November 2013        

Departments I, II and III and economic crisis

Marxist economic analysis breaks up the process of capital’s reproduction of itself into three “departments.”
     Department I is the production of the means of production, considered to be investment in new technologies or replacement technologies and materials. Capitalists here sell their product to other capitalists.
     Department II is the production of wage goods: those goods that workers buy with their wages to ensure their own reproduction. Capitalists here sell their products largely to workers but also to other capitalists.
     Finally, department III is the production of luxury goods, non-wage goods, and also those growing areas of unproductive reproduction of capital through advertising, military expenditure, and financial products. Capitalists here are again largely dependent on other capitalists, or indebted workers, as their market.
     These demarcations help us to understand the areas of investment in the system and how changes in these contribute to the crisis that is imperative within the system.
     Because of the competitive need to increase profits and to get more for less from workers, capitalists will seek to invest in new technology, which results in an increased demand for department I goods. This will also result in an increased supply of department II goods; and if workers’ wages are not increased to consume this supply, overproduction will follow.
     Monopoly finance capital has attempted to counter this tendency through the extension of debt to workers, so as to finance the consumption of both department II and department III goods by workers. However, this has increased new and highly unstable levels of debt, which create their own dynamics for crisis that we are seeing clearly today.
     The drive to replace workers with technology, to reduce wages and to shift production to Asia to increase profits was made easier as monopolisation occurred and has taken on a more pronounced character in recent times, leading to a variety of other systemic features (described in previous articles in Socialist Voice), such as growing unemployment, increased proletarianisation and pauperisation, and environmental crisis. This brings to the fore the inevitable contradiction between increased productive capacity and reduced consumption ability and as a consequence the struggle to realise profits for monopoly businesses with massive amounts of accumulated capital.
     Capital has adapted to this with a massive growth in department III, the production and consumption of luxury goods and the unproductive re-creation of capital. This can be seen in built-in obsolescence, in increasing expenditure on advertising, in the constant launching of new models of the same products, in the privatisation of public services, and of course in the financial services sector.
     These contradictions are not going away, and cannot be regulated away: they are core features of how capital re-creates itself today. This is why capitalism’s response to the crisis has been to further drive these features of the system.

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