Theory of the Reproduction of Social Capital

Marx’s theory on the process and laws of the circulation or reproduction of the aggregate social capital in the capitalist process of reproduction.

The theory of the social capital reproduction was put forth by Marx in the early 1860s in the Economic Manuscripts of 1861–1863. This theory was founded by Marx on the basis of criticizing and inheriting the theory of reproduction of the classical school. In this manuscript, Marx’s overall understanding of the process of realization of reproduction of social capital is accomplished on the basis of the critique of Quesnay’s Tableau économique. In the Tableau économique, Quesnay tried to give an outline description of the process of reproduction of social capital. Marx has discarded the false premises in it and put forth his own “economic table” that includes the entire process of reproduction. Moreover, Marx put forth two basic premises for the theory of the reproduction of social capital by criticizing “Smith’s dogma”. Smith upheld that the value of a commodity is made up of the three kinds of income, wages, profit and rent. Subject to this theoretical dogma, Smith confused the distinction between the value of the product and the value newly created by workers in the production of the product. The distinction between productive and subsistence consumption in the reproduction of social capital was confused. Marx clearly distinguished between the two, and established the basic premise for the theory of the reproduction of social capital. Then, from 1865 to 1870 and after 1877, Marx further examined and dealt with the theory of the reproduction of social capital. Volume 2 of Capital, edited by Engels, has completely and systematically reflected Marx’s theory of the reproduction of social capital. At the end of the 19th century and the beginning of the 20th century, Lenin, in the struggle against the Russian Narodniks and “legal Marxism”, further elucidated the theory of the reproduction of social capital. He pointed out that capitalist reproduction takes place in constant contradictions, in cyclical crises, and concluded that the production of means of production increases faster than the production of means of consumption, etc.

The key to the existence and development of human society lies in the production of material means. Production is a continuous process performed again and again, because a society cannot cease to consume, and therefore cannot cease to produce. Reproduction refers to this continuous production. This theory includes: firstly, the relevant determinations on aggregate social capital, aggregate social product and the two major departments of social production. The sum total of connected individual capitals makes up social capital (also known as aggregate social capital). The movement of social capital includes two aspects: productive consumption and individual subsistence consumption. The sum of all the material means produced by the branches of social production in a certain period (usually one year) is called the aggregate social product. From the perspective of material form, aggregate social product is divided into the means of production used to satisfy the needs of productive consumption and the means of consumption used to satisfy the needs of individual consumption. From the perspective of value form, aggregate social product is divided into three parts: constant capital (c), variable capital (v) and surplus-value (m). Accordingly, social production as a whole can be divided into two major departments, i.e., Department I, which produces the means of production, and Department II, which produces the means of consumption. Secondly, concerning the simple reproduction of social capital and the expanded reproduction of social capital. The simple reproduction of social capital is a reproduction in which the scale of social production is constant and all the surplus-value created by workers is used by capitalists for personal consumption without accumulation taking place. The expanded reproduction of social capital refers to the reproduction on an expanded scale of production, in which the capitalist does not use all of the surplus-value for personal consumption, but invests a part of the surplus-value as additional capital in production, in order to expand the scale of production and pursue more surplus-value.

Whether in simple reproduction or expanded reproduction, the replacement in kind and the addition in value of the components of the total social product have to be exchanged in certain proportions for the reproduction of social capital to proceed smoothly.

The equilibrium conditions for the realization of the simple reproduction of social products are expressed by the below formulae:

(1) I (v + m) = II c

(2) I (c + v + m) = I c + II c

(3) II (c + v + m) = I (v + m) + II (v + m)

Prerequisites for the expanded reproduction of social capital:

(1) I (v + m) > II c The newly created value in Department I must be greater than the constant capital consumed by Department II in order to ensure the need for expanded reproduction.

(2) II (c + m – m/x) > I (v + m/x) The sum of constant capital and surplus-value for accumulation in Department II must be greater than the sum of variable capital and surplus-value used for personal consumption in Department I to provide additional means of consumption.

The equilibrium conditions for the realization of the expanded reproduction of social products are expressed by the formulae:

(1) I (v + Δv + m/x) = II (c + Δc).

(2) I (c + v + m) = I (c + Δc) + II (c + Δc).

(3) II (c + v + m) = I (v + Δv + m/x) + II (v + Δv + m/x).

The conditions for the realization of the expanded reproduction of social capital require that the two major departments of social reproduction must maintain a certain proportional relation, otherwise social reproduction cannot develop harmoniously. Under capitalist conditions, however, the contradiction between the socialization of production and the capitalist private form of appropriation, and the resulting contradiction between the organized production of individual enterprises and the anarchy of the social production as a whole, and the contradiction between the blind expansion of production and the relative decrease in the demand for solvency of the working people, leads to a constant upsetting of the proportional relation required for the reproduction of social capital. The conditions required for the realization of the total social product in order to maintain the proportional relation required for the reproduction of social capital are often spontaneously realized forcibly through economic crises. This determines the fate of the inevitable downfall of capitalism.

The theory of the reproduction of social capital is an important component part of Marxist political economy, which has profoundly revealed the conditions and laws necessary for the normal operation of the capitalist economy without state intervention.