Reproduction (economics)

In Marxian economics, economic reproduction refers to recurrent (or cyclical) processes by which the initial conditions necessary for economic activity to occur are constantly re-created. Karl Marx developed the original insights of Quesnay to model the circulation of capital, money and commodities in the second volume of Das Kapital.

Marx distinguishes between simple reproduction and expanded (or enlarged) reproduction. In the former case, no economic growth occurs, while in the latter case, more is produced than is needed to maintain the economy at the given level, making economic growth possible. The difference is that in the former case, the surplus value created by wage-labour is spent by the employer on consumption, whereas in the latter case, part of it is reinvested in production.

Ernest Mandel additionally refers to "contracted reproduction", meaning production on a smaller and smaller scale, in which case business operating at a loss outnumbers growing business (e.g. in wars, depressions, or disasters - see further Joseph Tainter et al., "The Collapse of Complex Societies").

Theoretical approach

As an approach to studying economic activity, economic reproduction contrasts with equilibrium economics, because economic reproduction is concerned not with statics but with dynamics, i.e. the motion of an economy. It is not concerned with the conditions of a perfect match of supply and demand under idealised conditions, but with quantitative proportions between different economic activities or sectors which are necessary in any real economy so that economic activity can continue and grow. And it is concerned with "all" the conditions for that, including social and technical conditions, necessary for the economic process. Wassily Leontief developed Marx's idea further in his input-output economics.

In Marx's view, economic reproduction has four main aspects:

*the production of reproducible products replacing, maintaining or adding to the stock of society's assets.
*the maintenance and reproduction of the working population and their dependents.
*the reproduction, enforcement and maintenance of social relations, in particular the relations of production which characterize the social hierarchy, and property rights.
*the maintenance and reproduction of trading relations.

Marx's argument is that by producing an output value which equals the equivalent his own wage plus a surplus value (or gross profit) appropriated by capitalists, waged workers accomplish many of thes processes involved at the same time. Part of the role of the state is to secure those general (collective) conditions for the reproduction and maintenance of society which individuals and private enterprise cannot secure by themselves for one reason or another (for example, because they transcend competing interests, because they are too costly for private agencies, because it is technically not possible to privatize them, or because they are not profitable).

Ecologists would nowadays probably add as a "reproduction condition" good stewardship for the physical environment. Sustainable development cannot occur if the natural environment is constantly depleted without being restored.

Economic reproduction in capitalism

According to Marx, in a capitalist society economic reproduction is conditional on capital accumulation. If workers fail to produce more capital, economic reproduction begins to break down. Therefore, economic reproduction in capitalist society is "necessarily" expanded reproduction and requires market growth. Capital must grow, otherwise the process breaks down. Thus, economic growth is not simply desirable, but also absolutely necessary in capitalism.

In this light, the ecological vision of a "zero-growth society" appears rather utopian; or, at the very least, its achievement would require the abolition of capitalism. Some would argue that population growth makes economic growth absolutely necessary. The real argument though is not about "growth or no growth", but about the "kind" of growth that is best for the (enlarged) reproduction of the human species as such. Ecologists may validly argue that some types of growth undermine important conditions for human survival in the longer term, without this invalidating "other" kinds of growth which are beneficial.

Capital accumulation (the amassment of wealth in the form of capital assets) can occur in two basic ways: either by means of producing a net addition to the stock of capital assets, or by transferring wealth from one owner to another. In the former case, the total stock of capital grows. In the latter case, the accumulation of one owner is at the expense of the other, there is no net growth. These two ways are usually combined, meaning that all or most owners can make gains, but in unequal amounts. In considering the economic reproduction process as a whole, one therefore has to consider both the production of new resources and the transfer (distribution) of resources.

Economic reproduction, economic equilibrium and economic crises

Marx's models of economic reproduction in capitalism have often been interpreted as stating the conditions for economic equilibrium, or balanced economic growth. After all, there are certain "necessary proportions" between different branches of production, which have to adjust their output levels to each other. If those proportions do not reach a minimum acceptable level, then products remain unsold, or producers cannot get the inputs they require, in which case production begins to slow down or break down. So there are some necessary proportions between production, distribution and consumption. In this sense, Marx distinguishes between the production of means of production, consumer goods, and luxury goods and considers the commercial interactions between the sectors producing them.

If the growth of different sectors of production occurs very unevenly for some reason, "bottlenecks" can occur, so that a supply or demand cannot be met. In the worst case, an interruption in the normal reproduction process triggers a sequence of disturbances, a chain reaction which spreads from some branches of production to the whole economy, meaning that products are left unsold, and that producers receive insufficient income to pay their bills. The result is rising unemployment, productive capacity which is not utilized, and a drop in output and productive investment. That means lower economic growth.

This idea was the basis for numerous Marxist crisis theories devised in the 1920s and 1930s, most famously by Rosa Luxemburg, Otto Bauer and Henryk Grossmann. The argument is that balanced economic growth is only a temporary phenomenon, because a private enterprise economy is incapable of sustaining the necessary proportionalities it requires for that. It cannot do so, because there is no overall, conscious coordination of production activities in an economic system where producers compete to cut costs, increase sales and increase profits. There has been much dispute about which disproportionalities exactly are of decisive importance, and why those specific disproportionalities would occur and recur, but all the theorists agree that some disproportionalities must necessarily occur, making recurrent crises inevitable.

Other theorists such as Ernest Mandel and Roman Rosdolsky argued that capitalist economic development is "always" an "uneven" rather than "balanced" development in space and time. At most an approximate balance of supply and demand is achieved in particular areas. In that case, an economic equilibrium never exists in reality (it is only a theoretical abstraction) - there are constant market fluctuations all the time, as producers adjust to each other without being able to determine how much others will produce for sale. At most one could say that in times of strong economic growth, when markets strongly expand, all producers can make gains from increasing output, even if the gains are unequal. But after a certain time, productive investment will "overshoot" a by now saturated market demand, causing the economy to spiral into a crisis again.

The basis for this alternative interpretation is that as long as simple reproduction is at least accomplished, expanded reproduction permits a lot of variations, possibilities and flexibilities (elasticities) - the gross profit income of enterprises can, within certain obvious limits, be utilised or reinvested in many different ways, without causing any critical disturbance of the economic reproduction process as a whole. The greater labor-productivity is, and the larger the surplus product, the more discretionary wealth exists. In addition, the extension of credit can compensate for temporary supply-demand imbalances. So, while certain minimal quantitative conditions do exist for the proportionalities of outputs among different branches of production, these proportionalities can be maintained, even if the output growth rate per year drops from (say) 4% to 2%. Provided that the capitalist relations of production are stable and secure, capital accumulation will continue, despite constant market fluctuations, at a slower or faster pace. Society will reproduce itself anyway, but at a lower or higher standard of living.

In that case, models of economic reproduction are not a very useful guide to understanding economic crises, because (it is argued) Marx only intended them to show how it was "possible" for the whole economic reproduction process to be accomplished on the basis of the circulation of capital, by stating what would be the minimum requirements (not equilibrium conditions) for it. If certain quantitative assumptions are made about the growth rates of different sectors and about capital compositions, it can be proved that certain disproportions must necessarily develop. But in reality, the economic reproduction process could be interrupted or break down for all kinds of reasons (including non-economic causes such as wars or disasters). And if disproportions occur, the economic system can also adjust to them, within certain limits. If vastly more capital assets are created than are actually invested in production, one cannot explain economic crises simply in terms of disproportions happening in the sphere of production - one has to look at the process of capital accumulation as a whole, which includes the financial system (capital finance).

Reproduction of labor power

Reproduction can also refer to the worker's daily reproduction of his own labor power. This consists of the tasks of everyday existence — food preparation, laundry and so forth — that maintain him and his ability to show up at his job as required. Much of this domestic labor has historically been the responsibility of women; thus it is of particular interest in feminist economics.

References

*Karl Marx, Das Kapital
*Andrew Trigg, Marxian Reproduction Schema. Routledge, 2006.

ee also

*law of value
*labour power
*Comparative statics