Simple and Expanded Reproduction (Ben Fine Diagram)

An example: 

Department 1 produces the means of production. In this case, spatulas. It is owned by Capitalist 1, who owns a kitchenware factory. 

Department 2 produces the means of consumption. In this case, burgers. It is owned by Capitalist 2, the proprietor of a restaurant. 

In case of simple reproduction, let's assume that these two businesses exclusively buy and sell each other's products and no surplus is left over. This is for the sake of simplicity. 

First, we'll talk about Department 1. 

F is Capitalist 1's money-capital (let's assume that he borrowed money from the bank). Using this money, he buys constant capital 1. 

A (constant capital 1) is Capitalist 1's commodity-capital. This refers to the means of production (MP) and labor-power (LP) which the capitalist owns. In the former, the metal, rubber (for handles), machines used to make the spatulas, and in the latter, the labor-power of his employee, who assembles these. 

B isthe process by which the MP is referred to LP for production to happen. At this stage, the worker has all the means of production ready before him; all he needs to do is use his LP. In doing so, productive-capital (P1) is created. This refers to C1 advanced and consumed in the production process. 

C shows that LP is expended on the MP to create the product, a spatula. The spatula is the means of production for Capitalist 2 to make burgers. 

D is the finished product; the spatulas (C'). Surplus value is extracted from the laborer, which means that the mass of spatulas will sell for more than C1. 

E shows how Capitalist 1 sells these spatulas to Capitalist 2 for money. In effect, the spatulas are converted to money. Money is used to pay for the cost of Capitalist 1's constant capital, variable capital (used to buy labor power), and surplus value. 

F (again) shows that Capitalist 1 uses the money he got from the sale (money he got from Capitalist 2) to buy C1 again. In effect, Capitalist 2's money which was used to pay for C1 is immediately deducted since it will be used to buy again. What remains as Capitalist 1's profit is the surplus value he obtained from his workers. The cycle repeats again. 

But take note that the value of V1 may be reinvested right away but its value is not yet utilized until the process (P1) of applying labor power to the means of production occurs again. 

G shows that Capitalist 1's laborer uses his wages (V1) to buy burgers from Capitalist 2. 

Let's move to Department 2. 

H shows that Capitalist 2 has money. Just like Capitalist 1, he buys the means of production (his buns, patties, grill, etc.) represented by C2, and labor power (his employees' time) represented by V2. This produces C2. 

I is Capitalist 2's possession of C2. 

J is the process the Capitalist 2's employees undertake to grill the patties and assemble the burgers, with their labor-power. 

K is Capitalist 2's ownership of the mass of burgers produced, including the added value of his employee's surplus value. 

L shows how Capitalist 2 sells these spatulas to Capitalist 1 for money. In effect, the burgers are converted to money. Money is used to pay for the cost of Capitalist 2's constant capital, variable capital (used to buy labor power), and surplus value. 

M shows how Capitalist 2 uses that money to buy spatulas from Capitalist 1. The spatulas for him are just part of C2, while for Capitalist 1 it represents C'. Otherwise stated, the spatulas are both the means of production of Capitalist 2, and the finished product of Capitalist 1, including the surplus value of the latter's workers. 

N shows Capitalist 1 and Capitalist 2 buying burgers from Capitalist 2. In this way: 

1. Capitalist 1's surplus value (S1) goes to Capitalist 2 
2. Capitalist 2's surplus value (S1) in the form of money goes back to himself, and this money will eventually be used to buy C2. This is a simple circulation of money. 

Now let's look at the equations used to show how values can be shown in simple reproduction. Let's start with the finished product of Department 2: 

C2’ (C2 + V2 + S2) = V1 + V2 + S1 + S2 

The cost of the entire supply of burgers sold by Capitalist 2 is equal to that paid for them by V1, V2, S1, and S2 combined. 

All wages of the workers of both capitalists (V1 + V2) in this exchange are used to buy a burger. 

Here part of the money of the second capitalist again essentially returns to them (since he and his worker buys burgers made by the second capitalist). 

As for both capitalists, they use the surplus value made from their business to buy the burger (S1 + S2). This was also stated above. 

As mentioned earlier, the capitalists do NOT use any money from C1 or C2 since this is always reinvested. So, when C2’ sold for money reaches the pocket of capitalist 2, he already has to set aside a part of it for constant capital again. This is why we obviously cannot and should not account for C1 and C2 in the equation fixing the cost of C2'.

 

Simplified, the equation is C2 = V1 + S1. 

As for the finished product of Department 1 (the cost of the entire sale of spatulas by Capitalist 1), this is the formula: 

C’ (C1 + V1+ S1) = C1 + C2 

What is used to buy C’? As stated, it is C2 by the restaurant (because C’ is merely just MP of Capitalist 1's restaurant). C2 is used to pay for C1, V1, and S1. 

But when Capitalist 1 gets part of C2, he immediately reinvests it in the means of production (the metal, upkeep of machinery, etc.), so we can immediately subtract that and thus part of C2 has to cancel out C1. 

So what C2 ESSENTIALLY pays when it is used to buy the spatula is V1 and S1 of the first capitalist. 

Therefore, C’ (C1 + V1+ S1) = C1 + C2, when simplified, is C2 = V1 + S1. This is the same formula as in Department 1. 

V1 doesn’t automatically cancel out itself, since the capitalist cannot immediately obtain labor-power. That is part of the peculiarity of labor-power as a commodity; unlike constant capital, it cannot be immediately realized in value, it’s not enough to be bought, it must first be used to work on the constant capital before value can be realized. So there cannot be an instant transformation with V1 unlike with C1. 

Therefore, in simple reproduction, everything balances out. 

In expanded reproduction, the second capitalist does not consume his entire surplus value, but spends a part of it buying additional means of production. 

Thus, V1 + S1 (the portion the second capitalist essentially pays for) now becomes greater than C2, because the capitalist has already expended the entire of C2 in buying the means of production found in simple reproduction. He is expanding, and therefore he needs to put more than just C2. The formula in this case is unbalanced: 

V1 + S1 > C2 

So, to balance, and account for expanded reproduction, the capitalist must now put in new and additional constant capital with which to buy more means of production: 

V1 + S1 = C2 + X 

Where X is the new and additional constant capital. 

How does the second capitalist obtain this new and additional constant capital (X)?  From surplus value which is to form their constant capital, of course. 

Both simple and expanded reproduction exist in capitalist economy. But in the case of expanded reproduction, the goal of the capitalist is to expand the scale of his business operations. More spatulas (C1) means that Capitalist 1 will now have to hire more workers, or lengthen the working day (since there are more spatulas to compensate for the wear and tear of existing ones). In both cases, exploitation is intensified.