Circulation labour is both necessary and unproductive

My thoughts on the question Iren posed in her notes below, i.e. "If circulation is socially necessary, a necessary condition for capital’s reproduction, on what grounds does Marx argue that it does not create value? Can his argument about specificity of use-value of commodity labour power be such a criterion? What is the difference between being socially necessary and value positing? Is his argument convincing?" (And at the last meeting we spent most of time on this issue.)

To rephrase the question, why does Marx treat production and circulation asymmetrically, i.e. one adds value while the other doesn't, when he admits that both are necessary for the reproduction of the economy?

I think we already know that Marx is implying 'necessary' in a different sense for production and circulation. As for production, it is necessary in the sense that it creates value through affecting use value; as for circulation, it is necessary in that it changes form of value, or realizes value already produced in production.

(Footnote: When Marx contrasts production and circulation, I think he is referring to circulation in a restricted sense of the word in that it involves only formal changes of value between money and commodity without affecting use-value at all. Thus when I say circulation I mean pure circulation as buying and selling excluding storage and transportation which, as Marx writes, are part of the production process disguised in circulation process, and therefore do add value.)

So, as Marx argues in Volume 2 of Capital, workers employed in circulation process is necessary and at the same time unproductive.

Marx has an interesting analogy in Volume 2:

Labour employed in the circulation process "behaves somewhat like the 'work of combustion' involved in setting light to a material that is used to produce heat. This work does not itself produce any heat, although it is a necessary moment of the combustion process." (208)

Now if our question is one of more fundamental type, i.e. "but still, why production, not circulation, as a site where labour is productive?" then I think the fact that value and use-value constitute dual nature of commodity, that thus there is no value creation without adding or conserving (in case of storage and transportation) use-value, and that (pure) circulation does not add or conserve use-value is enough to ground Marx's argument.

Grundrisse, p. 602-635

Here is my outline of the reading

1. Critique of Malthus, on three grounds (p. 605-607).
- First, an analysis should be historical, i.e. phenomena that can seem ahistorical (overpopulation, in case of Malthus) do have a specificity given to them by a particular mode of production of which they are an element. They are “historically determined relations”.
- Second, the role of social mediations: population needs to be analyzed in its relationship to employment, not agricultural products.
- Third, theory of rent (not discussed).
He also seems to argue (as a part of the 1st argument), that human phenomena are socially determined, hence, have only immanent, inner barriers, whereas natural phenomena have a social, i.e. outer, determination (p. 607).
Q: Is it convincing?

2. Smith’s concept of “work as sacrifice” (p. 610-614).
- Smith correctly captures only a specific historical form of the relationship (that of wage labour, slavery, etc.), but not the property of labour in general. For Marx, the latter is “self-realization, objectification of the subject, hence real freedom”, although at the same time “the most damned seriousness, the most intense exertion” (p. 611).
- He also correctly captures worker’s subjective attitude to work, in this sense, it is a psychological theory.
- For Marx, Smith’s concept of labour is negative, whereas it is indeed “a positive, creative activity”. To create value, labour should be more than just a sacrifice – it requires social mediation (subject-subject relationship) and worker’s relationship to his product (subject-object relationship). Determination of value by labour time can be done only based on the second approach.

3. Role of additional demand (from J. St. Mill): it increases output by 1) realizing the value of inventories that can be reinvested; 2) creating conditions for reconversion of financial assets into productive capital, hence, raising profit mass by the difference between the profit rate and the interest rate, times the volume of capital invested; 3) expanded accumulation by means of borrowing, with the same additional profit (p. 618). Notice, expanded reproduction based on rechanneling own funds and borrowing results in the same increase of profit, i.e. Mill is aware of the cost of capital idea.
Q: Mill implicitly assumes that the return on production is higher than the interest rate, otherwise his second argument would not hold. Does it always have to be the case though?

4. Circulation (p. 624-635).
- Does not create value, hence, circulation costs – costs of realization of value – are a deduction from the created value. Hence, costs of circulation are faux frais.
- Costs of circulation arise not from division of labour and necessity of exchange in general, but from their capitalist form. They stem from a necessary change in form of capital.
- In socialism, communal consumption replaces exchange.
- Circulation is a limit of production, in that sense, “circulation time becomes a determinant moment for labour time, for the creation of value. The independence of labour time is thereby negated, and the production process is itself posited as determined by exchange” (p. 628).
- “Magnitude of the capital can be replaced by the velocity of turnover” (p. 630). An n-time increase in the volume of capital generates the same mass of profit as capital turning over n times faster during the same time period. Nevertheless, if one accounts for a possibility of reinvestment after each turnover period, the smaller capital with higher turnover rate will produce more profit.
- Q1: If circulation is socially necessary, a necessary condition for capital’s reproduction, on what grounds does Marx argue that it does not create value? Can his argument about specificity of use-value of commodity labour power be such a criterion? What is the difference between being socially necessary and value positing? Is his argument convincing?
- Q2: Marx’s criterion of value creation is not whether activity is performed in the sphere of production or exchange, but whether it affects use-value of commodity (e.g., transportation, storage, etc.). Where is the boundary between activities affecting use-value in circulation (hence, productive of value) and those not affecting it? Is there such a boundary?

A few smaller points.

1. One of the reasons making the emergence of credit necessary is a difference in reproduction time of different individual capitals (p. 603). Hodgskin mistakenly takes this condition as a prerequisite for money. But it should be credit, not money.
2. Marx seems to argue that any theory is always written from a class perspective, consciously or not (p. 605).
3. An interesting observation that a mode of suspension of some barriers is their generalization (e.g., money, credit) (p. 623).

Malthus, surplus population, etc.

On reading pages 602-635 of Grundrisse, I found the following points worth emphasizing:

(1) Critique of Malthus' theory of population (which even Ricardo had used): the two main points of Marx's critique being (1) theory of population is not ahistorical as Malthus thinks, every mode of production has its own theory of population, and (2) Malthus' theory implicitly assumes full employment of labour, an assumption that is now ubiquitous in neoclassical economics (here again, the point is to realize that the relationship between the means of subsistence and population is mediated through the relations of production; it is not direct as Malthus assumes). Interesting aside: Malthus's theory is not his own! He borrowed a lot from James Steuart, I think.

(2) Surplus population or the industrial reserve army of labour: the mains idea here, to my mind, which Marx developed more fully in Chapter 25, Vol 1 of Capital, is that capitalism, as a mode of production always needs a substantial body of surplus population of workers (the industrial reserve army of labour) for its stability and continued existence; the process of capital accumulation, in fact, produces this surplus population over and over again through the displacement of labour by machinery. Since the unemployed are only a small part of the reserve army of labour, the study of the latter should replace the more restricted study of unemployment; this is one of the differences, to my mind, between a Keynesian and a Marxian approach to the study of labour underutilization.

(3) Critique of Smith?s theory of "labour as sacrifice": I found this point absolutely fascinating; when one grasps the positive, liberating aspect of labour, as Marx emphasizes, one is immediately able to see the idiocy of all of modern neoclassical macroeconomics that is based on the so-called labour/leisure choice.

(4) There is a nice discussion pertaining to the turnover time of capital (as the sum of production time and circulation time); the example where the annual rate of profit increases because of the increase in the turnover time of capital is illuminating.

(5) Cost of circulation as deductions from surplus value: the important point here is that exchange does not create value and hence the part of total social (labour) time that is devoted to circulation is a cost from the point of view of society, is a deduction from social surplus value. (Important exception: Transportation of goods from one location to another is not to be considered as circulation; it is a part of production and adds value. This has a nice contemporary ring: state contingent commodity markets!)