Two Major Departments of Social Production

Two departments divided according to the production of means of production and the production of means of consumption. The physical form of the aggregate social product is divided into means of production and means of consumption according to its final use. Accordingly, social production is divided into two major departments, one is the production of means of production, also known as “Department I”; and the second department is the production of means of consumption, also known as “Department II”.

Marx’s Capital describes the two major departments of social production: “The total product, and therefore the total production, of society may be divided into two major departments: I. Means of production, commodities having a form in which they must, or at least may, pass into productive consumption.” “II. Articles of consumption, commodities having a form in which they pass into the individual consumption of the capitalist and the working class. All the various branches of production pertaining to each of these two departments form one single great branch of production, that of the means of production in the one case, and that of articles of consumption in the other. The aggregate capital employed in each of these two branches of production constitutes a separate large department of the social capital.” The division of the two major departments starts out from the physical form of social products and takes economic use as the hallmark of the division. However, the products of some branches of production can be used not only as the means of production, but also for individual consumption, such as coal, which is both essential fuel and raw material for the branches of production and also an indispensable fuel for people’s life. Which department a product belongs to can be divided according to its main use.

The realization of the aggregate social product must be achieved through exchanges within and between the two major departments. Under the conditions of commodity economy, social reproduction can only proceed smoothly when the products of the two major departments are exchanged, compensated and realized by each other. Moreover, an appropriate proportional relation must be maintained between the two major departments of social production.

Under the conditions of simple reproduction, the proportional relation between the two major departments must meet the following conditions: I (v + m) = II c, i.e., the sum of variable capital and the surplus-value of Department I is equal to the value of the means of production consumed by Department II. This is the basic condition for the realization of simple reproduction. The following two formulae can be further derived from this formula: (1) I (c + v + m) = I c + II c, i.e., all the products produced by Department I shall be capable of compensating, in physical form, for the consumption of the means of production in the two major departments. (2) II (c + v + m) = I (v + m) + II (v + m), i.e., all the products produced by Department II must be able to satisfy all the needs of consumption of workers and capitalists in the two major departments. Under the conditions of expanded reproduction, the proportional relation between the two major departments is: I (v + m) > II c, which indicates that the means of production produced by Department I, in addition to compensating for the means of production already consumed by the two major departments, must have a certain excess to satisfy the need for additional means of production for expanded reproduction. Moreover, the products of Department II, in addition to satisfying the need of the original workers and capitalists in the two major departments for consumer goods, must also have a certain excess to satisfy the need of the two major departments for additional consumer goods for expanded reproduction.

However, competition and the anarchy of production under capitalist conditions cause these proportional relations to be frequently disrupted, manifesting themselves as various fluctuations and cyclical economic crises, and it is only through such fluctuations and crises that the reproduction of social capital can be spontaneously and forcibly realized.

The theory of the two major departments of social production is a fundamental principle in Marx’s theory of reproduction. The value composition and material composition of the aggregate social product and the principle of the two major departments of social production are the theoretical premises for the study of the reproduction of aggregate social capital. By dividing social production into two major departments and dividing the aggregate social product into three parts in terms of value, Marx has scientifically solved a series of problems in the realization of the aggregate social product in value and in kind, thus laying a solid theoretical basis for scientifically revealing the laws of the total capital reproduction and circulation in capitalist society.