Reproduction (economics)

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. Economic reproduction involves physical production and distribution of goods and services, the trade (the circulation via exchanges and transactions) of goods and services, and the consumption of goods and services. Karl Marx developed the original insights of Quesnay to model the circulation of capital, money and commodities in the second volume of Das Kapital, to show how the reproduction process which must occur in any type of society can take place in capitalist society, by means of the circulation of capital.

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. In the capitalist mode of production, the difference is that in the former case, the new surplus value created by wage-labour is spent by the employer on consumption (or hoarded), whereas in the latter case, part of it is reinvested in production.

Ernest Mandel additionally refers in his two-volume Marxist economic theory 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). Reproduction in this case continues to occur, but investment, employment and output fall absolutely, so that the national income falls. In the Great Depression of the 1930s, for example, about one-quarter of the workers became unemployed; as a result of the 2008/2009 slump, the unemployed labour force increased by about 30 million workers (a number approximately equal to the total workforce of France, or Britain).