The shortcomings of the diagram of simple reproduction are obvious: it explains the laws of a form of reproduction which is possible only as an occasional exception in a capitalist economy. It is not simple but enlarged reproduction which is the rule in every capitalist economic system, even more so than in any other.[96]

Nevertheless, this diagram is of real scientific importance in two respects. In practice, even under conditions of enlarged reproduction, the greater part of the social product can be looked on as simple reproduction, which forms the broad basis upon which production in every case expands beyond its former limits. In theory, the analysis of simple reproduction also provides the necessary starting point for all scientific exposition of enlarged reproduction. The diagram of simple reproduction of the aggregate social capital therefore inevitably introduces the further problem of the enlarged reproduction of the total capital.

We already know the historical peculiarity of enlarged reproduction on a capitalist basis. It must represent itself as accumulation of capital, which is both its specific form and its specific condition. That is to say, social production as a whole—which on a capitalist basis is the production of surplus value—can in every case be expanded only in so far as the social capital that has been previously active is now augmented by surplus value of its own creation. This use of part of the surplus value (and in particular the use of an increasing part of it) for the purpose of production instead of personal consumption by the capitalist class, or else the increase of reserves, is the basis of enlarged reproduction under capitalist conditions of production.

The characteristic feature of enlarged reproduction of the aggregate social capital—just as in our previous assumption of simple reproduction—is the reproduction of individual capitals, since production as a whole, whether regarded as simple or as enlarged production, can in fact only occur in the form of innumerable independent movements of reproduction performed by private individual capitals.

The first comprehensive analysis of the accumulation of individual capitals is given in volume i of Marx’s Capital, section 7, chapters 22, 23. Here Marx treats of (a) the division of the surplus value into capital and revenue; (b) the circumstances which determine the accumulation of capital apart from this division, such as the degree of exploitation of labour power and labour productivity; (c) the growth of fixed capital relative to the circulating capital as a factor of accumulation; and (d) the increasing development of an industrial reserve army which is at the same time both a consequence and a prerequisite of the process of accumulation. In the course of this discussion, Marx deals with two inspired notions of bourgeois economists with regard to accumulation: the ‘theory of abstinence’ as held by the more vulgar economists, who proclaim that the division of surplus value into capital, and thus accumulation itself, is an ethical and heroic act of the capitalists; and the fallacy of the classical economists, their doctrine that the entire capitalised part of the surplus value is used solely for consumption by the productive workers, that is to say spent altogether on wages for the workers employed year by year. This erroneous assumption, which completely overlooks the fact that every increase of production must manifest itself not only in the increased number of employed workers but also in the increase of the material means of production (premises, tools, and, certainly, raw materials) is obviously rooted in that ‘dogma’ of Adam Smith which we have already discussed. Moreover, the assumption that the expenditure of a greater amount of capital on wages is sufficient to expand production, also results from the mistaken idea that the prices of all commodities are completely resolved into wages and surplus value, so that the constant capital is disregarded altogether. Strangely enough, even Ricardo who was, at any rate occasionally, aware of this element of error in Smith’s doctrine, subscribes most emphatically to its ultimate inferences, mistaken though they were:

‘It must be understood, that all the productions of a country are consumed; but it makes the greatest difference imaginable whether they are consumed by those who reproduce, or by those who do not reproduce another value. When we say that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to capital, is consumed by productive, instead of unproductive labourers.’[97]

If all the goods produced are thus swallowed up by human consumption, there can clearly be no room to spare in the total social product for such unconsumable means of production as tools and machinery, new materials and buildings, and consequently enlarged reproduction, too, will have to take a peculiar course. What happens—according to this odd conception—is simply that staple foodstuffs for new workers will be produced to the amount of the capitalised part of surplus value instead of the choice delicacies previously provided for the capitalist class. The classical theory of enlarged reproduction does not admit of any variations other than those connected with the production of consumer goods. After our previous observations it is not surprising that Marx could easily dispose of this elementary mistake of both Ricardo and Smith. Just as simple reproduction requires a regulated renewal of the constant capital, the material means of production, quite apart from the production of consumer goods in the necessary quantity for labourer and capitalist, equally so in the case of expanding production must part of the new additional capital be used to enlarge the constant capital, that is to add to the material means of production. Another law, Marx discovered, must also be applied here. The constant capital, continually overlooked by the classical economists, increases relative to the variable capital that is spent on wages. This is merely the capitalist expression of the general effects of increasing labour productivity. With technical progress, human labour is able to set in motion ever larger masses of means of production and to convert them into goods. In capitalist terms, this means a progressive decrease in expenses for living labour, in wages, relative to the expenses for inanimate means of production. Contrary to the assumption of Adam Smith and Ricardo, enlarged reproduction must not only start with the division of the capitalised part of the surplus value into constant and variable capital, but, as the technique of production advances, it is bound to allocate in this division ever increasing portions to the constant, and ever diminishing portions to the variable capital. This continuous qualitative change in the composition of capital is the specific manifestation of the accumulation of capital, that is to say of enlarged reproduction on the basis of capitalism.[98] The other side of this picture of continual changes in the relation between the portions of constant and variable capital is the formation of a relative surplus population, as Marx called it, that is to say that part of the working population which exceeds the average needs of capital, and thus becomes redundant. This reserve of unemployable industrial labour (taken here in a broader sense, and including a proletariat that is dominated by merchant capital) is always present. It forms a necessary prerequisite of the sudden expansion of production in times of boom, and is another specific condition of capitalist accumulation.[99]

From the accumulation of individual capitals we can therefore deduce the following four characteristic phenomena of enlarged reproduction:

(1) The volume of enlarged reproduction is independent, within certain limits, of the growth of capital, and can transcend it. The necessary methods for achieving this are: increased exploitation of labour and natural forces, and increased labour productivity (including increased efficiency of the fixed capital).

(2) All real accumulation starts with that part of the surplus value which is intended for capitalisation being divided into constant and variable capital.

(3) Accumulation as a social process is accompanied by continuous changes in the relation between constant and variable capital, whereby that portion of capital which is invested in inanimate means of production continually increases as compared with that expended on wages.

(4) Concomitant with the accumulative process, and as a condition of the latter, there develops an industrial reserve army.

These characteristics, derived from the reproductive process as it is performed by the individual capitals, represent an enormous step forward as compared with the analyses of bourgeois economists. Now, however, our problem is to demonstrate the accumulation of the aggregate capital which originates from these movements of individual capitals, and on the basis of the diagram of simple reproduction to establish the precise relations between the aspects of value prevalent in the production of surplus value and the material considerations in the production of consumer and producer goods, with a view to accumulation.

The essential difference between enlarged reproduction and simple reproduction consists in the fact that in the latter the capitalist class and its hangers-on consume the entire surplus value, whereas in the former a part of the surplus value is set aside from the personal consumption of its owners, not for the purpose of hoarding, but in order to increase the active capital, i.e. for capitalisation. To make this possible, the new additional capital must also find the material prerequisites for its activity forthcoming. Here the concrete composition of the aggregate social product becomes important. Marx says already in volume i, when he considers the accumulation of individual capitals:

‘The annual production must in the first place furnish all those objects (use-values) from which the material components of capital, used up in the course of the year, have to be replaced. Deducting these there remains the net or surplus-product, in which the surplus-value lies. And of what does this surplus-product consist? Only of things destined to satisfy the wants and desires of the capitalist class, things which, consequently, enter into the consumption fund of the capitalists? Were that the case, the cup of surplus-value would be drained to the very dregs, and nothing but simple reproduction would ever take place.—To accumulate it is necessary to convert a portion of the surplus-product into capital. But we cannot, except by a miracle, convert into capital anything but such articles as can be employed in the labour-process (i.e. means of production), and such further articles as are suitable for the sustenance of the labourer, (i.e. means of subsistence). Consequently, a part of the annual surplus-labour must have been applied to the production of additional means of production and subsistence, over and above the quantity of these things required to replace the capital advanced. In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already comprises the material elements of new capital.’[100]

Additional means of production, however, and additional consumer goods for the workers alone are not sufficient; to get enlarged reproduction really going, additional labour is also required. Marx now finds a specific difficulty in this last condition:

‘For this the mechanism of capitalist production provides beforehand, by converting the working class into a class dependent on wages, a class whose ordinary wages suffice, not only for its maintenance, but for its increase. It is only necessary for capital to incorporate this additional labour-power, annually supplied by the working class in the shape of labourers of all ages, with the surplus means of production comprised in the annual produce, and the conversion of surplus-value into capital is complete.’[101]

This is the first solution which Marx gave to the problem of the accumulation of the aggregate capital. Having dwelt on this aspect of the question already in volume i of Capital, Marx returns to the problem at the end of the second volume of his main work whose concluding 21st chapter is devoted to accumulation and enlarged reproduction of the aggregate capital.

Let us examine Marx’s diagrammatic exposition of accumulation more closely. On the model of the diagram of simple reproduction with which we are already familiar, he devised a diagram for enlarged reproduction, the difference appearing most clearly if we compare the two.

Assuming that society’s annual aggregate product can be represented by an amount to the value of 9,000 (denoting millions of working hours, or, in capitalist monetary terms, any arbitrary amount of money), the aggregate product is to be distributed as follows:

Department I represents means of production, Department II consumer goods. One glance at the proportion of the figures shows that in this case simple reproduction alone is possible. The means of production made in Department I equal the total of the means of production actually used by the two departments. If these are merely renewed, production can be repeated only on its previous scale. On the other hand, the aggregate product of Department II equals the total of wages and surplus value in both departments. This shows that the consumer goods available permit only the employment of just as many workers as were previously employed, and that the entire surplus value is similarly spent on consumer goods, i.e. the personal consumption of the capitalist class.

Now let us take the same aggregate product of 9,000 in the following equation:

Here a double disproportion confronts us: 6,000 means of production are created—more than those which are actually used by the society, i.e. 4,000c+ 1,500c, leaving a surplus of 500. Similarly, less consumer goods (3,000) are produced than the sum of what is paid out in wages (i.e. 1,000v+ 750v, the requirement of the workers), plus the aggregate of surplus value that has been produced (1,000s+ 750s). This results in a deficit of 500. Since our premises do not allow us to decrease the number of workers employed, the consequence must be that the capitalist class cannot consume the entire surplus value it has pocketed. This proves fully consistent with the two material preconditions of enlarged reproduction on a capitalist basis: part of the appropriated surplus value is not to be consumed but is used for the purposes of production; and more means of production must be produced so as to ensure the use of the capitalised surplus value for the actual expansion of reproduction.

In considering the diagram of simple reproduction, we saw that its fundamental social conditions are contained in the following equation: the aggregate of means of production (the product of Department I) must be equivalent to the constant capital of both departments, but the aggregate of consumer goods (the product of Department II) must equal the sum of variable capitals and surplus values of the two departments. As regards enlarged reproduction, we must now infer a precise inverse double ratio. The general precondition of enlarged reproduction is that the product of Department I must be greater in value than the constant capital of both departments taken together, and that of Department II must be so much less than the sum total of both the variable capital and the surplus value in the two departments.

This, however, by no means completes the analysis of enlarged reproduction; rather has it led us merely to the threshold of the question. Having deduced the proportions of the diagram, we must now pursue their further activities, the flow of circulation and the continuity of reproduction. Just as simple reproduction may be compared to an unchanging circle, to be repeated time and again, so enlarged reproduction, to quote Sismondi, is comparable to a spiral with ever expanding loops. Let us begin by examining the loops of this spiral. The first general question arising in this connection is how actual accumulation proceeds in the two departments under the conditions now known to us, i.e. how the capitalists may capitalise part of their surplus value, and at the same time acquire the material prerequisites necessary for enlarged reproduction.

Marx expounds the question in the following way:

Let us assume that half the surplus value of Department I is being accumulated. The capitalists, then, use 500 for their consumption but augment their capital by another 500. In order to become active, this additional capital of 500 must be divided, as we now know, into constant and variable capital. Assuming the ratio of 4 to 1 remains what it was for the original capital, the capitalists of Department I will divide their additional capital of 500 thus: they will buy new means of production for 400 and new labour for 100. This does not present any difficulties, since we know that Department I has already produced a surplus of 500 means of production. Yet the corresponding enlargement of the variable capital by 100 units of money is not enough, since the new additional labour power must also find adequate consumer goods which can only be supplied by Department II. Now the circulation between the two large departments is shifting. Formerly, under conditions of simple reproduction, Department I acquired 1,000 consumer goods for its own workers, and now it must find another 100 for its new workers. Department I therefore engages in enlarged reproduction as follows:

Department II, in turn, after selling these consumer goods to the value of 100, is now in a position to acquire additional means of production to the same amount from Department I. And in fact, Department I still has precisely one hundred of its surplus product left over which now find their way into Department II, enabling the latter to expand its own reproduction as well. Yet here, too, the additional means of production alone are not much use; to make them operate, additional labour power is needed. Assuming again that the previous composition of capital has been maintained, with a ratio of 2 to 1 as regards constant and variable capital, additional labour to the tune of 50 is required to work the additional 100 means of production. This additional labour, however, needs additional consumer goods to the amount of its wages, which are in fact supplied by Department II itself. This department must therefore produce, in addition to the 100 additional consumer goods for the new workers of Department I and the goods for the consumption of its own workers, a further amount of consumer goods to the tune of 50 as part of its aggregate product. Department II therefore starts on enlarged reproduction at a rate of 1,600c+ 800v.

Now the aggregate product of Department I (6,000) has been absorbed completely. 5,500 were necessary for renewing the old and used-up means of production in both departments, and the remaining 500 for the expansion of production: 400 in Department I and 100 in Department II. As regards the aggregate product of Department II (3,000), 1,900 have been used for the increased labour force in the two departments, and the 1,100 consumer goods which remain serve the capitalists for their personal consumption, the consumption of their surplus value. 500 are consumed in Department I, and 600 in Department II where, out of a surplus value of 700, only 150 had been capitalised (100 being expended on means of production and 50 on wages).

Enlarged reproduction can now proceed on its course. If we maintain our rate of exploitation at 100 per cent, as in the case of the original capital, the next period will give the following results:

The aggregate product of society has grown from 9,000 to 9,800, the surplus value of Department I from 1,000 to 1,100, and of Department II from 750 to 800. The object of the capitalist expansion of production, the increased production of surplus value, has been gained. At the same time, the material composition of the aggregate social product again shows a surplus of 600 as regards the means of production (6,600) over and above those which are actually needed (4,400+ 1,600), and also a deficit in consumer goods as against the sum total made up by the wages previously paid (1,100v+ 800v) and the surplus value that has been created (1,100s+ 800s). And thus we again have the material possibility as well as the necessity to use part of the surplus value, not for consumption by the capitalist class, but for a new expansion of production.

The second enlargement of production, and increased production of surplus value, thus follows from the first as a matter of course and with mathematical precision. The accumulation of capital, once it has started, automatically leads farther and farther beyond itself. The circle has become a spiral which winds itself higher and higher as if compelled by a natural law in the guise of mathematical terms. Assuming that in the following years there is always capitalisation of half the surplus value, while the composition of the capital and the rate of exploitation remain unchanged, the reproduction of capital will result in the following progression:

Thus, after five years of accumulation, the aggregate social product is found to have grown from 9,000 to 14,348, the social aggregate capital from (5,500c+ 1,750v= 7,250) to (8,784c+ 2,782v= 11,566) and the surplus value from (1,000s+ 500s= 1,500) to (1,464s+ 1,065s= 2,529), whereby the surplus value for personal consumption, being 1,500 at the beginning of accumulation, has grown to 732+ 958= 1,690 in the last year.[102] The capitalist class, then, has capitalised more, it has practised greater abstinence, and yet it has been able to live better. Society, in a material respect, has become richer, richer in means of production, richer in consumer goods, and it has equally become richer in the capitalist sense of the term since it produces more surplus value. The social product circulates in toto in society. Partly it serves to enlarge reproduction and partly it serves consumption. The requirements of capitalist accumulation correspond to the material composition of the aggregate social product. What Marx said in volume i of Capital is true: the increased surplus value can be added on to capital because the social surplus product comes into the world from the very first in the material form of means of production, in a form incapable of utilisation except in the productive process. At the same time reproduction expands in strict conformity with the laws of circulation: the mutual supply of the two departments of production with additional means of production and consumer goods proceeds as an exchange of equivalents. It is an exchange of commodities in the course of which the very accumulation of one department is the condition of accumulation in the other and makes this possible. The complicated problem of accumulation is thus converted into a diagrammatic progression of surprising simplicity. We may continue the above chain of equations ad infinitum so long as we observe this simple principle: that a certain increase in the constant capital of Department I always necessitates a certain increase in its variable capital, which predetermines beforehand the extent of the increase in Department II, with which again a corresponding increase in the variable capital must be co-ordinated. Finally, it depends on the extent of increase in the variable capital in both departments, how much of the total may remain for personal consumption by the capitalist class. The extent of this increase will also show that this amount of consumer goods which remains for private consumption by the capitalist is exactly equivalent to that part of the surplus value which has not been capitalised in either department.

There are no limits to the continuation of this diagrammatic development of accumulation in accordance with the few easy rules we have demonstrated. But now it is time to take care lest we should only have achieved these surprisingly smooth results through simply working out certain fool-proof mathematical exercises in addition and subtraction, and we must further inquire whether it is not merely because mathematical equations are easily put on paper that accumulation will continue ad infinitum without any friction.

In other words: the time has come to look for the concrete social conditions of accumulation.