Commodities 30 circulation

Now economists are very fond of diagrams, and one of the few diagrams Marx ever used was to summarize Quesnay s Tableau Economique (Marx 1969a). Quesnay was the doyen of the physiocrats, who thought that land was the source of all value hence the tableau shows the circulation of commodities between farmers and landlords. As shown by Pressman (1994), Marx shaped this model into his reproduction schema a model of how commodities circulate between capitalists and workers. For Marx (1969a 344), the tableau was an extremely brilliant conception, incontestably the most brilliant for which political economy had up to then been responsible . 

Key to modelling the circulation of money in this Marxian reproduction schema is a consideration of how it intertwines with the circulation of commodities between sectors. A precondition for the circuit of money is the commodity circuit. To explore in more detail how commodities circulate in Marx s system, the role of inventories has to be considered. Taking his lead... 

Scrap is a worldwide commodity. The United States alone exports some 10,000,000 t/yr. The total circulation of scrap ia the United States is in the range of 70 90 x 10 t/yr, including that for foundry operations, which is ca 10 x 10 t/yr, and modest quantities charged to blast furnaces when this is economical. 

The second main purpose of this book is to develop an alternative interpretation of the reproduction schema in which money plays a key role. Some degree of formalization is required here with respect to circulation of money, which takes on various often contradictory guises in Marx s work. As Foley (1973 viii) commented, Marx s writings on money remain in a pre-model stage. My objective is to develop a coherent model of how the circulation of money intertwines with the reproduction of commodities. 

The purpose of this chapter is to examine two main aspects of Marx s reproduction model. The first concerns the way in which sales of commodities are realized in the reproduction and circulation of commodities. Whereas in volume 1 of Capital the focus is on the production of value, on the assumption that each individual good is automatically sold, in volume 2 the market place is introduced. For Mandel (1978 14), in his introduction to the Penguin edition of volume 2, we have to understand the inner connection between the production of value and its realization. Commodities have to be sold, whether wage goods purchased by workers or means of production purchased by other capitalists. Reproduction can only take place if in aggregate... 

Thus the sum of value expressed in a particular commodity cannot be identified with the quantity of labour embodied in it, for the concept of value refers to the socially necessary labour-time embodied, to abstract rather than to concrete labour, and this quantity can only be established when private labours are socially validated through the circulation of commodities and of capital (original emphasis).7... 

What is more, these equally valid ways of defining value are consistent with a macroeconomic interpretation of the autonomous role of money. Since under the Kalecki principle capitalists earn what they spend, the social validation of the market, led by capitalist investment and consumption, is the starting point for economic activity. Commodities are only produced, labour is only employed, if capitalists cast into circulation the money required for sales to be realized - for labour embodied in commodities to become socially necessary. Since money, with its specific role in a capitalist economy, is so central to the Kalecki principle, a possible synthesis can be suggested with the value-form approach without, that is, compromising the use of a Leontief/Keynesian multiplier framework together with embodied labour categories. 

Equation (4.23) is comparable to a quantity equation in which 1/(1 c - w) is a term representing the velocity of money. To take an example given by Marx (1969a 341), say that 1,000 units of money circulate in the economy with a velocity of 3. The total price of commodities, or in the terminology of equation (4.23) the total income, is in this example 3,000. Dividing the income (3,000) by the velocity establishes the amount of money required to circulate (1,000). 

Because of the time delay between sales in one period and capital outlays in the next period capitalists set aside a hoard of money. As mentioned in Chapter 3, when capitalists are ready for new capital outlays money is drawn from the money hoard. De Brunhoff (1973 38-44) shows how money hoards are essential to the circulation of money and commodities in Marx s system, enabling a continuous production process. As lucidly stated by Marx (1964 136), The hoards thus act as channels for the supply or withdrawal of circulating money, so that the amount of money circulating as coin is always just adequate to the immediate requirements of circulation. ... 

Under simple reproduction, the amount of money required for circulation is constant. Capitalists allocate all of their surplus value to personal consumption, feasting in luxury instead of investing in expansion. Since there is no room for the economy to grow, there is no demand for the money hoard to grow. Output is static, with the same volume of commodities reproduced each year, serviced by the same money hoard. 

The abstract starting point for Marx s monetary theory of crisis is provided in chapter 17 of Theories of Surplus Value part 2. Here Marx explores the role of money under simple circulation (M-C-M). Money provides the starting point and end point of the circuit of commodities. Capitalists use money to purchase commodities (M-Q in order to carry out production, and must find an outlet to sell their commodities to a buyer willing to spend the right amount of money (C-M). This separation of purchase from sale is fraught with the possibility of breakdown. 

In chapter 9 of Capital, volume 3, Marx developed a procedure for the Transformation of Commodity Values into Prices of Production (Marx 1981 254). Instead of using Marx s rather complex example of five branches of production, in which fixed capital is employed, we shall explain his procedure using a simplified example for three sectors, borrowed from Howard and King (1985 99). In this example, all capital is assumed to be of the circulating type, and simple reproduction is assumed, so that there is no expansion of capital over time. 

As with most consumer products circulating through the economy today, the chemicals that people use in lawn care travel through many hands prior to their final fate. This vast commodity chain is international in scope, diverse in players, and intricate in connections. Figure 5.1 maps out the multiple parties who... 

The Romans were the first to discover the vicissitudes of a culture a that derives its power from finance. Gold, like any other commodity, I does not have an absolute value it depends on how much of it there is around. The gold denomination of the Roman Empire was the aureus, which was worth twenty-five silver denarii. But the later emperors were prone to grotesque displays of wealth - Nero constracted a Golden House with jewel-encrusted walls. These excesses removed so much gold and silver from circulation that the coin minters were forced to add other metals to the aureus and the denarius. By the third century ad the denarius was 98 per cent copper. Naturally, a trader will not give as much for a coin that is mostly copper as for one that is pure silver, even if they are called the same thing and bear the same stamp. 

Continuous hoi air driers are used to prepare most of the high quality, dried, piece-furm fruits and vegetables produced in the United States. Liquids and pastes arc commonly dried in spray, drum, or feeze dryers. Particulate foods can be dried in batch or continuous air-fluidized beds or freeze dryers. Many agricultural commodities are sun-dried when weather conditions at harvest provide low humidity, warm temperatures, and good air circulation. 

Let us examine this fantasy more closely It is admitted that there can be overproduction in each ftarticuhr industry. The only circumstance which could prevent overproduction in aU industries simultaneously is, according to the assertions made, the fact that commodity exchanges against commodity - i.e. recourse is taken to the supposed conditions of barter. But this loop-hole is blocked by the very fact that trade under capitalist conditions is not barter, and therefore the seller of a commodity is not necessarily at the same time the buyer of another. This whole subterfuge then rests on abstracting from mmtry and from the fact that we are not concerned here with the exchange of products, but with the circulation of commodities, an essential part of which is the separation of purchase and sale. ... 

The second, more sophisticated version of mercantilism derives profit from circulation, not from the mere possession of money. "The so-called monetary system is merely an expression of the irrational form M-C-M, a movement which takes place exclusively in circulation." In Capital I Marx explains that this version no less than the first rests on the fallacy of composition, which in this case is the erroneous inference from the fact that any commodity-owner can enrich himself, at the expense of others, by selling the product over the value, to the conclusion that all can do so simultaneously. "The capitalist class as whole, in any country, cannot overreach themselves." And Marx adds in a footnote "Deslutt de Tracy. .. held the opposite view. He says, industrial capitalists make profits because they all sell for more than it has cost to produce. And to whom do they sell In the first instance to one another. " ... 

M-C... P... C -M, fixed as the exdusive form, constitutes the basis of the more highly developed mercantile system, in which not only the circulation of commodities, but also their pn uction appears as a necessary element. The illusory character of M-C. .. P. . .. C -M and the corresponding illusory interpretation exists whenever this form is flxed as occurring once, not as fluent and ever renewed hence whenever this form is considered not as one of the forms of the circuit but as its exdusive form. ... 

II) The catholic fact that gold and silver as the direct embodiment of social labour, and therefore as the expression of abstract wealth, confront other profane commodities, has of course violated the protestant code of honour of bourgeois economists, and from fear of the prejudices of the Monetary system, they lost for some time any sense of discrimination towards the phenomena of money circulation. ... 

Economists distinguish among currency (or hand-to-hand circulating media, which includes coins and bank notes), money equivalents (such as demand bank deposits and treasury notes), and commodities used as money (such as gold or silver bullion or consumables such as tobacco). In modern industrial societies, coins and paper money form only a small part of a nation s total money supply, money equivalents accounting for the larger portion of it. 

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