are given in capital goods units e for Department I and in consumption units c for Department II. In this example, it will be noted that the organic composition is the same in both Departments.
It is assumed that the product of labor is shared between the proletarian and the capitalist in identical proportions in the two Departments (identical rates of surplus-value). It is also assumed that wages constitute the sole source of demand for consumer goods c, i.e., that the purchasing power incorporated in the remuneration of labor enables the entire output of Department II to be absorbed during each successive phase described. On the other hand, the entire surplus-value is “saved,” in order to finance gross investment (replacement and additions), i.e., the purchasing power incorporated in the surplus-value generated during one phase enables the installation of the capital goods necessary to maintain the dynamic equilibrium of the next phase.
As to dynamic equilibrium, we define the progress achieved between one phase and the next by the rate of increase of labor productivity (the output divided by the input of direct labor). For example, if productivity in each Department doubles between one phase and the next, the technology for Phase 2 will be given as follows:
The same quantity of direct labor utilizes twice the quantity of capital goods, raw materials, etc., to produce a doubled output. The physical organic compositions are doubled.
How, under these conditions, can equilibrium be maintained from one phase to the next? Let us assume that the quantity of labor available in the society (120h) and available stock of capital goods (30e) are given from the outset. Their distribution between the two Departments, the rate of surplus-value and the rate of growth (the surplus production in I over replacement needs) are simultaneously interdependent. For example, we have:
Here, the output of Department I during Phase 1 is twice what is necessary to replace the capital equipment and makes it possible to obtain during Phase 2 an output which is itself doubled. We verify that the proportions 2/3–1/3 which represent the distribution of the productive forces between I and II and a surplus-value rate of 100 percent, i.e., unchanged (hence double real wages) are the conditions of dynamic equilibrium, where Phase 2 is expressed in the following way:
Note that the purchasing power incorporated in the wages corresponding to 120 hours of labor (of which 60h is necessary labor) should make it possible to purchase 60c during Phase 1 and 120c during Phase 2, i.e., that real wages should double in the same way as labor productivity. Capital equipment output, being doubled between one phase and the next, finds an outlet in the following phase. We note that the rate of increase of available capital equipment governs the total quantity of labor used and not the reverse. This is a very important point: the accumulation of capital governs employment and not the reverse (as claimed by bourgeois economics in general and marginalism in particular). Here, by the very choice of assumptions, the volume of employment remains unchanged from one period to another. Under the assumption of an increase in the working population, for instance, a natural increase, the rate of accumulation does not make full employment possible.
This very simple model illustrates the nature of the objective relation between the value of labor-power and the development level of the productive forces in the capitalist mode of production. Nothing is gained by using a common denominator so as to be able to add up the inputs, by substituting prices for values in the computation (equalization of the profit rate which is, here in any case, equal to the rate of surplus-value, the organic compositions being the same in both Departments), or by introducing more complicated assumptions: different organic compositions and/or different increases in productivity in the two Departments.
The conditions of equilibrium, for example, can obviously be expressed in homogeneous terms. Assuming the unit price of c to be 1F, that of e, 2F, and the wage rate per hour 0.50F, the surplus-value (here equal to the profit) being obtained as the difference, we have the situation shown in Phase 1. For the following phase, if the money wage rate remains the same, the prices of the products are reduced by half, productivity having doubled (see Phase 2). Note that there is no difficulty of absorption. For the absorption of consumer goods, the wages paid in each phase (60F) make it possible to purchase the entire output of Department II in the same phase: in the first phase, 60c at 1F per unit; in the second phase, 120c at 0.50F per unit.
A useful observation at this point is that the capital equipment produced during one phase does not have the same use-value as did the capital equipment used in its production. With the 20e installed during Phase 1, not 60e of the same type but 60e of a new type were produced. For instance, with steam engines would be produced, not more steam engines, but electric motors. Otherwise, there would be no way to understand how, with the same type of capital equipment, its efficiency would be doubled in the following phase. If the capital equipments were the same, their efficiency would be the same; that is to say, the same ratio of capital equipment to direct labor. If the same quantity of direct labor can set in motion twice the value in capital equipment in order to produce twice as much output, it means that the equipment is different, new, and more efficient.
This observation allows us to distinguish between a model of intensive expanded reproduction from an extensive model. In the latter, the same capital equipment is produced, but in increasing quantity (such extensive expanded reproduction requires for its service a proportionally increased amount of labor). In the—more interesting—intensive model considered here this is no longer necessarily the case. (A general algebraic model of expanded reproduction is formulated in the Appendix to this chapter.)
2.REALIZATION OF THE SURPLUS-PRODUCT AND THE ACTIVE FUNCTION OF CREDIT
From this general scheme of expanded reproduction I have thus deduced a first important conclusion, namely, that dynamic equilibrium requires the existence of a credit system that places at the capitalists’ disposal the income that they will realize during the next phase. This demonstration established the status of the Marxist theory of money and gives precise content to the Marxist (anti-quantity-theory) proposition that the supply of money adjusts itself to the demand for money (to social need), by linking this social need to the conditions for accumulation. How important this proposition is remains unperceived by those theorists who do not dare to continue Marx’s work, but prefer to confine themselves to expounding it. Moreover, this precise integration of credit into the theory of accumulation is the only answer to the “market question” raised by Rosa Luxemburg.1
3.GIVEN THE HYPOTHESIS OF UNCHANGING REAL WAGES, IS ACCUMULATION POSSIBLE?
What happens with the equations of expanded-reproduction when real wages do not increase at the same rate as productivity; for example, when the real wage per hour remains unchanged? There are only two sets of mathematical solutions to the problem: an absurd one corresponding to Tugan-Baranovsky’s “roundabout” approach, and a realistic one, introducing the consumption of the surplus-value.
Joining in the debates concerning markets and the trade cycle as early as the beginning of the twentieth century, Tugan-Baranovsky considered a succession of phases in