Digitized by the Internet Archive in 2007 with funding from Microsoft Corporation http://www.archive.org/details/capitalcritiqueo02marxiala CAPITAL A CRITIQUE OF POLITICAL ECONOMY By KARL MARX VOLUME II THE PROCESS OF CIRCULATION OF CAPITAL EDITED BY FREDERICK ENGELS TRANSLATED FROM THE SECOND GERMAN EDITION BY ERNEST UNTERMANN CHIC AG O CHARLES H. KERR & COMPANY 1933 Copyright, 1909 BY CHARLES H. KERR & COMPANY VTA CONTENTS. Page PREFACE 7 TRANSLATOR'S1 NOTE 30 THE CIRCULATION OF CAPITAL. PART I. THE METAMORPHOSES OF CAPITAL AND THEIR CYCLES CHAPTER I.— The Circulation of Money-Capital 31 Section I.— First Stage M— C 32 Section II. — Second Stage, Functions of Productive Capital 41 Section III.^-Third Stage, C— M* 46 Section IV. — The Rotation as a Whole 58 CHAPTER II.— The Rotation of Productive Capital 72 Section I. — Simple Reproduction 73 Section II. — Accumulation and Reproduction on an Enlarged Scale 89 Section III. — Accumulation of Money 93 Section IV. — Reserve Funds 96 CHAPTER III.— The Circulation of Commodity-Capital 98 CHAPTER IV.— The Three Diagrams of the Process of Circulation 114 CHAPTER V.— The Time of Circulation 138 CHAPTER VI.— The Expenses of Circulation 147 Section I. — Genuine Expenses of Circulation 147 1. The Time of Purchase and Sale 147 2. Bookkeeping 151 3. Money 153 Section II. — Expenses of Storage 154 1. General Formation of Supply 155 2. The Commodity-Supply in Particular 162 Section III. — Expenses of Transportation 169 PART II. THE TURN-OVER OF CAPITAL CHAPTER VII.— The Period and Number of Turn-Overs 173 CHAPTER VIIL— Fixed Capital and Circulating Capital 178 Section I. — Distinctions of Form 178 Section II. — Composition, Reproduction, Repair, and Accumulation of Fixed Capital 192 CHAPTER IX.— The Total Turn-Over of Advanced Capital, Cycles of Turn-Over 208 CHAPTER X. — Theories of Fixed and Circulating Capital, The Physiocrats and Adam Smith 215 CHAPTER XL— Theories of Fixed and Circulating Capital, Ricardo 245 CHAPTER XII.— The Working Period 260 CHAPTER XIIL— The Time of Production 272 CHAPTER XIV.— The Time of Circulation 284 CHAPTER XV. — Influence of the Time of Circulation on the Magnitude of an Advance of Capital 294 Section I. — The Working Period Equal to the Period of Circulation.... 305 Section II. — The Working Period Greater than the Period of Circulation 310 Section III. — The Working Period Smaller than the Period of Circulation 315 5 493775 6 Contents Page Section IV. — Conclusions 319 Section V. — The Effect of a Change of Prices 326 CHAPTER XVI.— The Turn-Over of the Variable Capital 336 Section I. — The Annual Rate of Surplus- Value 336 Section II. — The Turn-Over of the Individual Variable Capital 354 Section III. — The Turn-Over of the Variable Capital Considered from the Point of View of Society 359 CHAPTER XVII.— The Circulation of Surplus Value 367 Section I. — Simple Reproduction 373 Section II. — Accumulation and Reproduction on an Enlarged Scale 397 PART III. THE REPRODUCTION AND CIRCULATION OF THE AGGREGATE SOCIAL CAPITAL CHAPTER XVIII.— Introduction 404 Section I. — The Object of the Analysis 404 Section II. — The Role of Money-Capital 407 CHAPTER XIX.— Former Discussions of the Subject 414 Section I. — The Physiocrats 414 Section II. — Adam Smith 417 1. The General Point of View of Adam Smith 417 2. Smith Resolves Exchange- Value into V-|-S 427 3. The Constant Portion of Capital 430 4. Capital and Revenue in Adam Smith 436 5. Recapitulation 444 Section III. — The Economists After Smith 450 CHAPTER XX.— Simple Reproduction 453 Section I. — The Formulation of the Question 453 Section II. — The Two Departments of Social Production 457 Section III. — The Transactions Between the Two Departments 460 Section IV. — Transactions Within Department II; Necessities of Life and Articles of Luxury 465 Section V. — The Promotion of the Transactions by the Circulation of Money 477 Section VI. — The Constant Capital of Department 1 489 Section VII. — Variable Capital and Surplus- Value in Both Departments 493 Section VIII. — The Constant Capital in Both Departments 498 Section IX. — A Retrospect on Adam Smith, Storch and Ramsay 504 Section X. — Capital and Revenue, Variable Capital and Wages 50S Section XL — Reproduction of the Fixed Capital 522 1. The Reproduction of the Value of the Worn-Out Part in the Form of Money 526 2. The Reproduction of Fixed Capital in its Natural Form 532 Section XII. — The Reproduction of the Money-Supply 547 Section XIII. — Destutt De Tracy's Theory of Reproduction 560 CHAPTER XXI. — Accumulation and Reproduction on an Enlarged Scale.. 571 Section I. — Accumulation in Department 1 574 1. The Formation of a Hoard 574 2. The Additional Constant Capital 579 3. The Additional Variable Capital 5S5 Section II. — Accumulation in Department II 586 Section III. — Diagramatic Presentation of Accumulation 591 1. First Illustration 596 2. Second Illustration 600 3. Exchange of lie under Accumulation 607 Section IV. — Concluding Remarks 610 PREFACE. It was no easy task to prepare the second volume of "CAP- ITAL" for the printer in such a way that it should make a connected and complete work and represent exclusively the ideas of its author, not of its publisher. The great number of available manuscripts, and their fragmentary character, ad- ded to the difficulties of this task. At best one single manu- script (No. 4) had been revised throughout and made ready for the printer. And while it treated its subject-matter fully, the greater part had become obsolete through subsequent re- vision. The bulk of the material ^as not polished as to lan- guage, even if the subject-matter was for the greater part fully worked out. The language was that in which Marx used to make his outlines, that is to say his style was careless, full of colloquial, often rough and humorous, expressions and phrases, interspersed with English and French technical terms, or with whole sentences or pages of English. The thoughts were jotted down as they developed in the brain of vhe author. Some parts of the argument would be fully treated, others of equal importance only indicated. The material to be used for the illustration of facts would be col- lected, but barely arranged, much less worked out. At the conclusion of the chapters there would be only a few inco- herent sentences as mile-stones of the incomplete deductions, showing the haste of the author in passing on to the next chapter. And finally, there was the well-known handwriting which Marx himself was sometimes unable to decipher. I have been content to interpret these manuscripts as lit- erally as possible, changing the style only in places where Marx would have changed it himself and interpolating ex- planatory sentences or connecting statements only where this was indispensable, and where the meaning was so clear that there could be no doubt of 'the correctness of my interpreta- 7 8 Preface. tion. Sentences which seemed in the least ambiguous were preferably reprinted literally. The passages which I have re- modeled or interpolated cover barely ten pages in print, and concern mainly matters of form. The mere enumeration of the manuscripts left by Marx as a basis for Volume II proves the unparalleled conscien- tiousness and strict self-criticism which he practiced in his endeavor to fully elaborate his great economic discoveries before he published them. This self-criticism rarely permit- ted him to adapt his presentation of the subject, in content as well as in form, to his ever widening horizon, which he enlarged by incessant study. The material for this second volume consists of the fol- lowing parts: First, a manuscript entitled "A Contribution to the Critique of Political Economy," containing 1472 quarto pages in 23 divisions, written in the time from August, 1861, to June, 1863. It is a continuation of the work of the same title, the first volume of which appeared in Berlin, in 1859. It treats on pages 1-220, and again pages 1159-1472, of the subject analyzed in Volume I of "CAPITAL," beginning with the transformation of money into capital and continuing to the end of the volume, and is the first draft for this subject. Pages 973-1158 deal with capital and profit, rate of profit, merchant's capital and money capital, that is to say with subjects which have been farther developed in the manuscript for Volume III. The questions belonging to Volume II and many of those which are part of Volume III are not arranged by themselves in this manuscript. They are merely treated in passing, espe- cially in the section which makes up the main body of the manuscript, viz.: pages 220-972, entitled "Theories of Sur- plus Value." This section contains an exhaustive critical history of the main point of political economy, the theory of surplus value, and develops at the same time, in polemic remarks against the position of the predecessors of Marx, most of the points which he has later on discussed individually and in their logical connection in Volume II and III. I re- Preface. 9 serve for myself the privilege of publishing the critical part of this manuscript, after the elimination of the numerous parts covered by Volumes II and III, in the form of Volume IV. This manuscript, valuable though it is, could not be used in the present edition of Volume II. The manuscript next following in the order of time is that of Volume III. It was written for the greater part in 1864 and 1865. After this manuscript had been completed in its essential parts, Marx undertook the elaboration of Volume I, which was published in 1867. I am now preparing this manuscript of Volume III for the printer. The period after the publication of Volume I, which is next in order, is represented by a collection of four manu- scripts for Volume II, marked I-IV by Marx himself. Man- uscript I (150 pages), presumably written in 1865 or 1867, is the first independent, but more or less fragmentary, elab- oration of the questions now contained in Volume II. This manuscript is likewise unsuited for this edition. Manuscript II is partly a compilation of quotations and references to the manuscripts containing Marx's extracts and comments, most of them relating to the first section of Volume II, partly an elaboration of special points, particularly a critique of Adam Smith's statements as to fixed and circulating capital and the source of profits; furthermore, a discussion of the rela- tion of the rate of surplus value to the rate of profit, which belongs in Volume III. The references furnished little that was new, while the elaborations for Volumes II and III were rendered valueless through subsequent revisions and had to be ruled out for the greater part. Manuscript IV is an elaboration, ready for printing, of the first section and the first chapters of the second section of Volume II, and has been used in its proper place. Although it was found that this manuscript had been written earlier than Manu- script II, yet it was far more finished in form and could be used with advantage for the corresponding part of this volume. I had to add only a few supplementary parts of Manuscript II. This last manuscript is the only fairly 10 Preface. complete elaboration of Volume II and dates from the year 1870. The notes for the final revision, which I shall mention immediately, say explicitly: "The second elab- oration must be used as a basis." There is another interruption after 1870, due mainly to ill health. Marx employed this time in his customary way, that is to say he studied agronomics, agricultural conditions in America and especially Russia, the money market and banking institutions, and finally natural sci- ences, such as geology and physiology. Independent mathematical studies also form a large part of the numer- ous manuscripts of this period. In the beginning of 1877, Marx had recovered sufficiently to resume once more his chosen life's work. The beginning of 1877 is marked by references and notes from the above-named four manu- scripts intended for a new elaboration of Volume II, the beginning of which is represented by Manuscript V (56 pages in folio). It comprises the first four chapters and is not very fully worked out. Essential points are treated in foot notes. The material is rather collected than sifted, but it is the last complete presentation of this most important first section. A preliminary attempt to prepare this part for the printer was made in Manuscript VI (after October, 1877, and before July, 1878), embracing 17 quarto pages, the greater part of the first chapter. A second and last at- tempt was made in Manuscript VII, dated July 2, 1878, and consisting of 7 pages in folio. About this time Marx seems to have realized that he would never be able to complete the second and third volume in a, manner satisfactory to himself, unless a complete revolution in his health took place. Manuscripts V-VIII show traces of hard struggles against depressing physical conditions far too frequently to be ignored. The most difficult part of the first section had been worked over in Manuscript V. The remainder of the first, and the entire second section, with ths exception of Chapter 17, presented no great theoretical diffi- culties. But the third section, dealing with the reproduction Preface. 1 \ and circulation of social capital, seemed to be very much in need of revision. Manuscript II, it must be pointed out, had first treated of this reproduction without regard to the circu- lation which is instrumental in effecting it, and then taken up the same question with regard to circulation. It was the intention of Marx to eliminate this section and to reconstruct it in such a way that it would conform to his wider grasp of the subject. This gave rise to Manuscript VIII, contain- ing only 70 pages in quarto. A comparison with section III, as printed after deducting the paragraphs inserted out of Manuscript II, shows the amount of matter compressed by Marx into this space. Manuscript VIII is likewise merely a preliminary pre- sentation of the subject, and its main object was to ascertain and develop the new points of view not set forth in Manu- script II, while those points were ignored about which there was nothing new to say. An essential part of Chapter XVII, Section II, which is more or less relevant to Section III, was at the same time drawn into this discussion and expanded. The logical sequence was frequently interrupted, the treat- ment of the subject was incomplete in various places, and especially the conclusion was very fragmentary. But Marx expressed as nearly as possible what he intended to say on the subject. This is the material for Volume II, out of which I was supposed "to make something," as Marx said to his daughter Eleanor shortly before his death. I have interpreted this request in its most literal meaning. So far as this was pos- sible, I have confined my work to a mere selection of the various revised parts. And I always based my work on the last revised manuscript and compared this with the preced- ing ones. Only the first and third section offered any real difficulties, of more than a technical nature, and these were indeed considerable. I have endeavored to solve them ex- clusively in the spirit of the author of this work. For Volume III, the following manuscripts were avail- able, apart from the corresponding sections of the above- 12 Preface. named manuscript, entitled "A Contribution to the Crit- ique of Political Economy," from the sections in Manu- script III likewise mentioned above, and from a few occa- sional notes scattered through various extracts: The folio manuscript of 1864-65, referred to previously, which is about as fully elaborated as Manuscript II of Volume II ; further- more, a manuscript dated 1875 and entitled "The Relation of the Rate of Surplus Value to the Rate of Profit," which treats the subject in mathematical equations. The prepara- tion of Volume III for the printer is proceeding rapidly. So far as I am enabled to judge at present, it will present mainly technical difficulties, with the exception of a few very important sections. I avail myself of this opportunity to refute a certain charge which has been raised against Marx, first indistinctly and at various intervals, but more recently, after the death of Marx, as a statement of fact by the German state and university socialists. It is claimed that Marx plagiarized the work of Rodbertus. I have already expressed myself on the main issue in my preface to the German edition of Marx's "Poverty of Philosophy" (1885), but I will now produce the most convincing testimony for the refutation of this charge.1 To my knowledge this charge is made for the first time in R. Meyer's "Emancipationskampf des Vierten Standes" (Struggles for the Emancipation of the Fourth Estate), page 43: "It can be demonstrated that Marx has gathered the greater part of his critique from these publications" — meaning the works of Rodbertus dating back to the last half of the thirties of this century. I may well assume, until such time as will produce further proof, that the "demonstration" of this assertion rests on a statement made by Rodbertus to Mr. Meyer. Furthermore, Rodbertus him- self appears on the stage in 1879 and writes to J. Zeller 1 In the preface to " The Poverty of Philosophy." A Reply to Proudhon's " Philoso- phy of Poverty," by Karl Marx. Translated Into German by E. Bernstein and K. Kauteky. Stuttgart, 1885. Preface. 13 (Zeitschrift fur die Gesammte Staatswissenschaft, Tubin- gen, 1879, page 219), with reference to his work "Zur Er- kenntniss Unserer Staatswirthschaftlichen Zustande" (A Contribution to the Understanding of our Political and Economic Conditions), 1842, as follows: "You will find that this line of thought has been very nicely used ... by Marx, without, however, giving me credit for it." The pub- lisher of Rodbertus posthumous works, Th. Kozak, repeats his insinuation without further ceremony. (Das Kapital von Rodbertus. Berlin, 1884. Introduction, page XV.) Finally in the "Brief e und Sozialpolitische Aufsatze von Dr. Rodbertus-Jagetzow," (Letters and Essays on Political Econ- omy by Dr. Rodbertus-Jagetzow), published by R. Meyer in 1881, Rodbertus says directly: "To-day I find that I am robbed by Schaffle and Marx without having my name men- tioned" (Letter No. 60, page 134). And in another place, the claim of Rodbertus assumes a more definite form: "In my third letter on political economy, I have shown prac- tically in the same way as Marx, only more briefly and clearly, the source of the surplus value of the capitalists." (Letter No. 48, page 111.) Marx never heard anything definite about any of these charges of plagiarism. In his copy of the "Emancipations- kampf" only that part had been opened with a knife which related to the International. The remaining pages were not opened until I cut them myself after his death. The "Zeit- schrift" of Tubingen was never read by him. The "Let- ters," etc., to R. Meyer likewise remained unknown to him, and I did not learn of the passage referring to the "robbery" of which Rodbertus was supposed to be the victim until Mr. Meyer himself called my attention to it. However, Marx was familiar with letter No. 48. Mr. Meyer had been kind enough to present the original to the youngest daughter of Marx. Some of the mysterious whispering about the secret source of his critique and his connection with Rodbertus having reached the ear of Marx, he showed me this letter with the remark that he had at last discovered authentic 14 'Preface. information as to what Rodbertus claimed for himself; if that was all Rodbertus wanted, he Marx, had no objection, and he could well afford to let Rodbertus enjoy the pleasure of considering his own version the briefer and clearer one. In fact, Marx considered the matter settled by this letter of Rodbertus. He could so much the more afford this, as I know posi- tively that he was not in the least acquainted with the liter- ary activity of Rodbertus until about 1859, when his own critique of political economy had been completed, not only in its fundamental outlines, but also in its more important details. Marx began his economic studies in Paris, in 1843, starting with the prominent Englishmen and Frenchmen. Of German economists he knew only Rau and List, and he did not want any more of them. Neither Marx nor I heard a word of Rodbertus' existence, until we had to criticise, in the "Neue Rheinische Zeitung," 1848, the speeches he made as the representative of Berlin and as Minister of Commerce. We were both of us so ignorant that we had to ask the Rhen- ish representatives who this Rodbertus was that had become a Minister so suddenly. But these representatives could not tell us anything about the economic writings of Rodbertus. On the other hand, Marx showed that he knew even then, without the help of Rodbertus, whence came "the surplus value of the capitalists," and he showed furthermore how it was produced, as may be seen in his "Poverty of Philoso- phy," 1847, and in his lectures on wage labor and capital, delivered in Brussels in 1847, and published in Nos. 264-69 of the "Neue Rheinische Zeitung," 1849. Marx did not learn that an economist Rodbertus existed, until Lassalle called his attention to the fact in 1859, and thereupon Marx looked up the "Third Letter on Political Economy" in the British Museum. This is the actual condition of things. And now let us see what there is to the content of Rodbertus which Marx is charged with appropriating by "robbery." Says Rodbertus : "In my third letter on political economy, I have shown prac- Preface. 15 tically in the same way as Marx, only more briefly and clearly, the source of the surplus-value of the capitalists." This, then, is the disputed point: The theory of surplus value. And indeed, it would be difficult to say what else there is in Rodbertus which Marx might have found worth appropriating. Rodbertus here claims to be the real origin- ator of the theory of surplus-value of which Marx is sup- posed to have robbed him. And what has this third letter on political economy to say in regard to the origin of surplus-value ? Simply this : That the "rent," as he terms the sum of ground rent and profit, does not consist of an "addition to the value" of a commod- ity, but is obtained "by means of a deduction of value from the wages of labor, in other words, the wages represent only a part of the value of a certain product," and provided that labor is sufficiently productive, wages need not be "equal to the natural exchange value of the product of labor in order to leave enough of it for the replacing of capital and for rent." We are not informed, however, what sort of a "nat- ural exchange value" of a product it is that leaves nothing for the "replacing" of capital, or in other words, I suppose, for the replacing of raw material and the wear and tear of tools. I am happy to say that we are enabled to ascertain what impression was produced on Marx by this stupendous dis- covery of Rodbertus. In the manuscript entitled "A Contri- bution to the Critique of Political Economy," Section X, pages 445 and following, we find, "A deviation. Mr. Rod- bertus. A new theory of ground rent." This is the only point of view from which Marx there looks upon the third letter on political economy. The Rodbertian theory of sur- plus value is dismissed with the ironical remark : "Mr. Rod- bertus first analyzes what happens in a country where prop- erty in land and property in capital are not separated, and then he arrives at the important discovery that rent — mean- ing the entire surplus-value — is only equal to the unpaid 16 Preface. labor or to the quantity of products in which it is em- bodied." Now it is a fact, that capitalist humanity has been pro- ducing surplus-value for several hundred years, and has in the course of this time also arrived at the point where peo- ple began to ponder over the origin of surplus-value. The first explanation for this phenomenon grew out of the prac- tice of commerce and was to the effect that surplus-value arose by raising the value of the product. This idea was cur- rent among the mercantilists. But James Steuart already saw that in that case the one would lose what the other would gain. Nevertheless, this idea persists for a long time after him, especially in the heads of the "socialists." But it is crowded out of classical science by Adam Smith. He says in "Wealth of Nations," Vol. I, Ch. VI: "As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or, by what their labor adds to the value of the materials. . . . The value which the workmen add to the materials, therefore, resolves itself in this case into two parts, of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced." And a little farther on he says: "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. . . . The laborer . . . must give up to the landlord a portion of what his labor either collects or produces. This portion, or what comes to the same tk'ng, the price of this portion, constitutes the rent of land." Marx comments on this passage in the above-named man- uscript, entitled, "A Contribution, etc.," page 253 : "Adam Smith, then, regards surplus-value, that is to say the surplus labor, the surplus of labor performed and embodied in its product over and above the paid labor, over and above that Preface. 17 labor which has received its equivalent in wages, as the gen- eral category, and profit and ground rent merely as its ram- ifications." Adam Smith says, furthermore, Vol. I, Chap. VIII : "As soon as land becomes private property, the landlord demands a share of almost all the produce which the laborer can either raise or collect from it. His rent makes the first deduction from the produce of labor which is employed upon land. It seldom happens that the person who tills the ground has wherewithal to maintain himself till he reaps the harvest. His maintenance is generally advanced to him from the stock of a master, the farmer who employs him, and who would have no interest to employ him, unless he was to share in the produce of his labor, or unless his stock was to be re- placed by him with a profit. This profit makes a second deduction from the produce of the labor which is employed upon land. The produce of almost all other labor is liable to the like deduction of profit. In all arts and manufactures the greater part of the workmen stand in need of a master to advance them the materials for their work, and their wages and maintenance till it be completed. He shares in the prod- uce of their labor, or in the value which it adds to the materials upon which it is bestowed; and in this share con- sists his profit." The comment of Marx on this passage (on page 256 of his manuscript) is as follows: "Here Adam Smith declares in so many words that ground rent and profit of capital are simply deductions from the product of the laborer, or from the value of his product, and equal to the additional labor expended on the raw material. But this deduction, as Adam Smith himself has previously explained, can consist only of that part of labor which the laborer expends over and above the quantity of work which pays for his wages and furnishes the equivalent of wages; in other words, this deduction consists of the surplus labor, the unpaid part of his labor." It is therefore evident that even Adam Smith knew "the 18 Preface. source of the surplus-value of the capitalists," and further- more also that of the surplus-value of the landlords. Marx acknowledged this as early as 1861, while Rodbertus and the swarming mass of his admirers, who grew like mush- rooms under the warm summer showers of state socialism, seem to have forgotten all about that. V "Nevertheless," continues Marx, "Smith did not separate; surplus-value proper as a separate category from the special form which it assumes in profit and ground rent. Hence there is much error and incompleteness in his investigation, and still more in that of Ricardo." This statement literally fits Rodbertus. His "rent" is simply the sum of ground rent plus profit. He builds up an entirely erroneous theory of ground rent, and he takes surplus-value without any critical reservation just as his predecessors hand it over to him. On the other hand, Marx's surplus-value represents the general form of the sum of values appropriated without any equiva- lent return by the owners of the means of production, and ^ this form is then seen to transform itself into profit and ground rent by very particular laws which Marx was the first to discover. These laws are traced in Volume III. We shall see there how many intermediate links are required for the passage from an understanding of surplus-value in gen- eral to that of its transformation into profits and ground rent; in other words, for the understanding of the laws of the distribution of surplus-value within the capitalist class. Ricardo goes considerably farther than Adam Smith. He bases his conception of surplus-value on a new theory of value which is contained in the germ in Adam Smith, but which is generally forgotten when it comes to applying it. This theory of value became the starting point of all subse- quent economic science. Ricardo starts out with the deter- mination of the value of commodities by the quantity of labor embodied in them, and from this premise he derives his theory of the distribution, between laborers and capital- ists, of the quantity of value added by labor to the raw materials, this value being divided into wages and proni Preface. 19 (meaning surplus-value). He shows that the value of the commodities remains the same, no matter what may be the proportion of these two parts, and he claims that this law has only a few exceptions. He even formulates a few funda- mental laws relative to the mutual relations of wages and surplus-value (the latter considered by him as profit), al- though his statements are too general (see Marx, CAPITAL, Vol. I, Chap. XVII, 1), and he shows that ground rent is a quantity realized under certain conditions over and above profit. Rodbertus did not improve on Ricardo in any of these respects. He either remained unfamiliar with the internal contradictions which caused the downfall of the Ricardian theory and school, or they misled him into Utopian de- mands instead of enabling him to solve economic problems (see his "Zur Erkenntniss, etc.," page 130). But the Ricardian theory of value and surplus-value did not have to wait for Rodbertus' "Zur Erkenntniss" in order to be utilized for socialist purposes. On page 609 of the sec- ond edition of the German original of "CAPITAL," Vol. I, we find the following quotation : "The possessors of surplus produce or capital." This quotation is taken from a pamph- let entitled "The Source and Remedy of the National Diffi- culties. A Letter to Lord John Russell. London, 1821." In this pamphlet, the importance of which should have been recognized on account of the terms surplus produce or cap- ital, and which Marx saved from being forgotten, we read the following statements: "Whatever may be due to the capitalist" (from the cap- italist standpoint) "he can never appropriate more than the surplus labor of the laborer, for the laborer must live" (page 23) . As for the way in which the laborer lives and for the quantity of the surplus value appropriated by the capitalist, these are very relative things. — "If capital does not de- crease in value in proportion as it increases in volume, the capitalist will squeeze out of the laborer the product of every hour of labor above the minimum on which the laborer can live. . . . the capitalist can ultimately say to 20 Preface. the laborer: You shall not eat bread, for you can live on beets and potatoes ; and this is what we have to come to" (page 24). "If the laborer can be reduced to living on potatoes, instead of bread, it is undoubtedly true that more can be gotten out of his labor; that is to say, if, in order to live on bread, he was compelled, for his own subsistence and that of his family, to keep for himself the labor of Monday and Tuesday, he will, when living on potatoes, keep only half of Monday's labor for himself; and the other half of Monday, and all of Tuesday, are set free, either for the benefit of the state or for the capitalist." (Page 26.) "It is admitted that the sums of interest paid to the capitalist, either in the form of rent, money-interest, or commercial profit, are paid from the labor of others." (Page 23.) Here we have the same idea of "rent" which Rodbertus has, only the writer says "interest" instead of rent. Marx makes the following comment (manuscript of "A Contribution, etc.," page 852) : "The little known pamph- let— published at a time when the 'incredible cobbler' Mac- Culloch began to be talked about — represents an essential advance over Ricardo. It directly designates surplus-value or 'profit' in the language of Ricardo (sometimes surplus produce), or interest, as the author of this pamphlet calls it, as surplus labor, which the laborer performs gratuitously, which he performs in excess of that quantity of labor re- quired for the reproduction of his labor-power, the equiva- lent of his wages. It was no more important to reduce value down to labor than it is to reduce surplus-value, represented by surplus-produce, to surplus-labor. This had already been stated by Adam Smith, and forms a main factor in the analy- sis of Ricardo. But neither of them said so anywhere clearly and frankly in such a way that it could not be misunder- stood." We read furthermore, on page 859 of this manu- script: "Moreover, the author is limited by the economic theories which he finds at hand and which he accepts. Just as the confounding of surplus-value and profit misleads Ricardo into irreconcilable contradictions, so this author Preface. 21 fares by baptizing surplus-value with the name of 'interest of capital.' It is true, he advances beyond Ricardo by reduc- ing all surplus-value to surplus-labor. And furthermore, in calling surplus-value 'interest of capital,' he emphasizes that he is referring by this term to the general form of surplus- labor as distinguished from its special forms, rent, money interest, and commercial profit. But yet he chooses the name of one of these special forms, interest, at the same time for the general form. And this causes his relapse into the economic slang." This last passage fits Rodbertus just as if it were made to order for him. He, too, is limited by the economic cate- gories which he finds at hand. He, too, applies the name of one of the minor categories to surplus-value, and he makes it quite indefinite at 'that by calling it "rent." The result of these two mistakes is that he relapses into the economic slang, that he makes no attempt -to follow up his advance over Ricardo by a critical analysis, and that he is misled into using his imperfect theory, even before it has gotten rid of its egg-shells, as a basis for a Utopia which is in every respect too late. The above-named pamphlet appeared in 1821 and anticipated completely Rodbertus "rent" of 1842. This pamphlet is but the farthest outpost of an entire lit- erature which the Ricardian theories of value and surplus- value directed against capitalist production in the interest of the proletariat, fighting the bourgeoisie with its own weapons. The entire communism of Owen, so far as it plays a role in economics and politics, is 'based on Ricardo. Apart from him, there are still numerous other writers, some of whom Marx quoted as early as 1847 in his "POVERTY OF PHILOSOPHY" against Proudhon, such as Edmonds, Thompson, Hodgskin, etc., etc., "and four more pages of et cetera." I select from among this large number of writ- ings the following by a random choice: "An Inquiry into the Principles of the Distribution of Wealth, Most Conducive to Human Happiness, by William Thompson; a new edi- tion. London, 1850." This work, written in 1822, first ap- 22 Preface. peared in 1827. It likewise regards the wealth ap- propriated by the non-producing classes as a deduction from the product of the laborer, and uses pretty strong terms in referring to it. The author says that the ceaseless endeavor of that which we call society consisted in inducing, by fraud or persuasion, by intimidation or compulsion, the produc- tive laborer to perform his labors in return for the minimum of his own product. He asks why the laborer should not be entitled to the full product of his labor. He declares that the compensations, which the capitalists filch from the pro- ductive laborer under the name of ground rent or profit, are claimed in return for the use of land or other things. According to him, all physical substances, by means of which the propertiless productive laborer who has no other means of existence but the capacity of producing things, can make use of his faculties, are in the possession of others with opposite material interests, the consent of these is re- quired in order that the laborer may find work; under these circumstances, he says, it depends on the good will of the capitalists how much of the fruit of his own labor the laborer shall receive. And he speaks of "these defalcations" and of their relation to the unpaid product, whether this is called taxes, profit, or theft, etc. I must admit that I do not write these lines without a cer- tain mortification. I will not make so much of the fact that the anti-capitalist literature of England of the 20's and 30's is so little known in Germany, in spite of the fact that Marx referred to it even in his "POVERTY OF PHILOSOPHY," and quoted from it, as for instance that pamphlet of 1821, or Ravenstone, Hodgskin, etc., in Volume I of "CAPITAL." But it is a proof of the degradation into which official political economy has fallen, that not only the vulgar economist, who clings desperately to -the coat tails of Rodbertus and really has not learned anything, but also the duly installed profes- sor, who boasts of his wisdom, have forgotten their classical economy to such an extent that they seriously charge Marx Preface. 23 with having robbed Rodbertus of things which may be found even in Adam Smith and Ricardo. But what is there that is new about Marx's statements on surplus-value? How is it that Marx's theory of surplus- value struck home like a thunderbolt out of a clear sky, in all modern countries, while the theories of all his socialist predecessors, including Rodbertus, remained ineffective? The history of chemistry offers an illustration which ex- plains this: Until late in the 18th century, the phlogistic theory was accepted. It assumed that in the process of burning, a cer- tain hypothetical substance, an absolute combustible, named phlogiston, separated from the burning bodies. This theory sufficed for the explanation of most of the chemical phenom- ena then known, although it had to be considerably twisted in some cases. But in 1774, Priestley discovered a certain kind of air which was so pure, or so free from phlogiston, that common air seemed adulterated in comparison to it. He called it "dephlogistieized air." Shortly after him, Scheele obtained the same kind of air in Sweden, and demonstrated its existence in the atmosphere. He also found that this air disappeared, whenever some body was burned in it or in the open air, and therefore he called it "fire-air." "From these facts he drew the conclusion that the combination arising from the union of phlogiston with one of the elements of the atmosphere" (that is to say by combustion) "was noth- ing but fire or heat which escaped through the glass." 2 Priestley and Scheele had produced oxygen, without knowing what they had discovered. They remained "lim- ited by the phlogistic categories which they found at hand." The element, which was destined to abolish all phlogistic ideas and to revolutionize chemistry, remained barren in their hands. But Priestley had immediately communicated his discovery to Lavoisier in Paris, and Lavoisier, by means of this discovery, now analyzed the entire phlogistic chemistry and came to the conclusion that this new air was 2 Roscoe-Schorlemmer, Ausuehrlicb.es Lehrbuch der Chemie. Braunsch- weig, 1877, I, p. 33, 18. 24 Preface. a new chemical element, that it was not the mysterious phlo- giston which departed from a burning body, but that this new element combined with the burning body. Thus he placed chemistry, which had so long stood on its head, squarely on its feet. And although he did not obtain the oxygen simultaneously and independently of the other two scientists, as he claimed later on, he nevertheless is the real discoverer of oxygen as compared to the others who had pro- duced it without knowing what they had found. Marx stands in the same relation to his predecessors in the theory of surplus-value that Lavoisier maintains to Priestley and Scheele. The existence of those parts of the value of products, which we now call surplus-value, had been ascertained long before Marx. It had also been stated with more or less precision that it consisted of that part of the laborer's product for which its appropriator does not give any equivalent. But there the economists halted. Some of them, for instance the classical bourgeois economists in- vestigated, perhaps, the proportion in which the product of labor was divided among the laborer and the owner of the means of production. Others, the socialists, declared that this division was unjust and looked for Utopian means of abolishing this injustice. They remained limited by the economic categories which they found at hand. Now Marx appeared. And he took an entirely opposite view from all his predecessors. What they had regarded as a solution, he considered a problem. He saw that he had to deal neither with dephlogisticized air, nor with fire-air, but with oxygen. He understood that it was not simply a matter of stating an economic fact, or of pointing out the conflict of this fact with "eternal justice and true morals," but of explaining a fact which was destined to revolutionize the entire political economy, and which offered a key for the understanding of the entire capitalist production, pro- vided you knew how to use it. With this fact for a start- ing point Marx analyzed all the economic categories which he found at hand, just as Lavoisier had analyzed the cate- Preface. 25 gories of the phlogistic chemistry which he found at hand. In order to understand what surplus-value is, Marx had to find out what value is. Therefore he had above all to an- alyze critically the Ricardian theory of value. Marx also analyzed labor as to its capacity for producing value, and he was the first to ascertain what kind of labor it was that produced value, and why it did so, and by what means it accomplished this. He found that value was nothing but crystallized labor of this kind, and this is a point which Rodbertus never grasped to his dying day. Marx then ana- lyzed the relation of commodities to money and demonstrated how, and why, thanks to the immanent character of value, commodities and the exchange of commodities must pro- duce the opposition of money and commodities. His the- ory of money, founded on this basis, is the first exhaustive treatment of this subject, and it is -tacitly accepted every- where. He analyzed the transformation of money into capital and demonstrated that this transformation is based on the purchase and sale of labor-power. By substituting labor-power, as a value-producing quality, for labor he solved with one stroko one of the difficulties which caused the down- fall of the Ricardian school, viz.: the impossibility of har- monizing the mutual exchange of capital and labor with the Ricardian law of determining value by labor. By as- certaining the distinction between constant and variable capital, he was enabled to trace the process of the forma- tion of surplus-value in its details and thus to explain it, a feat which none of his predecessors had accomplished. In other words, he found a distinction inside of capital itself with which neither Rodbertus nor the capitalist economists know what to do, but which nevertheless furnished a key for the solution of the most complicated economic problems, as is proved by this Volume II and will be proved still more by Volume III. He furthermore analyzed surplus- value and found its two forms, absolute and relative sur- plus-value. And he showed that both of them had played a different, and each time a decisive role, in the historical 26 Preface. development of capitalist production. On the basis of this surplus-value he developed the first rational theory of wages which we have, and drew for the first time an outline of the history of capitalist accumulation and a sketch of its historical tendencies. And Rodbertus? After he has read all that, he regards it as "an assault on society," and finds that he has said much more briefly and clearly by what means surplus-value is originated, and finally declares that all this does indeed ap- ply to "the present form of capital," that is to say to capi- tal as it exists historically, but not to the "conception of capital," that is to say, not to the Utopian idea which Rod- bertus has of capital. He is just like old Priestley, who stood by phlogiston to the end and refused to have anything to do with oxygen. There is only this difference: Priestley had actually produced oxygen, while Rodbertus had merely rediscovered a common-place in his surplus-value, or rather his "rent;" and Marx declined to act like Lavoisier and to claim that he was the first to discover the fact of the exist- ence of surplus-value. The other economic feats of Rodbertus were performed on about the same plane. His elaboration of surplus-value into a utopia has already been inadvertently criticized by Marx in his "POVERTY OF PHILOSOPHY." What may be said about this point in other respects, I have said in my preface to the German edition of that work. Rodbertus' explanation of commercial crises out of the underconsump- tion of the working class has been stated before him by Sis- mondi in his "Nouveaux Principes de l'Economie Politique," liv. IV, ch. IV.3 However, Sismondi always had the world- market in mind, while the horizon of Rodbertus does not extend beyond Prussia. His speculations as to whether wages are derived from capital or from income belong to the domain of scholasticism and are definitely settled by the 3 " Thus the concentration of wealth into the hands of a small number of proprietors narrows the home market more and more, and Industry Is more and more compelled to open up foreign markets, where still greater revolutions await it" (namely, the crisis ot 1817, which is Immediately described). Nouveaux Principes, edition of 1819 I., p. 336. Preface. 27 third part of this second volume of "CAPITAL." His the- ory of rent has remained his exclusive property and may rest in peace, until the manuscript of Marx criticising it will be published. Finally his suggestions for the eman- cipation of the old Prussian landlords from the oppression of Capital are entirely Utopian; for they avoid the only prac- tical question, which has to be solved, viz.: How can the old Prussian landlord have a yearly income of, say, 20,000 marks >and a yearly expense of, say, 30,000 marks, without running into debt? The Ricardian school failed about the year 1830, being unable to solve the riddle of surplus-value. And what was impossible for this school, remained still more insoluble for its successor, vulgar economy. The two points which caused its failure were these: 1. Labo:* is the measure of value. However, actual labor in its exchange with capital has a lower value than labor embodied in the commodities for which actual labor is ex- changed. Wages, the value of a definite quantity 'of 'actual labor, are always lower than the value of the commodity produced by this same quantity of labor and in which it is embodied. The question is indeed insoluble, if put in this form. It has been correctly formulated by Marx and then answered. It is not labor which has any value. As an activity which creates values it can no more have any special value in itself than gravity can have any special weight, heat any special temperature, electricity any special strength of current. It is not labor which is bought and sold as a commodity, but labor-power. As soon as labor- power becomes a commodity, its value is determined by the labor embodied in this commodity as a social product. This value is equal to the social labor required for the produc- tion and reproduction of this commodity. Hence the pur- chase and sale of labor-power on the basis of this value does not contradict the economic law of value. 2. According to the Ricardian law of value, two capitals employing the same and equally paid labor, all other con- 28 Preface. ditions being equal, produce the same value and surp\as« value, or profit, in the same time. But if they employ un- equal quantities of actual labor, they cannot produce equal surplus-values, or, as the Ricardians say, equal profits. Now in reality, the exact opposite takes place. As a matter of fact, equal capitals, regardless of the quantity of actual labor employed by them, produce equal average profits in equal times. Here we have; therefore, a clash with the law of value, which had been noticed by Ricardo himself, but which his school was unable to reconcile. Rodbertus likewise could not but note this contradiction. But instead of solving it, he made it a starting point of his Utopia (Zur Erkenntniss, etc.). Marx had solved this contradiction even in his manu- script for his "CRITIQUE OF POLITICAL ECOMONY." According to the plan of "CAPITAL," this solution will be made public in Volume III. Several months will pass before this can be published. Hence those economists, who claim to have discovered that Rodbertus is the secret source and the superior predecessor of Marx, have now an 'opportunity to demonstrate what the economics of Rodbertus can accom- plish. If they can show in which way an equal average rate of profit can and must come about, not only without a violation of the law of value, but by means of it, I am willing to discuss the matter further with them. In the mean- time, they had better make haste. The brilliant analyses of this Volume II and its entirely new conclusions on an al- most untilled ground are but the initial statements prepar- ing the way for the contents of Volume III, which develops the final conclusions of Marx's analysis of the social process of reproduction on a capitalist basis. When this Volume III will appear, little mention will be made of a certain economist called Rodbertus. The second and third volumes of "CAPITAL" were to be dedicated, as Marx stated repeatedly, to his wife. FRIEDRICH ENGELS. London, on Marx's birthday, May 5, 1885. Preface. 29 The present second edition is, in the main, a faithful reprint of the first. Typographical errors have been cor- rected, a few inconsistencies 'of style eliminated, and a few short passages containing repetitions struck out. The third volume, which presented quite unforeseen diffi- culties, is likewise almost ready for the printer. If my health holds out, it will be ready for the press this fall. FRIEDRICH ENGELS. London, July 15, 1893. 30 Preface. TRANSLATOR'S NOTE. The conditions and the location of the place in which I translated volumes II and III of this work made it im- possible for me to get access to the original works of the authors quoted by Marx. I was compelled, under these circumstances, to retranslate many quotations from Eng- lish authors from the German translation, without an op- portunity to compare my retranslated version with the Eng- lish original. But whatever may be the difference in the wording of the originals and of my retranslation from the German, it does not affect the substance of the quotations in the least. The meaning of the originals will be found to be the same as that of my retranslation. The interpretation given by Marx to the various quotations from other authors, and the conclusions drawn by him from them, are not altered in the least by any deviation, which my translation may show from the original texts. If any one should be inclined to turn these statements of mine to any controversial advan- tage, he should remember that he cannot use them against Marx, but only against me. Ernest Untermann. BOOK II The Circulation of Capital PART I The Metamorphoses of Capital and Their Cycles CHAPTER I. THE CIRCULATION OF MONEY-CAPITAL. The circulation process1 of capital takes place in three stages, which, according to the presentation of the matter m Volume I, form the following series : First stage: The capitalist appears as a buyer on the commodity and labor market; his money is transformed into commodities, or it goes through the circulation pro- cess M-C. Second stage: Productive consumption of the purchased commodities by the capitalist. He acts in the capacity of a capitalist producer of commodities; his capital passes through the process of production. The result is a com- modity of more value than that of the elements compos- ing it. Third stage: The capitalist returns to the market as a seller; his commodities are exchanged for money, or they pass through the circulation process C-M. 1 From Manuscript II. 31 32 Capital. Hence the formula for the circulation process of money capital is: M-C ...P ...C'-M', the dots indicating the points where the process of circulation was interrupted, and C' and M' designating C and M increased by surplus value. The first and third stages were discussed in Volume I only in so far as it was required for an understanding of the sec- ond stage, the process of production of capital. For this reason, the various forms which capital assumes in its dif- ferent stages, and which it either retains or discards in the repetition of the circulation process, were not considered. These forms are now the first objects of our study. In order to conceive of these forms in their purest state, we must first of all abstract from all factors which have nothing to do directly with the discarding or adopting of any of these forms. It is therefore taken for granted at this point that the commodities are sold at their value and that this takes place under the same conditions through- out. Abstraction is likewise made of any changes of value which might occur during the process of circulation. I. First Stage. M-C.2 M-C represents the exchange of a sum of money for a sum of commodities; the purchaser exchanges his money for commodities, the sellers exchange their commodities for money. It is not so much the form of this act of exchange which renders it simultaneously a part of the general circu- lation of commodities and a definite organic section in the independent circulation of some individual capital, as its substance, that is to say the specific use-values of the com- modities which are exchanged for money. These commodi- ties represent on the one hand means of production, on the other labor-power, and these objective and personal factors in the production of commodities must naturally correspond in their peculiarities to the special kind of articles to be manufactured. If we call labor-power L, and the means of production Pm, the sum of commodities to be purchased is C=L+Pm, or more briefly C{£m. M-C, considered as to its substance, is therefore represented by M-C}pm, that is to say M-C is composed of M-L and M-Pm. The sum of 2 Beginning of Manuscript VII, started July 2, 1878. The Circulation of Money-Capital. 33 money M is separated into two parts, one of which buys labor -power, the other means of production. These two series of purchases belong to entirely different markets, the one to the commodity-market proper, the other to the labor- market. Aside from this qualitative division of the sum of com- modities into which M is transformed, the formula M-C \ pm also represents a very characteristic quantitative relation. We know that the value, or price, of labor-power is paid to its owner, who offers it for sale as a commodity, in the form of wages, that is to say it is the price of a sum of labor containing surplus-value. For instance, if the daily value of labor-power is equal to the product of five hours' labor val- ued at three shillings, this sum figures in the contract be- tween the buyer and seller of labor power as the price, or wages, for say, ten hours of labor time. If such a contract is made, for instance, with 50 laborers, they are supposed to work 500 hours per day for their purchaser, and one- half of this time, or 250 hours equal to 25 days of labor of 10 hours each, represent nothing but surplus-value. The quantity and the volume of the commodities to be pur- chased must be sufficient for the utilization of this labor- power. M-C{pm, then, does not merely express the qualitative relation represented by the exchange of a certain sum of money, say 422 pounds sterling, for a corresponding sum of means of production and labor-power, but also a quanti- tative relation between certain parts of that same money spent for the labor-power L and the means of production Pm. This relation is determined at the outset by the quantity of surplus-labor to be expended by a certain number of la- borers. If, for instance, a certain manufacturer pays a weekly wage of 50 pounds sterling to 50 laborers, he must spend 372 pounds sterling for means of production, if this is the value of the means of production which a weekly labor of 3,000 hours, 1,500 of which are surplus-labor, transforms into factory products. It is immaterial for the point under discussion, how much additional value in the form of means of production is re- 84 Capital. quired in the various lines of industry by the utilization of surplus-labor. We merely emphasize the fact that the amount of money M spent for means of production in the exchange M-Pm must buy a proportional quantity of them. The quantity of means of production must suffice for the absorption of the amount of labor which is to transform them into products. If the means of production were in- sufficient, the surplus-labor available for the purchaser would not be utilized, and he could not dispose of it. On the other hand, if there were more means of production than available labor, they would not be saturated with labor and would not be transformed into products. As soon as the process M-C{£m has been completed, the purchaser has more than simply the means of production and labor-power required for the manufacture of some use- ful article. He has also at his disposal a greater supply of labor-power, or a greater quantity of labor, than is neces- sary for the reproduction of the value of this labor-power, and he has at the same time the means of production re- quired for the materialization of this quantity of labor. In other words, he has at his disposal the elements required for the production of articles of a greater value than these elements, he has a mass of commodities containing sur- plus-value. The value advanced by him in the form of money has then assumed a natural form in which it can be incarnated as a value generating more value. In brief, value exists then in the form of productive capital which has the faculty of creating value and surplus-value. Let us call capital in this form P. Now the value of P is equal to that of L-f Pm, it is equal to M exchanged for L and Pm. M is the same capital-value as P, only it has a different form of existence, it is capital value in the form of money — money-capital. M-C{pm, or the more general formula M-C, a sum of purchases of commodities, a process within the general cir- culation of commodities, is therefore at the same time, seeing that it is <a stage in the independent circulation of capital, a process of transforming capital-value from its money form into its productive form. It is the transforma- tion of money-capital into productive capital. In the diagram The Circulation of Money-Capital. 85 of the circulation which we are here discussing, money ap- pears as the first bearer of capital-value, and money-capital therefore represents the form in which capital is advanced. Money in the form of money-capital finds itself employed in the functions of a medium of exchange, in the present case it performs the service of a general purchasing medium and general paying medium. The last-named service is re- quired inasmuch as labor-power, though first bought is not paid until it has been utilized. If the means of production are not found ready on the market, but have to be ordered, money in the process M-Pm likewise serves as a paying medium. These functions are not due to the fact that money-'capital is 'capital, but that it is money. On the other hand, money-capital, or capital- value in the form of money, cannot perform any other service but that of money. This service appears as a function of capital simply because it plays a certain role in the movements of capital. The stage in which this function is performed is interrelated with other stages of the circulation of money- capital. Take, for instance, the case with which we are here dealing. Money is here exchanged for commodities which represent the natural form of productive capital, and this form contains in the germ the phenomena of the process of capitalist production. A part of the money performing the function of money- capital in the process M-C{pm assumes, in the course of this circulation, a function in which it loses its capital character but preserves its money character. The circula- tion of money-capital M is divided into the stages M-Pm and M-L, into the purchase of means of production and of labor-power. Let us consider the last-named stage by itself. M-L is the purchase of labor-power by the capitalist. It is also the sale of labor-power, or we may say of labor, since we have assumed the existence of wages, by the laborer who owns it. What is M-C, or in this case M-L, from the standpoint of the buyer, is here, as in every other transaction of this kind, C-M from the standpoint of the seller, L-M from the standpoint of the laborer. It is the sale of labor-power by the laborer. This is the first stage of circulation, or the 36 Capital. first metamorphosis, of commodities (Vol. I, Chap. Ill, Sect. 2a) . It is for the seller of labor-power a 'transforma- tion of his commodity into the money-form. The laborer spends the money so obtained gradually for a number of commodities required for the satisfaction of his needs, for articles of consumption. The complete circulation of his commodity therefore appears as L-M-C, that is to say first as L-M, or C-M, second as M-C, which is the general form of the simple circulation of commodities, C-M-C. Money is in this case merely a passing circulation-medium, a mere mediator in the exchange of one commodity for another. M-L is the typical stage of the transformation of money- capital into productive capital. It is the essential condition for the transformation of value advanced in the form of money into capital, that is to say into a value producing surplus-value. M-Pm is necessary only for the purpose of realizing the quantity of labor bought in the process M-L. This process was discussed from this point of view in Vol. I, Part II, under the head of "Transformation of Money into Capital." But at this point, we shall have to consider it also from another side, relating especially to money-capi- tal as a form of capital. M-L is regarded as a general characteristic of the capital ist mode of production. But in this case we are doing so, not so much because the purchase of labor-power repre- sents a contract which stipulates the delivery of a certain quantity of labor-power for the reproduction of the price of labor-power, or of wages, not so much for the reason that it means the delivery of surplus-labor which is the funda- mental condition for the capitalization of the value ad- vanced, or for the production of surplus-value; but we do so rather on account of its money form, because wages in the form of money buy labor-power, and this is the charac- teristic mark of the money system. Nor is it the irrational feature of the money form which we shall note as the characteristic part. We shall overlook the irrationalities. The irrationality consists in the fact that labor itself as a value-creating element cannot havQ any value which could be expressed in its price, and that, therefore, a certain quantity of labor cannot have any The Circulation of Money-Capital. 37 equivalent in a certain quantity of money. But we know that wages are but a disguised form in which, for instanoe, the price of one day's labor-power is seen to be the price of the quantity of labor materialized by this labor-power in one day. The value produced by this labor-power in six hours of labor is then expressed as the value of twelve hours of its labor. M-L is regarded as the characteristic signature of the so- called money system, because labor there appears as the com- modity of its owner, and money as the buyer. In other words, it is the money relation in the sale and purchase of human activity which is considered. It is a fact, however, that money appears at an early stage as a buyer of so-called services, without the transformation of M into money- capital, and without any change in the general character of the economic system. It makes no difference to money into what sort of com- modities it is transformed. It is the general equivalent of all commodities, which show by their prices that they rep- resent in an abstract way a certain sum of money and an- ticipate their exchange for money. They do not assume the form in which they may be translated into use-values for their owners, until they change places with money. Once that labor power has come into the market as the commod- ity of its owner, to be sold for wages in return for labor, its sale and purchase is no more startling than the sale and purchase of any other commodity. The peculiar character- istic is not that the commodity labor-power is salable, but that labor-power appears in the shape of a commodity. By means of M-C \ pm, that is to say by the transformation of money-capital into productive capital, the capitalist ac- complishes the combination of the objective and personal factors of production so far as they consist of commodities. If money is transformed into productive capital for the first time, or if it performs for the first time the function of money-capital for its owner, he must begin by buying means of production, such as buildings, machinery, etc., be- fore he buys any labor-power. For as soon as labor-power passes into his control, he must have means of production for it, in order to utilize it. 88 Capital. This is the capitalist's point of view. The laborer, on the other hand, looks at this question in the following light: The productive application of his la- bor-power is not possible, until he has sold it and brought it into contact with means of production. Before its sale, it exists in a state of separation from the means of produc- tion which it requires for its materialization. So long as it remain's in this state, it cannot be used either for the pro- duction of use-values for its owner, or for the production of commodities, by the sale of which he might live. But from the moment that it is brought into touch with means of production, it forms part of the productive capital of its purchaser, the same as the means of production. It is true, that in the act M-L the owner of money and the owner of labor-power enter into the relation of buyer and seller, of money-owner and commodity-owner. To this extent they enter into a money relation. But at the same time the buyer also appears in the role of an owner of means of production, which are the material conditions for the productive expenditure of labor-power on the part of its owner. The means of production, then, meet the owner of labor-power in the form of the property of another. On the other hand, the seller of labor meets its buyer in the form of the labor-power of another and it must pass into the buyer's possession, it must become a part of his capital, in order that it may become productive capital. The class relation be- tween the capitalist and the wage laborer is therefore es- tablished from the moment that they meet in the act M-L, which signifies L-M from the standpoint of the laborer. It is indeed a sale and a purchase, a money relation, but it is a sale and a purchase in which the buyer is a capitalist and the seller a wage-laborer. And this relation arises out of the fact that the conditions required for the materializa- tion of labor-power, viz. : means of subsistence and means of production, are separated from the owner of labor-power and are the property of another. We are not here concerned in the origin of this separa- tion. It is a fact, as soon as the act M-L can be performed. The thing which interests us here is that M-L does not be- come a function of money-capital for the sole reason that The Circulation of Money-Capital. 39 it is a means of paying for a useful human activity or serv- ice. The function of money as a paying medium is not the main object of our attention. Money can be expended in this form only because labor-power finds itself separated from its means of production, including the means of sub- sistence required for its reproduction ; because this separa- tion can be overcome only by the sale of the labor-power to the owner of the means of production; because the ma- terialization of labor-power, which is by no means limited to the quantity of labor required for the reproduction of its own price, is likewise in the control of its buyer. The capital relation during the process of production arises only because it is inherent in the process of circulation based on the different economic conditions, the class distinctions be- tween the buyer and the seller of labor-power. It is not money which by its nature creates this relation ; it is rather the existence of this relation which permits of the trans- formation of a mere money-function into a capital-func- tion. In the conception of money-capital, so far as it relates to the special function which we are discussing, two errors run parallel to one another or cross each other. In the first place, the functions performed by capital-value in its ca- pacity of money-capital, which are due to its money form, are erroneously derived from its character as capital. But they are due only to the money form of capital-value. In the second and reverse case, the specific nature of the money-function, which renders it simultaneously a capi- tal-function, is attributed to its money nature. Money is here confounded with capital, while the specific nature of the money-function is conditioned on social relations such as are indicated by the act M-L, and these conditions do not exist in the mere circulation of commodities and money. The sale and purchase of slaves is formally also a sale and purchase of commodities. But money cannot perform this function without the existence of slavery. If slavery exists, then money can be invested in the purchase of slaves. On the other hand, the mere possession of money cannot make slavery possible. In order that the sale of his labor-power by the laborer, 40 'Capital. in the form of the sale of labor for wages, may take place as a result of social conditions which make it the basis of the production of commodities, in order that it may not be an isolated instance, so that money-capital may perform, on a social scale, the function in the process M-C{pm, definite historical processes are required, by which the original con- nection of the means of production with labor-power is dis- solved. These processes must have resulted in opposing the mass of the people, the laborers, as propertiless to the idle owners of the means of production. It makes no dif- ference in this case, whether the connection between the la- bor-power and the means of production before its disso- lution was such that the laborer belonged to the means of production and was a part of them, or whether he was their owner. The fact which lies back of the process M-C { pm is dis- tribution; not distribution in the ordinary meaning of a distribution of articles of consumption, but the distribu- tion of the elements of production themselves. These con- sist of the objective things which are concentrated on one side, and labor-power which is isolated on the other. . The means of production, the objective things of pro- ductive capital, must therefore stand opposed to the la- borer as capital, before the process M-L can become a uni- versal, social one. We have seen on previous occasions that capitalist pro- duction, once it is established, does not only reproduce in its further development this separation, but extends its scope more and more, until it becomes the prevailing social con- dition. However, there is still another side to this ques- tion. In order that capital may be able to arise and take control of production, a definite stage in the development of commerce must precede. This includes the circulation of commodities, and therefore also the production of com- modities; for no articles can enter circulation in the form of commodities, unless they are manufactured for sale, and intended for commerce. But the production of com- modities does not become the normal mode of production, until it finds as its basis the capitalist system of production. The Russian landowners, who are compelled to carry on The Circulation of Money-Capital. 41 agriculture by the help of wage-laborers instead of serfs, since the so-called emancipation of the serfs, complain about two things. They wail in the first place about the lack of money-capital. They say, for instance, that large sums must be paid to wage-laborers, before the crops can be sold, and there is a dearth of ready cash. Capital in the form of money must always be available for the payment of wages, before production on a capitalist scale can be carried on. But the landowners may take hope. In due time the in- dustrial capitalist will have at his disposal, not alone his own money, but also that of others. The second complaint is more characteristic. It is to the effect that even if money is available, there are not enough laborers at hand at any time. The reason is that the Rus- sian farm laborer, owing to the communal property in land, has not been fully separated from his means of production, and hence is not yet a "free wage-worker" in the full capi- talist meaning of the word. But the existence of "free" wage-workers is the indispensable condition for the reali- zation of the act M-C, the exchange of money for commodi- ties, the transformation of money-capital into productive capital. As a matter of course, the formula M-C ... P ...C -M' does not represent the normal form of the circulation of money- capital, until capitalist production is fully developed, be- cause it is conditioned on the existence of a social class of wage-laborers. We have seen that capitalist production does not only create commodities and surplus-values, but also gives rise to an ever growing class of wage-laborers, either by propagation or by the transformation of independ- ent producers into proletarians. Since the first condition for the realization of the act M-C ... P ... C -M' is the permanent existence of a class of wage-workers, capital in the form of productive capital and jhe circulation of productive capital must precede it. II. Second Stage. Functions of Productive Capital. The circulation of capital which we have here considered begins with the act of circulation represented by the formula M-C, the transformation of money into commodities, or 42 Capital. purchase. Circulation must therefore be supplemented by the reverse metamorphosis C-M, the transformation of com- modities into money, or sale. But the immediate result of M-C { pm is the interruption of the circulation of the oapital advanced in the form of money. By the transformation of money-capital into productive capital the value of capital has assumed a natural form in which it cannot continue to circulate, but must enter into consumption, more accurately into productive consumption. The application of labor-power, labor, can not be carried into effect anywhere but in the labor process. The capitalist cannot sell the laborer along with the commodities, because the wage-worker is not a chattel slave and the capitalist does not buy anything from the laborer but the privilege of utilizing the labor-power purchased in the person of ■the laborer for a certain time. On the other hand, the capitalist cannot use this labor-power in any other way than by using it up in transforming, by its help, means of production into commodities. The result of the first stage of the circu- lation of money-capital is therefore its entrance into the second stage, that of productive capital. This movement is represented by the formula M-C {pm, P, in which the dots indicate the place where the circulation of capital is interrupted, while its rotation continues, since it passes from the sphere of the circulation of commodities into that of production. The first stage, the transformation of money-capital into productive capital, is therefore merely the harbinger of the second, the productive stage of capi- tal. The act M \$M presupposes that the person performing it not only has at his or her disposal values of some useful form, but also that he or she has them in the form of money. And the act consists precisely in giving away money. A man can, therefore, remain the owner of money only on the condition, that the giving away of money at the same time implies a return of money. But money can return only through the sale of commodities. Hence the above formula assumes the owner of money to be a pro- ducer of commodities. INow let us look at the formula M-L. The wage worker The Circulation of Money-Capital. 43 lives only by the sale of bis labor-power. The preservation of this power, equivalent to the self-preservation of the la- borer, requires a' daily consumption. Hence the payment of wages must be continually repeated at short intervals, in order that the wage laborer may be able to repeat acts L-M or C-M-C, by means of which he is enabled to purchase the articles required for his self-preservation. For this reason the capitalist must stand opposed to the wage worker in the capacity of a money-capitalist, and his capital must be money-capital. On the other hand, if (the wage labor- ers, the mass of direct producers, are to perform the act L-M-C, the means of subsistence required for it must be present in the form of purchasable commodities. This state of affairs necessitates a high degree of development of the circulation of products in the form of commodities, and this again must be preceded by a corresponding exten- sion of the production of commodities. As soon as pro- duction by means of wage labor has become universal, the production of commodities must be the typical form of production. If this mode of production is general, it car- ries in its wake an ever increasing division of labor, that is to say an ever growing differentiation in the special nature of the products which are manufactured in the form of commodities by the various capitalists, an ever greater di- vision of supplementary processes of production into inde- pendent specialties. To the extent that M-L develops, M-Pm also develops, that is to say the production of means of pro- duction to that extent differentiates from the production of commodities with those means. The means of produc- tion then stand opposed as commodities to every producer of commodities and he must buy those means in order to be able to carry on his special line of commodity produc- tion. They are derived from branches of production which are entirely divorced from his own and enter into his own branch as commodities which he must buy. The objective materials of commodity production assume more and more the character of products of other commodity manufactur- ers which he must purchase. And to the same extent the capitalist must become a money-capitalist, in the same 44 Capital. ratio his capital must assume the functions of money-capi- tal. On the other hand, the same conditions which are the cause of the fundamental constitution of capitalist produc- tion, especially the existence of a class of wage laborers, also demand the transition of all commodity production into the capitalist mode of commodity production. In proportion as the capitalist mode of production develops, it has a disintegrating effect on all older forms of produc- tion, which were mainly adjusted to the individual needs and transformed only the surplus over and above those needs into commodities. Capitalist production makes of the sale of products the main incentive, without at first apparently affecting the mode of production itself. Such was, for instance, the first effect of capitalist world commerce on such nations as the Chinese, Indians, Arabs, etc. But wherever it takes root, there it destroys all forms of com- modity production which are either based on the self-em- ployment of the producers, or merely on the sale of the surplus product. The production of commodities is first made general and then transformed by degrees into the capitalist mode of commodity production.3 Whatever may be the social form of production, laborers and means of production always remain its main elements. But either of these factors can become effective only when they unite. The special manner in which this union is accomplished distinguishes the different economic epochs from one another. In the present case, the separation of the so-called free laborer from his means of production is the starting point, and we have observed the way and the conditions in which these two elements are united in the hands of the capitalist, as the productive mode of existence of his capital. The actual process which combines the per- sonal and objective materials of commodity production un- der these conditions, the process of production, thus becomes in its turn a function of capital, a capitalist process of pro- duction, the nature of which has been fully analyzed in the first volume of this work. Every process of commodity production at the same time becomes a process of exploiting 8 End of Manuscript VII. Beginning of Manuscript VI. The Circulation of Money-Capital. 45 labor-power. But it is not until the capitalist production of commodities is established that this mode of exploitation becomes universal and typical, and revolutionizes in the course of its historical development, through the organiza- tion of the labor process and the enormous improvement of technique, the entire economic structure of society, in a manner eclipsing all former epochs. The means of production and labor-power in so far as they are forms of existence of advanced capital values, are distinguished by the different roles assumed by them in the production of value, hence 'also of surplus-value, and known under the names of constant and variable capital. As different parts of productive capital they are further- more distinguished by the fact that the means of production in the possession of the capitalist remain his capital even outside of the process of production, while labor-power exists in the form of individual capital only within this process. While labor-power is a 'commodity only in the hands of its seller, the wage worker, it becomes capital only in the hands of its buyer, the capitalist who uses it temporarily. And the means of production do not become objective parts of productive capital, until labor-power, the personal form of productive 'capital, is embodied in them. Human labor- power is originally no more capital than are the means of production. They assume this specific social character only under definite historically developed conditions, and the same character is impregnated upon precious metals, and still more upon money, by the same circumstances. Productive capital, in performing its functions, consumes its own component parts for the purpose of transforming them into a mass of products of a higher value. Seeing that laborjpower acts likewise merely as an organ of pro- ductive capital, the surplus-value produced by its surplus- labor over and above the value of its component elements is also gathered by capital. The surplus-labor of labor- power is the inexpensive labor of capital and thus forms surplus-value for the capitalist, a value which costs him no equivalent return. The product is, therefore, not only a commodity, but a commodity pregnant with surplus-value. Its value is equal to P+S, that is to say equal to the value 46 Capital. of the productive capital consumed in its manufacture plus the surplus-value S created by it. Assuming that this product were represented by 10,000 pounds of yarn, let us say that means of production valued at 372 pounds sterling and labor-power valued at 50 pounds sterling were con- sumed in the production of this quantity of yarn. During the process of spinning, the spinners transferred the value of the means of production to the amount of 372 pounds sterling to the yarn, and at the same time they created, by means of their labor-power, new values to the amount of 128 pounds sterling. The 10,000 pounds of yarn there- fore represent a value of 500 pounds sterling. III. Third Stage. C-M'. Commodities become commodity-capital by springing into existence as a direct result of commodity-production, embodying in a new form the capital values already utilized. If the production of commodities were carried on as capi- talist production in all spheres of society, all commodities would be elements of commodityjcapital from the outset, whether they would be composed of crude iron, Brussels laces, sulphuric acid, or cigars. The problem as to what class of commodities is destined by its nature to rank as capital and what class to serve as general commodities, is one of the self-prepared ills of the scholastic economists. In the form of commodities, capital has to perform the functions of commodities. The articles of which commod- ity capital is composed are produced for sale and must be exchanged for money, must go through the process C-M. The commodities of the capitalist may consist of 10,000 pounds of yarn. If 372 pounds sterling represent the value of the means of production consumed in the spinning pro- cess, and new values to the amount of 128 pounds sterling have been created, the yarn has a value of 500 pounds sterling, which is expressed in its price of the same amount. This price is realized by the sale C-M. What is it that makes of this simple process of all commodity circulation at the same time a capital function? It is not any change that takes place inside of it. Neither the use-value of the The Circulation of Money-Capital. 47 product has been changed, for it passes into the hands of the buyer as an object of use, nor has anything been al- tered in its exchange-value, for this value has not ex- perienced any change of magnitude, but only of form. It first existed as yarn, while now it exists as money. Thus a plain distinction is evident between the first stage C-M, and the last stage C'-M'. There the advanced money serves as money-capital, because it is transformed, by means of the circulation of commodities, into articles of a specific use- value. Here, on the other hand, the commodities can only serve as capital, since they brought this character with them from the process of production before their circulation be- gan. During the spinning process, the spinners created new values to the amount of 128 pounds sterling in the shape of yarn. Of this sum, say 50 pounds sterling are regarded by the capitalist merely as an equivalent for wages advanced for labor-power, while 78 pounds sterling — representing an ex- ploitation of 156 per cent — are his surplus-value. The value of the 10,000 pounds of yarn therefore embodies first the value of the 'consumed productive capital P, which consists of a constant capital of 372 pounds sterling and a variable capital of 50 pounds sterling, their sum being 422 pounds sterling, equal to 8,440 pounds of yarn. Now the value of the productive capital P is equal to C, the value of the elements constituting it which the capitalist found to be in the hands of their sellers in the stage M-C. In the second place, the value of the yarn embodies a surplus-value of 78 pounds sterling, equal to 1,560 pounds of yarn. C as an expression of the value of 10,000 pounds of yarn is there- fore equal to C plus surplus C, or C plus an increment of C worth 78 pounds sterling, which we shall call c, since it ex- ists in the same commodity form as that now assumed by the original value C. The value of the 10,000 pounds of yarn, equal to 500 pounds sterling, is therefore represented by the formula C+c=C\ What changes C, the value of the 10,000 pounds of yarn, into C is not its absolute value of 500 pounds sterling, for it is determined, the same as C standing for the expression of the value of any other sum of commodities, by the quantity of labor embodied in it. It is rather its relative value, its value as compared to that of 48 Capital the productive capital P consumed in its production, which is the essential thing. This value is contained in it plus the surplus-value created through the productive capital. Its value exceeds that of the capital by the surplus-value c. The 10,000 pounds of yarn are the bearers of the consumed capital value increased by this surplus-value, and they are so by virtue of the capitalist process of production. C' ex- presses the relation of the value of the commodities to that of the capital advanced in its production, in other words the composition of the value of the commodities, of capital value and surplus-value. The 10,000 pounds of yarn repre- sent a commodity-capital €' only because they are an altered form of the productive capital P, and this relation exists originally by virtue of the circulation of this individual capital, it applies primarily to the capitalist who produced the yarn by the help of his capital. It is, so to say, an in- ternal, not an external relation which makes a commodity capital of the 10,000 pounds of yarn in their capacity of representatives of value. They are bearing the imprint of capital not in the absolute magnitude of their value, but in its relative magnitude, in the proportion of their value to that of productive capital embodied in them before they became commodities. If, then, these 10,000 pounds of yarn are sold at their value of 500 pounds sterling, this act of circulation, considered by itself, is identical with C-M, a mere transformation of the same value from the form of a commodity into that of money. But as a special stage in the circulation of a certain individual capital, the same act is also a realization of the capital value, embodied in the commodity, to the amount of 422 pounds sterling plus the surplus-value, likewise embodied in it, of 78 pounds ster- ling. That is to say, it also represents C'-M', the trans- formation of the commodity-capital from its commodity form into that of money.* The function of C is now that of all commodities, viz.: to transform itself into money, to be sold, to go through the circulation stage C-M. So long as the capital utilized so far remains in the form of commodity-capital and stays 4 End of Manuscript VI. Beginning of Manuscript V. The Circulation of Money-Capital. 49 on the market, the process of production rests. The com- modity-capital serves then neither as a creator of value nor of products. In proportion to the degree of speed with which capital throws off the commodity-form and assumes that of money, in other words, in proportion to the rapidity of the sale, the same capital-value will serve in widely dif- ferent degrees as a creator of products or of values, and the scale of reproduction will be extended or abridged. It has been shown in Volume I that the effectiveness of any given capital is conditioned on factors in the productive process which are to a certain extent independent of the magnitude of its own value. Here we see that the process of circulation sets in motion new factors which are independent of the value of the capital, its effectiveness, its expansion or con- traction. The mass of commodities C, being the embodiment of the consumed capital, must furthermore pass in its entire volume through the metamorphosis C'-M'. The quantity sold is here the main determinant. The individual com- modity figures only as an integral part of the total mass. The 500 pounds sterling are embodied in 10,000 pounds of yarn. If the capitalist succeeds in selling only 7,440 pounds of yarn at their value of 372 pounds sterling, he has recovered only the value of his constant capital, the value expended by him for means of production. If he sells 8,440 pounds of yarn, he recovers only the value of his total capital. He must sell more, in order to obtain some surplus-value, and he must sell the entire 10,000 pounds in order to get the entire surplus-value of 78 pounds ster- ling (1,560 pounds of yarn). In 500 pounds sterling he receives merely an equivalent for the commodity sold. His transaction within the process of circulation is simply C-M. If he had paid his laborers 64 pounds sterling instead of 50 pounds sterling, his surplus-value would be only 64 pounds sterling instead of 78, and the degree of exploita- tion would have been only 100 per cent instead of 150. But the value of the yarn would remain the same; only the relation of its component parts would be changed. The circulation-act C-M would still represent the sale of 10,000 pounds of yarn for 500 pounds sterling, which is their value. 50 Capital. C is equal to C+c (or 422 plus 78 pounds st.) . C equals the value of P, the productive capital, and this equals the value of M, the money advanced in the act M-C, the purchase of the elements of production, amounting to 422 pounds ster- ling in our example. If the mass of commodities is sold at its value, then C equals 422 pounds sterling, and c, the value of the surplus product of 1,560 pounds of yarn, equals 78 pounds sterling. If we call c, expressed in money, m, then C'-M'=(C+c)-(M+m), and the cycle M-C.. .P.. .C'-M', in its expanded form, is represented by M-C'j£m...P...(C+c)- (M+m). In the first stage, the capitalist takes articles of use out of the commodity-market proper and the labor-market. And in the third stage he throws commodities back, but only into one market, the commodity-market proper. But the fact that he extracts from the market, by means of his com- modities, a greater value than he threw upon it originally, is due only to the circumstance that he throws more commodity- values back upon it than he first drew out of it. He threw the value M into it and drew out of it the equivalent C; he throws the value C+c back into it, and draws out of it the equivalent M+m. M was in our example equal to the value of 8,440 pounds of yarn. But he throws 10,000 pounds of yarn into the market, he returns a greater value than he drew out of it. On the other hand, he threw this increased value into it only by virtue of the fact that he obtained a surplus-value through the exploitation of labor-power (this value being expressed by an aliquot part of the product). The mass of commodities becomes a commodity-capital only by virtue of this process, it is the impersonation of the used-up capi- tal value only through it. By the act C'-M' the advanced capital-value is recovered as well as the surplus-value. The realization of both coincides with that series of sales, or with that one sale, of the entire mass of commodities, which is expressed by C'-M'. But this same act of circulation is different for capital-value and surplus-value, because it ex- presses for each one of these two values a different stage of their circulation, a different section of the series of meta- morphoses through which each of them passes in its circu- The Circulation of Money-Capital. 51 lation. The surplus-value c did not come into the world until the process of production began. It appeared for the first time on the commodity-market in the form of commodities. This is its first form of circulation, hence the act c-m is its first circulation act, or its first metamorphosis, which remains to be supplemented by the reverse circulation, or the opposite metamorphosis, m-c.e It is different with the circulation which the capital- value C performs in the same circulation act C'-M', and which constitutes for it the circulation act C-M, in which C is equal to P, the M originally advanced. It opened its circulation in the form of M, money-capital, and returns through the act C-M to the same form. In other words, it has now passed through the two opposite stages of the circulation, first M-C, second C-M, and finds itself once more in the form in which it can begin its cycle anew. What constitutes for surplus-value the first transformation of the commodity-form into that of money, constitutes for capi- tal-value its return, or retransformation, into its original money-form. By means of M-C |pm, money-capital is transformed into an equivalent mass of commodities, L and Pm. These com- modities no longer perform the function of commodities, of articles of sale. Their value now exists in the hands of the capitalist who bought them, they represent the value of his productive capital P. And in the function P, pro- ductive consumption, they are transformed into commodi- ties substantially different from the means of production, into yarn, in which their value is not only preserved but increased, rising from 422 pounds sterling to 500 pounds sterling. By means of this metamorphosis, the commodities taken from the market in the first stage, M-C, are replaced by commodities of a different substance and value, which now perform the function of commodities, being exchanged for money and sold. The process of production, therefore, appears to us as an interruption of the process of circula- 5 This is true, no matter how we separate capital-value and surplus- value. 10,000 lbs. of yarn contain 1,560 lbs., or 78 pounds sterling, sur- plus-value ; but one lb., or one shilling, likewise contains 2.496 ounces, or 1,728 pence of surplus-value. 52 Capital. tion of capital-value, since up to production it has passed only through the phase M-C. It passes through the sec- ond and concluding phase, C-M, after C has been altered in substance and value. But so far as capital-value, considered by itself, is concerned, it has merely gone through a trans- formation of its use-form in the process of production. It existed in the form of 422 pounds sterling's worth of L and Pm, while now it exists in the form of 8,440 pounds of yarn valued at 422 pounds sterling. If we consider merely the two circulation phases of capital-value, apart from its surplus-value, we find that it passes through the stages M-C and C-M, in which the second C represents a different use- value, but the same exchange-value as the first C. And the process M-C-M is, therefore, a cycle which requires the re- turn of the value advanced in money to its money-form, because the commodity here changes places twice and in the opposite direction, the first change being from the money to the commodity-form, the second from the commodity to the money-form. Capital-value is retransformed into money. The same circulation act C-M', which constituted the second and concluding metamorphosis, a return to the mon- ey-form, for capital-value, represents for the surplus-value simultaneously embodied in the commodity-capital, and rea- lized by its exchange for money, its first metamorphosis, its transformation from the commodity to the money-form, C-M, its first circulation phase. We have, then, two observations to make. First, the final return of capital-value to its original money-form is a func- tion of commodity-capital. Second, this function includes the first transformation of surplus-value from its original commodity-form to that of money. The money-form, then, plays a double role here. On the one hand, it is a return of a value, originally advanced in money, to its old form, a return to that form of value which opened the process. On the other hand, it is the first metamorphosis of a value which originally enters the circulation in the form of a com- modity. If the commodities composing the commodity- capital are sold at their value, as we assume, then C plus c is transformed into M plus m, its equivalent. The sold com- The Circulation of Money-Capital. 53 modity-capital now exists in the hands of the capitalist in the form of M plus m (422 pounds sterling plus 78 pounds sterling, equal to 500 pounds sterling). Capital-value and surplus-value are now present in the form of money, the form of the general equivalent. At the conclusion of the process, capital-value has re- sumed the form in which it entered, and can now open a new cycle of the same kind, in the form of money-capital, and go through it. Just because the opening and conclud- ing form of this process is that of money-capital, M, we call this form of the circulation process the circulation of money- capital. It is not the form, but merely the magnitude of the advanced value which is changed in the end. M plus m is a sum of money of a definite magnitude, in this case 500 pounds sterling. As a result of the circu- lation of capital, of the sale of commodity-capital, this sum of money contains the capital-value and the surplus- value. And these values are now no longer organically connected, as they were in the yarn, they are now arranged side by side. Their sale has given both of them an independent money form; 211-250th of this money represent the capi- tal value of 422 pounds sterling, and 39-250th constitute the surplus-value of 78 pounds sterling. This separation of capital-value and surplus-value, which results from the sale of the commodity-capital, has not only the formal meaning to which we shall refer presently. It becomes important in the process of the reproduction of capital, according to whether m is entirely, or partially, or not at all, lumped together with M, that is to say according to whether or not it continues to perform the functions of capital-value. Both m and M may also pass through widely different cycles of circulation. In M', capital has returned to its original form M, to its money-form. But it then has a form, in which it is mate- rialized capital. There is in the first place a difference of quantity. It was M, 422 pounds sterling. It is now M', 500 pounds sterl- ing, and this difference is expressed by the quantitatively different points M...M' of the cycle, the movement of which is indicated by the dots. M' is greater than M, and M'-M 54 Capital. is equal to the surplus-value s. But as a result of this cycle M....M' it is only M' which exists now; it is the product which marks the close of the process of formation of money- capital. M' now exists independently of the movement which it started. This movement is completed, and M' exists in its place. But M', being M plus m, or in this case 500 pounds ster- ling, composed of 422 pounds sterling advanced capital plus an increment of 78 pounds sterling, represents at the same time a qualitative relation. It is true that this qualitative re- lation does not exist outside of the quantitative relation of the parts of one and the same sum. M, the advanced capital, which is now once more present in its original form (422 pounds sterling), exists as the realization of capital. It has not only preserved itself, but also realized its own capital- form, distinguished from m (78 pounds sterling), to which it stands in the relation of creator, m being its fruit, an increment born by it. It has realized its capital-form, be- cause it is a value which has created more value. M' exists as a capital relation. M no longer appears as mere money, but it is explicitly used as money-capital, as a value which has utilized itself by creating a higher value than itself. M acts as capital by virtue of its relation to another part of M', which it has created. Thus M' appears as a sum of values expressing the capital relation, being differentiated into functionally different parts. But this expresses only a result, without showing the in- termediate process which caused it. Parts of value as such are not qualitatively different from one another, except in so far as they are values of different articles, of concrete things, embodied in different use-values. They are values of different commodities, and this difference is not due to their character as exchange-values. In money, all differences of commodities are extinguished, because it is an equivalent form common to all of them. A sum of money of 500 pounds sterling consists of equal elements of one pounds sterling each. Since the intermediate links of descent are extinguished in the simple form of this sum of money, and all traces of the specific differences of the in- dividual parts of capital in the productive process have dis- The Circulation of Money-Capital. 55 appeared, there exists only the mental distinction between the main sum of 422 pounds sterling, which was the capi- tal advanced, and a surplus sum of 78 pounds sterling. Or, again, let M' be equal to 110 pounds sterling, of which 100 may be equal to the main sum M and 10 equal to the surplus-value s. There is an absolute homogeneity, an ab- sence of distinctions, between the two constituent parts of the sum of 110 pounds sterling. Any 10 pounds of thi.a sum always constitute 1-llth of the sum of 110 pounds re- gardless of the fact that they are also l-10th of the advanced main sum of 100 pound's, or the excess of 10 pounds above it. Main sum and surplus sum (capital and surplus-value), may simply be expressed as fractional parts of the total sum. In our illustration, 10-llth form the main sum, and 1-llth the surplus sum. Materialized capital, at the end of its cycle, therefore appears as an undifferentiated expression, the money expression, of the capital relation. True, this applies also to C (C plus c). But there is this difference, that C, of which C and c are also proportional parts of the same homogeneous mass of commodities, indi- cates its. origin P, the immediate product of which it is, while in M', a form derived immediately from circulation, the direct relation to P is obliterated. The undifferentiated distinction between the main sum and the surplus sum, which are contained in M', so far as this expresses the result of the movement M...M', disap- pears as soon as it performs its active function of money- capital and is not preserved as a fixed expression of mate- rialized industrial capital. The circulation of money-capi- tal can never begin with M' (although M' now performs the function of M). It can begin only with M, that is to say, it can never begin as an expression of the capital rela- tion, but only as an advance of capital- value. As soon as the 500 pounds sterling are once more advanced as capital, in order to be again utilized, they constitute a point of de- parture, not one of conclusion. Instead of a capital of 422 pounds sterling, a capital of 500 pounds sterling is now advanced. It is more money than before, more capital-value, but the relation between its two constituent parts has dis- 56 Capital. appeared. In fact, a sum of 500 pounds sterling might have served instead of the 422 pounds sterling as the origi- nal capital. It is not an active function of money-capital to mate- rialize in the form of M'; this is rather a function of C\ Even in the simple circulation of commodities, first in C-M, then in M-O, money M does not figure actively until in the second movement, M-C.2 Its embodiment in the form of M is the result of the first act, by virtue of which it be- comes a transfoimation of C.1 The capital relation con- tained in M', the relation of its constituent parts in the form of capital-value and surplus-value, assumes a func- tional importance only in so far as the repeated cycle M...M' splits M' into two circulations, one of them a cir- culation of capital, the other of surplus-value. In this case these two parts perform not only quantitatively, but also qualitatively different functions, M others than m. But considered by itself, M...M' does not include the consump- tion of the capitalist, but emphatically only the self-utiliza- tion and accumulation of money-capital, the latter function expressing itself at the outset as a periodical augmentation of ever renewed advances of money-capital. Although M' (M plus m) is the undifferentiated form of capital, it is at the same time a materialization of money- capital, it is money which has generated more money. But this is different from the role played by money-capital in the first stage, M-C {£m. In this first stage, M circulates as money. It assumes the functions of money-capital only because it cannot serve as money unless it assumes the form of money, because it cannot transform itself in any other way into the component parts of P, L and Pm, which stand opposed to it in the form of commodities. In this circula- tion act it serves as money. But as this act is the first stage in the circulation of capital-value, it is also a function of money-capital, by virtue of the specific use-value of the com- modities L and Pm which are bought by it. M', on the other hand, composed of M, the capital-value, and m, the surplus- value created by M, stands for materialized capital-value, ex- presses the purpose and the outcome, the function of the The Circulation of Money-Capital. 57 total process of circulation of capital. The fact that it ex- presses this outcome in -the form of money, of materialized money-capital, is due to the capital-character of money-capi- tal, not to its money-character; for capital opened the proc- ess of circulation in the form of an advance of money. Its return to the money-form, as we have seen, is a function of C, not of money-capital. As for the difference between M and M', it is simply m, the money-form of c, the increment of C. For M' is composed of M plus m only because C was composed of C plus c. In C, this difference and the rela- tion of capital-value to its product, surplus-value, is already present and expressed, before both of them are transformed into M\ And in this form, these two values appear independ- ently side by side and may, therefore, be employed in sepa- rate and distinct functions. M' is the outcome of the materialization of C\ Both M' and C are different forms of utilized capital-value, one of them the commodity, the other the money-form. Both of them share the quality of being utilized capital-value. Both of them are materialized capital, because capital-value here exists simultaneously with its product, surplus-value, al- though it is true that this relation is expressed in the un- differentiated form of the proportion of two parts of one and the same sum of money or commodity-value. But as expressions of capital, and in distinction from the surplus- value produced by it, M' and C are the same and express the same thing, only in different forms. In so far as they represent utilized value, capital acting in its own role, they express the result of the function of productive capital, the only function in which capital-value generates more value. What is common to both of them, is that money-capital as well as commodity-capital are different modes of existence of capital. Their distinctive and specific functions cannot, therefore, be anything else but the difference between the functions of money and of commodities. Commodity-capi- tal, the direct product of the capitalist process of pro- duction, indicates its capitalist origin and is, therefore, to that extent more rational and less difficult to understand than money-capital, in which every trace of this process has 58 Capital. disappeared. In general, all special use-forms of commodi- ties disappear in money. It is only when M' itself figures as commodity-capital, when it is the direct outcome of a productive process, in- stead of being a transformed product of this process, that it loses its bizarre form, that is to say, in the production of money itself. In the production of gold, for instance, the formula would be M-C {£m< ...P...M (M plus m), and M' would here figure as a commodity, because P furnishes more gold than had been advanced for the elements of production contained in the first money-capital M. In this case, the irrational nature of the formula M...M' (M plus m) disap- pears. Here a part of a certain sum of money appears as the mother of another part of the same sum of money. IV. The Rotation as a Whole. We have seen that the process of circulation is inter- rupted at the end of its first phase, M-C |pm> by P, which makes the commodities L and Pm parts of the substance and value of productive capital and consumes them. The result of this productive consumption is a new commodity C, which is of different composition and value than the commodities L and Pm. The interrupted process of circulation, C-M, must be completed by M-C. The basis of this second and concluding phase of circulation is C, a commodity of dif- ferent composition and value than C. The process of cir- culation therefore appears first as M-C,1 then as C 2-M', the C2 in this second phase representing a greater value and a different use-value than C1, due to the 'interruption caused by the function of P which is the production of C from elements of C, embodied in the productive capital P. The first form assumed by capital (vol. I, chap. IV), viz., M-C-M', or extended first M-C,* second O-M', shows the same commodity twice. It is the same commodity which is ex- changed for money in the first phase and again exchanged for more money in the second phase. In spite of this es- sential difference, these two modes of circulation share the peculiarity of transforming in their first phase money into commodities, and in the second phase commodities into money, so that the money spent in the first phase returns in The Circulation of Money-Capital. 59 the second. On the one hand, both have in common this return of money to its starting point, on the other hand the excess of the returned money over the money first advanced. To this extent, the formula M-C.C'-M' is apparently con- tained in the general formula M-C-M'. It follows furthermore that equal quantities of simultan- eously existing values are placed in opposition to one another and exchanged in the two metamorphoses of circulation rep- resented by M-C anc C'-M'. The change of value is due ex- clusively to the metamorphosis P, the process of produc- tion, which thus appears as a natural metamorphosis of capi- tal, as compared to the merely formal metamorphosis of cir- culation. Let us now consider the total movement, M-C. .P. ..C'-M', or its more explicit form, M-C {£m..P...C (C+c) -M' (M+m). Capital here appears as a value which goes through a series of connected metamorphoses conditioned on one another and representing so many phases of the total process. Two of these phases belong to the sphere of circulation, one of them to that of production. In each one of these phases, capi- tal-value has a different form corresponding to a different, special, function. Within this cycle, value does not only maintain itself at the magnitude in which it was originally advanced, but it increases. Finally,, in the concluding stage, it returns to the same form which it had at the beginning of the cycle. This total movement constitutes the process of rotation as a whole. The two forms assumed by capital-value are that of money- capital and commodity-capital. In the stage of production, its form is that of productive capital. The capital which assumes these different forms in the course of its total process of ro- tation, discards them one after the other, and performs a special function in each one of them, is industrial capital. The term industrial applies to every branch of industry run on a capitalist basis. Money-capital, commodity-capital, productive capital are not, therefore, terms indicating independent classes of capital, nor are their functions processes of independent and sepa- rate branches of industry. They are here used only to indi- 60 Capital. cate special functions of industrial capital, assumed by it seriatim. The circulation of capital proceeds normally only so long as its various phases flow uninterruptedly one into the other. If capital stops short in its first phase M-C, money-capital assumes the rigid form of a hoard; if it stops in the phase of production, the means of production remain lifeless on one side, while labor-power remains unemployed on the other; and if capital stops short in its last phase C'-M', masses of unsold commodities accumulate and clog the flow of rota- tion. At the same time, it is a matter of course that the rota- tion of capital includes the stopping of capital for a certain length of time in the various sections of its cycle. In each of these sections, industrial capital is poured into a definite mold, being either money-capital, productive capital, or commodity-capital. It does not assume a form in which it may enter a new metamorphosis, until it has gone through the function corresponding to the form preceding the new metamorphosis. In order to make this plain, we have as- sumed in our illustration, that the capital-value of the mass of commodities created in the phase of production is equal to the total sum of values originally advanced in the form of money, or, in other words, that the entire capital-value advanced in the form of money enters undivided from one stage into the next. Now we have seen (vol. I, chap. IV) that a part of the constant capital, the means of production proper, such as machinery, always serve repeatedly, for a greater or smaller number of times, in the same processes of production, so that they transfer their values piece-meal to the products. We shall see later, to what extent this cir- cumstance modifies the process of rotation of capital. For the present, it suffices to say this: In our illustration, the value of the productive capital of 422 pounds sterling con- tained only the average wear and tear of buildings, machin- ery, etc., that is to say only that part of value which they transferred in the transformation of 10,600 pounds of cot- ton to 10,000 pounds of yarn, which represents the product of one week's spinning, or of 60 hours. In the means of production, into which the advanced constant capital of 372 The Circulation of Money-Capital. 61 pounds sterling is transformed, <the instruments of labor, buildings, machinery, etc., figure only as would ob- jects which were rented in the market for a weekly rate. But this does not change the problem in any way. We have but to multiply the quantity of yarn produced in one week, or 10,000 pounds of yarn, with the number of weeks contained in a certain number of years, in order to transfer the entire value of the means of production bought and consumed during this period. It is then plain that the advanced money-capital must first be transformed into these means of production, must first have gone through the phase M-C, before it can be used as productive capital, P. And it is likewise plain that, in our illustration, the capital value of 422 pounds sterling, embodied in the yarn during the proc- ess of production, cannot become a part of the value of the 10,000 pounds of yarn and enter the circulation phase C'-M', until it has been produced. The yarn cannot be sold, until it has been spun. In the general formula, the product of P is regarded as a material thing different from the elements of the produc- tive capital, as an object existing apart from the process of production and having a different use-value than the ele- ments of production. And if the fruit of production as- sumes the form of such an object, it always corresponds to this description, even if a part of it should re-enter pro- duction as one of its elements. Grain, for instance, serves as seed for its own reproduction, but the final product is always grain and has a different composition than the ele- ments used in its production, such as labor-power, imple- ments, and fertilizer. But there are certain independent branches of industry, in which the result of the productive process is not a new material product, not a commodity. Among these, only the industries representing communica- tion, such as transportation proper for commodities and hu- man beings, and the transmission of communications, let- ters, telegrams, etc., are economically important. A. Cuprov6 says on this score: "The manufacturer may first produce articles and then look for consumers" (his 6 A. Cuprov : Zeleznodoroznoje chostjajstvo, Moskva, 1875, pg. 75 and 76. 62 Capital. product, having been completed in the process of produc-, tion, is transferred to the process of circulation as a separate commodity). "Production and consumption thus appear as two acts distinct from one another in space and time. In the transportation industry, which does not create any new prod- ucts, but merely transfers men and things, these two acts coincide; its services (change. of place) must be consumed at the same time that they are produced. For this reason the distance, within which railroads can find customers, extends at best 50 verst (53 kilometers or about 30 miles) on either side of their tracks." The result in the transportation of either men or com- modities is a change of place. Yarn, for instance, is thus transferred from England, where it was produced, to In- dia. Now transportation, as an industry, sells this change of location. This utility is inseparably connected with the process of transportation, which is the productive process of transportation. Men and commodities travel by the help of the means of transportation, and this traveling, this change of location, constitutes the production in which these means of transportation are consumed. The utility of trans- portation can be consumed only in this process of produc- tion. It does not exist as a use-value apart from this proc- ess, it does not, like other commodities, serve as a com- modity which circulates after its process of production. The exchange value of this utility is determined, like that of any other commodity, by the value of the elements of production (labor-power and means of produc- tion) plus the surplus-value created by the surplus-labor of the laborers employed in transportation. This utility also entertains the same relations to consumption that all other commodities do. If it is consumed individually, its value is used up in consumption ; if it is consumed productively by entering into the process of production of the transported commodities, its value is added to that of the commodity. The formula for the transportation industry would, there- fore, be M-C \p ...P-M', since it is the process of production itself which is paid for and consumed, not a product dis- tinct and separate from it. This formula has almost the The Circulation of Money-Capital. 63 same form as that of the precious metals, only with the dif- ference, that in this case M' represents the changed form of the utility resulting during the process of production, while in the case of the precious metals it represents the natural form of the gold or silver obtained in this process and trans- ferred from it to other stages. Industrial capital is the only form of existence of capital, in which not only the appropriation of surplus value or sur- plus product, but also its creation is a function of capital. Therefore it gives to production its capitalist character. Its existence includes that of class antagonisms between capital- ists and laborers. To the extent that it assumes control over social production, the technique and social organization of the labor process are revolutionized and with them the eco- nomic and historical type of society. The other classes of capital, which appear before industrial capital amid past or declining conditions of social production, are not only sub- ordinated to it and suffer changes in the mechanism of their functions corresponding to it, but move on it as a basis, live and die, stand and fall with this basis. Money-capital and commodity-capital, so far as they still persist as independent branches of industry along with industrial capital, are noth- ing but modes of existence of different functional forms either assumed or discarded by industrial capital in the sphere of circulation, made independent and developed one-sidedly by the social division of labor. The cycle M...M' on one side intermingles with the general circulation of commodities, proceeds from it and flows back into it, is a part of it. On the other hand, it is for the indi- vidual capitalist an independent movement of his capital value, taking place partly within the general circulation of commodities, partly outside of it, but always preserving its independent character. For in the first place, its two phases taking place in the sphere of circulation, M-C and C'-M', have functionally different characters as functions of capital circulation. In M-C, the commodity C is composed of labor- power and means of production; in C'-M', capital value is realized plus surplus-value. In the second place, the process of production, P, includes productive consumption. In the 64 Capital. third place, the return of money to its starting point makes of the cycle M...M' a process of circulation complete in itself. Every individual capital is therefore, on the one hand, in its two phases M-C and C'-M', an active element in the general circulation of commodities, with which it is con- nected either as money or as a commodity. Thus it forms a link in the general chain of metamorphoses in the world of commodities. On the other hand, it goes through its own independent circulation within the general circulation. Its independent circulation passes through the sphere of produc- tion and returns to its starting point in the same form in which it left that point. Within its own circulation, which includes its natural metamorphosis in the process of produc- tion, it changes at the same time its value. It returns not only as the same money-value, but as an increased money- value. Let us finally consider M-C ...P...C-M' as a special form of the process of circulation of capital, apart from the other forms which we shall analyze later. It is distinguished by the following points: 1. It appears as the circulation of money-capital, because industrial capital in its money form, as money-capital, forms the starting and terminal point of its total process. The formula itself expresses the fact that money is not expended as money at this stage, but advanced as the money-form of capital. It expresses furthermore that exchange-value, not use-value, is the determining aim of this movement. Just because the money-form of this value is its tangible and inde- pendent form, the compelling motive of capitalist produc- tion, the making of money, is most fittingly expressed by the circulation formula M...M.' The process of production appears merely as an indispensable and intermediate link, as a necessary evil of money-making. All nations with a capitalist mode of production are seized periodically by a feverish attempt to make money without the mediation of the process of production. 2. The stage of production, the function of P, represents an interruption of the two phases of circulation M-C... C'-M', which in their turn represent links in the simple circulation M-C-M'. The process of production appears formally and The Circulation of Money-Capital. 65 essentially in circulation as that which is typical of capitalist production, that is to say as a mere means of utilizing pre- viously advanced values. The accumulation of wealth is the purpose of production. 3. Since the series of phases is opened by M-C, the second link of the circulation is C'-M.' In other words, the start- ing point is M, or the money-capital to be utilized, the ter- minal point M', or the utilized money-capital M plus m, in which M figures together with its offspring m. This dis- tinguishes the circulation of M from that of the two other cycles P and C, in two ways. On one side, its two extremes are represented by the money-form. And money is the tangible form of value, the value of the product in its inde- pendent form, in which every trace of the use-value of the commodities has been extinguished. On the other side, the formula P...P is not necessarily transformed into P...P' (P plus p,) and in the form C-C, no difference in value is visi- ble between the two extremes. It is, therefore, characteristic for the formula M-M' that capital value is its starting point, and utilized capital value its terminal point, so that advanced capital value appears as the means, and utilized capital value as the end of the entire operation. And furthermore, this relation is expressed in the form of money, in the form of independent value, so that money-capital is money genera- ting more money. The generation of surplus-value by value is not only expressed as the Alpha and Omega of the process, but more explicitly in the form of glittering money. 4. Since M', the money-capital realized as a result of C'-M', the supplementary and concluding form of M-C, has absolutely the same form in which it began its first circula- tion, it can immediately begin the same circulation over again as an increased (accumulated) money-capital, or as M' equal to M plus m. And it is not expressed in the formula M-M' that, in the repetition of the cycle, the circulation of m separates from that of M. Considered in its complete form, the circulation of money capital expresses simply the process of utilization and accumulation. The consumption in it is pro- ductive consumption, as shown by the formula M-C { pm< and it is only this which is included in this circulation of individual capital. M-L means L-M, or C-M, on the part 86 Capital. > of the laborer. It is therefore the first phase of circulation which promotes his individual consumption, thus: L-M-C (means of subsistence). The second phase, M-C, no longer falls within the circulation of individual capital, but it is ini- tiated by individual capital and an indispensable premise for it, since the laborer must above all live and maintain himself by individual consumption, in order to be always on the market for exploitation by the capitalist. But this con- sumption is here only assumed as the indispensable condition for the productive consumption of labor power by capital, and it is, therefore, considered only in so far as it preserves and reproduces his labor power by means of his individual consumption. But the means of production Pm, the com- modities proper which enter into the circulation of capital, are only material feeding 'the productive consumption. The act L-M promotes the individual consumption of the laborer, the transformation of means of subsistence into flesh and blood. It is true, that the capitalist must also be present, must also live and consume in order to perform the function of a capitalist. To this end, he has, indeed, but to consume in the same way as the laborer, and this is all that is assumed in this form of the circulation process. But it is not for- mally expressed, since the term M' concludes the formula and indicates that it may at once re-enter on its function of in- creased money-capital. In the formula C'-M', the sale of C is directly indicated ; but this sale C'-M' on the part of one is M-C, or the purchase of commodities, on the part of another, and in the last analy- sis a commodity is bought only for its use-value, in order to enter (leaving intermediate sales out of consideration) into the process of consumption, and this may be either produc- tive or individual consumption, according to the nature of the commodity. But this consumption does not enter into the circulation of individual capital, the product of which is C. This product is eliminated from this circulation from the moment that it is sold. C is explicitly produced for con- sumption by others. For this reason we note that certain spokesmen of the mercantile system (which is based on the formula M-C. .P.. .C'-M') deliver lengthy sermons to the effect that the individual capitalist should consume only in his The Circulation of Money-Capital. 67 capacity as a worker, that capitalist nations should let other and less intelligent nations consume their own and other commodities, and that a capitalist nation should devote itself for life to the productive consumption of commodities. These sermons frequently remind us in form and content of analogous ascetic exhortations of the fathers of the church. The rotation process of capital is therefore a combination of circulation and production, it includes both. In so far as the two phases M-C and C'-M' are processes of circulation, the rotation of capital is a part of the general circulation of com- modities. But in so far as they are definite sections perform- ing a peculiar function in the rotation of capital, which com- bines the spheres of circulation and production, capital goes through its own circulation in the general circulation of com- modities. The general circulation of commodities serves capital in its first stage as a means of assuming that form in which it can perform the function of productive capital; in its second stage, it serves to eliminate the commodity func- tion in which capital cannot renew its circulation; at the same time it enables capital to separate its own circulation from that of the surplus-value created by it. The circulation of money-capital is therefore the most one- sided, and thus the most convincing and typical form of the circulation of industrial capital. Its aim and compelling motive, the utilization of value, the making and accumula- tion of money, is thus most clearly revealed. Buying in order to sell dearer is its slogan. The first phase M-C also indicates the origin of the elements of productive capital in the commodity market, or more generally, the dependence of the capitalist mode of production on circulation, on com- merce. The circulation of money-capital is not merely the production of commodities ; it is itself possible only through circulation of commodities and based on it. This is plain from the fact that the term M belongs to circulation and represents the first and most typical form of advanced capi- tal-value. This is not the case in the other two forms of cir- culation. 68 Capital. The circulation of money-capital always remains the gen- eral expression of industrial capital, because it always implies the utilization of the advanced value. In P...P, the money- character of capital is shown only in the price of the ele- ments of production as a value expressed in money-terms for the purpose of calculation and book-keeping. M...M' becomes a special form of the circulation of indus- trial capital when new capital is first advanced in the form of money and then returned in the same form, either in pass- ing from one branch of industry to another, or in the case that industrial capital retires from business. This includes the capital function of the surplus-value first advanced in the form of money, and becomes most evident when surplus- value performs a function in some other business than the one in which it originated. M...M' may be the first circula- tion of a certain capital; it may be the last; it may be re- garded as the form of the total social capital ; it is that form of capital which is newly invested, either as a recently accu- mulated capital in the form of money, or as some old capi- tal which is entirely transformed into money for the purpose of transfer from one branch of industry to another. Being a form always contained in all circulations, money- capital performs this circulation precisely for that part of capital which produces surplus-value, viz., variable capital. The normal form of an advance in wages is payment in money; this process must be renewed in short intervals, be- cause the laborer lives from hand to mouth. In his relation to the laborer, the capitalist must therefore always be a money-capitalist, and his capital must be money-capital. There can be no direct or indirect balancing of accounts in this case, such as we find in the purchase of means of produc- tion or in the sale of productive commodities, where the greater part of the money capital really exists in the form of commodities, while the money is mainly used for purposes of calculation and figures in cash only in the balancing of accounts. On the other hand, a part of the surplus-value arising out of variable capital is spent by the capitalist for his individual consumption, which is a part of the retail trade, and this surplus-value is in the last analysis always The Circulation of Money-Capital. 69 expended in the form of money. It does not matter how large or small may be this part of surplus- value. Variable capital always appears anew as money-capital invested in wages (M-L) and m as surplus-value which may be expended for the individual consumption of the capitalist. So that M, capital advanced for wages, and m, its increment, are necessarily held and spent in the form of money. The formula M-C...P...C-M', with its result M' equal to M plus m, is, in a certain sense, deceptive, owing to the exist- ence of the advanced and surplus-value in the form of the general equivalent, money. The emphasis in this formula is not on the utilization of value, but on the money-form of this process, on the fact that more money-value is finally drawn out of 'the circulation than had originally been advanced ; in other words, the emphasis is on the multiplica- tion of the amount of gold and silver belonging to the capi- talist. The so-called monetary system is merely the expres- sion of the abstract formula M-C-M', a movement which takes place exclusively in the circulation. And this system can- not explain the two phases M-C and C-M' in any other way than by declaring that C is sold above its value in the second phase and thus draws more money out of the circulation than was put into it in its purchase. But if M-C...P...C'-M, becomes the exclusive form of circulation, it is the basis of a more highly developed mercantile system, in which not only the circulation of commodities, but also their produc- tion, is recognized as a necessary element. The illusive character of M-C...P...C,-M' and the resulting illusive interpretation always appear, whenever this form is considered as rigid, not as a flowing and ever renewed move- ment ; in other words, they appear whenever this formula is considered not as one section of circulation, but as the exclu- sive form of circulation. But it itself points toward other forms. In the first place, this entire circulation is conditioned on the capitalist character of the process of production, and con- siders it and the specific social conditions created by it as the basis. M-C is equal to M-C{£m. but M-L assumes the exist- ence of the wage laborer, and regards the means of produc- *70 Capital. tion as parts of productive capital. It assumes, therefore, that the process of labor and of utilization, the process of pro- duction, is a function of capital. In the second place, if M...M' is repeated, the return to the money-form is just as transient as the money-form in the first phase. M-C disappears and makes room for P. The re- current advance of money-capital and its equally persistent return in the form of money appear merely as passing moments in the general circulation. In the third place; the repeated formula has this form: M-C...P...C-M'. M-C...P...C-M'. M-C...P... etc. Beginning with the second repetition of the circulation, the cycle P...C'-M'.M-C...P appears, before the second circulation of M is completed, and all other cycles may be considered under the form of P...C-M-C...P, so that the first phase of the first circulation is merely the passing introduction for the constantly repeated circulation of the productive capital. And this is indeed the case for the first time in the investment of industrial capital in the form of money. On the other hand, before the second circulation of P is completed, the first circulation, that of the commodity-capi- tal, as shown in the formula C'-M'. M-C...P...C (or abridged C...C) has preceded. Thus the first form already con- tains the other two, and the money-form disappears, so far as it is a general equivalent and not merely an expression of value used for calculation. Finally, if we consider some newly invested capital going for the first time through the circulation M-C. .P.. .C'-M', then M-C is the introductory phase, the preparation for the first process of production undertaken by this capital. This phase M-C is not considered as existing, but is caused by the requirements of the process of production. But this applies only to this individual capital. The general form of the circulation of industrial capital is the circulation of money- capital, whenever the capitalist mode of production exists and with it the social conditions corresponding to it. It is there- fore the capitalist mode of production which is the first con- dition for the circulation of money-capital, and if it is not assumed for the first phase of a newly invested industrial The Circulation of Money Capital. 71 capital, it is certainly assumed for all others. The continu- ous movement of this process of production requires the per- sistent renewal of the cycle P.. .P. Even the first stage, M-C {pmt reveals this basic condition. For it requires on one side the existence of the wage-working class. On the other side, that which is M-C for the buyer of means of pro- duction, is C'-M' for their seller. Hence C presupposes the existence of commodity-capital, and thus of commodities as the result of capitalist production, and this implies the func- tion of productive capital. 72 Capital. CHAPTER II. THE ROTATION OF PRODUCTIVE CAPITAL. The rotation of productive capital has the general formula P...C'-M'-C...P. It signifies the periodical renewal of the function of productive capital, in other words its reproduc- tion, or its process of production as a reproductive process generating surplus-value. It is not only production, but a periodical reproduction of surplus-value; it is the function of industrial capital in its productive form, and this function is not performed merely once, but periodically so that the terminal point of one cycle is the starting point of another. A portion of C may re-enter directly into the same labor pro- cess as means of production out of which it came in the form of commodities (for instance, in various branches of investment of industrial capital). This merely does away with the transformation of its value into money proper, or token-money, or else it finds an independent expression merely in calculation. This part of value does not enter into the circulation. Thus it is that values enter into the process of production wThich do not enter into circulation. The same is also true of that part of C which is consumed by the capitalist, and which represents surplus-value in the form of means of consumption, in their natural state. But this is inconsiderable for capitalist production. It deserves con- sideration, if at all, only in agriculture. Two things are at once apparent in this form. In the first place, while in the first form, M...M', the pro* cess of production, a function of P, interrupts the circulation of money-capital and acts only as a mediator between its two phase MjC and C'-M', it is the entire circulation process of industrial capital, its entire movement within the sphere of circulation, which intervenes here and forms the connecting link between productive capitals, which begin the circulation at one extreme and close it at another, only to make this last extreme the starting point of a new cycle. Circulation The Rotation of Productive Capital. 73 proper appears but as an instrument promoting the periodic renewal, and thus the continuous reproduction, of productive capital. In the second place, the entire circulation assumes a form which is the reverse of that which it has in the circulation of money-capital. While the circulation of money-capital pro- ceeds after the formula M — C — M (M — C. C — M), making- exception of the determination of value, it proceeds in the case of productive capital, making the same exception, after the formula C— M— C (C— M. M— C) . which is the form of the simple circulation of commodities. I. Simple Reproduction. Let us first consider the process C'-M'-C, which takes place between the two extremes P...P. The starting point of this circulation is the commodity- capital C, equal to C plus c, or equal to P plus c. The func- tion of commodity-capital C — M' has been considered in the first form of the circulation. It consisted in the realization of the capital-value P, contained in it, which now exists as a part of the commodity C, and likewise in the realization of the surplus-value contained in it, which now exists as a part of the same mass of commodities C and has the value of c. But in the former case, this function formed the second phase of the interrupted circulation and the concluding phase of the entire cycle. In the present case, it forms the second phase of the cycle, but the first phase of the circula- tion. The first cycle ends with M', and since M' as well as the original M may again open the second cycle as money- capital, it was not necessary for the moment to analyze whether the parts of M', viz., M and m (surplus-value) con- tinue in their course together, or whether each one of them pursues its own course. This would only have been neces- sary, if we had followed up the first cycle in its renewed course. But in studying the cycles of productive capital, this point must be decided, because the determination of its very first cycle depends on it, and because C — M' appears in it as the first phase of circulation which has to be supple- 74 Capital. mented by M — C. It depends on the outcome of this deci- sion, whether our formula represents the simple reproduc- tion, or reproduction on an enlarged scale. The character of the cycle changes according to this decision. Let us, then, take first the simple reproduction of produc- tive capital, assuming that the conditions are the same as those taken for a basis in the first chapter, end that the com- modities are bought and sold at their value. Under these conditions, the entire surplus-value enters into the individual consumption of the capitalist. As soon as the transforma- tion of the commodity-capital C into money has taken place, that part of the money which represents the capital-value continues in the cycle of industrial capital; the other part, which represents surplus-value in the form of gold, enters into the general circulation of commodities as a circulation of money emanating from the capitalist but taking place outside of the circulation of his individual capital. In our illustration, we had a commodity-capital C of 10,000 pounds of yarn, valued at 500 pounds sterling; 422 pounds sterling of this represent the value of productive capital and continue, as the money-form of 8,440 pounds of yarn, the capital circulation begun by C, while the surplus- value of 78 pounds sterling, as the money-form of 1,560 pounds of yarn, the surplus-product, leaves this circulation and describes its own separate course within the general cir- culation of commodities. it) :':'?©"! !Pm The formula m — c represents a series of purchases by means of money which the capitalist spends either in com- modities proper or for personal services to his cherished self or family. These purchases are made piece-meal at various times. Money, therefore, exists temporarily in the form of a supply, or hoard, of money destined for gradual consump- tion, for money interrupted in its circulation partakes of the nature of a hoard. Its function as a circulating medium, including that of a temporary hoard, does not share in the The Rotation of Productive Capital. 75 circulation of capital having the form of money M. This money is not advanced, but spent. We have assumed that the advanced total capital always passed entirely from one of its phases into the other. In this case, we, therefore, assume that the mass of commodities produced by P represents the total value of the productive capital P, or 422 pounds sterling plus 78 pounds sterling of surplus-value created in the process of production. In our illustration, which deals with an easily analyzed commodity, the surplus-value exists in the form of 1,560 pounds of yarn; if computed on the basis of one pound of yarn, it would exist in the form of 2.496 ounces. But if the com- modity were, for instance, a machine valued at 500 pounds sterling and representing the same division of values, one part of the value of this machine would indeed be repre- sented by 78 pounds sterling of surplus-value, but these 78 pounds sterling would exist only in the machine as a whole. This machine cannot be divided into capital-value and sur- plus-value without breaking it to pieces and thus destroy- ing, with its use-value, also its exchange-value. For this reason the two parts of value can be represented only ideally as portions of a mass of commodities, not as independent elements of the commodity C, such as we are able to dis- tinguish in each pound of yarn in the 10,000 pounds of our illustration. In the case of the machine, the total com- modity representing the commodity-capital must be sold before m can enter into its independent circulation. On the other hand, when the capitalist has sold 8,440 pounds of yarn, the sale of the remaining 1,560 pounds of yarn would represent an entirely separate circulation of the surplus-value in the form of c (1,560 pounds of yarn) — m (78 pounds sterling) equal to c (articles of consumption). But the ele- ments of value of each individual portion of yarn in the 10,000 pounds may be individually separated and valuated the same as the total quantity of yarn. Just as the entire 10,000 pounds of yarn may be divided into the value of the constant capital c (7,440 pounds of yarn worth 372 pounds sterling), variable capital v (1,000 pounds of yarn worth 50 pounds sterling, and surplus- value s (1,560 pounds of yarn worth 78 pounds sterling), so every pound of yarn 76 Capital. may be divided into c (11.904 ounces of yarn worth 8.929 d.)', v (1.640 ounces of yarn worth 1.200 d.), and s (2.496 ounces of yarn worth 1.872 d.). The 'capitalist might also sell various portions of the 10,000 pounds of yarn succes- sively and consume the different portions of surplus-value contained in them in the same way, thus realizing gradu- ally the sum of c plus v. But this operation likewise re- quires the final sale of the entire lot, so that the value of c plus v would be made good by the sale of 8,440 pounds of yarn (vol. I, chap IX, 2). However that may be, by the movement C — M', both the capital-value and surplus-value contained in C secure a separate existence in separate sums of money. In both cases, M and m are actually transformed values, which had orig- inally only an ideal existence in C as prices of commodities. The formula c — m — c represents the simple circulation of commodities, the first phase of which, c — m, is included in the circulation of the commodity-capital C — M', in short, included in the cycle of capital; while its supplementary phase m — c falls outside of this cycle and is a separate proc- ess in the general circulation of commodities. The circula- tion of 'C and c, of capital-value and surplus-value, is dif- ferentiated after the transformation of C into M'. Hence it follows: First, by the realization on the commodity-capital in the process C — M', or C — (M+m), the courses of capital-value and surplus-value, which are united so long as they are both embodied in the same mass of commodities in C — M', are separated, for both of them henceforth appear in two inde- pendent sums of money. Second, after this separation has taken place, m being spent as the income of the capitalist, while M continues its way as a functional form of capital-value in a course deter- mined by this cycle, the movement C — M' in connection with the subsequent movements M — C and m — c, may be represented in the form of two different circulations, viz.: C__M — C and c — m — c, and both of these, so far as their general form is concerned, belong to the general circulation of commodities. The Rotation of Productive Capital. 77 By the way, in the case of commodities which cannot be cut up into their constituent parts, it is a matter of practice to isolate their different portions of value and surplus-value ideally. In the building-business of London, for instance, which is carried on mainly on credit, the contractor re- ceives advances in proportion to the different stages in which the construction of a house proceeds. None of these stages is a house, but only an actually existing fraction of the growing house; in spite of its actuality, each stage is but an ideal portion of the entire house, but it is real enough to serve as security for an additional advance. (See on this point chapter XII, vol. II.) Third, if the movement of capital-value and surplus-value, which proceeds unitedly so long as they are in the form of C and M, is separated only in part (so that a portion of the surplus-value is not spent as income), or is not separated at all, a change takes place in the capital-value itself within its own cycle, before it is completed. In our illustration the value of the productive capital was equal to 422 pounds sterling. If it continues its cycle M-C, for instance as 480 pounds sterling or 500 pounds sterling, then it goes through the further stages of its cycle with an increase of 58 pounds sterling or 78 pounds sterling over its original value. This change may also go hand in hand with a change in the proportion of its component parts. C — M', the second stage of the circulation and the final stage of cycle I (M...M'), is the second stage in our cycle and the first in the circulation of commodities. So far as the circulation is concerned, this stage must be supplemented by M' — C\ But C — M' has not only passed the process of utilization (in this case the function of P, the first stage), but has also realized as its result the commodity C\ The process of utilization of capital, and the realization on the commodities which are its product, are therefore completed in C'—W. "We have started out with simple reproduction and assumed that m — e separates entirely from M — C. Since both cir- culations, c — m — c as well as C — M — C, belong to the cir- culation of commodities, so far as their general form is con- cerned (and do not show, for this reason, any difference 78 Capital. in the value of their extremes), it is easy to conceive of the process of capitalist production, after the manner of vulgar economy, as a mere production of commodities, of use-value destined for consumption of some sort, which the capitalist produces for no other purpose than that of get- ting in their place commodities with different use-values, or exchanging them, as vulgar economy erroneously states. C appears from the very outset as commodity-capital, and the purpose of the entire process, the accumulation of wealth, does not exclude an increasing consumption on the part of the capitalist in proportion as his surplus- value (and thus his capital) increases; on the contrary, it promotes such an increasing consumption. Indeed, in the circulation of the income of the capitalist, the produced commodity c, or the ideal fraction of the com- modity C corresponding to it, serves merely for its transfor- mation, first into money, and from money into a number of other commodities required for individual consumption. But we must not, at this point, overlook the trifling circumstance that c is that part of the commodity-value which did not cost the capitalist anything, since it is the embodiment of surplus-labor and steps originally on the stage as a part of the commodity-capital C. This c is, by the varying nature of its existence, bound to the cycle of circulating capital- value, and if this cycle is clogged, or otherwise disturbed, not only the consumption of c is restricted or entirely ar- rested, but also the disposal of that series of commodities which are to take the place of c. The same is true in the case that the movement C — M' is a failure, or that only a part of C is sold. We have seen that c — m — c, as representing the circula- tion of the revenue of the capitalist, enters into the circula- tion of capital only so long as c is a part of the value of C, of the commodity-capital ; but that, as soon as it materializes in the form of m — c, that is to say, as soon as it completes the entire cycle c — m — c, it does not enter into the movements of the capital advanced by the capitalist, although this ad- vance is its cause. It is connected with the movements of capital only in so far as the existence of capital presupposes The Rotation of Productive Capital. 79 the existence of the capitalist, and this is conditioned on the consumption of surplus-value by the capitalist. ■ Within the general circulation, C, for instance yarn, passes only as a commodity; but as an element in the cir- culation of capital it performs the function of commodity- capital, and capital-value alternately assumes and discards this form. After the sale of the yarn to a merchant, it has passed out of the circulation of the capital which produced it, but nevertheless, as a commodity, it moves always in the cycle of the general circulation. The circulation of one and the same mass of commodities continues, although it may have ceased to be an element in the independent cycle of the capital of the manufacturer. Hence the actual and final metamorphosis of the mass of commodities thrown into cir- culation by the capitalist by means of C — M, their final elimination in consumption, may be separated in space and time from that metamorphosis in which this same mass of commodities performs the function of commodity-capi- tal. The same metamorphosis which has been completed in the circulation of capital still remains to be accomplished in the sphere of the general circulation. This state of things is not changed by the transfer of this yarn to the cycle of some other industrial capital. The general circulation comprises as much the interrelations of the various independent fractions of social capital, in other words, the totality of the individual capitals, as the circu- lation of those values which are not thrown on the market as capital, but enter into individual consumption. The different relations in the cycle of capital, according to whether it is a part of the general circulation, or forms certain links in the independent cycles of capital, may be further understood when we consider the circulation of M', or of M plus m. M as money-capital, continues the cycle of capital. On the other hand m, spent as revenue in the act m — c, enters into the general circulation, but is elimi- nated from the cycle of capital. Only that part enters the capital cycle which performs the .function of additional money-capital. In c — m — c, money serves only as coin, and the purpose of this circulation is the individual con- sumption of the capitalist. It is significant for the idiocy of 80 i Capital. vulgar economy that it pretends to regard this circulation, which does not enter into the circulation of capital but is merely the circulation of that part of the surplus-product which is consumed as revenue, as the characteristic cycle of capital. In its second phase, M — C, the capital-value M (which is equal to P, the value of the productive capital that at this point re-opens the cycle of industrial capital) is again pres- ent, delivered of its surplus-value. Therefore it has once more the same magnitude which it had in the first stage of the cycle of money-capital, M — C. In spite of the different place at which we now find it, the function of money-capi- tal, into which form the commodity-capital has now been transformed, is the same: Transformation into Pm and L, into means of production and labor-power. Simultaneously with c — m, capital-value in the function of commodity-capital (C — M') has also gone through the phase C — M, and enters now into the supplementary phase M — C|pm. Its complete circulation is, therefore, C — M — C Pm. First: Money-capital M appeared in cycle I (M...M') as the original form in which capital-value is advanced; it appears at the very outset as a part of that sum of money into which commodity-capital transformed itself in the first phase of circulation, C — M'. It is from the beginning the transformation of P by means of the sale of commodities into the money-form. Money-capital exists here as that form of capital-value which is neither its original nor its final one, since the phase M — C, which supplements the phase C — M, can only be completed by again discarding the mon- ey-form. Therefore, that part of M — C which is at the same time M — L appears now no longer as a mere advance of money in the purchase of labor-power, but also as an advance by means of which the same 1,000 pounds of yarn, valued at 50 pounds, which form a part of the commodity-value created by labor-power, are given to the laborer in the form of money. The money thus advanced to the laborer is merely a transformed equivalent of a fraction of the value of the commodities produced by himself. And for this very reason, the act M — C, so far as it means M — L, is by no The Rotation of Productive Capital. 81 means simply a replacement of a commodity in the form of money by a commodity in the form of a use-value, but it includes other elements which are in a way independent of the general circulation of commodities. M' appears as a changed form of C, which is itself a prod- uct of a previous function of P, of the process of production. The entire sum of money M is therefore a money-expression of past labor. In our illustration, 10,000 pounds of yarn (worth 500 pounds sterling), are the product of the spinning process. Of this quantity, 7,440 pounds represent the ad- vanced constant capital c (worth 372 pounds sterling) ; 1,000 pounds represent the advanced variable capital v (worth 50 pounds sterling) ; and 1,560 pounds represent the surplus- value s (worth 78 pounds sterling). If in M', only the original capital of 422 pounds sterling is again advanced, other conditions remaining the same, then the laborer re- ceives next week, in M — L, only a part of the 10,000 pounds of yarn produced in this week (the money-value of 1,000 pounds of yarn). As a result of C — M, money is always the expression of past labor. If the supplementary act M — C takes place at once on the commodity-market and M is given in return for commodities existing in this market, then this act is again a transformation of past labor from the money-form into the commodity-form. But M — C dif- fers in the matter of time from C — M. True, these two acts may exceptionally take place at the same time, for instance when the capitalist who performs the act M — C and the other capitalist for whom this act signifies C — M mutually ship their commodities at the same time and M is used only to square the balance. The difference in time between the performance of C — M and M — C may be considerable or insignificant. Although M, as the result of C — M, repre- sents past labor, it may, in the act M — C, represent the changed form of commodities which are not as yet on the market, but will be thrown upon it in the future, since M — C need not take place until C has been produced anew M may also stand for commodities which are produced sim- ultaneously with the C whose money-expression M is; for instance, in the movement M — C (purchase of means of pro- duction), coal may be bought before it has been mined. 82 Capital. In so far as m represents an accumulation of money which is not spent as revenue, it may stand for cotton which will not be produced until next year. The same holds good of the revenue of the capitalist represented by m — c. It also applies to wages, in this case to L equal to 50 pounds ster- ling; this money is not only the money-form of the past labor of the laborers, but at the same time a draft on simul- taneously performed labor or on future labor. The laborer may buy for his wages a coat which will not be made until next week. This applies especially to the vast number of necessary means of subsistence which must be consumed al- most as soon as they have been produced, to prevent their being spoiled. Thus the laborer receives in the money which represents his wages the changed form of his own future labor or that of others. By means of a part of the laborer's past labor, the capitalist gives him a draft on his own future labor. It is the laborer's simultaneous or future labor which represents the not yet existing supply that will pay for his past labor. In this case, the idea of the formation of a sup* ply disappears altogether. Second : In the circulation C — M — C \ pm the same money changes places twice; the capitalist first receives it as a seller and gives it away as a buyer; the transformation of commodities into the money-form serves only for the purpose of retransforming it from money into commodities; the money-form of capital, its existence as money-capital, is therefore only a passing factor in this movement; or, so far as the movement proceeds, money-capital appears only as a circulating medium when it serves to buy things; on the other hand, money-capital performs the function of a pay- ing medium when capitalists buy mutually from one an- other and square only the balance of their accounts. Third: The function of money-capital, whether it is a mere circulating medium or a paying medium, mediates only the renewal of C by L and Pm, that is to say, the renewal of the commodities produced by productive capital, such as yarn (after deducting the surplus-value used as revenue), out of its constituent elements, in other words, the retransformation of capital-value from its commodity - form into the elements constituting this commodity. In the The Rotation of Productive Capital. 83 last analysis, the function of money-capital mediates only the retransformation of commodity-capital into productive capital. In order that the cycle may be completed normally, C must be sold at its value and completely. Furthermore, C — M — C does not signify merely the replacing of one com- modity by another, but also the replacing of the same rela- tive values. We assume that this takes place here. As a matter of fact, however, the values of the means of produc- tion vary; it is precisely capitalist production which has for its characteristic a continuous change of value-relations, and this is conditioned on the ever changing productivity of labor, which is another characteristic of capitalist produc- tion. This change in the value of the factors of produc- tion will be discussed later on, and we merely refer to it here. The transformation of the elements of production into commodity-products, of P into C, takes place in the sphere of production, while their retransformation from C into P takes place in the sphere of circulation; it is ac- complished by way of the simple metamorphosis of com- modities, but its content is a phase in the process of repro- duction, regarded as a whole. C — M — C, considered as a form of the circulation of capital, includes a change of sub- stance due to this function. The process C — M — C requires that C should be identical with the elements of production of the quantity of commodities C, and that these elements maintain their relative proportions toward one another. It is, therefore, understood that the commodities are not only bought at their value, but also that they do not undergo any change of value during their circulation. Otherwise this process cannot run normally. In M...M', the factor M represents the original form of capital-value, which is discarded only to be resumed. In P...C — M' — C...P, the factor M represents a form which is only assumed in this process and which is discarded before this process is over with. The money-form appears here only as a passing independent form of capital-value. Capital is just as anxious to assume this form in C as it is to discard it in M' after barely assuming it, in order to again transform itself into productive capital. So long as it remains in the 84 Capital. money-form, it does not perform the function of capital and does not, therefore, generate new values; it then lies fal- low. M serves here as a circulating medium, but as a circu- lating medium of capital. The semblance of independence, which the money-form of capital-value possesses in the first form of the circulation of money-capital, disappears in this second form, which, therefore, is the negation of the first form and reduces it to a concrete form. If the second meta- morphosis M — C meets with any obstacles — for instance, if there are no means of production in the market — the unin- terrupted flow of the process of reproduction is arrested, quite as much as it is when capital in the form of commodity- capital is held fast. But there is this difference-. It can re- main longer in the money-form than in that of commodi- ties. It does not cease to be money, if it does not perform the functions of money-capital; but it does cease to be a commodity, or even a use-value, if it is interrupted too long in its functions of commodity-capital. Furthermore, it is capable in its money-form, of assuming another form in- stead of its original one of productive capital, while it does not change places at all if held in the form of C\ C — M' — C includes processes of circulation only for C, and they are phases in its reproduction, but the actual repro- duction of C, into which C is transformed, is necessary for the completion of C — M' — C. This, however, is conditioned on a process of reproduction which lies outside of the process of reproduction of the individual capital represented by C\ In the first form, M — C Pm prepares only the first trans- formation of money-capital into productive capital; in the second form, it prepares the retransformation of commodity- capital into productive capital; that is to say, so far as the investment of industrial capital remains the same, the com- modity-capital is retransformed into the same elements of production out of which it originated. Here as well as in the first form, the process of production is in a preparatory stage, but it is a return to it and its renewal, it is for the pur- pose of repeating the process of self-utilization. It must be noted, once more, that M — L is not merely the exchange of commodities, but the purchase of a commodity L, which is to serve for the production of surplus-value, just The Rotation of Productive Capital. 85 as M — Pm is a process which is indispensable for the same end. When M — C |pm has been completed, M has been retrans- formed into productive capital P, and the cycle begins anew. The elaborated form of P...C— M'— C...P is c M + + c m The transformation of money-capital into productive capital is the purchase of commodities for the purpose of producing commodities. Consumption falls within the cycle of capital only in so far as it is productive consumption ; its premise is that surplus-value is produced by means of the commodities so consumed. And this is quite different from a production, even though it be a production of commodi- ties, which has for its end the existence of the producer. A replacing of one commodity by another for the purpose of producing surplus-value is a different matter than the ex- change of products which is perfected merely by means of money. But some economists use this sort of exchange as a proof that there can be no overproduction. Apart from the productive consumption of M, which is transformed into L and Pm, this cycle contains the first phase M — L, which signifies, from the standpoint of the laborer L — M, or C — M. In the laborer's circulation, L — M — C, which includes his individual consumption, only the first factor falls within the cycle of capital by means of L — M. The second act, M — C, does not fall within the circulation of individual capital, although it is conditioned on it. But the continuous existence of the laboring class is necessary for the capitalist class, and this requires the indi- vidual consumption of the laborer, made possible by M — C. The act C — M' requires only that C be transformed into money, that it be sold, in order that capital-value may con- tinue its cycles and surplus-value be consumed by the capi- talist. Of course, C is bought only because the article is a use-value and serviceable for individual or productive con- sumption. But if C continues to circulate, for instance, in the hand of the merchant who has bought the yarn, this 86 Capital. does not interfere with the continuation of the cycle of indi- vidual capital which produced the yarn and sold it to the merchant. The entire process proceeds uninterruptedly and simultaneously with the individual consumption of the capi- talist and the laborer. This point is important in a discus- sion of commercial crises. As soon as C has been sold for money, it may re-enter into the material elements of the labor process, and thus of the reproductive process. Whether C is bought by the final consumer or by a merchant, does not alter the case. The quantity of commodities produced by capitalist production depends on the scale of production and on the continual necessity for expansion following from this production. It does not depend on a predestined circle of supply and de- mand, nor on certain wants to be supplied. Production on a large scale can have no other buyer, apart from other indus- trial capitalists, than the wholesale merchant. Within certain limits, the process of reproduction may take place on the same or on an increased scale, although the commodi- ties taken out of it may not have gone into individual or productive consumption. The consumption of commodities is not included in the cycle of the capital which produced them. For instance, as soon as the yarn has been sold, the cycle of the capital-value contained in the yarn may begin anew, regardless of what may become of the sold yarn. So long as the product is sold, everything is going its regular course from the standpoint of the capitalist producer. The cycle of his capital-value is not interrupted. And if this process is expanded — including an increased productive con- sumption of the means of production — this reproduction of capital may be accompanied by an increased individual con- sumption (demand) on the part of the laborers, since this individual consumption is initiated and mediated by produc- tive consumption. Thus the production of surplus- value, and with it the individual consumption of the capitalist, may increase, the entire process of reproduction may be in a flour- ishing condition, and yet a large part of the commodities may have entered into consumption only apparently, while in reality they may still remain unsold in the hands of deal- The Rotation of Productive Capital. 87 ers, in other words, they may still be actually in the market. Now one stream of commodities follows another, and finally it becomes obvious that the previous stream had been only apparently absorbed by consumption. The commodity-cap- itals compete with one another for a place on the market. The succeeding ones, in order to be able to sell, do so below price. The former streams have not yet been utilized, when the payment for them is due. Their owners must declare their insolvency, or they sell at any price in order to fulfill their obligations. This sale has nothing whatever to do with the actual condition of the demand. It is merely a question of a demand for payment, of the pressing necessity of transforming commodities into money. Then a crisis comes. It becomes noticeable, not in the direct decrease of consumptive demand, not in the demand for individual con- sumption, but in the decrease of exchanges of capital for cap- ital, of the reproductive process of capital. If the ■commodities Pm and L, into which M is trans- formed in the performance of its function of money-capital, in its capacity as capital-value destined for retransformation into productive capital, if, I say, those commodities are to be bought or paid at different dates, so that M — C represents a series of successive purchases or payments, then a part of M performs the act M — C, while another part persists in the form of money, and does not serve in the performance of simultaneous or successive acts M — 0, until the conditions of this process itself demand it. This part of M is temporarily withheld from circulation, in order to perform its function at the proper moment. This storing of M for a certain time is a function conditioned on its circulation and intended for circulation. Its existence as a fund for purchase and pay- ment, the suspension of its movement, the condition of its interrupted circulation, are conditions in which money per- forms one of its functions as money-capital. I say money- capital ; for in this case the money remaining temporarily at rest is itself a part of money-capital M (of M' — m equal to M), of that part of commodity-capital which is equal to P, of that value of productive capital from which the cycle pro- ceeds. On the other hand, all money withdrawn from cir- culation has the form of a hoard. In the form of a hoard, 88 Capital. money is thus likewise a function of money-capital, just as the function of money in M — C as a medium of purchase or payment becomes a function of money-capital. For capital- value here exists in the form of money, the money-form is a condition of industrial capital in one of its stages, pre- scribed by the interrelations of processes within the cycle. At the same time it is here once more obvious, that money- capital performs no other functions than those of money within the cycle of industrial capital, and that these func- tions assume the significance of capital functions only by virtue of their interrelations with the other stages of this cycle. The representation of M' as a relation of m to M, as a capital relation, is not so much a function of money-capital, as of commodity-capital C, which in its turn, as a relation of c to C, expresses but the result of the process of production, of the self-utilization of capital which took place in it. If the movement of the process of circulation meets with obstacles, so that M must suspend its function M — C on account of external conditions, such as the condition of the market, etc., and if it therefore remains for a shorter or longer time in its money-form, then we have once more money in the form of a hoard which it may also assume in the simple circulation of commodities, as soon as the transi- tion from C — M to M — C is interrupted by external condi- tions. It is an involuntary formation of a hoard. In the present case, money has the form of fallow, latent, money- capital. But we will not discuss this point any further for the present. In both cases, the suspension of money-capital in the form of money is the result of an interruption of its movements, no matter whether this is advantageous or harmful, volun- tary or involuntary, in accord with its functions or contrary to them. The Rotation of Productive Capital. 89 II. Accumulation and Reproduction On An Enlarged Scale. Since the proportions of the expansion of the productive process are not arbitrary, but determined by technical condi- tions, the produced surplus-value, though intended for capi- talization, frequently does not attain a size sufficient for its function as additional capital, for its entrance into the cycle of circulating capital-value, until several cycles have been repeated so that it must be accumulated until that time. , Surplus-value thus assures the rigid form of a hoard and is, then, latent capital. It is latent, because it cannot function as capital so long as it persists in the money-form. 6a The formation of a hoard thus appears as a phenomenon included in the process of capitalist accumulation, accompanying it, but nevertheless essentially different from it. For the proc- ess of reproduction is not expanded by latent capital. On the contrary, latent money-capital is here formed, because the capitalist producer cannot at once expand the scale of his production. If he sells his surplus-product to a producer of gold or silver, or, what amounts to the same thing, to a merchant who imports additional gold or silver from foreign countries for a part of the national surplus-product, then his latent money-capital forms an increment of the national gold or silver hoard. In all other cases, the surplus-value, for instance the 78 pounds sterling, which were a circulating medium in the hand of the purchaser, have only assumed the form of a hoard in the hands of the capitalist. In other words, a different repartition of the national gold or silver hoard has taken place, that is all. If the money serves in the transactions of our capitalist as a means of payment, in such a way that the commodities are to be paid for by the buyer on long or short terms, then the surplus-product intended for capitalization is not trans- formed into money, but into creditor's claims, into titles of 6a The term "latent" is borrowed from the idea of latent heat in physics, which has now been almost replaced by the theory of the trans- formation of energy Marx therefore uses in the third part, which is of later date, another term borrowed from the idea of potential energy, viz. : "potential," or, analogous to the virtual velocities of D'Alembert, "virtual capital." — F. E. 90 Capital. ownership of a certain equivalent, which the buyer may either have in his possession, or which he may expect to pos- sess. It does not enter into the reproductive process of the cycle any more than money which is invested in interest^ bearing papers, although it may enter into the cycles of other individual industrial capitals. The entire character of capitalist production is determined by the utilization of the advanced capital-value, that is to say, in the first instance by the production of as much surplus- value as possible; in the second place, by the production of capital, in other words, by the transformation of surplus- value into capital (see vol. I, chap. XXIV). But, as we have seen in volume I, the further development makes it a necessity for every individual capitalist to accumulate, or to produce on an enlarged scale, in order to produce more and more surplus-value, and this appears as a personal motive of the capitalist for his own enrichment. The preservation of his capital is conditioned on its continuous enlargement. But we do not revert any further to our previous analysis. We considered first simple reproduction, and we assumed that the entire surplus-value was spent as revenue. But in reality and under normal conditions, only a part of the sur- plus-value can be spent as revenue, and another part must be capitalized. And it is quite immaterial, whether a certain surplus-value, produced within a certain period, is entirely consumed or entirely capitalized. In the average movement — and the general formula cannot represent any other — both cases occur. But in order not to complicate the form- ula, it is better to assume that the entire surplus-value is accumulated. The formula P...C — M' — C {£m...P stands for productive capital, which is reproduced on an enlarged scale and with enlarged values, and which begins its second cycle as enlarged productive capital, or, what amounts to the same, which renews its first cycle. As soon as this second cycle is begun, we have once more P as a starting point ; only P is a larger productive capital than the first P was. Hence, if the second cycle begins with M' in the formula M — M', this M' functions as M, as an advanced capital of a definite size. It is a larger money-capital than the one with which the first cycle was opened ; but all relations to its growth by the The Rotation of Productive Capital. 91 capitalization of surplus-value have disappeared, as soon as it appears in the function of advanced money-capital. This origin is extinguished in its form of money-capital which begins its cycle. This also applies to P', as soon as it becomes the starting point of a new cycle. If we compare P...P' with M...M', or with the first cycle, we find that they have not the same significance. M...M', taken by itself as an individual cycle, expresses only that M, money-capital, or industrial capital in its cycle as money-capital, is money generating more money, value generating more value, in other words, producing surplus- value. But in the cycle of P, the process of utilization is completed as soon as the first stage, the process of produc- tion, is over with, and after going through the second stage (the first stage of the circulation), C — M', the capital-value plus surplus-value exists already as materialized money-cap- ital, as M', which appeared as the last extreme in the first cycle. The fact that surplus-value has been produced is registered in the first considered formula P...P by c — m — c (see expanded formula previously given). This, in its sec- ond stage, falls outside of the circulation of capital and represents the circulation of surplus-value as revenue. In this form, where the entire movement is represented by P...P and where there is no difference in value between the two extremes, the utilization of the advanced value, or the production of surplus-value, is represented in the same way as in M...M', only the act C — M', which appears as the last stage in M — M', and as the second stage of the cycle, appears as the first stage of the circulation P. ..P. In P...P', the term F does not express the fact that sur- plus-value has been produced, but that the produced surplus- value has been capitalized, that capital has been accumulated, and that P as distinguished from P consists of the original capital-value plus the value of capital accumulated by its movements. M[, as the closing link of M...M', and C, as it appears within all these cycles, do not express the movement, but its result, if taken by themselves: they represent the result, in the form of money or commodities of the utilization of capi- tal-value, and capital-value therefore appears as M plus m, or 92 Capital. C plus c, as a relation of capital-value to its surplus-value, its offspring. But whether this result appears in the form of JVP or C, it is not a function of either money-capital or com- modity-capital. As special and different forms correspond- ing to special functions of industrial capital, money-capital can perform only money functions, and commodity-capital only commodity functions. Their difference is merely that of money and commodity. Industrial capital, in its capac- ity of productive capital, can likewise consist only of the same elements as those of any other process of labor which creates products: on one side objective means of production, on the other labor-power as the productive element. Just as industrial capital can exist within the process of produc- tion only in a composition which corresponds to the require- ments of all production, even if it is not capitalist production so it can exist in the sphere of circulation only in the two forms corresponding to it, viz., that of a commodity or of money. Now the sum of the elements of production reveals its character of productive capital at the outside by the fact that the labor-power belongs to another from whom the cap- italist purchases it, just as he purchases his means of pro- duction from others who own them, so that the process of production itself appears as a productive function of indus- trial capital. In the same way money and commodities appear as forms of circulation of the same industrial capital, hence their functions as those of the circulation of this capi- tal, which either introduce the function of productive capital or originate from it. The money function and the commod- ity function become at the same time functions of money-cap- ital and commodity-capital for no other reason than that they enter into relationship with the functional forms through which industrial capital passes in the different stages of its process of circulation. It is, therefore, a mistake to attempt to derive the specific characters of money and commodities, and their specific functions as such, from their capital-char- acter, and it is likewise a mistake to derive the qualities of productive capital from its existence in means of production. As soon as M' or C have become fixed in the relation of M plus m, or C plus c, in other words, as soon as they become parts of the relation between capital-value and its offspring The Rotation of Productive Capital. 93 surplus-value, they give expression to this relation either in the form of money or of commodities, without changing the nature of the relation itself. This relation is not due to any qualities or functions of either money or commodities as such. In both cases the characteristic quality of capital, that of being a value generating more value, is expressed only as a result. C is always the product of the function of P, and M' is always merely a form of C changed in the cycle of industrial capital. As soon as the realized money-capi- tal begins its special function as money-capital anew, it ceases to express the capital-relation conveyed by the formula M' equal to M plus m. After M...M' has been completed and M' begins the cycle anew, it no longer figures as M' but as M, even if the entire capital-value contained in M' is capitalized. The second cycle begins in our case with a money-capital of 500 pounds sterling, instead of 422 pounds in the first cycle. The money-capital, which opens the cycle, is larger by 78 pounds sterling than before ; this difference exists in the com- parison of one cycle with another, but it does not exist within each cycle. The 500 pounds sterling advanced as money- capital, 78 pounds of which formerly existed as surplus- value, do not play any different role than some other 500 pounds sterling by which another capitalist opens his first cycle. The increased P' opens a new cycle as P, just as P did in the simple reproduction P.. .P. In the stage M' — C |pm> the increased magnitude is indi- cated only by C, but not by L' and Pm\ Since C is the sum of L and Pm, the term C indicates sufficiently that the sum of the L and Pm contained in it is greater than the orig- inal P. In the second place, the terms L' and Pm' would be incorrect, because we know that the growth of capital implies a change in the relative proportions of the values composing it, and that, with the progressive changing of this proportion, the value of Pm increases, while that of L always decreases relatively, if not absolutely. III. Accumulation of Money Whether or not m, the surplus-value transformed into gold, is immediately combined with the circulating capital- value and is thus enabled to enter into the cycle together 94 Capital. with the capital M in the magnitude of M', depends on cir- cumstances which are independent of the mere existence of m. If m is to serve as money-capital in a second independ- ent business, to be run by the side of the first, it is evident that it cannot be used for this purpose, unless it is of the mini- mum size required for it. And if it is intended to use it for the extension of the original business, the condition of the substances composing P and their relative values likewise demand a minimum magnitude for m. All the means of production employed in this business have not only a quali- tative, but also a definite quantitative relation toward one another. These proportions of the substances and of their values entering into the productive capital determine the minimum magnitude required for m, in order to be capable of transformation into additional means of production and labor-power, or only into means of production as an addi- tion to the productive capital. For instance, the owner of a spinning loom cannot increase the number of his spindles without at the same time purchasing a corresponding num- ber of carders and preparatory looms, apart from the increased expense for cotton and wages, which such an ex- tension of his business demands. In order to carry this out, the surplus-value must have reached a considerable figure (one pound sterling per spindle is generally assumed for new installations) . So long as m does not reach this figure, the cycle of the original capital must be repeated several times, until the sum of the successively produced surplus-values m can take part in the functions of M, in the process M' — C |pm. Even mere changes of detail, for instance, in the spin- ning machinery, made for the purpose of making it more productive, require greater expenditures for spinning mate- rial, preparatory looms, etc. In the meantime, m is accumu- lated, and its accumulation is not its own function, but the result of repeated cycles of P. ..P. Its own function consists in persisting in the form of money, until it has received suffi- cient additions from the outside by means of successive cycles of utilization of capital to have acquired the minimum mag- nitude necessary for its active function. Only when it has reached this magnitude, can it actually serve as money-capi- tal and eventually take part in the functions of the active The Rotation of Productive Capital. 95 money-capital M as its accumulated part. But until that time it is accumulated and exists only in the form of a hoard in a process of gradual growth. The accumulation of money, the formation of a hoard, appears here as a process which accompanies temporarily the accumulation by which industrial capital expands the scale of its productive action. This is a temporary phenomenon, for so long as the hoard remains in this condition, it does not perform the function of capital, does not take part in the process of utilization, and remains a sum of money which grows only by virtue of the fact that other money, existing without the initiative of the hoard, is thrown into the same safe. The form of a hoard is simply the form of money not in circulation. It is money interrupted in its circulation and stored up in the form of money. As for the process of forming a hoard, it is found in all systems of commodity- production, and it plays a role as an end in itself only in the undeveloped, precapitalist forms of this production. In the present case, the hoard assumes the form of money-capi- tal, and goes through the process of forming a hoard as a temporary corollary of the accumulation of capital, merely because the money here figures as latent money-capital, and because the formation of a hoard as well as the surplus-value hoarded in the form of money represent a functionally pre- scribed and preliminary stage required for the transforma- tion of surplus-value into capital actually performing its functions. It is this end which gives it the character of latent money-capital. Hence the volume, which it must have acquired before it can take part in the process of capi- tal, is determined in each case by the values of which the productive capital is composed. But so long as it remains in the condition of a hoard, it does not perform the func- tions of money-capital, but is merely sterile money-capital; its functions have not been interrupted, as in a previous case, but it is as yet incapable of performing them. "We are here discussing the accumulation of money in its original and real form of an actual hoard of money. But it may also exist in the form of mere outstanding money, of credits granted by a capitalist who has sold C\ As concerns 96 Capital. ite other forms, where this latent money-capital exists in the meantime in the shape of money breeding more money, such as interest-bearing deposits in a bank, in drafts, or in bonds of some sort, these do not fall within the discussion at this point. Surplus-value realized in the form of money then performs special capital-functions outside of that cycle of industrial capital which originated it. In the first place, these functions have nothing to do with that cycle of indus- trial capital as such, in the second place they represent capi- tal-functions which are to be distinguished from the func- tions of industrial capital and which are not yet developed at this stage. IV. Reserve Funds. In the case which we have just discussed, surplus-value in the form of a hoard represents accumulated funds, a money-form temporarily assumed by the accumulation of capital and to that extent a condition of this accumulation. However, such accumulated funds may also perform special services of a subordinate nature, that is to say they may enter into the circulation-process of capital, even if this process, has not assumed the form of P — P', in other words, with- out an expansion of capitalist reproduction. If the process C — M' is prolonged beyond its normal size, so that commodity-capital meets with abnormal obstacles dur- ing its transformation into the money-form, or if, after the completion of this transformation, the price of the means of production into which the money-capital is to be transformed has risen above the level occupied by it in the beginning of the cycle, the hoard held as accumulated funds may be used in the place of money-capital, or of a part of such capital. In that case, the accumulated funds of money serve as reserve funds for the purpose of counterbalancing disturb- ances of the circulation. When in use as such a reserve fund, accumulated money differs from the fund of purchase or paying media discussed in the cycle P — P\ These media are a part of money-capi- tal performing its functions, they are forms of existence of a part of capital-value in general going through the process of its circulation, and its different parts perform their func- tions successively at different times. In the continuous The Rotation of Productive Capital. 97 process of production, money-capital in reserve is always formed, obligations being incurred today which will not be paid until later, and large quantities of commodities being sold today, while other large quantities are not to be bought until some other day. In these intervals, a part of the cir- culating capital exists continuously in the form of money. A reserve fund, on the other hand, is not a part of money- capital in the performance of its functions. It is rather a part of capital in a preliminary stage of its accumulation, of surplus-value not yet transformed into active capital. Of course, it requires no explanation, that the capitalist, when pressed for funds, does not concern himself about the definite functions of the money in his hands. He simply employs whatever money he has for the purpose of keeping the circulation-process of his capital in motion. For in- stance, in our illustration, M is equal to 422 pounds sterling, M' to 500 pounds sterling. If a part of the capital of 422 pounds sterling exists in the form of money as a fund for paying or buying, it is intended that all of it should enter into circulation, conditions remaining the same, and that it is sufficient for this purpose. The reserve fund, on the other hand, is a part of the 78 pounds sterling of surplus-value. It cannot enter the circulation process of the capital of 422 pounds sterling, unless this circulation takes place under changed conditions; for it is a part of the accumulated funds, and figures here under conditions, where the scale of the reproduction has not been enlarged. Accumulated money-funds represent latent money-capi- tal, or the transformation of money into money-capital. The following is the general formula for the cycle of pro- ductive capital, combining simple reproduction and repro- duction on an enlarged scale: P...C— M\ M— C^m...P (P'). If P equals P, then M in 2) is equal to M' — m ; if P equals P', then M in 2) is greater than M' — m, that is to say, m has been completely or partially transformed into money- capital. The cycle of productive capital is that form, under which classical political economy discusses the rotation process of industrial capital. 88 Capital. CHAPTER III. THE CIRCULATION OF COMMODITY-CAPITAL. The general formula for the cycle of commodity-capital in C'_ M'— C...P...C. C appears not alone as the product, but also as the premise of the two previous cycles, since M — C includes for one capi- tal that which C — M' includes for the other, at least in so far as a part of the means of production represents the com- modity-product of other individual capitals going through their circulation process. In our case, for instance, coal, machinery, etc., represent the commodity-capital of the mine- owner, of the capitalist machine-manufacturer, etc. Fur- thermore, we have shown in chapter I, IV, that not only the cycle P...P, but also the cycle C...C' is assumed even in the first repetition of M...M', before this second cycle of money-capital is completed. If reproduction takes place on an enlarged scale, then the final C is greater than the initial C and we shall then call the final one C". The difference between the third form and the first two is on the one hand, that in this case the total circulation opens the cycle with its two opposite phases, while in form I the circulation is interrupted by the process of production, and in form II the total circulation with its two complementary phases appears as a connecting link for the process of repro- duction, intervening as a mediating movement between P.. .P. In the case of M...M', the cycle has the form M — C ...C— M'=M— C— M. In the case of P...P it has the op- posite form, namely, C — M'. M — C=C — M — C. In the case of C — C, it likewise has this last form. On the other hand, when the cycles I and II are repeated, even if the final points M' and P' are at the same time the starting points of the renewed cycle, the form in which they The Circulation of Commodity-Capital. 99 were originally generated disappears. M'=M plus m, and P'=P plus p, begin the new cycle as M and P. But in form III, the starting point C must be designated as C, also in the case of the renewal of the cycle on the same scale, for the following reason. As soon as M' as such opens a new cycle in the form I, it performs the functions of money- capital M, as an advance in the form of money of the capi- tal value to be utilized. The size of the advanced money- capital, increased by the accumulation resulting from the first cycle, is greater. But whether the size of the advanced money-capital is 422 pounds sterling or 500 pounds sterling, it nevertheless appears merely as a capital-value. M' no longer exists as a utilized capital pregnant with surplus- value, for it is still to be utilized. The same is true of P...P', for P' must always perform the functions of P, of capital-value used for the generation of surplus-value, and must renew its cycle for this purpose. Now the circulation of commodity-capital does not open with capital-value, but with augmented capital-value in the form of commodities. It includes from the start not only the cycle of capital-value represented by commodities, but also of surplus-value. Hence, if simple reproduction takes place in this form, C at the starting point is equal to C at the closing point. If a part of the surplus-value enters into the circulation of capital, C", an enlarged C, appears at the close, but the succeeding cycle is once more opened by C\ This is merely a larger C than that of the preceding cycle, and it begins its new cycle with a proportionately in- creased accumulation of capital-value, which includes a pro- portionate increase of newly produced surplus-value. In every case, C always opens the cycle as a commodity-capi- tal which is equal to capital-value plus surplus-value. C as C does not appear in the circulation of some individu- al industrial capital as a form of this capital, but as a form of some other industrial capital, so far as the means of pro- duction are its products. What is M — C (or M — Pm) for the first capital, is C — M' for this second capital. In the circulation act M — C{£m the factors L and Pm have identical relations, in so far as they are commodities 100 Capital. in the hands of those who sell them; on the one hand the laborers who sell their labor-power, on the other hand the owners of the means of production, who sell these. For the purchaser, whose money here performs the functions of money-capital, L and Pm represent merely commodities, so long as he has not bought them, so long as they confront his money-capital in the form of commodities owned by others. Pm and L here differ only in this respect that Pm may be C, or capital, in the hands of its owner, if Pm is the commodity-form of his capital, while L is always nothing else but a commodity for the laborer, and does not become capital, until it is made a part of P in the hand of its purchaser. For this reason, C can never open any cycle as a mere commodity-form of capital-value. As commodity-capital it is always the representative of two things. From the point of view of use-value it is the product of the function of P, in the present case yarn, whose elements L and Pm, coming from the circulation, have been active in creating this prod- uct. And from the point of view of exchange-value, com- modity-capital is the capital-value P plus the surplus:value m produced by the function of P. It is only in the circulation of C itself that C equal to P, and equal to the capital-value, can and must separate from that part of C in which surplus-value is contained, from the surplus-product representing the surplus-value. It does not matter, whether these two parts can be actually separated, as in the case of yarn, or whether they cannot be separated, as in the case of a machine. They may always be sepa- rated, as soon as C is transformed into M\ If the entire commodity-product is separable into inde- pendent homogeneous parts, as is the case in. our 10,000 lbs. of yarn, so that the act C — M' is performed by means of a number of successive sales, then capital-value in the form of commodities can perform the functions of C and can be separated from C, before the surplus-value, or the entire value of C, has been realized. In the 10,000 lbs. of yarn at 500 pounds sterling, the value of 8,440 lbs., equal to 422 pounds sterling, is sepa- rated from the surplus-value. If the capitalist sells first The Circulation of Commodity-Capital. 101 8,440 lbs. at 422 pounds sterling, then these 8,440 lbs. of yarn represent C, or the capital-value, in the form of commodi- ties. The surplus-product of 1,560 lbs. of yarn, likewise con- tained in C, and valued at 78 pounds sterling, does not cir- culate until later. The capitalist may accomplish C — M — C- |£m before the surplus product c — m — c circulates. Or, if he sells 7,440 lbs. of yarn at 372 pounds sterling, and then 1,000 lbs. of yarn at 50 pounds sterling, he might replace the means of production (the constant capital c) with the first part of C and the variable capital v, the labor-power, with the second part of C, and then proceed as before. But if such successive sales take place, and the condi- tions of the cycle permit it, the capitalist, instead of separat- ing C into c plus v plus s, may make such a separation also in the case of aliquot parts of C\ For instance, 7,440 lbs. of yarn, valued at 372 pounds ster- ling, representing a constant capital as parts of C, namely of 10,000 lbs. of yarn valued at 500 pounds sterling, may be separated into 5,535 lbs. of yarn valued at 276.768 pounds sterling, which replace the constant part, the value of the means of production used up in producing 7,440 lbs. of yarn ; 744 lbs. of yarn valued at 37.200 pounds sterling, which replace only the variable capital ; and 1,160- .640 lbs. of yarn valued at 58.032 pounds sterling, which are the surplus-product and represent surplus-value. If he sells his 7,440 lbs. of yarn, he can replace the capital-value contained in them after the sale of 6,279.360 lbs. of yarn at 313.968 pounds sterling, and he can spend as his revenue the value of the surplus-product of 1,160.640 pounds, or 58.032 pounds sterling. In the same way, he may separate 1,000 lbs. of yarn, valued at 50 pounds sterling, or equal to the variable capi- tal-value, into its aliquot parts and sell them successively, as follows: 744 lbs. of yarn at 37.200 pounds sterling, for the constant capital-value of 1,000 lbs. of yarn ; 100 lbs. of yarn at 5 pounds sterling, for the variable capital-value; or to- gether 844 lbs. of yarn at 42.2 pounds sterling, for replac- ing the capital-value contained in 1,000 lbs. of yarn; finally, 156 lbs. of yarn at 7.8 pounds sterling, representing the 102 Capital. surplus-product contained in 1,000 lbs. of yarn, which may be spent as such. Finally, the capitalist may divide the remaining 1,560 lbs. of yarn, valued at 78 pounds sterling, provided he suc- ceeds in selling them, in such a way that the sale of 1,160 lbs. of yarn, valued at 58.032 pounds sterling, replaces the value of the means of production contained in those 1,560 lbs. of yarn, and 156 lbs. of yarn, valued at 7.8 pounds ster- ling, replaces the variable capital-value; or a total of 1,316- .640 lbs. of yarn, valued at 65.832 pounds sterling, for re- placing the total capital-value; finally, the surplus-product of 243.360 lbs., valued at 12.168 pounds sterling, remains, to be spent as revenue. Just as all the elements of c, v, and s, contained in the yarn, are divisible into the same component parts, so may every individual pound of yarn, valued at 1 sh., or 12 d., be divided. c = 0.744 lbs. of yarn = 8.928 d. v = 0.100 lbs. of yarn = 1.200 d. s = 0.156 lbs. of yarn = 1.872 d. c+v+s = 1.00 lb. of yarn = 12.00 d. If we add the results of the three above partial sales, we obtain the same result as we should when selling the entire 10,000 lbs. at one time. We have the following parts of constant capital : In the first lot 5,535.360 lbs. of yarn at £276.768. In the second lot 744.000 lbs. of yarn at £37.200. In the third lot 1,160.640 lbs. of yarn at £58.032. Total 7,440.000 lbs. of yarn at £372.000. Furthermore, the following parts of variable capital: In the first lot of 744.000 lbs. of yarn at £37.200. In the second lot 100.000 lbs. of yarn at £5.000. In the third lot 156,000 lbs. of yarn at £7.800. Total 1,000.000 lbs. of yarn at £50.000. The Circulation of Commodity-Capital. 103 Finally, the following parts of surplus-value: In the first lot 1,160.740 lbs. of yarn at £58.032. In the second lot 156.000 lbs. of yarn at £7.800. In the third lot 343.360 lbs. of yarn at £12.168. Total 1,560.000 lbs. of yarn at £78.000. Grand Total: Constant capital 7,450 lbs. of yarn at £372. Variable capital 1,000 lbs. of yarn at £50. Surplus-value 1,560 lbs. of yarn at £78. Total 10,000 lbs. of yarn at £500. C — M' stands in itself merely for the sale of 10,000 lbs. of yarn. These 10,000 lbs. of yarn are a commodity like all other yarn. The purchaser is interested in the price of 1 sh. per lb., or 500 pounds sterling for 10,000 lbs. If he ana- lyzes during the negotiations the different values of which this lot is composed, he does so simply with the malignant in- tention of proving that it can be sold at less than 1 sh. per pound and still leave a fair profit to the seller. But the quantity purchased by him depends on his own require- ments. If he is, for instance, the owner of a cloth-factory, the amount of his purchase depends on the composition of his own capital invested in this plant, not on that of the owner of the yarn from whom he buys. The conditions, in which C has to replace on one side the capital used up in its production (or the component parts of this capital), and on the other to serve as a surplus-product for the spend- ing of surplus-value or for the accumulation of capital, exist only in the cycle of that capital, which exists as a com- modity capital in the form of 10,000 lbs. of yarn. These conditions have nothing to do with the sale itself. In the present case we have also assumed that C is sold at its value, so that it is only a question of its transformation from the commodity-form into that of money. Of course, it is essential for C, when performing a function in the cycle of this individual capital by which the productive capital is to be replaced, that it should be known to what extent, if at 104 Capital. all, the price and the value vary in the sale. But this does not concern us here in the discussion of the distinctions of form. In form I, or M...M', the process of production intervenes midway between the two complementary and opposite phases of the circulation of capital, and is past before the concluding phase C — M' begins. Money has been advanced as capital, transformed into means of production and labor power, trans- ferred from these to the commodity-product, and this in its turn changed into money. It is a complete cycle of business, which results in money, the universal medium. The renewal of the cycle is then possible, but not necessary. M...P...M' may either be the last cycle, concluding the function of some individual capital withdrawn from business, or the first cycle of some new capital beginning its active function. The general movement is here M...M', from money to more money. In form II, or P...C— M'— C.P(P'), the entire circula- tion process follows after the first P and takes place before the second P; but it takes place in the opposite direction from that of form I. The first P is the productive capital, and its function is the productive process, on which the suc- ceeding circulation process is conditioned. The concluding P, on the other hand, does not stand for the productive process; it is only the return of the industrial capital to its form of productive capital. And it has that form by virtue of the last phase of circulation, in which the transforma- tion of capital-value into L plus Pm was accomplished, those subjective and objective factors which combine to form the productive capital. The capital, whether it be P or P', is in the end once more present in a form in which it may again perform the function of productive capital, in which it must go through the productive process. The general form of the movement P...P'(P) is that of reproduction and does not indicate that capital is to be increased by new values, as does M...M'. This enables classic political economy to ignore so much easier the capitalistic form of the process of produc- tion and to pretend that production itself is the purpose of this process; just as though it were only a question of pro- ducing as much as possible, as cheaply as possible, and of The Circulation of Commodity-Capital. 105 exchanging the product for the greatest variety of other products, either for the renewal of the production (M — C), or for consumption (m — c). It is then quite likely that the peculiarities of money and money-capital may be over- looked, for M and m appear here merely as passing media of circulation. The entire process seems so simple and natural, but natural in the sense of a shallow rationalism. In the same way, the profit is occasionally overlooked in the commodity-capital and it is mentioned merely as a commod- ity when discussing the productive circulation as a whole. But as soon as the question of the values composing it comes up for discussion, it is spoken of as commodity-capital. Ac- cumulation, of course, is seen in the same light as production. In form III, or C— M'— C...P...C, the two phases of the circulation process open the cycle, in the same order which obtains in form II, or P...P; next follows P with its function, the productive process, the same as in form I; the cycle closes with the result of the process of production, C. While form II closes with P, the return of productive capital to its mere form, so form III closes with C, the re- turn of commodity-capital to its form. Just as in form II the capital, in its concluding form of P, must renew its cycle by beginning with the process of production, so in this case, where the industrial capital re-appears in the form of com- modity-capital, the cycle is re-opened by the circulation- phase C — M\ Both forms of the cycle are incomplete, be- cause they do not close with M', that is to say with capital- value retransformed into money and utilized. Both cycles must, therefore, be continued and include the reproduction. The total cycle of form III is represented by C...C'. The third form is distinguished from the two first by the fact that it is the only one in which the utilized capital- value appears as the starting point of its utilization, instead of the original value which is to be utilized. C as a capital- relation is the starting point and has a determining influ- ence on the entire cycle, for it includes the cycle of capital- value as well as that of surplus-value in its first phase, and the surplus-value is compelled to act partly as revenue by going through the circulation c — m — c, partly to perform 106 Capital. the function of an element of capital accumulation, at least in the average of the cycles, if not in all of them. In the form C...C the consumption of the entire com- modity-product is assumed as the condition of the normal course of the cycles of capital itself. The individual con- sumption of the laborer and the individual consumption of the unaccumulated part of the surplus-product comprise the entire individual consumption. Hence the consumption in its totality — individual as well as productive consumption — are conditional factors in the cycle C\ Productive con- sumption, which includes the individual consumption of the laborer as a corollary, since labor-power is a continuous product of the laborer's individual consumption, within certain limits, is performed by every individual capital it- self. Individual consumption, in so far as it is not required for the existence of the individual capitalist, is here only regarded as a social act, not as an act of the individual capi- talist. In forms I and II, the aggregate movement appears as a movement of advanced capital-value. In form III, the util- ized capital, in the shape of the total commodity-product, is the starting point and has the nature of moving capital, commodity-capital. Not until the transformation into money has been accomplished, does this movement sep- arate into movements of capital and revenue. The dis- tribution of the total social product as well as the special distribution of the product of every individual capital for purposes of individual consumption or for reproduction, is included in the cycle of capital under this form. In M...M', the possible expansion of the cycle is included, and depends on the volume of m entering into the renewed cycle. In P...P, the new cycle may be started by P with the same, or even with a smaller, value, and yet may represent a reproduction on an enlarged scale, for instance in the case where certain elements of commodities become cheaper by increased productivity of labor. On the other hand, a productive capital which has increased in value may, in the opposite case, represent a reproduction on a decreased scale with less raw material, for instance, if some elements The Circulation of Commodity-Capital. 107 of production have become dearer. The same is true of C...C'. In C...C' capital in the form of commodities is the prem- ise of production. It re-appears as a premise within this cycle in the second C. If this C has not yet been produced or reproduced, the cycle is arrested in its course. This C must be reproduced, for the greater part as C of some other industrial capital. In this cycle, C is found as the point of departure, of transit, and of conclusion ; it is always there. It is a permanent condition of the process of reproduction. C...C' is distinguished from forms I and II by still an- other feature. All three cycles have this in common, that capital begins its course in the same form in which it ends the cycle, and thus re-assumes the original form whenever it. renews the same cycle. The initial form M,P,C, is always the one in which capital-value (in III together with its increment of surplus-value) is advanced, in other words always the original starting form of this cycle. The con- cluding form M',P,C, on the other hand, is always a changed form of a functional one, which preceded the final form in the circulation and is not the original one. Thus M' in I is a changed form of C, the final P in II is a changed form of M, and this transformation is accom- plished in I and II by a simple transaction in the circula- tion of commodities, .by a formal change of position of com- modity and money ; in III, C is a changed form of the pro- ductive capital P. But here, in III, the transformation does not merely concern the functional form of capital, but also its magnitude as a value; and in the second place, the transformation is not the result of a formal change of position pertaining to the circulation process, but of an actual modification experienced by the use-form and value of the commodity parts of productive capital in the process of production. The forms m,P,C, at the starting end, always precede every one of the cycles I, II, III. The return of these forms at the terminal end is conditioned on the series of metamorphoses in the cycle itself. C, as the terminal prod- uct of an individual cycle of industrial capital, presupposes only that form P of the industrial capital which does not 108 Capital. belong to .the circulation, M', since the terminal point of J representing the changed form of C (C — M'), presuppose! the existence of M in the hand of the buyer, that is to say outside of the cycle M...M', but drawn into it and made it its terminal form by the sale of C\ In the same way, the final P in II presupposes the existence of L and PM(C) outside of II, but incorporated as its final form by means of M — C. But apart from this last extreme, neither the cycle of individual money-capital presupposes the existence of money-capital in general, nor the cycle of individual pro- ductive capital that of productive capital, in these cycles. In I, M may be the first money-capital ; in II, P may be the first productive capital appearing on the historical scene. But in III, C'l ...M'j ( c ( m . . . .c C is presupposed twice outside of the cycle. The first time, it is assumed to exist in the cycle C — M' — C\^m. The C in this formula, so far as it consists of Pm, is a commodity in the hands of the seller; it is itself a commodity-capital, in so far as it is the product of a capitalist process of produc- tion ; and even if it is not, it appears as a commodity-capital in the hands of the merchant. The second time it is as- sumed in c, in the formula c — m — c, where it must likewise be at hand in the form of a commodity, in order to be available for purchase. At any rate, whether they are com- modity-capital or not, L and Pm are commodities as well as C and maintain towards one another the relation of com- modities. The same is true of the second c in the formula c — m — c. Inasmuch as C is equal to C (L plus Pm), it is composed of commodities and must be replaced by equal commodities in the circulation. In the same way, the sec- ond c in c — m — c must be replaced by equal commodities in the circulation. With the capitalist mode of production for a basis, as the prevailing mode, all commodities in the hands of the seller must be commodity-capital. And they retain this character in the hand of the merchant, or assume it, if they did not The Circulation of Commodity-Capital. 109 have it before. Or they would have to be commodities, such as imported articles, which replace some original com- modity-capital by bestowing upon it another form of ex- istence. The commodity-elements L and Pm, of which the pro- ductive capital is composed, do not possess the same form as modes of existence of P, which they have on the various commodity-markets where they are gathered. They are now combined, and so combined they can perform the func- tions of productive capital. C appears as the premise of C within the cycle III, because capital in commodity-form is its starting point. The cycle is opened by the transformation of C (in so far as it per- forms the functions of capital-value, whether increased by surplus-value or not) into those commodities which are its elements of production. And this transformation com- prises the entire process of circulation, C — M — C (equal to L plus Pm), and is its result. C here stands at both ex- tremes, but the second extreme, which receives its form C by means of M — C from the commodity-market on the outside, is not the last extreme of the cycle, but only of its two first stages comprising the process of circulation. Its result is P, which then performs its function, the process of production. It is only as the result of this process, not as that of the circulation, that C* appears as the terminal point of the cycle and in the same form as the starting point, C\ On the other hand, in M...M' and P...P, the final extremes M' and P are the immediate results of the process of circula- tion. In these instances, it is only M' and P which are sup- posed to exist at the end in the hands of another. So far as the process* of circulation takes place between the ex- tremes, neither M in the hands of another as money, nor P as the productive process of another, are the premises of these cycles. But C\..C requires the existence of C (equal to L plus Pm) as commodities in the hands of others who are their owners. These commodities are drawn into the cycle by the introductory process of circulation and trans- formed into productive capital, and as a result of the func- tions of this capital, C once more appears at the end of the cycle. 110 Capital. But just because the cycle C ...C presupposes for its real- ization the existence of some other industrial capital in the form of C (equal to L plus Pm) — and Pm comprises various other capitals, in our case machinery, coal, oil, etc., — it demands of itself that it be considered not merely as the general form of the cycle, that is to say as a social form common to every industrial capital (except when it is first invested). It is not merely a common mobile form of all industrial capitals, but also the sum of all industrial capitals in action. It is a movement of the aggre- gate capital of the capitalist class, in which every individual capital appears only as a part whose movements intermingle with those of the others and are conditioned on them. For instance, if we regard the aggregate of commodities annual- ly produced in a certain country, and analyze the move- ments by which a part of this aggregate product replaces the productive capital in all individual businesses, while another part enters into the individual consumption of the various classes, then we consider C...C' as the formula indi- cating the movements of social capital as well as of the sur- plus-value, or surplus-product, generated by it. The fact that the social capital is equal to the sum of the individual capitals (including the stocks and state capital, so far as governments employ productive wage-labor in mining, railroading, etc., and perform the function of capitalists), and that the aggregate movement of social capital is equal to the algebraic sum of the movements of individual capi- tals, does not militate against the possibility that this move- ment, seen as the movement of some individual ' capital, may present other phenomena than the same movement studied as a part of the aggregate movement of social capital. In the latter case, when studied in connection with all its parts, the movement simultaneously solves problems, the solution of which does not follow from the study of the cycles of some individual capital, but must be taken for granted. C...C' is the only cycle, in which the originally advanced capital-value constitutes only a part of the value opening the movement at one extreme, and in which the movement thus reveals itself at the outset as the total movement of the i»- The Circulation of Commodity-Capital. Ill dustrial capital. It includes that part of the product which replaces the productive capital as well as that part which creates a surplus-product and which is on an average either spent as revenue or employed as an element of accumula- tion. In so far as the expenditure of surplus-value in the form of revenue is included in this cycle, the individual consumption is likewise included. The latter is further- more included for the reason, that the starting point C, com- modity, exists in the form of some article of use ; but every article produced by capitalist methods is a commodity-capi- tal, no matter whether its use-form destines it for productive or for individual consumption, or for both. M...M' indi- cates only the quality of value, the utilization of the ad- vanced capital-value for the purposes of the entire process; P...P(P') indicates the process of production of capital in the form of a process of reproduction with a productive capi- tal of the same or of increased value (accumulation) ; C...C, while it indicates at the outset that it is a part of the capi- talist production of commodities, comprises productive and individual consumption from the start, and productive con- sumption with its implied generation of more value appears only as one branch of its movement. Finally, since C may have a use-value which cannot enter any more into any proc- ess of production, it follows as a matter of course, that the dif- ferent elements of value of C expressed by parts of the prod- uct must occupy a different position, according to whether C\..C is regarded as the formula for the movement of the total social capital, or for the independent movement of some individual industrial capital. All these peculiarities point to the fact that this cycle implies more than the mere cycle of some individual capital. In the formula C...C', the movement of the commodity- capital, that is to say of the total product created by capital- ist methods, appears simultaneously as the premise of the independent cycle of individual capital and as its effect. If this formula is grasped in its peculiarities, then it is no longer sufficient to be content with the knowledge that the metamorphoses C — M' and M — C are on the one hand functionally defined sections in the metamorphoses of capi- tal, on the other links in the general circulation of commodi- 112 Capital. ties. It becomes necessary to follow the ramifications of the metamorphoses of one industrial capital among those of other individual capitals and with that part of the total product which is intended for individual consumption. In the analysis of an individual industrial capital, we there- fore base our studies mainly on the two first formulas. The cycle C...C' appears as the movement of an indi- vidual and independent capital in the case of agriculture, where calculations are made from crop to crop. In figure II, the sowing is the starting point, in figure III the harvest, or, to speak with the physiocrats, figure II starts out with the avances, and figure III with the reprises. The move- ment of capital-value in III appears from the outset only as a part of the movement of the general mass of products, while in I and II the movement of C is only a part of the movement of some individual capital. In figure III, the commodities on the market are the con- tinuous premise of the processes of production and repro- duction. If this formula is regarded as fixed, all elements of the process of production seem to originate in the circula- tion of 'Commodities and to consist only of commodities. This one-sided conception overlooks those elements of the processes of production, which are independent of the com- modity-elements. Since C'...C has for its starting point the total product (total value), it follows that (making exception of foreign trade) reproduction on an enlarged scale, productivity re- maining otherwise the same, can take place only when the part of the surplus-product to be capitalized already con- tains the material elements of the additional productive capi- tal; so that a surplus-product is at once produced in that form which enables it to perform the functions of additional capital, so far as the production of one year can serve as the basis of next year's production, or in so far as this can take place simultaneously with the simple process of reproduc- tion in the same year. Increase 1 productivity can increase only the subs' mce of capital, but not its value ; of course, it The Circulation of Commodity-Capital. 113 creates additional material for the generation of more value. C...C' is the basis of Quesnay's Tableau Economique, and it shows great discrimination on his part that he selected this form instead of P...P as opposed to M...M' (which is the isolated formula retained by the mercantilists). 114 Capital. CHAPTER IV. THE THREE DIAGRAMS OF THE PROCESS OF CIRCULATION. The three diagrams may be formulated in the following manner, using the sign Tc for ''total process of circulation" : I. M— U...P...C— M' II. P...Tc...P III. Tc.P(C'). If we take all three diagrams together, all premises of the process appear as its effects, as premises produced by it- self. Every element appears as a point of departure, transit, and return to the starting point. The total process appears as the unity of the processes of production and circulation. The process of production mediates the process of circula- tion, and vice versa. All three cycles have the following point in common: The creation of more value as the compelling motive. Diagram I expresses this by its form. Diagram II begins with P, the process of creating surplus-values. Diagram III begins the cycle with the utilized value and closes with renewed utilized value, even if the movement is repeated on the same scale. So far as C — M means M — C from the point of view of the buyer, and M — 0 means C — M from the point of view of the seller, the circulation of capital presents only the fea- tures of the ordinary metamorphosis of commodities, subject to the laws relative to the amount of money in circulation, as analyzed in volume I, chap. Ill, 2. But if we do not cling to this formal aspect, but rather consider the actual connection of the metamorphoses of the various individual capitals, in other words, if we study the interrelation of the cycles of individual capitals as partial movements of the process of reproduction of the total social capital, then the mere change of form between money and commodities does not explain matters. In a continuously revolving circle, every point is simul- taneously a point of departure and point of return. If Diagrams of the Process of Circulation. 115 we interrupt the rotation, not every point of departure is a point of return. We have seen, for instance, that not only does every individual cycle imply the existence of the others, but also that the repetition of one cycle in a certain form necessitates the rotation of this cycle through its other forms. The entire difference thus assumes a formal aspect, it appears as a mere subjective difference made for the convenience of the observer. In so far as every one of these cycles is studied as a special form of movement through which various individual indus- trial capitals are passing, their differences have but an in- dividual nature. But in reality every individual industrial capital is contained simultaneously in all three cycles. These three cycles, the forms of reproduction assumed by the three modes of capital, rotate continuously side by side. For in- stance, one part of capital value which now performs the function of commodity-capital, is transformed into money- capital, but at the same time another part leaves the process of production and enters the circulation as a new commodi- ty-capital. The cycle C.-.C is thus continuously rotating, and so are the two other forms. The reproduction of capi- tal in each one of its forms and stages is just as continuous as the metamorphoses of these forms and their successive transition through the three stages. The entire circulation is thus actually a unit with these three forms. We assumed in our analysis that the entire volume of capital-value acts either as money-capital, productive capital, or commodity-capital. For instance, we had those 422 pounds sterling first in the role of money-capital, then we transformed them entirely into productive capital, and final- ly into commodity-capital, into yarn valued at 500 pounds sterling and containing 78 pounds sterling of surplus-value. Here the various stages are so many interruptions. So long as, for instance, those 422 pounds sterling retain the form of money, that is to say until the purchases M — C (L plus Pm) have been made, the entire capital exists only in the form of money-capital and performs its functions. But as soon as it is transformed into productive capital, it performs neither the functions of money-capital nor of commodity-capital. Its entire process of circulation is interrupted, just as on the 116 Capital. other hand its entire process of production is interrupted, as soon as it performs any functions in one of its two cir- culation stages, either as M or as C. From this point of view, the cycle P...P would not only present a periodical renewal of the productive capital, but also the interruption of its function, the process of production, up to the time when the process of circulation is completed. Instead of proceeding continuously, production took place in jumps and was renewed only in periods of uncertain duration, according to whether the two stages of the process of circula- tion were completed fast or slowly. This would apply, for instance, to a Chinese artisan, who works only for private customers and whose process of production is interrupted, until he receives a new order. This is true of every individual part of capital in process of circulation, and all parts of capital pass through this cir- culation in succession. For instance, the 10,000 lbs. of yarn are the weekly product of some spinner. These 10,000 lbs. of yarn leave the sphere of production in their entirety and enter the sphere of circulation. The capital-value contained in them must all be converted into money-capital, and so long as it retains the form of money-capital, it cannot return into the process of production. It must first go into circu- lation and be reconverted into the elements of productive capital, L plus Pm. The process of rotation of capital is a succession of interruptions, leaving one stage and entering the next, discarding one form and assuming another. Every one of these stages not only causes the next, but also excludes it. But continuity is the characteristic mark of capitalist pro- duction, conditioned on its technical basis, although not absolutely attainable. Let us see, then, what passes in real- ity. While the 10,000 lbs. of yarn appear on the market as commodity-capital and are transformed into money (re- gardless of whether it is a paying, purchasing, or calculating medium), new cotton, coal, etc., take the place of the yarn in the process of production, having been reconverted from the form of money and commodities into that of productive capital and performing its functions. At the time when these 10,000 lbs. of yarn are converted into money, the pre- Diagrams of the Process of Circulation. IVi ceding 10,000 lbs. are going through the second stage of circulation and are reconverted from money into the ele- ments of productive capital. All parts of capital pass suc- cessively through the process of rotation and are simultane- ously in its different stages. The industrial capital thus exists simultaneously in all the successive stages of its rota- tion and in the various forms corresponding to its functions. That part of industrial capital, which is for the first time converted from commodity-capital into money, begins the cycle C\..C, while industrial capital as a rotating body of aggregates, has passed through it. One hand advances money, the other receives it. The inauguration of the cycle M...M' at one place coincides with its return to the starting point of another. The same is true of productive capital. The actual rotation of industrial capital in its continuity is therefore not alone the unity of the processes of produc- tion and circulation, but also the unity of its three cycles. But it can be such a unity only, if every individual part of capital can go successively through the various stages of the rotation, pass from one phase and from one functional form to another, so that the industrial capital, being the aggregate of all these parts, is found simultaneously in its various phases and functions and describes all three cycles at the same time. The succession of these parts is conditioned on their simultaneous existence side by side, that is to say,, on the division of capital. In a systematized manufacture, the product is as much ubiquitous in the various stages of its process of formation, as it is in the transition from one phase of production to another. As the individual industrial capi- tal has a definite volume which does not merely depend on the means of the capitalist and which has a minimum mag- nitude for every branch of production, it follows that its division must proceed according to definite proportions. The magnitude of the available capital determines the volume of the process of production, and this, again, determines the size of the commodity-capital and money-capital which per- form their functions simultaneously with the process of pro- duction. The simultaneous functions, which enable the pro- duction to proceed continuously, are only due to the rota- 118 Capital. tion of the various parts of capital which pass successively through their different stages. The simultaneousness is mere- ly the result of the succession. For if the rotation of one phase, for instance of C — M', is interrupted for one of the parts of capital, if the commodity cannot be sold, then the cycle of this part is broken and the reproduction of its ele- ments of production cannot take place ; the succeeding parts, which come out of the process of production in the shape of C, find the conversion of their function blocked by their predecessors. If this is continued for some time, production is restricted and the entire process arrested. Every stop of the succession carries disorder into the simultaneousness of the cycles, every obstruction of one stage causes more or less obstruction in the entire rotation, not only of the obstructed part of capital, but of the total individual capital. The next form, in which the process presents itself, is that of a succession of phases, so that the transition of capi- tal into a new phase is conditioned on its departure from another. Every special cycle has therefore one of the func- tional forms of capital for its point of departure or return. On the other hand, the aggregate process is indeed the unity of its three cycles, which are the different forms in which the continuity of the process expresses itself: The total rota- tion appears as its own specific cycle to every functional form of capital, and every one of these cycles contributes to the continuity of the process. The rotation of one functional form requires that of the others. This is the inevitable re- quirement for the aggregate process of production, especially for the social capital, that it is at the same time a process of reproduction, and thus a rotation of each one of its ele- ments. Different aliquot parts of capital pass successively through the various stages and functional forms. By this means, every functional form passes simultaneously with the others through its own cycles, although other parts of capi- tal are continuously presented by each form. One part of" capital, continually changing, continually reproduced, exists as a commodity-capital which is converted into money; an- other as money-capital converted into productive capital; and a third as productive capital converted into commodity- capital. The continuous existence of all three forms is Diagrams of the Process of Circulation. 119 bi ought about by the rotation of the aggregate cycle through these three phases. Capital as a whole, then, exists simultaneously side by side in its different phases. But every part passes continu- ously and successively from one phase and functional form into the next one and performs a function in all of them. Its forms are fluid and their simultaneousness is brought about by their succession. Every form follows and precedes another, so that the return of one capital part to a certain form is conditioned on the return of another part to some other form. Every part describes continuously its own cycle, but it is always another part which assumes a certain form, and these special cycles are simultaneous and succes- sive parts of the aggregate rotation. The continuity of the aggregate process is realized only by the unity of the three cycles, and would be impossible with the above-mentioned interruptions. The social capital always has this continuity and its process always rests on the unity of the three cycles. The continuity of the reproduction is more or less inter- rupted so far as the individual capitals are concerned. In the first place, the masses of value are frequently distributed at various periods and in unequal portions over the various stages and functional forms. In the second place, these por- tions may be differently distributed, according to the charac- ter of the commodity, which is to be produced. In the third place, the continuity may be more or less interrupted in those branches of production, which are dependent on the seasons, either on account of natural causes, such as agricul- ture, fishing, etc., or on account of conventional circumstance such as the so-called season-work. The process proceeds most regularly and uniformly in the factories and in mining. But this difference of the various branches of production does not cause any difference in the general forms of the proc- ess of rotation. Capital, as a value creating more value, is not merely con- ditioned on 'dass-relaitions, on a definite social system rest- ing on the existence of labor in the form of wage-labor. It is also a movement, a rotation through various stages, com- prising three different cycles. Therefore it can be understood 120 Capital. only as a thing in motion, not as a thing at rest. Those who look upon the self-development of value as a mere abstraction forget that the movement of industrial capital is the realiza- tion of this abstraction. Value here passes through various forms in which it maintains itself and at the same time increases its value. As we are here concerned in the form of this movement, we shall not take into consideration the revolutions, which capital-value may undergo during its ro- tation. But it is clear that capitalist production can only exist and endure, in spite of the revolutions of capital-value, so long as this value creates more value, that is to say, so long as it goes through its cycles as a self-developing value, or so long as the revolutions in value can be overcome and balanced in some way. The movements of capital appear as the actions of some individual industrial capitalist who performs the functions of a buyer of labor-power, a seller of commodities, and an owner of productive capital, and who brings about the process of rotation by his activity. If social capital-value experiences a revolution in value, it may hap- pen, that the capital of the individual capitalist succumbs and fails, because it cannot adapt itself to the conditions of this conversion of values. To the extent that such revolutions in value become acute and frequent, the automatic nature of self-developing value makes itself felt with the force of elementary powers against the foresight and calculations of the individual capitalist, the course of normal production becomes subject to. abnormal speculation, and the existence of individual capitals is endangered. These periodical revo- lutions in value, therefore, prove that which they are alleged to refute, namely, the independent nature of value in the form of capital and its increasing independence in the course of its development. This succession of the metamorphoses of rotating capital includes the continuous comparison of the changes of value brought about by rotation with the original magnitude of capital. When the growing independence of value as com- pared to the power of creating value, of labor-power, has been inaugurated by the act M — L (purchase of labor-power) and is realized during the process of production as an ex- ploitation of labor-power, this rise of independence on the Diagrams of the Process of Circulation. 121 part of value does not re-appear in that cycle, in which money, commodities, and elements of production are merely passing forms of rotating capital value, and in which the former magnitude of value compares itself to the present changed value of capital. "Value," says Bailey, in opposition to the idea of the growing independence of value characteristic of capitalist production, which he regards as an illusion of certain economists, "value is a relation between contemporary com- modities, because such only admit of being exchanged with each other." This criticism is directed against the compari- son of commodity-values of different periods of time, which amounts to the comparison of the expenditure of productive labor required for the manufacture of equal commodities at different periods, once that 'the value of money for every period has been fixed. His opposition is due to his general misunderstanding, for he thinks that exchange-value is value itself, that the form of value is identical with the volume of value ; so that values of commodities cannot be compared, so long as they do not perform active service as exchange values and are not actually exchanged for each other. He has not the least inkling of the fact that value performs only the functions of capital, in so far as it remains identical with itself and is compared with itself in those different phases of its rotation, which are not at all contemporary, but succeed one another. In order to study the formula of this rotation in its puri- ty, it is not sufficient to assume that the commodities are sold at their value, but that this takes place under con- ditions which are otherwise equal. Take, for instance, the cycle P...P and make abstraction of all technical revolutions within the process of production, by which the productive capital of a certain individual capitalist might be depreci- ated; make abstraction furthermore of all reactions, which a change in the elements of value of productive capital might cause in the value of the existing commodity-capital, which might be increased or lowered, if a stock of it were kept on hand. Take it also, that C, or 10,000 lbs. of yarn, have been sold at their value of 500 pounds sterling; 8,440 lbs., equal to 422 pounds sterling, reproduce the capital-value contained 122 Capital in C\ But if the prices of cotton, coal, etc., have increased (we do not consider mere fluctuations in price), these 422 pounds sterling may not suffice for the full reproduction of the elements of productive capital; in that case, additional money-capital is required and money-value is tied up. The opposite takes place, if those prices fall, and money-capital is set free. The process takes a normal course only so long as the values remain constant; it proceeds practically normal, so long as the disturbances during the repetition of the proc- ess balance one another. But to the extent that these dis- turbances increase in volume, the industrial capitalist must have at his disposal a greater money-capital, in order to tide himself over the period of compensation ; and as the scale of each individual process of production and thus the mini- mum size of the capital to be advanced increase in the proc- ess of capitalist production, we have here another circum- stance to add to those others which transform the functions of the industrial capitalist more and more into a monopoly of great money-capitalists, who may be individuals or asso- ciations. We remark incidentally that a difference in the form of M...M' on one side, and of P...P and C...C' on the other ap- pears, if a change in the value of the elements of produc- tion occurs. In the cycle M...M', the formula of newly invested capital, which for the first time appears in the role of money-capi- tal, a fall in the value of elements of production, such as raw materials, auxiliary materials, etc., will require a smaller investment of money-capital than would have been necessary before this fall for ■the purpose of starting a busi- ness of a definite size, because the scale of the process of pro- duction depends on the mass and volume of the means of production (provided the productivity remains unchanged), which a given quantity of labor-power can assimilate ; but it does not depend on the value of these means of production nor on that of the labor-power (the latter has an influence only on the creation of more value) . Take the opposite case. If the value of the elements of production of certain com- modities is increased, which are required as elements of a Diagrams of the Process of Circulation. 123 certain productive capital, then more money-capital is re- quired for 'the establishment of a business of definite pro- portions. In both cases it is only the quantity of the money- capital required for investment which is affected. In the former case, money-capital is set free, in the latter it is tied up, provided the advent of new industrial capitals proceeds normally in a given branch of production. The cycles P...P and C\..C assume the character of M...M' only to the extent that the movement of P and C is at the same time accumulation, so that additional m, money, is converted into money-capital. Apart from this case, they are differently -affected than M...M' by a change of value of the elements of production; here, too, we do not take into consideration the reaction of such changes in value on those parts of capitals which are engaged in the process of pro- duction. It is not the original investment, which is here directly affected, not a capital engaged in its first rotation, but one in a process of reproduction; in other words, C'...C{pm> the reconversion of commodity-capital into its elements of production, so far as they are composed of commodities. In a reduction of value (or price), three cases are possible: The process of reproduction is continued on the same scale; in that case a part of the available money-capital is set free and money-capital is accumulated, although no actual ac- cumulation (production on an enlarged scale) , or the trans- formation of m (surplus-value) into funds for accumulation initiating and accompanying it, has previously taken place. Or, the process of reproduction is renewed on a more enlarged scale than would have been ordinarily the case, provided the technical proportions admit it. Or, finally, a larger stock of raw materials, etc., is laid in. The opposite takes place if the value of the elements of reproduction of a commodity-capital increases. In that case, reproduction does not take place on its normal scale (work is done in a shorter time, for instance) ; or additional money- capital must be employed in order to maintain the old scale (money-capital is tied up) ; or the money-fund of the ac- cumulation, if available, is entirely or partially employed for the enlargement of the process of reproduction to its old scale. This is also tying up money-capital, only the ad- 124 Capital. ditional money-capital does not come from the outside, from the money-market, but out of the pockets of the industrial capitalist himself. However, there may be modifying circumstances in P...P and C\..C\ If our cotton spinner has a large stock of cotton (a large proportion of his productive capital in the form of a stock of cotton), a part of his productive capital is de- preciated by a fall in the price of cotton ; but if this price has risen, this part of his productive capital is enhanced in value. On the other hand, if he had tied up a large part of his capi- tal in the form of commodity-capital, for instance in cot- ton yarn, a part of his commodity capital, or for that matter of any of his rotating capital, is depreciated by a fall in the price of cotton, or enhanced by a rise in that price. Finally take the process C — M — C|pm. If C — M, the realization on the commodity-capital, has taken place before a change in the value of the elements of C, then capital is affected only in the way indicated in the first case, that is to say, in the second act of circulation, M — C|pm; but if such a change has occurred before the realization of C — M, then, other conditions remaining equal, a fall in the price of the cotton causes a corresponding fall in the price of yarn, and a rise in the price of cotton a rise in the price of yarn. The effect on the various individual capitals in the same branch of production may differ widely according to the circumstances in which they find themselves. Money-capital may also be set free or tied up by differences in the duration of the process of circulation, in other words, by the pace of the cir- culation. But this belongs in the discussion of the periods of turn-over. At this point, we are only interested in the real difference arising from changes of values in the elements of productive capital between M...M' and the other two cycles of the process of rotation. In the section of circulation indicated by M — C{p-m, at a period of developed and prevailing capitalist modes of pro- duction, a large portion of the commodities composing Pm, means of production, will be rotating commodity-capital of some one else. From the standpoint of the seller, therefore, the transaction is C — M', the transformation of commodity- capital into money-capital. But this does not apply absolutely. Diagrams of the Process of Circulation. 125 In the opposite case, in those sections of its process of rota- tion, where industrial capital performs either the functions of money or of commodities, the cycle of industrial capi- tal, whether as money-capital or as commodity-capital, crosses the circulation of commodities of the most varied social modes of production, so far as they produce commodities. No matter whether a commodity is the product of slavery, of peasants (Chinese, Indian ryots), of communes (Dutch East Indies), or of state enterprise (such as existed in former epochs of Russian history on the basis of serfdom), or of half- savage hunting tribes, etc., commodities and money of such modes of production, when coming in contact with commodi- ties and money representing industrial capital, enter as much into its rotation as into that of surplus-values embodied in the commodity-capital, provided the surplus-value is spent as revenue. They enter into both of the cycles of circula- tion of commodity-capital. The character of the process of production from which they emanate is immaterial. They perform the function of commodities on the market, and enter into the cycles of industrial capital as well as into those of the surplus-value carried by it. It is the universal character of the commodities, the world character of the market, which distinguishes the process of rotation of the industrial capital. What is true of foreign commodities, is also true of foreign money. Just as commodity-capital has only the character of commodities in contact with foreign money, so this money has only the character of money in contact with commodity-capital. Money here performs the functions of world-money. However, two points must be noted here. First. As soon as the transaction M — Pm is completed, the commodities (Pm) cease to be such and become one of the modes of existence of industrial capital in its function of productive capital. Henceforth their origin is obliterated. They exist only as forms of industrial capital and are em- bodied in it. But it still remains necessary to reproduce them, if their places are to be filled, and to this extent the capitalist mode of production is conditioned on other modes of production outside of its own stage of development. But it is the tendency of capitalist production to transform all 126 Capital. production as much as possible into a production of com- modities. The mainspring, by which this is accomplished, is the implication of other modes of production into the cir- culation process of capitalist production. And developed commodity-production is capitalist production. The inter- vention of industrial capital promotes this transformation everywhere, and simultaneously with it also the transforma- tion of all direct producers into wage laborers. Second. The commodities entering into the process of cir- culation (including the means of existence necessary for the reproduction of the labor-power of the laborer, who receives variable capital in the form of wages), regardless of their origin and of the social form of the productive process by which they were created, entertain the relation of commodity- capital, in the form of merchandise or merchant's capital, toward industrial capital. Merchant's capital, by its very nature, includes commodities of all modes of production. Capitalist production does not only imply production on a large scale, but also necessarily sale on a large scale, in other words, sale to the dealer, not to the individual con- sumer. Of course, so far as a consumer is himself a produc- tive consumer, an industrial capitalist, whose industrial capi- tal produces means of production for some other branch of industry, a direct sale of one industrial capitalist's product to many other capitalists takes place (orders, etc). To this extent, every industrial capitalist is a direct seller and his own dealer, also, when he sells to the merchant. Trading in commodities as a function of merchant's capi- tal is the premise of capitalist production and develops more and more in the course of development of this mode of pro- duction. Therefore we use it occasionally for the illustra- tion of various aspects of the process of capitalist circula- tion; but in the general analysis of this process, we assume that commodities are sold directly without the intervention of the merchant, because this intervention obscures various points of the movement. See, for instance, Sismondi, who presents the matter some- what naively, in the following words: "Commerce employs considerable capital, which at first sight does not seem to be a part of that capital whose movements we have just de- Diagrams of the Process of Circulation. 127 scribed. The value of the cloth in the stores of the cloth- merchant seems at first to be entirely foreign to that part of the annual production which the rich give to the poor as wages in order to make them work. However, this capital has simply replaced the other of which we have spoken. For the purpose of clearly understanding the progress of wealth, we have begun with its creation and followed its movements to their conclusion. "We have then seen that the capital employed in manufacture, for instance in the manu- facture of cloth, was always the same; and when it was ex- changed for the income of the consumer, it was merely divided into two parts; one of them serving as revenue for the capitalist in the form of the product, the other serving as revenue to the laborers in the form of wages while they were manufacturing new cloth. But it was soon found that it would be to the advantage of all to replace the different parts of this capital one by another and, if 10,000 dollars were sufficient for the entire circula- tion between the manufacturer and the consumer, to divide them equally between the manufacturer, the wholesale dealer, and the retail merchant. The first then did the same work with only one-third of this capital which he had formerly done with the entire capital, because, as soon as his work of manufacturing was completed, he found that the merchant bought from him much more readily than he could have found the consumer. On the other hand, the capital of the wholesale dealer was much sooner replaced by that of the retail merchant. . . . The difference between the sums ad- vanced for wages and the purchase price paid by the last con- sumer was considered the profit of those capitals. It was divided between the manufacturer, the wholesale dealer, and the retail merchant, from the moment that they had divided their functions, and the work accomplished was the same, although it had required three persons and three parts of capital instead of one (Nouveaux Principes, I, pages 159, 160). All the merchants contributed indirectly to produc- tion ; for having consumption for its object, production can- not be regarded as completed, until the product is placed into the reach of the consumer (Ibidem, page 157)." 128 Capital. We operate in the discussion of the general forms of the rotation, in short in the entire second volume, with money as metallic money, to the exclusion of symbolic money, of mere tokens of value, which are the specialties of certain states, and of credit-money, which is not yet developed. In the first place, this is the historical order ; credit-money plays only a very minor role, or none at all, during the first epoch of capitalist production. In the second place, the necessity of this order is demonstrated theoretically by the fact, that everything which Tooke and others have hitherto produced of a critical nature in regard to the circulation of credit- money was compelled to hark back to the question, what would be the aspect of the matter if nothing but metal-money were in circulation. But it must not be forgotten, that metal-money may serve as a purchase medium and as a pay- ing medium. For the sake of simplicity, we consider it in this second volume generally only in its first functional form. The process of circulation of industrial capital, which is only a part of its individual process of rotation, is determined by the general laws outlined in volume I, chapter III, in so far as it is a series of transactions within the general circula- tion of commodities. The same mass of money, for instance 500 pounds sterling, starts successively so many more indus- trial capitals or eventually individual capitals in the form of commodity-capitals) in circulation, the greater the velo- city of rotation of money is, and the more rapidly therefore every individual capital passes through the metamorphoses of commodities or money. One and the same volume of cap- ital-value therefore requires so much less money for its cir- culation, the more this money performs the functions of a paying medium ; the more, for instance, in the reproduction of some commodity-capital by its corresponding means of production, nothing but balances have to be squared; and the shorter the time of the payments is, for instance in pay- ing wages. On the other hand, assuming that the velocity of the circulation and all other conditions remain the same, the volume of money required for the circulation of money- capital is determined by the sum of the prices of commodi- ties (price multiplied by the volume of commodities), or, Diagrams of the Process of Circulation. 129 if tne volume and value of the commodities are given, by the value of money itself. But the laws of the general circulation of commodities apply only to the extent that the process of circulation of capital consists of a series of simple transactions in circula- tion ; they do not apply to the extent that such transactions are definite functional sections in the rotation of individual industrial capitals. In order to make this plain, it is best to study the process of circulation in its uninterrupted and connected form, such as it appears in the following two formulas : (C- (M-Cj£m..P(P') II) P..C j — M'j (_ c ( m — c (C (M-C^m..P..C III)CV— M'l ( c ( m — c As a series of transaction, in circulation, the process of circulation, whether in the form of C — M — C or of M — C — M, represents merely the two opposite lines of metamorphoses of commodities, and every individual metamorphosis in its turn includes its opposite on the part of the commodity or money in the hands of another. C — M on the part of the owner of some commodity means M — C on the part of its buyer; the first metamorphosis of the commodity in C — M is the second metamorphosis of the commodity appearing in the form of M ; the opposite applies to M — C. The statements concerning the intermingling of the metamorphosis of a certain commodity in one stage with that of another in another stage apply to the circula- tion of capital to the extent that the capitalist performs the functions of a buyer and seller of commodities, so that his capital in the form of money meets the commodities of another, or in the form of commodities the money of another. But this intermingling is not identical with the intermingling of the metamorphoses of capitals. In the first place, M — C'Pm), as we have seen, may repre- sent an intermingling of the metamorphoses of different 130 Capital. individual capitals. For instance, the commodity-capital of the cotton-spinner, yarn, is partly replaced by coal. One part of his capital is in the form of money and is trans- formed into commodities, while the capital of the capitalist producer of coal exists in the form of commodities and is therefore transformed into money; the same transaction of circulation in this case represents opposite metamor- phoses of two industrial capitals in different departments of production, the series of metamorphoses of these capitals intermingles in it. But we have also seen, that the Pm into which M is transformed need not be commodity-capital in the strictest sense, that is to say need not be a functional form of industrial capital, need not be produced by a capi- talist. It is always a question of M — C on one side, and C — M on the other, but not always of intermingling meta- morphoses of capitals. Furthermore M — L, the purchase of labor-power, never intermingles with any metamorphoses of capital, for labor-power, though a commodity from the point of view of the laborer, does not become capital until it is sold to the capitalist. On the other hand, in the process C — M', it is not necessary that M' should represent trans- formed commodity-capital; it may be the money-equivalent of labor-power (wages), or of the product of some independ- ent laborer, some slave, serf, or some commune. In the second place, a definite functional role played by every metamorphosis of some individual capital within the process of circulation, need not represent a corresponding opposite metamorphosis in the rotation of the other capital, provided we assume that the entire production of the world- market is carried on capitalistically. For instance, in the cycle P...P, the M' which pays for C may be merely the money-form of the surplus-value of the buyer, in case that the commodity is an article for consumption ; or, in M' — C \ pm where accumulated capital is concerned, it may simply replace the advanced capital of the seller of Pm, or it may not return into the rotation of his capital at all by being side-tracked into expenditures as revenue. This shows that the manner in which the different com- ponent parts of the aggregate social capital, of which individ- ual capitals are merely components performing independent Diagrams of the Process of Circulation. 131 functions, mutually replace one another in the process of circulation (in regard to capital as well as surplus-value), is not apparent from the simple intermingling of the meta- morphoses in the circulation of commodities. Such inter- mingling occurs in the transactions of capital circulation as it does in all other circulation of commodities, but it requires a different method of analysis. Hitherto nothing but gen- eral phrases have been employed by economists for his pur- pose, and if we test those phrases, they contain nothing but indefinite ideas borrowed from the intermingling of meta- morphoses common to all circulations of commodities. One of the most obvious peculiarities of the process of rota- tion of industrial capital, and therefore of capitalist produc- tion, is the fact that on the one side, the component elements of productive capital are derived from the commodity-mar- ket, are continually renewed out of it, and are sold as com- modities; that, on the other side, the product of the labor- process comes forth from it as a commodity and must be continually sold over and over as a commodity. Com- pare, for instance, a modern tenant of Lower Scotland with an old-fashioned small farmer on the continent. The form- er sells his entire product and has therefore to reproduce all its elements, even his seeds, by means of the market; the latter consumes the greater part of his product directly, buys and sells as little as possible, fashions tools, clothing, etc., so far as possible himself. Such comparisons have led to the classification of produc- tion into natural economy, the money-system, and the credit-system, as being the three characteristic stages of economy in the development of social production. But in the first place, these three forms do not represent any equivalent phases of development. The so-called credit- system is itself merely a modification of the money-system, so far as both terms express transactions between the pro- ducers themselves. In the developed capitalist production, the money-system appears only as the basis of the credit- system. The money-system and credit-system thus corre- 132 Capital spond only to different stages in the development of capital- ist production, but they are by no means independent modes of economy as compared to natural economy. With the same justification, one might place the various forms of natural economy as equivalents by the side of those two sys- tems. In the second place, it is not the process of production itself which is emphasized as the distinguishing mark of the two systems of that classification, the money-system, the credit-system, but rather the mode of transaction between the various producers under those systems. Then the same should apply to the natural economy, which should in that case be classified as the exchange-system. A completely rounded system of natural economy, such as the state of the Inkas in Peru, would not fall under any of these classifica- tions. .In the third place, the money-system is common to all production of commodities, and the product appears as a commodity in the most varied organisms of social produc- tion. The characteristic mark of capitalist production would then be only the extent to which the product is manu- factured for purposes of trade, as a commodity, and the extent to which its own elements of formation enter as com- modities into the economy which creates that product. It is true, that capitalist production has for its general form the production of commodities. But it is so and be- comes more so in its development, only because labor itself here appears as a commodity, because the laborer sells labor, that is to say the function of his labor-power, and our assumption is that he sells it at a value determined by \U cost of reproduction. To the extent that labor becomes wage-labor, the producer becomes an industrial capitalist. For this reason capitalist production (and the production of commodities) does not reach its full scope, until the agricul- tural laborer becomes a wage-laborer. In the relation of cap- italist and wage-laborer, the relation between the buyer and the seller, the money-relation, becomes an imminent relation of production. And this relation has its foundation in the social character of production, not of circulation. The char- acter of the circulation rather depends on that of production. Diagrams of the Process of Circulation. 133 It is, however, quite characteristic of the bourgeois horizon, which is entirely bounded by the craze for making money, not to see in the character of the mode of production the basis of the corresponding mode of circulation, but vice versa.7 The capitalist throws less value in the form of money into the circulation than he draws out of it, because he throws into it more value in the form of commodities than he had withdrawn from it. To the extent that he is simply a per- sonification of capital, an industrial capitalist, his supply of commodity-value is always larger than his demand for that value. The equality of his supply and demand in this respect would indicate that his capital had not produced any surplus-value; it would not have performed the func- tions of productive capital; the productive capital would have been converted into commodity-capital which would not be impregnated with surplus-value; it would not have drawn any surplus-value in commodity-form out of labor- power during the process of production, it would not have performed any capital-functions at all. The capitalist must indeed "sell dearer than he has bought," but he succeeds only in doing so, because the capitalist process of production enables him to transform the cheaper commodity, which con- tains less value, into a dearer commodity with increased value. He sells dearer, not because he gets more than the value of his commodity, but because his commodity contains a greater value than that contained in the natural elements of its production. The rate at which value is added to the capital of the cap- italist increases in proportion to the difference between his supply and his demand, that is to say in proportion as the surplus of the commodities which he places on the market exceeds the value of the commodities which he has taken from it. His aim is not to equalize his supply and demand, but to make the difference between them as much as possible in favor of his supply. 7 End of Manuscript V. What follows to the end of the chapter is a note found in a Manuscript of 1877 or 1S78 amid extracts from other works. 134 Capital. What is true of the individual capital, also applies to the capitalist class. In so far as the capitalist personifies but his industrial capital, his own demand is only for means of production and labor-power. His demand for Pm, expressed in value, is smaller than his advanced capital ; he buys means of pro- duction of a value smaller than his capital, and therefore much smaller than the value of the commodity-capital which he takes back to the market. As regards his demand for labor-power, its value is deter- mined by the proportion of his variable capital to his total capital, as expressed by Vh-C Its proportion in capitalist production decreases continually more than his demand for means of production. His purchases of Pm steadily increase over his purchases of L. Inasmuch as the laborer generally converts his wages into means of existence, and for the overwhelmingly larger part necessities of life, the demand of the capitalist for labor- power is indirectly also a demand for the articles of consump- tion assimilated by the working class. But this demand is equal to v and not one atom greater. If the laborer saves a part of his wages — we do not consider any questions of credit at all — he converts a part of his wages into a hoard and does not perform the functions of a purchaser to that extent. The limit of the maximum demand of the capitalist is C, equal to c plus v, but his supply for the market is c plus v plus s. If the composition of his commodity-capital is 80c+20v+ 20s, his demand is equal to 80c+20v, or one fifth smaller in value than his supply. His demand as compared to his sup- ply decreases in proportion as the percentage of the mass of surplus-value produced by him (his rate of profit) increases. Although the demand of the capitalist for labor-power, and thus indirectly for necessities of life, decreases continually compared to his demand for means of production in the further development of production, it must not be forgotten that day by day his demand for Pm is always smaller than his capital. His demand for means of production must, therefore, be always smaller in value than the commodity- product of the capitalist who, working with a capital of equal value and conditions like his, furnishes him with those Diagrams of the Process of Circulation. 135 means of production. It does not alter the case, if many- capitalists instead of one furnish him with means of produc- tion. Take it that his capital is 1,000 pounds sterling, and its constant part 800 pounds sterling; then his demand on all the capitalists supplying him is equal in value to 800 pounds sterling. Together they supply for each 1,000 pounds sterling means of production valued at 1,200 pounds sterling, assuming that the rate of profit is the same for all of 'them, regardless of the rate at which they share in the 1,000 and of the proportion which -the share of each one may represent in his total capital. The demand of the buy- ing capitalist covers only 'two-thirds of the supply of the sellers, while his total demand equals only four-fifths of the value of 'his own supply to the market. It still remains to anticipate the analysis of the problem of turn-over. Let the total capital of the capitalist be 5,000 pounds sterling, of which 4,000 pounds is fixed and 1,000 pounds circulating capital; these 1,000 pounds sterling are composed of 800 c plus 200 v, as assumed before. His circulating capital must be turned over five times per year in order that his fixed capital may be turned over once. His commodity-product is then equal in value to 6,000 pounds sterling, it is valued at 1,000 pounds sterling more than his advanced capital, so that the same proportion of surplus- value is obtained as before: 5,000 CH-1,000 s=100(c+v)-20 s. This turn-over does not change anything in the proportion of the total demand of the capitalist to his total supply. The former remains one-fifth smaller than the latter. Take it that his fixed capital must be reproduced in 10 years. Hence he sinks every year one tenth, or 400 pounds sterling, so that he has only -a value of 3,600 pounds of fixed capital left plus 400 pounds in money. Inasmuch as repairs are necessary which do not exceed the average, they represent nothing but capital invested later. "We may look at the matter from the standpoint that he has allowed for the expenses for repairs when calculating the value of his invest- ment, so far as this enters into the annual commodity-pro- duct, so that they are included in that one tenth of sinking fund. If the repairs cost less than the average he is so much 136 Capital. money in pocket, and in the reverse case he loses it. At any rate, although his demand, after his total capital has been turned over once a year, still remains at 5,000 pounds sterling which was the value of the original capital advanced, it increases so far as the circulating part of this capital is concerned, while it decreases so far as the fixed part is con- cerned. We now come to the question of reproduction. Take it that the capitalist consumes the entire surplus-value com- posed of money m and reconverts only the original capital- value C into productive capital. Then the demand of the capitalist is equal to his supply ; but this does not refer to the movements of his capital. As a capitalist, his demand is only for four-fifths of the value of his supply. He consumes one-fifth as a non-capitalist; he consumes it, not in the per- formance of his function as capitalist, but for his private re- quirements or pleasure. His calculation, expressed in percentages, stands as follows: Demand as capitalist 100, supply 120. Demand as man of the world. 20, supply 0. Total demand 120, supply 120. This assumption amounts to a non-existence of capitalist production, and thus the non-existence of the industrial capitalist himself. For capitalism is destroyed in its very foundation, if we assume that its compelling motive is enjoy- ment instead of the accumulation of wealth. But such an assumption is also technically impossible. The capitalist must not only form a reserve-capital as a pro- tection against fluctuations of value and as a fund enabling him to wait for favorable conditions of the market for sale and purchase; he must also accumulate capital, in order to extend his production and embody the progress of technique in his productive organization. In order to accumulate capital, he must first withdraw a a part of the surplus-value from circulation which he ob- tained from that circulation in the form of money, and must hoard it until it has increased sufficiently for the extension of his old business or the opening of a side-line. So long as Diagrams of the Process of Circulation. 137 the formation of the hoard continues, it does not increase the demand of the capitalist. The money is then inactive. It does not withdraw from the commodity-market any equivalent in commodities for the money-equivalent which it withdrew for commodities supplied to it. Credit is not considered here. And credit includes the depositing, on the part of the capitalist, of accumulating money in a bank on payment of interest as shown by a run- ning account. 138 Capital. CHAPTER V. THE TIME OF CIRCULATION.8 We have seen that the movement of capital through the sphere of production and the two phases of circulation takes place in a succession of time. The duration of its sojourn in the sphere of production is its time of produc- tion, that of its stay in the sphere of circulation its time of circulation. The time of production naturally includes the period of the labor-process, but is not comprised in it. We must first remember that a part of the constant capital exists in the form of instruments of production, such as machinery, buildings, etc., which serve for the repeated labor-processes until they are worn out. Periodical interruptions of the la- bor-process by night, etc., interrupt the function of these instruments of production, but not their location on the place of production. They belong to this place when they are not in function as well as when they are. On the other hand, the capitalist must have a definite supply of raw material and auxiliary substances in readiness, in order that the process of production may take place for a longeT or shorter time on a previously determined scale, without being dependent on the accidents of a daily supply from the market. This supply of raw material, etc., is consumed productively by degrees. There is, therefore, a difference between its time of production9 and its time of function. The time of production of the means of production in gen- eral comprises, therefore, first the time during which they serve as means of production by taking part in the produc- tive process; second, the stops during which a certain pro- cess of production, and thus the function of the means of 8 Beginning of Manuscript IV. 9 Time of production of the means of production does not mean, in this case, the time required for their production, but the time during which they take part in the process of production *f a certain commodity. — F. E. The Time of Circulation. 139 production embodied in it, is interrupted; third, the time during which the means of production are held in readiness as requirements for the process of production, during which they represent productive capital, without having entered into the process of production. The difference so far discussed is always the difference between the time which the productive capital passes in the sphere of production and that in the process of production. But the process of production itself may require interrup- tions of the labor-process, and thus of the labor time, and during such pauses the object of labor is exposed to the influence of physical processes without the intervention of human labor. The process of production, and thus the function of the means of production, continue in this case, although the labor-process, and thus the function of the means of production as instruments of labor, have been in- terrupted. This applies, for instance, to the grain, after it has been sowed, the wine fermenting in the cellar, the la- bor-material of many manufacturers, such as tanneries, where the material is given over to chemical processes. The time of production is then greater than the labor-time. The difference between the two consists in an excess of the time of production over the labor-time. This excess always arises by the latent existence of productive capital in the sphere of production, without performing its function in the process of production itself, or by the performance of its function in the productive process without taking part in the labor-process. That part of the latent productive capital, which is held in readiness as a requirement for the productive process, such as cotton, coal, etc., in a spinnery, produces neither products nor value. It is fallow capital, although its fallow condition is a requirement for the uninterrupted flow of the process of production. The buildings, apparatus, etc., necessary for the storage of the productive supply (latent capital) are requirements of the productive process and therefore component parts of the advanced productive capi- tal. They perform their function as conservators of the elements of production in a preliminary stage. Inasmuch as labor-processes are required in this stage, they add to 140 Capital. the cost of the raw material, etc., but they are productive labor and produce surplus-value, because a part of this la- bor, like all wage-labor, is not paid. The normal inter- ruptions of the entire process of production, the pauses in which the productive capital does not perform any func- tions, create neither value nor surplus-value. Hence the tendency to keep the work going at night (Volume I, Chap- ter X, 4) . — The intervals in the labor-time, which the object of labor must endure in the process of production itself, create neither value nor surplus-value. But they ad- vance the product, form a part of its life, a process through which it must necessarily pass. The value of the apparatus, etc., is transferred to the product in proportion to the entire time, during which they perform their function; the prod- uct is brought to this stage by labor itself, and the em- ployment of these apparatus is as much a requirement of production as the wasting of a part of the cotton which does not enter into the product, but nevertheless transfers its value .to that product. The other parts of latent capital, such as buildings, machinery, etc., that is to say those instru- ments of labor whose function is interrupted only by the regular pauses of the productive process (irregular inter- ruptions caused by the restriction of production, crises, etc., are total losses) create additional values without entering into the creation of the product. The total value which this part of capital adds to the product, is determined by the average time which it lasts, for its own value, being use-value, diminishes during the time that it performs its functions as well as during that in which it does not. Finally, the value of the constant part of capital, which continues in the productive process although the labor- process is interrupted, re-appears in the result of the produc- tive process. Labor itself has here placed the means of production in a condition, where they pass without further assistance through certain useful processes, the result of which is a definite advantage or a change in the form of the use-values. Labor always transfers the value of the means of production to the product, to the extent that it really con- sumes them to good effect as means of production. And it does not change the case, whether labor has to be exerted The Time of Circulation. 141 continually on its object in order to produce this effect, or whether it merely gives the first impulse for it by placing the means of production in a condition wherein they un- dergo the intended transformation through the influence of natural processes, without further assistance from labor. Whatever may be the reason for the excess of the time of production over the labor-time — whether it is that the means of production are still latent capital in a stage pre- liminary to the actual productive process, or that their func- tion is interrupted within the process of production by its pauses, or that the process of production itself requires an interruption of the labor-process — in none of these cases do the means of production assimilate any labor. And if they do not assimilate any labor, they do not imbibe any surplus-labor. Hence the productive capital does not in- crease its value, so long as it remains in that part of its time of production which exceeds the labor-time, no matter how indispensable these pauses may be for the realization of the process of increasing value. It is plain, that the productiv- ity and increment of a given productive capital in a given time are so much greater, the more nearly the time of pro- duction and labor-time are equal. Hence we have the ten- dency of capitalist production to reduce the excess of the time of production over the labor-time as much as possible. But although the time of production of a certain capital may exceed its labor-time, it always includes the latter, and its excess is a logical condition of the process of production. The time of production, then, is always that time in which a capital produces use-values and surplus-values, and in which it performs the functions of productive capital, al- though it includes time in which it is either latent or pro- duces without creating surplus-values. Within the sphere of circulation, capital abides as com- modity-capital and money-capital. Its two processes of cir- culation consist in its transformation from the commodity- form into that of money, and from the money-form into that of commodities. It does not alter the character of these pro- cesses as transactions in circulation, of processes in the simple metamorphosis of commodities, that this transfor- mation of commodities into money is at the same time a re- 142 Capital. alization of the surplus-values embodied in the commodities, and that the transformation of money into commodities is at the same time a transformation or reconversion of cap- ital-value into the forms of its elements of production. The time of circulation and time of production mutually exclude one another. During its time of circulation, capital does not perform the functions of productive capital and therefore produces neither commodities nor surplus-value. If we study the cycle in its simplest form, so that the entire capital-value passes in one bulk from one phase into the other, we can plainly see that the process of production is interrupted and therefore also the production of surplus- value, so long as its time of circulation lasts, and that the renewal of the process of production will take place prompt- ly or slowly, according to the length of the time of circula- tion. But if the various parts of capital pass through the cycle successively, so that the rotation of the entire capital- value proceeds successively by the rotation of its component parts, then it is evident that the part performing continu- ally the function of productive capital must be so much smaller, the longer the aliquot parts of capital-value remain in the sphere of circulation. The expansion and contrac- tion of the time of circulation are therefore a check on the contraction or expansion of the time of production or of the volume which a given capital can assume for its produc- tive function. To the extent that the metamorphoses of circulation of a certain capital are reduced, to the extent that the time of circulation approaches zero, its productivity and increment of surplus-value will increase. For instance, if a capitalist executes an order, so that he receives pay- ment for his goods on delivery, and if this payment is made in his own elements of production, the time of circulation of his capital approaches zero. In short, the time of circulation of a certain capital lim- its its time of production and the process of creating surplus- value. And this limitation is proportional to the duration of the time of circulation. Seeing that this time may in- crease or decrease in different ratios, it may limit the time of production in various degrees. But political economy sees only the seeming effect, that is to say the effect of the The Time of Circulation. 148 time of circulation on the creation of surplus-values in gen- eral. It takes this negative effect for a positive one, because its results are positive. It clings so much the more to this semblance, as this seems to prove that capital has a mystic source from which surplus-value flows toward it through the circulation, independently of its process of production and the exploitation of labor. We shall see later, that even sci- entific political economy has been deceived by this appear- ance of things. Various phenomena contribute to this de- ception: 1. The capitalist method of calculating profit, in which the negative cause figures as a positive one, seeing that with capitals in different spheres of investment, with different times of circulation only, a longer time of circula- tion tends toward an increase of prices, in short serves as one of the causes which bring about an equalization of profits. 2. The time of circulation is but a factor in the period of turn-over; and this period includes both the time of production and reproduction. What is really due to the period of turn-over, seems to be due to the time of circu- lation. 3. The conversion of commodities into variable capital (wages) is conditioned on their previous conversion into money. In the accumulation of capital, the conversion into additional variable capital takes place in circulation, or during the time of circulation. It thus appears as though this accumulation were due to the time of circulation. Within the sphere of circulation, capital passes through the two opposite phases of C — M and M — C, no matter in what succession. Hence its time of circulation is likewise divided into two parts, viz.: the time required for its con- version from money into commodities, and that required for its conversion from commodities into money. We have already learned from the analysis of the simple circulation of commodities (Vol. I, Chap. Ill), that C — M, the sale, is the most difficult part of its metamorphosis and that, therefore, under ordinary conditions, it takes up the greater part of its time of circulation. As money, value exists in its ever convertible form. But as a commodity, value must first be transformed into money in order to assume such a directly convertible form of continual readiness. How- ever, in the process of circulation of capital, its phase C — M 144 Capital. deals with commodities which constitute definite elements of. productive capital in a certain investment. The means of production may not be on the market and must first be produced, or they must be ordered from distant markets, or their ordinary supply is interrupted, or prices change, etc., in short there are a multitude of circumstances which are not visible in the simple change of form from M to C, but which nevertheless require more or less time for this part of the phase of circulation. C — M and M — C may not only be separate in time, but also in space, the selling and the buying market may be located apart. In the case of factories, for instance, the buyer and seller are frequently different persons. In the production of commodities, circu- lation is as necessary as production itself, so that agents are just as much needed in circulation as in production. The process of reproduction includes both functions of capital, therefore it also includes the necessity of having representa- tives for both of them, either in the person of the capital- ist or of wage-workers, as his agents. But this is no more a good reason for mistaking the agents in circulation for those in production, than it is to confound the functions of commodity-capital and money-capital with those of produc- tive capital. The agents of circulation must be paid by the agents of production. And since capitalists who mutually sell and buy do not create either values or products by these transactions, this state of affairs is not changed, if they are enabled or compelled by the expansion of their business to charge others with those transactions. In some businesses, the buyers and sellers get their wages in the form of percentages on the profits. It does not alter the matter to use the phrase that they are paid by the con- sumer. The consumers can pay only inasmuch as they are themselves instrumental in producing an equivalent in com- modities as agents of production or appropriate it out of the product of other agents in production, whether it be by means of legal titles or of personal services. There is a difference between C — M and M — C, which has nothing to do with the different forms of commodities and money, but arises from the capitalist character of pro- duction. Intrinsicallv. C — M as well as M — G is merely a The Time of Circulation. 145 conversion of a given value out of one form into another. But C — M' is at the same time a realization of the surplus- value contained in C Not so M — C. For this reason the sale is more important than the purchase. M — C is under normal conditions a necessary act for the creation of more value by means of the value contained in it, but it is not the realization of surplus-value; it is the intimation of its production, not its after-effect. The form in which a commodity exists, the form of its use-value, prescribes definite limits for the circulation of commodity-capital C — M\ Use-values are naturally perish- able. Hence, if they are not productively or individually consumed within a certain time, in other words, if they are not sold within a certain period, they spoil and thus lose with their use-value also the faculty of being bearers of sur- plus-value. The capital-value, or eventually the surplus- value, contained in them is lost. The use-values do not remain the bearers of perennial capital-value increasing by the addition of surplus-value, unless they are continually reproduced and replaced by new use-values of the same or of some other order. The sale of the use-values in the form of finished commodities, their transfer to the productive or individual consumption by means of this sale, is the ever recurring requirement for their reproduction. They must change their old use-form within a certain time, in order to continue their existence in a new form. Exchange- value maintains itself only by means of this constant renewal of its substance. The use-values of certain commodities spoil sooner or later; the time between their production and consumption may therefore be long or short; they may retain the form of commodity-capital in phase C — M of the circulation for a shorter or longer term and endure a shorter or a longer time of circulation. The limit of the time of circulation of a certain commodity-capital imposed by the spoiling of the substance of the commodity is the absolute limit of this part of the time of circulation, or of the time of circulation of commodity-capital as such. To the extent that a commodity is perishable, to the extent that it must be sold and consumed as soon as possible after its production, its capacity for removal from its place of pro- 146 Capital. duction is restricted, the sphere of its circulation is nar- rowed, its selling market is localized. For this reason a commodity is so much less suited for capitalist production as it is perishable, as its physical composition limits its time of circulation. It is available for this purpose only in thickly populated districts, or to the extent that the im- provement of transportation brings places closer together. But the concentration of the production of such articles into a few hands and in a populous district may create a relatively large market even for them, for instance, such as the product of large beer-breweries, dairies, etc. The Expenses of Circulation. 14*J CHAPTER VI. THE EXPENSES OF CIRCULATION. I. GENUINE EXPENSES OF CIRCULATION. 1. The Time of Purchase and Sale. The transformations of capital from commodities into money and from money into commodities are at the same time transactions of the capitalist, acts of purchase and sale. The time in which these transformations take place consti- tutes from the personal standpoint of the capitalist a purchase and selling time, it is the time during which he performs the functions of a buyer and seller on the market. Just as the time of circulation of capital is a necessary part of its time of reproduction, so the time in which the capitalist buys and sells and remains in 'the market is a necessary part of the 'time in which he performs the functions of a capitalist, in which he personifies capital. It is a part of his business time. 9a Since we have assumed that commodities are bought and sold at their values, these transformations constitute merely a conversion of the same value from one form into another, from the form of commodities into that of money or vice versa, a change of composition in substance. If commodi- ties are sold at their values, then the magnitude in the hands of the buyer and seller remains unchanged. Only the form of its existence is changed. If the commodities are not sold at their values, then the sum of the con- verted values remains the same; the plus on one side is off- set by a minus on the other. The metamorphoses C — M and M — C are transactions between buyers and sellers ; they require time to perfect the trade, the more so as this represents a struggle in which each seeks to get the best of the other; for to business men applies the statement: "When Greek meets Greek, then 9a From here to 10 are statements taken from a note at the end of Manuscript VIII. 148 Capital. comes the tug of war." The conversion of a commodity costs time and labor-power, not for the purpose of creating values, but in order to accomplish the conversion of value from one form into another. The mutual attempt to ap- propriate an extra share of this value, changes nothing fundamentally. This work, increased by the evil designs on either side, does not create value any more than the work done in a civil process increases the value of the ob- ject of contention. It is with this labor, which is a neces- sary part of the totality of the capitalist process of produc- tion, including the circulation or included by it, as it is with the labor of combustion of some element used for the generation of heat. This labor of combustion does not generate any heat, although it is a necessary part in the process of combustion. In order to employ coal as fuel, it must combine wdth oxygen, and for this purpose coal must be brought to the condition of carbonic acid gas; in other words, a physical change of form must take place. The separation of carbon molecules, which are united into a solid mass, <and the breaking up of these molecules into their atoms, must precede the new combination, and this requires a certain effort, which is not transformed into heat, but taken from it. If the owners of commodities are not capitalists, but direct producers, the time required for buying and selling is so much loss of labor time, and for this reason such trans- actions were deferred in ancient and medieval times to holidays. Of course, the dimensions acquired by the business in commodities in the hands of the capitalists cannot transform this labor, which does not create any values and promotes merely changes of form, into labor productive of surplus- value. Nor can this miracle of transsubstantiation be accom- plished by unloading this work of "combustion" from the shoulders of the industrial capitalists to those of paid em- ployees who attend to it exclusively. These employees will not tender their services out of pure love for the capitalists. The collector of some real-estate owner or the messenger of some bank is indifferent to the fact that their labor does not add any value to the rent or to the money carried to the bank in bags.10 10 See explanation 9a. The Expenses of Circulation. 149 For the capitalist who has others working for him, selling and buying become primary functions. Seeing that he ap- propriates the products of many on a large social scale, he must sell on the same scale and then reconvert the money into elements of production. But still neither the sale nor the purchase create any values. An illusion is here cre- ated by the function of merchant's capital. But without en- tering at this point into a detailed discussion of this fact, we can plainly see this much : If a function, which is unproduc- tive in itself, although a necessary link in reproduction, is transformed by a division of labor from an incidental occu- pation of many into an exclusive occupation of a few, the character of this function is not changed thereby. One mer- chant, as an agent promoting the transformation of com- modities by assuming the role of a mere buyer and seller, may abbreviate by his operations the time of sale and pur- chase for many producers. To that extent he may be re- garded as a machine which reduces a useless expenditure of energy or helps to set free some time of production." In order to simplify the matter, seeing that we shall not discuss the merchant as a capitalist and his capital as mer- chant's capital until later, we shall assume that this buying and selling agent is a man who sells his labor-power. He expends his labor-power and labor-time in the operations C — M and M — C. And he makes his living that way, just as another does by spinning or by making pills. He per- forms a necessary function, because the process of reproduc- tion itself includes an unproductive function. He works as well as any other man, but intrinsically his labor creates 11 "The expenses of commerce, although necessary, must be regarded as a burden." (Quesnay, Analyse du Tableau Economique, in Daire. Physiocrates, part I, Paris, 1846, page 71.) According to Quesnay, the "profit," which the competition between merchants produces, and which he sees in the fact that competition compels them "to figure a discount on their loss or gain is really nothing but a prevention of loss for the seller at first hand or for the consuming buyer. Now, a pre- vention of loss on the expenses of commerce is not a real product or an increase of wealth through commerce, considering it simply as an exchange, whether with or without the cost of transportation." (Pages 145 and 146.) "The expenses of commerce are always paid by those who sell the products and who would enjoy the full prices paid for them by the buyers, if there were no incidental expenses." (Page 163, Ibidem.) The "proprietaires" and "producteurs" are "salariants," the merchants are "salaries." (Page 164, Quesnay, Problemes Economiques, in Daire, Physiocrates, Part I, Paris, 1S46.) 150 Capital. neither products nor values. He belongs himself to the un- productive expenses of production. His services do not trans- form an unproductive function into a productive one, nor unproductive into productive labor. It would be a miracle, if such a transformation could be accomplished by a mere transfer of a function. His usefulness consists rather in the fact that a small part of the labor-power and labor-time of society is tied up in this unproductive function. We shall as- sume that he is a wage-worker, even though better paid than others. Whatever may be his wages, in the role of a wage- worker he always works a part of his time for nothing. He may receive in wages the value of the product of eight work- ing hours, when he performs his functions for ten hours. But his two hours of surplus-labor do not produce any sur- plus-values any more than his eight hours of necessary labor, although by means of these eight hours of necessary labor a part of the social product is transferred to him. In the first place, looking at it from the standpoint of society, his labor- power is used up for ten hours in a mere function of circula- tion. It cannot be used otherwise, for productive labor. In the second place, society does not pay for those two hours of surplus-labor, although they are expended by the man who worked during that time. Society does not appropriate any surplus-product or value through them. But the expenses of circulation, which he represents, are thereby reduced by one- fifth, from ten hours to eight. Society does not pay any equivalent for this fifth of this actual time of circulation, of which he is the agent. But if this man is employed by a capitalist, then the non-payment of these two hours re- duces the expenses of circulation of his capital, which rep- resent a deduction from his income. For the capitalist this is a positive gain, because the negative limit for the utiliza- tion of his capital is thereby reduced. So long as small inde- pendent producers of commodities spend a part of their own time in selling and buying, this shows itself either as time spent during the intervals of their productive function, or as a reduction of their time of production. At all events, the time required for this purpose is an expense of circulation, which does not add any increment to the converted values. It is the expense which is required in The Expenses of Circulation. 151 order to convert them from commodities into money. Inas- much as the capitalist producer of commodities appears as an agent of circulation, he differs from the direct producers of commodities only by the fact that he buys and sells on a larger scale and therefore is a greater factor in circula- tion. And if the expansion of his business compels or en- ables him to hire his own wage-laborers as agents of circu- lation, the nature of this phenomenon is not changed in any way. A certain amount of labor-power and labor-time must be expended in the process of circulation, so far as it is merely a change of form. But this now appears as an addi- tional expenditure of capital. A part of the variable capi- tal must be expended in the purchase of these labor-powers active only in circulation. This advance of capital creates neither products nor values. It reduces to that extent the volume of the productive function of capital. It is as though one part of the product were transformed into a machine, which buys or sells the rest of the product. This machine deducts so much from the product. It does not participate in the productive process, although it can reduce the labor- power required for the circulation. It constitutes simply a part of the expenses of circulation. 2. Bookkeeping. Apart from the actual selling and buying, labor-time is expended in bookkeeping, which assimilates more mate- rialized labor, such as pens, ink, paper, desks, office-expenses. This function, therefore, requires labor-power and materials. It is the same condition of 'things which we observed in the case of the time of sale and purchase. As a principle of unity within its cycles, as a value in process of rotation, whether it be in the sphere of production or in both phases of the sphere of circulation, capital exists ideally only in the form of accounting money, principally in the mind of the producer of commodities, more espe- cially the capitalist producer of commodities. This move- ment is fixed and controlled by bookkeeping, which includes also the determination of prices, or the calculation of the prices of commodities. The movement of production, espe- 152 Capital. cially of the productian of values — in which the commodities figure as bearers of value, as mere names of things, the ideal existence of which as values is crystallized in accounting money — thus is symbolically reflected in imagination. So long as the individual producer of commodities keeps ac- count only in his head (for instance a farmer; a bookkeep- ing tenant is not known until capitalist production intro- duces him), or incidentally, outside of his time of produc- tion, makes a note of his expenses, receipts, instalment days, etc., just so long does it appear intelligible that this func- tion, and the materials consumed by it, such as paper, etc., require an additional expenditure of labor-time and mate- rials, which is necessary, but constitutes a deduction from the time available for productive consumption and from the materials which are used in the actual process of production and are embodied in the creation of products and values.12 The nature of the function itself is not changed. The vol- ume which it assumes by its concentration in the hands of the capitalist producer of commodities, who transforms it from a function of many small producers into that of one single capi- talist within a process of large scale production does not alter the case, neither is its nature affected by its separation from those productive functions, which it accompanied inci- dentally, nor by its modification into an independent func- tion of agents exclusively entrusted with it. The division of labor, the assuming of independence, does not make a function productive, if it was not so before it became independent. If a capitalist invests his capital anew, then he must invest a part of it in hiring a bookkeeper, etc., and materials for bookkeeping. If his capital is already in active operation, in the process of continual reproduction, 12 In. the middle ages, we find bookkeeping for agriculture only in the convents. But we have seen in Vol. I, that a bookkeeper was in- stalled tor agriculture as early as the primitive Indian, communes. Book- keeping is then made an independent function of a communal officer. This division of labor saves time, pains, and expenses, but production and bookkeeping for production remain as much two different things as a cargo of a ship and the way-bill. In the person of the bookkeeper, a part of the labor-power of the commune is withdrawn from production, and the cost of his function is not reproduced by his own labor, but by a deduotion from the communal product. What is true of the book- keeper of an Indian commune, is true under changed circumstances of the bookkeeper of the capitalists. (From Manuscript II.) The Expenses of Circulation. 153 then he must continually reconvert a part of his commodity- product by means of its transformation into money, into a bookkeeper, salesman, etc. This part of his capital is with- drawn from production and belongs to the expenses of cir- culation, deductions from the total product (including the labor-power itself, which is expended wholly for this func- tion). But there is a certain difference between the expenses incidental to bookkeeping, or the unproductive expenditure of labor-time on one side, and that of mere sellingand buying time on the other. The latter arise only from the definite social form of the process of production, they are due to the fact that it is a production of commodities. Bookkeep- ing, for the control and ideal survey of the process, becomes necessary to the extent that the process assumes a social scak and loses its purely individual character. It is, therefore, more necessary in capitalist production than in scattered handicraft and agricultural production, and still more nec- essary in co-operative than in capitalist production. But the expenses of bookkeeping are reduced to the extent that production is concentrated and becomes social bookkeeping. We are here concerned only about the general character of the expenses of circulation, which arise out of the general metamorphoses. It is superfluous to discuss all its details. To what extent phenomena, which are mere incidents in changes of form due to the social character of the process of production, may deceive the eyes when they cease to be im- perceptible and incidental accompaniments of individual pro- duction, we may observe in the case of the mere handling of money, when it is concentrated into an exclusive function of banks on a large scale, or of a cashier in individual busi- nesses. But it must be remembered, that these expenses of circulation do not change their character by changing their form. 3. Money. Whether a product is intended for a commodity or not, it is always a materialized form of wealth, a use-value to be pro- ductively or individually consumed. If it is a commodity, 154 Capital. its value is ideally expressed in its price, which does not change its actual use-value. But the fact that certain com- modities, such as gold and silver, may perform the function of money and as such reside exclusively in the process of circulation (even in the form of a hoard, a reserve fund, etc., they remain in the sphere of circulation, although latent), is due to the definite social form of the process of production, which is a production of commodities. Since capitalist pro- duction gives to all its products the general form of com- modities, and since the overwhelming mass of products are produced for sale and must therefore assume the form of money, and since the commodity-part of the social wealth grows continually in proportion, it follows that the quantity of gold and silver employed as means of circulation, paying medium, reserve fund, etc., must likewise increase. These commodities performing the function of money do not enter either into productive or into individual consumption. They represent social labor fixed in a form in which it may serve as a mere machine in circulation. Apart from the fact that a part of the social wealth is tied up in this unproductive form, the wearing out of the money constantly requires its reproduction, or the conversion of more social labor, in the form of products, into more gold and silver. These expenses of reproduction are considerable in capitalistically developed nations, because there is a large part of the wealth tied up in the form of money. Gold and silver as money-commodi- ties represent social expenses of circulation, due to the social form of production. They are dead expenses of commodity- production in general, and they increase with the develop- ment of this production, especially when capitalized. They represent a part of the social wealth, which must be sacrificed in the process of circulation." II. EXPENSES OF STORAGE. Expenses of circulation, which are due to a mere change 13 "The money circulating in a country is a certain portion of the capital of the country, absolutely withdrawn from productive purposes, in order to facilitate or increase the productiveness of the remainder ; a certain amount of wealth is, therefore, as necessary in order to adopt gold as a circulating medium, as it is to make a machine, in order to facilitate any other production." (Economist, Vol. V, Page 519.) The Expenses of Circulation. 155 of form in circulation, ideally speaking, do not enter into the value of the commodities. The capital parts expended for them are deductions from the productively expended capital, so far as the capitalist is concerned. Not so the ex- penses of circulation which we shall consider now. They may arise from processes of production, which are continued only in circulation, the productive character of which is merely concealed by the form of the circulation. Or, on the other hand, they may represent from the standpoint of society mere unproductive expenses of subjective or mate- rialized labor, while for this very reason they may become productive of value for the individual capitalist, by making an addition to the price of his commodities. This follows from the simple fact that these expenses are different in different spheres of production, or even for different indi- vidual capitalists in the same sphere of production. When added to the prices of commodities, they are divided in pro- portion as they fall upon the shoulders of the various in- dividual capitalists. But all labor which adds value can also add surplus-value, and will always do so under capitalist production, the value created by it depending on the amount of the labor, the surplus-value added depending on the amount which the capitalist pays for it. In other words, expenses which increase the price of a commodity without adding anything to its value, which therefore are dead ex- penses so far as society is concerned, may be a source of profit for the individual capitalist. On the other hand, in so far as the addition to the price of commodities merely distributes these expenses of circulation equally, the unpro- ductive character of this expenditure is not changed. For instance, insurance companies divide the losses of individual capitalists among the capitalist class. But this does not alter the fact that these equalized losses are losses so far as the aggregate social capital is concerned. 1. General Formation of Supply. During its existence as commodity-capital, or its stay on the market, in other words, in the interval between the proc- ess of production from which it originates and the process 156 Capital. of consumption into which it enters, the product forms a supply of commodities. As a commodity on the market, and therefore in the form of a supply, the commodity-prod- uct figures twice in each cycle: The first time as the com- modity-product of that rotating capital whose cycle is being considered; the second time as the commodity-product of another capital, which must be found ready on the market, in order to be bought and converted into productive capi- tal. It is, indeed, possible that this last-named commodity- capital is not produced until ordered. In that case, an in- terruption occurs until it has been produced. But the flow of the process of production and reproduction requires that a certain mass of commodities (means of production) should be always on the market, that there should be a supply of them. In the same way, productive capital comprises the purchase of labor-power, and the money-form is here only that form of the value of means of existence which the laborer must find at hand on the market, for the greater part. We shall discuss this more in detail in a short while ; suffice it to make this point at present. From the standpoint of the rotating capital-value, which has been transformed into a commodity-product and must now be sold or reconverted into money, which, therefore, has for the moment the function of commodity-capital on the market, the condition in which it forms a supply is contrary to its intentions and its stay on the market is in- voluntary. The sooner the sale is effected, the smoother runs the process of reproduction. The delay in the phase C — M' prevents the actual change of substance which must take place in the rotation of capital and obstructs its further func- tion as productive capital. On the other hand, so far as M — C is concerned, the constant presence of a supply of commodities on the market is a requirement for the flow of the process of reproduction and of the investment of new or additional capital. The demurrage of the commodity-capital as a supply on the market requires buildings, stores, storage places, ware- houses, in other words, an expenditure of constant capital; furthermore the payment of labor-power for storing the com- The Expenses of Circulation. 157 modities. Finally, the commodities spoil and are exposed to injurious elementary influences. Additional capital is required to protect them, and this capital must be invested in materialized labor as well as in labor-power." We see, then, that the sojourn of commodity-capital as a supply on the market causes expenses, which belong to the expenses of circulation, since they do not fall within the sphere of production. These expenses of circulation differ from those mentioned under I, by the fact that they enter in part into the value of the commodities, in other words, that they increase the price of commodities. Under all circum- stances the capital and labor-power required for the con- servation and storage of the commodity-supply, are with- drawn from the direct process of production. On the other hand, the capitals thus employed, including their labor- power, must be reproduced by the social product. Their ex- penditure, therefore, reduces the productivity of labor-power to that extent, so that a greater amount of capital and labor is needed to obtain a certain intended effect. They are dead expenses. Inasmuch as the expenses of circulation arising out of the formation of a supply of commodities are due merely to the time required for the transformation of existing com- modity-values into money, in other words, inasmuch as they are due to the prevailing social form of production, which makes the production of commodities and their transforma- tion into money imperative, they share the character of the expenses of circulation enumerated under I. On the other hand, the value of the commodities is here preserved or in- creased, because the use-value, the product itself, is placed in conditions which require an outlay of capital. The com- 14 Corbet calculates, in 1841, that the cost of storing wheat for a season of nine months amounts to a loss of lx/<> per cent in quantity, 3 per cent for interest on the price of wheat, 2 per cent for warehouse rental, 1 per cent for sifting and drayage, % per cent for delivery, together 7 per cent, or 3 sh. 6 d. on a price of 50 sh. per quarter. (Th. Corbet, An Inquiry Into the Causes and Modes of the Wealth of Individuals, etc., London, 1841.) According to the testimony of Liverpool merchants before the railroad commission, the net expenses of grain storage in 1865 amounted to 2 d. per month per quarter, or 9 to 10 d. per ton. (Royal Commission on Railways, 1867. Evidence, page 19; Nr. 331.) 158 Capital. modities are -submitted to operations, which expend addi- tional labor on the use-values. But the computation of the values of commodities, the bookkeeping incidental to this process, the transactions of sale and purchase, do not influ- ence the use-values in which the exchange-values of the com- modities are embodied. These transactions concern merely the form of the values. Although, in the present case, the expenses of keeping a supply (which is done involuntarily) arise only from a delay of the metamorphosis and from its necessity, these expenses differ from those mentioned under I, in that they are not made for the purpose of effecting a change of form, but for the purpose of preserving the value embodied in the commodity as a use-value, which can- not be preserved in any other way than by preserving the use-value, the product, itself. The use-value is neither in- creased nor raised in value, on the contrary, it diminishes. But its diminution is restricted and it is preserved. Neither is the advanced value contained in the commodity increased, although new materialized and subjective labor is added. We have now to investigate furthermore, to what extent these expenses arise from the peculiar nature of the produc- tion of commodities in general and from the prevailing abso- lute form of this mode of production, its capitalistic form; and to what extent they are common to all social production and merely assume a peculiar form and mode of expression in capitalist production. Adam Smith has expressed the strange opinion, that the formation of a supply is a phenomenon peculiar to capital- ist production alone.15 More recent economists, for instance Lalor, insist on the other hand, that it declines with the development of capitalist production. Sismondi even re- gards this as one of the drawbacks of this mode of produc- tion. As a matter of fact, the supply exists in three forms: In the form of productive capital, in the form of a fund for individual consumption, and in the form of a commodity- supply or commodity-capital. The supply in one form de- 15 Wealth of Nations, Book II, Introduction. The Expenses of Circulation. 159 creases relatively, when it increases in another, although it may increase absolutely in all three forms simultaneously. It is plain from the outset, that wherever production is carried on for direct consumption on the part of the pro- ducer, and only to a minor extent for exchange or sale, where the social product does not assume the character of commodities at all, or only to a small degree, there the sup- ply in the form of commodities can be only a small and insignificant part of the social wealth. On the other hand, the supply for consumption is relatively large, especially that of the means of existence. We have but to take a look at ancient agriculture, in order to understand this. The overwhelming part of the product there constitutes directly a supply of means of production and means of existence, without becoming a supply of commodities, because it re- mains in the hands of its producers and owners. It does not assume the form of a supply of commodities, and for this reason Adam Smith declares that there is no supply at all in societies based on this form of production. He confounds the form of the supply with the supply itself and believes that society -hitherto lived from hand to mouth or trusted to the luck of the next day.16 This is a naive misunderstanding. A supply in the form of productive capital exists in the shape of means of production, which are either in operation in the process of production, or at least in the hands of the producer, so that they are latent in the process of produc- 16 Instead of a supply arising from the conversion of the product into a commodity, and of the supply of articles of consumption into commodi- ties, as Adam Smith thinks, this transformation, on the contrary, causes violent crises in the economy of the producer during the transition from production for use to production for sale. In India, for instance, the custom of storing up large quantities of grain in years of superfluity, when little could be gotten for it, was observed until very recent times. (Return. Bengal and Orissa Famine. H. of C, 1807, I, page 230, Nr. 74.) The sudden increase in the demand for cotton, jute, etc., led in many parts of India to a restriction of rice culture, a rise in the price of rice, and a sale of old supplies of the producers. Then followed the unexampled export of rice to Australia, Madagascar, etc., in 1864-66. This accounts for the acute character of the famine of 1866, which cost the lives of more than a million inhabitants in the district of Orissa alone (1. c. 174, 175, 213, 214, and III. Papers relating to the Famine in Behar, pages 32, 33, where the "drain of the old stork" is emphasized as one of the causes of the famine). — From Manuscript II. 160 Capital. tion. We have seen previously, that with the develt pment of the productivity of labor, and therefore with the d evelop- ment of the capitalist mode of production, which develops the socially productive power of labor more than all previ- ous modes of production, there is a steady increase of the mass of means of production, which are permanently em- bodied in the productive process as instruments oi labor and perform their function in it for a longer or shorter time at repeated intervals (buildings, machinery, etc.) ; also, that this increase is at the same time the premise and result of the development of the productivity of social labor. It is especially capitalist production, which is characterized by relative as well as absolute growth of this sort of wealth. The material forms of existence of constant capital, the means of production, do not consist merely of such instru- ments of labor, but also of raw material in various stages of finish and of auxiliary substances, with the enlargement of the scale of production and the increase in the productivity of labor by co-operation, division, machinery, etc., the mass of raw materials and auxiliary substances used in the daily process of reproduction, grows likewise. These elements must be ready at hand in the shop. The volume of this form of productive capital increases absolutely. In order that the process may flow along smoothly — apart from the fact whether this supply may be renewed daily or only at fixed intervals — there must always be more raw material, etc., accumulated at the place of production than is used up, say, daily or weekly. The continuity of the process re- quires that the fulfillment of its conditions should neither depend on its possible interruption by daily purchases, nor on the daily or weekly sale of the product, so that the regu- larity of its reconversion into its elements of production may not be broken. But it is evident, that the productive capital may be latent, or form a supply, in different propor- tions. There is, for instance, quite a difference, whether a spinner must have on hand a supply of cotton or coal for three months or for one. Plainly this supply may decrease relatively, while it may at the same time increase absolutely. The Expenses of Circulation. 161 This depends on various conditions, all of which practi- cally amount to the requirement that there shall be a great- er rapidity, regularity, and security in furnishing the neces- sary amount of raw material always in such a way, that there may be no interruption. To the extent that these conditions are not fulfilled, to the extent that there is no rapid- ity, regularity, and security of supply, the latent part of the productive capital in the hands of the producer, that is to say the supply of raw materials waiting to be used, must increase in size. These conditions are inversely propor- tional to the degree of development of capitalist production, and thus to the productive power of social labor. The same applies to the supply in this form. However, that wnich appears as a decrease of the supply, for instance, to Lalor, is in part merely a decrease of the supply in the form of commodity-capital, or of the actual commodity-supply; it is only a change of form of the same supply. If, for instance, the mass of coal daily produced in a certain country, and therefore the scale and energy of the coal-industry, are great, the spinner does not need a large store of coal in order to insure the continuity of his produc- tion. The security of the continuous reproduction of the coal supply makes this unnecessary. In the second place, the rapidity with which the product of one process may be transferred as means of production to another process depends on the development of the means of transportation and communication. The cheapness of transportation plays a great role in this question. The continually renewed transport, for instance, of coal from the mine to the spin- nery, would be more expensive than the storing up of a large supply for a long time when the price of transporta- tion is relatively cheap. These two circumstances are due to the process of production itself. In the third place, the development of the credit-system exerts an influence on this question. The less the spinner is dependent on the immedi- ate sale of his yarn for the renewal of his supply of cotton, coal, etc., — and this dependence will be so much smaller, the more the credit-system is developed — the smaller can be the relative size of these supplies, in order to insure inde- 162 Capital. pendence from the hazards of the sale of yarn for the con- tinuous production of yarn on a given scale. In the fourth place, many raw materials, and half-finished products, etc., require long periods of time for their production, and this applies especially to all raw materials furnished by agricul- ture. If no interruption of the process of production is to take place, there must be a certain amount of raw materials on hand for the entire period, in which no new products can take the places of the old. If this supply decreases in the hands of the capitalist, it proves merely that it increases in the hands of the merchant in the form of a supply of commodities. The development of transportation, for in- stance, makes it possible to convey the cotton stored in the import warehouses of Liverpool rapidly to Manchester, so that the manufacturer can renew his supply in small por- tions according to his needs. But in that case, the cotton remains in so much larger quantities as a commodity- supply in the hands of the merchants in Liverpool. It is therefore merely a question of a change of form, and Lalor and others have overlooked this. And from the standpoint of social capital, the same quantity of products still remains in the form of a supply. The quantity of the supply re- quired for, say, a whole nation during the period of one year decreases to the extent that the means of transporta- tion are developed. If a large number of sailing vessels trade between America and England, the opportunities of England for the renewal of its supply of cotton are in- creased and the quantity of the cotton supply to be held in storage on an average decreases. The same effect is pro- duced by the development of the world-market and thus of the multiplication of the sources of supply of the same arti- cles. Various quantities of this supply are carried to the market from different countries and at different intervals. 2. The Commodity-Supply in Particular. We have already seen that the product assumes the gen- eral form of commodities on the basis of capitalist produc- tion, and to the extent that the scale and scope of this pro- The Expenses of Circulation. 163 duction increase, this character becomes prevalent. Even if production retains the same scale, there will still be a far greater proportion of the product in the form of commodi- ties, compared to other modes of production. And all com- modities, and therefore all commodity-capital, which is but another expression for commodities in the form of capital- value, constitute an element of the commodity-supply, unless they pass immediately from the sphere of production into productive or individual consumption, instead of remain- ing on the market in the interval between production and consumption. If the scale of production remains the same, the commodity-supply, that is to say, the individualization and fixation of the commodity-form of the product, grows therefore with the development of capitalist production. We have seen, furthermore ■, that this is merely a change of form on the part of the supply, that is to say the supply in the form of commodities increases on one side, while on the other the supply in the form of direct means of production for consumption decreases. It is merely a question of a changed form of the social supply. The fact that it is not only the relative size of the commodity-supply com- pared to the aggregate social product which increases, but also its absolute size, is due to the growth of the aggregate product with the advance of capitalist production. With the development of capitalist production, the scale of production becomes less and less dependent on the im- mediate demand for the product and falls more and more under the determining influence of the amount of capital available in the hands of the individual capitalist, of the instinct for the creation of more value inherent in capital, of the need for the continuity and expansion of its processes of production. This necessarily increases the mass of prod- ucts required in each branch of production in the shape of commodities. The amount of capital fixed for a longer or shorter period in the form of commodity-capital grows pro- portionately. In short, the commodity-supply increases. Finally, the majority of the members of human society are transformed into wage workers, into people who live from hand to mouth, who receive their wages weekly and spend them daily, who therefore must find a supply of the 164 Capital. necessities of life ready at hand. Although the individual elements of this supply may be in continuous flow, a part of them must always suffer delay in order that the supply may be ever renewed. All these characteristics are due to the form of capitalist production and to t"he metamorphoses incidental to it, which the product must undergo in the process of circula- tion. Whatever may be the social form of the supply of prod- ucts, its preservation requires an outlay for buildings, stor- age facilities, etc., which protect the product; furthermore for means of production and labor, more or less of which must be expended, according to the nature of the product, in order to preserve it against injurious influences. The more the supply is socially concentrated, the smaller are the rela- tive expenses. These expenses always consume a part of the social labor, either in a materialized or in a subjective form ; they require an outlay of capital which does not enter into the productive process itself and thus diminish the product. They constitute the cost of preserving the social wealth, and are, therefore, necessary expenses, without re- gard to the fact whether the existence of the social product in the form of a commodity-supply is due merely to the so- cial form of production, to the commodity-form and its metamorphoses, or whether we regard the commodity-sup- ply merely as a special form of the supply of products, a supply common to all societies, though not always in the form of a commodity-supply, which is a form of the sup- ply of products belonging to the process of circulation. The question is now, to what extent these expenses enter into the value of the commodities. If the capitalist has converted the capital advanced by him for means of production and labor-power into a prod- uct, into a mass of commodities ready for sale, and these commodities remain in stock unsold, then it is not only the creation of values by means of his capital which is inter- rupted. The expenses required for the conservation and storage of this supply in buildings, etc., and for additional labor, signify a positive loss for him. The final buyer would laugh in his face, if he were to say to him: "My articles The Expenses of Circulation. 165 were unsalable for six months, and their preservation dur- ing that period did not only make so and so much of my capital unproductive, but also cost me so much extra-ex- penses." "So much the worse for you," would the buyer say. "Here is another seller, whose articles were completed the day before yesterday. Your articles are old and proba- bly more or less injured by the ravages of time. Therefore you will have to sell cheaper than your rival." It does not alter the life-processes of a commodity, wheth- er its producer is a direct producer or a capitalist producer, who is merely a representative of the actual producer. The product must be converted into money. The expenses caused by the fixation of the product in the form of com- modities are a part of the individual adventures of the seller, and the buyer does not concern himself about them. The buyer does not pay for the time of circulation of the com- modities. Even if the capitalist holds his goods back inten- tionally, in times of an actual or expected revolution of values, it depends on the materialization of this revolution of values, on the correctness or incorrectness of the seller's speculation, whether he will recover his outlay or not. In- asmuch, therefore, as the formation of a supply involves a delay in the circulation, the expenses caused thereby do not add anything to the value of the commodities. On the other hand, there cannot be any supply without a sojourn of the commodities in circulation, without the stay of capi- tal for a longer or shorter time in the form of a commod- ity; hence there cannot be any supply without a delay of the circulation. It is the same with money, which cannot circulate without the formation of a money-reserve. Hence there cannot be any circulation of commodities without a supply of commodities. If this necessity does not confront the capitalist in C — M', it will do so in M — C; not so far a3 his own commodity-capital is concerned, but that of other capitalists, who produce means of production for him and necessities of life for his laborers. It appears that the nature of the case is not altered, whether the formation of a supply is voluntary or involun- tary, that is to say whether the producer accumulates a sup- 166 Capital. ply intentionally or whether his product forms a supply in ' consequence of the resistance offered to its sale by the con- ditions of the process of circulation. But it is useful for the solution of this question to know what distinguishes the voluntary from the involuntary formation of a supply. The involuntary formation of a supply arises from, or is identical with, an interruption of the circulation, which is independ- ent of the knowledge of the producer of commodities and thwarts his will. And what characterizes the voluntary formation of a supply? The seller seeks to get rid of his commodity as much as ever. He always offers his product as a commodity. If he were to withdraw it from sale, it would be only a, latent, not an effective organ of the com- modity-supply. The commodity as such is still as much as ever a bearer of exchange-value and can become effective only by discarding the commodity-form and assuming the money-form. The commodity-supply must have a certain size, in order to satisfy the demand during a given period. The contin- ual extension of the circle of buyers is one of the factors in the calculation. For instance, in order to last to a certain day, a part of the commodities on the market must retain the form of commodities while the remainder continue in flow and are converted into money. The part which is de- layed while the rest keep moving decreases continually, to the extent that the size of the entire supply decreases, until it is all sold. The delay of the commodities is thus calcu- lated on as a necessary requirement of their sale. The size of the supply must be larger than the average sale or the average extent of the demand. Otherwise the excess over this average could not be satisfied. At the same time, the supply must be continually renewed, because it is contin- ually dissolved. This renewal cannot come from anywhere in the last instance than from production, from a new sup- ply of commodities. Whether this comes from abroad or not, does not alter the case. The renewal depends on the periods required by the commodities for their reproduction. The commodity-supply must last during these periods. The fact that it does not remain in the hands of the original producer, but passes through various stores from the whole- The Expenses of Circulation. 167 saler to the retailer, changes merely the aspect, not the na- ture of the thing. From the point of view of society, a part of capital still retains the form of a commodity-supply, so long as the commodities have not been consumed produc- tively or individually. The producer tries to keep a supply corresponding to his average demand, in order to be some- what independent of the process of production and to insure for himself a steady circle of customers. Corresponding to the periods of production, terms of sale are formed and the commodities form a supply for a longer or shorter time, until they can be replaced by new commodities of the same kind. Tne continuity and regularity of the process of cir- culation, and therefore of the process of reproduction, which includes the circulation, is safeguarded only by the forma- tion of a supply. It must be remembered that C — M' may have been trans- acted for the producer of C, although C may still be on the market. If the producer were to keep his own commodities until they are sold to the last consumer, he would have to invest two capitals, one as a producer and one as a merchant. For the commodity itself, whether we look upon it as an in- dividual commodity or as a part of social capital, it is im- material whether the expenses of the formation of a supply fall on the shoulders of its producer or on those of a series of merchants from A to Z. In so far as the commodity-supply is nothing but the commodity-form of the supply which would exist at a given scale of social production either as a productive supply or as a supply of means of consumption, if it did not have the form of a commodity-supply, the expenses required for its conservation and formation, that is to say the expenses for materialized and subjective labor, are merely converted ex- penses for maintaining either the social fund for production or the social fund for consumption. The increase of the value of commodities caused by them distributes these expenses simply pro rata to the different commodities, since the cost is different for different kinds of commodities. And the expenses for the formation of the supply are as much as ever deductions from the social wealth, although they are one of its requirements. 168 Capital The circulation of commodities is normal only to the ex- tent that the formation of a commodity-supply is its prem- ise and necessarily arises by means of it, only in so far as this apparent stagnation is a part of the rotation itself, just as it is in the case of the formation of a money-reserve. But as soon as the commodities resting in the reservoirs of cir- culation refuse to give space to the succeeding wave of so that the reservoirs are overstocked, the commodity-sup- ply expands just as the hoards do, if the circulation of money is clogged. It does not make any difference, whether this stop occurs in the magazines of the industrial capital- ist or in the warehouses of the merchant. The supply is in that case not the premise of the uninterrupted sale, but the result of the impossibility of selling the goods. The expenses remain the same, but since they now arise entirely out of the form, that is to say, out of the necessity of selling the commodities, and out of the obstacles to this metamor- phosis into money, they do not enter into the values of the commodities, but cause deductions, losses, from the value to be realized. Since the normal and abnormal form of the supply cannot be distinguished externally, and both of them are clogging the circulation, these phenomena may be confounded and may deceive the agent in production so much easier as the process of circulation of the capital of the producer may continue smoothly, while that of the com- modities he has sold to merchants may be arrested. If the size of production and consumption increase, other condi- tions remaining the same, then the size of the commodity- supply increases likewise. It is renewed and absorbed just as fast, but its size is greater. Hence the growing size of the commodity-supply caused by a delay in the circulation may be mistaken for a symptom of the expansion of the process of reproduction, especially when the development of the credit-system makes it possible to mystify the real nature of the movement. The expenses of the formation of the supply consist (1) of quantitative losses of the mass of the product (for in- stance, in the case of a supply of flour) ; (2) in a spoiling of the quality; (3) in the materialized and individual labor required for the conservation of the supply. The Expenses of Circulation. 169 III. EXPENSES OF TRANSPORTATION. It is not necessary to enter at this place into all the details of the expenses of circulation, such as packing, sorting, etc. The general law is that all expenses of circulation, which arise only from changes of form, do not add any value to the commodities. They are merely expenses required for the realization of value, or for its conversion from one form into another. The capital invested in those expenses (in- cluding the labor employed by it) belongs to the dead ex- penses of capitalist production. They must be made up out of the surplus-product and are, from the point of view of the entire capitalist class, a deduction from the surplus- value or surplus product, just as the labor required for the purchase of the necessities of life is lost time for the labor- er. But the expenses of transportation play a too prominent role to pass them by without a few short remarks. Within the rotation of capital and the metamorphoses of commodities which are a part of that rotation, the mutation- processes of social labor take place. These mutation-processes may require a change of location on the part of the prod- ucts, their transportation from one place to another. Still, a circulation of commodities may take place without their change from place to place, and a transportation of prod- ucts without a circulation of commodities, or even with- out a direct exchange of products. A house which is sold by A to B does not wander from one place to another, al- though it circulates as a commodity. Movable commodity- values, such as cotton or iron ore, remain in the same ware- house at a lime when they are passing through dozens of circulation processes, when they are bought and resold by speculators." That which really changes its place here is the title of ownership, not the thing itself. On the other hand, transportation played a prominent role in the land of the Incas, although the social product did not circulate either as a commodity or by means of exchange. Even though the transportation industry under capital- ist production appears as a cause of expenses of circula- 17 Storch calls this circulation factice. 170 Capital. tion, this special form does not alter the nature of the prob- lem. Quantities of products are not increased by transporta- tion, neither is the eventual alteration of their natural quali- ties, with a few exceptions, the result of premeditated action, but an inevitable evil. But the use-value of things has no existence except in consumption, and this may necessitate a change of place on the part of the product, in other words, it may require the additional process of production of the transportation industry. The productive capital invested in this industry adds value to the transported products, partly by transferring value from the means of transportation, partly by adding value through the labor-power used in transportation. This last-named addition of value consists, as it does in all capitalist production, of a reproduction of wages and of surplus-value. Within each process of production, the change of place of the object of labor and the required instruments of labor and labor-power — such as cotton which passes from the card- ing to the spinning room, or coal which is hoisted from the shaft to the surface — play a great role. The transition of the finished product, in the role of a finished commodity, from one independent place of production to another in a different location shows the same phenomenon on a larger scale. The transport of the products from one factory to another is finally succeeded by the passage of the finished products from the sphere of production to that of consump- tion. The product is not ready for consumption until it has completed these movements. We have shown previously that a general law of the production of commodities decrees: The productivity of labor and its faculty of creating value stand in opposition to one another. This is true of the transportation industry as well as of any other. The smaller the amount of mate- rialized and subjective labor required for the transportation of the commodities over a certain distance, the greater is the productivity of labor, and vice versa.18 18 Ricardo quotes Say, who considers it one of the blessings of com- merce that it increases the price, or the value, of the products by trans- portation. "Commerce," writes Say, "enables us to obtain a commodity The Expenses of Circulation. 171 The absolute magnitude of the value which the trans- portation of the commodities adds to them is smaller in proportion as the productivity of the transportation industry increases, and vice versa, and directly proportional to the distance traveled, other conditions remaining the same. The relative magnitude of the value added to the prices of commodities by the cost of transportation, other condi- tions remaining the same, is directly proportional to their volume and weight. But there are many modifying cir- cumstances. Transportation requires, for instance, more or less provision for protection against accidents, and therefore more or less expenditure of labor and instruments of labor, according to the relative fragility, perishable nature, explo- siveness of the articles. In this department, the railroad mag- nates show a greater talent for inventing fantastic species than botanists and zoologists. The classification of the arti- cles on English railroads fills volumes and rests in general on the tendency of transforming the many-sided natural quali- ties of commodities into so many difficulties of transportation and inevitable excuses for exploitation. "Glass, which was formerly valued at the rate of 11 pounds sterling per crate, is now valued at only 2 pounds sterling in consequence of industrial improvements and the abolition of the glass-tax, but the railway rates are as high as ever and exceed the cost of transportation by water. Formerly glass and glass ware for lead work was carried for 10 shillings per ton with- in a radius of 50 miles of Birmingham. Now the rates have been raised to thrice that figure on the pretext of the risk involved by the fragility of the article. But if any- thing is broken, the railway management does not pay for at its original place of production and to transport it to another place for consumption ; it enables us, therefore, to increase the value of com- modities by .the entire difference between their price at the first and that at the second place." Ricardo remarks with reference to this : "True, but how is the additional value given to it? By adding to the cost of pro- duction, first, the expenses of conveyance, secondly, the profit on the advances of capital made by the merchant. The commodity is only more valuable, for the same reason that every other commodity may become more valuable, because more labor is expended on its production and conveyance before it is purchased by the consumer. This must not be mentioned as one of the advantages of commerce." (Ricardo, Principles of Political Economy, 3rd ed., London, 1821, pp. 309 310.) 172 Capital. it."19 The fact that the relative magnitude of the value added by the cost of transportation to the articles is inversely pro- portional to their values furnishes a special excuse for the railroads to tax the articles in direct proportion to their values. The complaints of the industrials and merchants on this score are found on every page of the testimony of witnesses given before the royal commission on railways. The capitalist mode of production reduces the cost of transportation for the individual commodities by the de- velopment of the means of transportation and communica- tion, by their concentration, the scale of their traffic, etc. It increases that part of the materialized and subjective social labor, which is expended in the transportation of commodi- ties, first by converting the great majority of all products into commodities, secondly, by substituting distant for local markets. The circulation, that is to say the actual perambulation of the commodities through space, is carried on in the form of transportation. The transportation industry forms on one hand an independent branch of production, and thus a special sphere of investment of productive capital. On the other hand, it is distinguished from other spheres of production by the fact that it represents a continuation of a process of production within the process of circulation and for its benefit. 19 Royal Commission of Railways, p. 31, No. 630. The Period and Number of Turn-Overs. 173 PART II The Turn-Over of Capital. CHAPTER VII. THE PERIOD AND NUMBER OF TURN-OVERS. We have seen that the entire time of rotation of a given capital is equal to the sum of its time of circulation plus its time of production. It is the period of time from the mo- ment of the advance of capital-value in a definite form to the return of the rotating capital-value in the same form. The compelling motive of capitalist production is always the creation of value by means of the advanced value, no matter whether this value is advanced in its independent money-form, or in commodities, in which case its value is only ideally independent in the price of the advanced com- modities. In both cases this capital-value passes through various forms of existence during its rotation. Its identity with itself is confirmed by the books of the capitalists, or in the ideal form of calculating money. No matter whether we consider the formula M...M' or the formula P...P, both forms imply (1) that the advanced value performs the function of capital-value and has created more value; (2) that it has returned to the form in which it began its rotation, having completed its cycle. The creation of more value by means of the advanced value M and the re- turn of capital to this money-form is plainly visible in M...M'. But the same takes place in the second formula. For the startiiig point of P is the existence of the elements of production, of commodities having a given value. The formula includes the creation of value by means of the ad- 174 Capital. vanced value (C and M') and the return to the original form, for in the second P the advanced value has again the form of the elements of production in which it was originally advanced. We have seen previously: "If production be capitalistic in form, so, too, will be reproduction. Just as in the former the labor-process figures but as a means towards the self- expansion of capital, so in the latter it figures but as a means of reproducing as capital, i. e., as self-expanding value, the value advanced." (Vol. I, chap. XXIII, p. 620.) The three formulas (I) M...M', (II) P...P, and (III) C...C, present the following distinctions: In formula II. P...P, the renewal of the process by the process of reproduc- tion is expressed as a reality, while it is only implied as a probability in formula I. But both of these formulas dif- fer from III by the fact that in them the advanced capital- value, either in the form of money or of material elements of production, is the starting and returning point. In M...M', the return to M' means M plus m. If the process is renewed on the same scale, M is again the starting point and m does not enter into it, but shows merely that M per- formed the function of capital and created surplus-value m, which it threw off. In the formula P...P, capital-value P advanced in the form of means of production is likewise the starting point. This form includes the creation of more value. If simple reproduction takes place, the same capital- ist renews the same process in the same form P. If accumu- lation takes place, then P' (equal in magnitude of value to M' and C) reopens the cycle as an expanded capital- value. But it begins with the advanced capital-value in its original form, although it is of greater value than before. In form III, on the other hand, capital-value does not begin the process as an advance, but as an expanded value, as the aggregate wealth existing in the form of commodities, of which the advanced value is but a part. This last form is important for the third part of this volume, in which the movement of the individual capitals is discussed in connec- tion with the movements of the aggregate social capital. But it is not available for the discussion of the turn-over of capi- The Period and Number of Turn-Overs. 1 * o tal, which always begins with the advance of capital-value in the forms of money or commodities, and which always requires the return of the rotating capital-value to the form in which it had been advanced. Of these cycles I and II, the former is serviceable in the study of the influence of the turn-over on the formation of surplus-value, the latter in the study of its influence on the formation of the prod- uct. Economists have not distinguished the different relations of the turn-over of capital to its cycles any more than they have distinguished between these cycles. They generally con- sider the formula M...M, because it dominates the individual capitalist and serves for a basis of his calculations, even if money is the starting point of this cycle only in the form of calculating money. Others start out from the outlay of capital in the form of elements of production and follow the cycle to the point of return, without alluding to the form of the returns, be they commodities or money. For instance, "the economic cycle, . . . the whole course of production, from the time that outlays are made till returns are received. In agriculture, seed time is its commence- ment, and harvesting its ending." S. P. Newman, Elements of Political Economy, Andover and New York, p. 81. Others begin with C, the third form. Says Th. Chalmers, in his work on "Political Economy," 2nd Ed.,' London, 1832, p. 84 and following, in substance: The world of the pro- ductive traffic may be regarded as rotating in a cycle, which we will call the economic cycle. Each cycle is completed, whenever the business, after passing through its successive transactions, returns to its starting point. The beginning may be made at the point where the capitalist gets his re- ceipts, which return his capital. From this point, the capi- talist proceeds once more to hire his laborers and parcel out to them their subsistence, or rather the means to purchase it with wages. They manufacture for him the articles which are his specialty. And the capitalist then takes his articles to the market and brings the cycle of this one series of transactions to a close by selling and receiving in the price of his commodities a return for his entire investment of capital. 170 Capital. As soon as the entire capital-value invested by some in- dividual capitalist in any one branch of production has completed the cycle of its movements, it finds itself once more in the form in which it started and is ready to repeat the same process. It must repeat this process, if value is to perpetuate itself as capital-value and create more value. The individual cycle is but a fragment in the life of capital, it is a period which is continually repeated. At the end of the period M...M' capital has once more the form of money- capital, which passes anew through that series of metamor- phoses in which its process of reproduction, or self -expan- sion, is included. At the end of the period P...P, capital has resumed the form of elements of production, which are the requirement for a renewal of its cycle. The rotation of capital, considered as a periodical process, not as an indi- vidual event, constitutes its turn-over. The duration of this turn-over is determined by the sum of its time of produc- tion plus its time of circulation. This sum constitutes the time of turn-over. It measures the passing of time while the entire capital-value goes through the period of its cycle until it reaches the next one. It counts the periods in the life of capital, or, the time of the renewal, repetition, of the process of self-expansion, which is the process of production, of the same capital-value. Apart from the individual adventures which may ac- celerate or retard the time of turn-over of individual capi- tals, this time is different according to the different spheres of investment of capitals. Just as the working day is the natural unit for the func- tion of labor-power, so the year is the natural unit for the periods of turn -over of rotating capital. The natural basis of this unit is found in the fact that the most important crops of the temperate zone, which is the mother country of capitalist production, are annual products. If we designate the year as the unit of the time of turn- over by T, the time of turn-over of a given capital by t, and the number of its turn-overs by n, then n = ? If» for instance, the time of turn-over t is 3 months, then n is equal to g2, or 4: in other words, capital is turned over The Period and Number of Turn- Overs. 177 four times per year. If it is equal to 18 months then n = \% = |, capital completes only two-thirds of its turn-over in one year. If its time of turn-over is several years, it is com- puted in multiples of one year. From the point of view of the capitalist, the time of turn- over is the time for which he must advance his capital in order to create value with it and have it returned in its orig- inal form. Before we can study the influence of the turn-over on the processes of production and self-expansion, we must take a look at two new forms which accrue to capital from the process of circulation and influence the form of its turn- over. 178 Capital. CHAPTER VIII. FIXED CAPITAL AND CIRCULATING CAPITAL. I. Distinctions of Form. We have seen in vol. I, chap. VIII, that a portion of the constant capital retains that form of the use-value, in which it entered into the process of production and does not share in the transfer to the products toward the creation of which it contributes. In other words, it performs for a longer or shorter period, in the ever repeated labor process, the same function. This applies, for instance, to buildings, machin- ery, etc., in short to all things which we comprise under the name of instruments of labor. This part of constant capital yields value to the product in proportion as it loses its own exchange-value with the dwindling of its use-value. This transfer of value from an instrument of production to the product which it helps to create is determined by a cal* culation of averages. It is measured by the average dura- tion of its function, from the moment that the instrument of labor transfers its parts to the product to the moment that it is completely spent and must be reproduced, or re- placed by a new specimen of the same kind. This, then, is the peculiarity of this part of constant capital of the instruments of labor: A certain part of capital has been advanced in the form of constant capital, of instruments of labor, which now per- form their function in the labor-process so long as their own use-value lasts, which they bring with them into this process. The finished product, with the elements it absorbed from the instruments of production, is pushed out of the process of production and transferred as a commodity to the sphere of circulation. But the instruments of labor never leave the sphere of production, once that they have entered Fixed Capital and Circulating Capital. 179 it. Their function holds them there. A certain portion of the advanced capital-value is fixed in this form by the func- tion of the instruments of labor in the process of produc- tion. In the performance of this function, and thus by *he wear and tear incidental to it, a part of the value of tfie instruments of labor is transferred to the product, while •mother remains fixed in the instruments of labor and thus \n the process of production. The value thus fixed decreases constantly, until the instrument of labor is worn out, its value having been distributed during a shorter or longer period, over a mass of products which emanated from a series of currently repeated labor processes. But so long as an instrument of labor is still effective and has not been replaced by a new specimen of the same kind, a certain amount of constant capital-value remains fixed in it, while another part of the value originally fixed in it is trans- ferred to the product and circulates as a component part of the commodity-supply. The longer an instrument lasts, the slower it wears out, the longer will its constant capital-value remain fixed in this form of use-value. But whatever may be its durability, the proportion in which it yields its value is always inverse to its entire time of service. If of two ma- chines of equal value, one wears out in five years and the other in ten, then the first yields twice as much value in the same time as the second. This value fixed in the instruments of labor circulates as well as any other. We have seen that all capital-value is constantly in circulation, and ihat in this sense all capital is circulating capital. But the circulation of the portion of capital which we are now studying is peculiar. In the first place, it does not circulate in its use-form, but it is merely its exchange-value which circulates, and this takes place gradually and piecemeal, in proportion as it is transferred to the product which circulates as a commodity. During the entire period of its service, a portion of its value always re- mains fixed in it, independent of the commodities which it helps to produce. It is this peculiarity which gives to this portion of capital the character of fixed capital. On the 180 Capital. other hand, all other substantial parts of the capital ad- vanced in the process of production form the circulating, or fluid, capital. Some portions of the means of production do not yield their substance to the product. Such are auxiliary substances, which are consumed by the instruments of labor themselves in the performance of their functions, such as coal consumed by a steam engine ; or substances which merely assist in the operation, such as gas for lighting, etc. It is only their value which forms a part of the value of products. In cir- culating its own value, the product circulates theirs. To this extent they share the fate of the fixed capital. But they are entirely consumed in every labor-process which they enter, and must therefore be replaced by new speci- mens of their kind in every new labor-process. They do not preserve their own use-form while performing their func- tion. Hence no portion of capital-value remains fixed in their natural use-value during their service. The fact that this portion of the auxiliary substances does not pass bodily into the product, but yields only its value to swell thereby the value of the product, although the function of these substances is confined to the sphere of production, has mis- led some economists, for instance Ramsay — who also con- founded fixed capital with constant capital — to class them among the fixed capital. That part of the means of production which yields its substance to the product, in other words, the raw materials, may eventually assume forms which enable it to pass into individual consumption. The instruments of labor, prop- erly so called, that is to say, the material bearers of the fixed capital, can be consumed only productively and cannot pass into individual consumption, because their substance does not enter into the product, into the use-value, which they help to create, but they rather retain their independent form until they are completely worn out. The means of trans- portation are an exception to this rule. The useful effect which they produce by their productive function during their stay in the sphere of production, that is to say, the change of location, passes simultaneously into the individual con- Fixed Capital and Circulating Capital. 181 sumption, for instance into that of a traveler. He pays for its use in the same way in which he pays for the use of other articles of consumption. We have seen that some- times the raw material and auxiliary substances pervade one another, for instance in the manufacture of chemicals. In the same way, instruments of labor, raw material and aux- iliary substances may pervade one another. In agriculture, for instance, the substances employed for the improvement of the soil pass into the plants and help to form the product. On the other hand, their influence is distributed over a lengthy period, say four or five years. A portion of them, therefore, pass into the product and enhance its value, while another portion remains fixed in its old use-form and re- tains its value. It persists as an instrument of production and retains the form of fixed capital. An ox is fixed capi- tal, so long as it is a beast of toil. If it is eaten, it does not perform the functions of an instrument of production, and is, therefore, not fixed capital. That which determines whether a certain portion of the capital-value invested in means of production is fixed capi- tal or not is exclusively the peculiar manner in which this value circulates. This peculiar manner of circulation arises from the peculiar manner in which the means of produc- tion yield their value to the product, that is to say the man- ner in which the means of production participate in the creation of values in the process of production. This, again, arises from the special nature of the function of these means of production in the labor-process. We know that the same use-value, which comes as a prod- uct from one labor-process, passes as a means of production into another. It is only the function of a product as a means of production in the labor-process which stamps it as fixed capital. But to the extent that it arises itself out of such a process, it is not fixed capital. For instance, a ma- chine, as a product, as a commodity of the machine manu- facturer, belongs to his commodity-capital. It does not be- come fixed capital, until it is employed productively in the hands of its purchaser. All other circumstances being equal, the degree of fixity 182 Capital. increases with the durability of the means of production. This durability determines the magnitude of the difference be- tween the capital-value fixed in the instruments of labor and between that part of its value which is yielded to the prod- uct in successive labor-processes. The slower this value is yielded — and some of it is given up in every repetition of the labor-process — the larger will be the fixed capital, and the greater will be the difference between the capital em- ployed and the capital consumed in the process of produc- tion. As soon "as this difference has disappeared, the instru- ment of labor has ceased to live and lost, with its use-value, also its exchange-value. It has ceased to be the bearer of value. Since an instrument of labor, the same as every other material bearer of constant capital, yields value only to the extent that its use-value is converted into exchange-value, it is evident that the period in which its constant capital- value remains fixed will be so much longer, the longer it lasts in the process of production, the more slowly its use- value is lost. If any one means of production, which is not an instru- ment of labor, strictly speaking, such as auxiliary substances, raw material, partly finished articles, etc., yields and circu- lates its value in the same way as the instruments of produc- tion, then it is likewise the material bearer, the form of existence, of fixed capital. This is the case with the above- mentioned improvements of the soil, which add chemical substances to the soil, the influence of which is distributed over several periods of production, or years. In this case, a portion of the value continues to exist independently of the product, it persists in the form of fixed capital, while an- other portion has been transferred to the product and cir- culates with it. And in the latter case, it is not alone a portion of the value of the fixed capital which is transferred to the product, but also a portion of the use-value, the sub- stance in which this portion of value is embodied. Apart from the fundamental mistake — the confounding of the categories "fixed capital and circulating capital" with the categories "constant capital and variable capital"— the confusion of the economists in the matter of definitions is based on the following points : Fixed Capital and Circulating Capital. 183 They make of certain qualities, embodied in the sub- stances of the instruments of labor, direct qualities of fixed capital, for instance, the physical immobility of a house. It is always easy in that case to prove that other instruments of labor, which are likewise fixed capital, have an opposite quality, for instance, physical mobility, such as a vessel's. Or, they confound the definite economic form, which arises from the circulation of value, with some quality of the object itself, as though things which are not at all cap- ital in themselves, but rather become so under given social conditions, could be of themselves and intrinsically capital in some definite forms, such as fixed or circulating capital. We have seen in volume I that the means of production in every labor-process, regardless of the social conditions in which it takes place, are divided into instruments of labor and objects of labor. But both of them do not become capi- tal until the capitalist mode of production is introduced, and then they become "productive capital," as shown in the preceding part. Henceforth the distinction between instru- ments and objects of labor, based on the nature of the labor- process, is reflected in the new distinction between fixed and circulating capital. It is then only, that a thing which performs the function of an instrument of labor, becomes fixed capital. If it can serve also in other capacities, owing to its material composition, it may be fixed capital or not, according to the functions it performs. Cattle as beasts of toil are fixed capital; if they are fattened, they are raw ma- terial which finally enters into circulation as commodities, in other words, they are circulating, not fixed capital. The mere fixation of some means of production for a cer- tain length of time in repeated labor-processes, which are consecutively connected and form a period of production, that is to say, the entire period required to complete a cer- tain product, demands advances from the capitalist for a longer or shorter term, just as fixed capital does, but this does not give to his capital the character of fixed capital. Seeds, for instance, are not fixed capital, but only raw ma- terial which is held for about a year in the process of pro- duction. All capital is held in the process of production, 184 Capital. so long as it performs the functions of productive capital, and so are, therefore, all elements of productive capital, whatever may be their substantial composition, their func- tion and the mode of circulation of their value. Whether the period of fixation lasts a long or a short time, according to the manner of the process of production or the effect aimed at, it does not determine the distinction between fixed and cir- culating capital.20 A portion of the instruments of labor, which determine the general conditions of labor, may be located in a fixed place, as soon as it enters on its duties in the process of pro- duction or is prepared for them, for instance, machinery. Or it is produced from the outset in its locally fixed form, such as improvements of the soil, factory buildings, kilns, canals, railroads, etc. The constant fixation of the instru- ment of labor in the process of production is in that case also due to its mode of material existence. On the other hand, an instrument of labor may continually be shifted bodily from place to place, may move about, and neverthe- less be continually in the process of production, for instance, a locomotive, a ship, beasts of burden, etc. Neither does im- mobility in the one case bestow the character of fixed capi- tal on the instrument of labor, nor does mobility in the other case deprive it of this character. But the fact that some instruments of labor are attached to the soil and remain so fixed, assigns to this portion of fixed capital a peculiar role in the economy of nations. They cannot be sent abroad, cannot circulate as commodities on the market of the world. The titles to this fixed capital may be exchanged, it may be bought and sold, and to this extent it may circulate ideally. These titles of ownership may even circulate on foreign markets, for instance in the form of stocks. But the change of the persons of the owners of this class of fixed capital does not alter the relation of the immobile, substantially fixed part of national wealth to its circulating part.21 The peculiar circulation of fixed capital results in a pecu- liar turn-over. That part of value which is lost by wear "On account of the difficulty of determining what constitutes the dis- tinguishing mark of fixed and circulating capital, Mr. Lorenz Stein thinks that this distinction is suitable only for lighter study. 21End of Manuscript IV, beginning of Manuscript II. Fixed Capital and Circulating Capital. 185 and tear circulates as a part of the value of the product. The product converts itself by means of its circulation from commodities into money ; hence the value of the instrument of labor circulated by the product does the same, and this value is precipitated in the form of money by the process of circulation in the same proportion in which the instrument of labor loses its value in the process of production. This value has then a double existence. One part of it remains attached to the form of its use-value in the process of pro- duction, another is detached from the instrument of labor and becomes money. In the performance of its function, that part of the value of an instrument of labor which ex- ists in its natural form constantly decreases, while that which is transformed into money constantly increases, until at last the instrument is exhausted and its entire value, detached from its body, has assumed the form of money. Here the peculiarity in the turn-over of this element of productive capital becomes apparent. The transformation of its value into money keeps pace with the like transformation of the commodity which is its bearer. But its reconversion from the form of money into that of a use-value separates itself from the reconversion of the commodities into their other elements of production and is determined by its own period of reproduction, that is to say by the time during which the instrument of labor has worn out and must be replaced by another specimen of the same kind. If a machine lasts for, say, a period of ten years, then the period of turn-over of the value originally advanced for it amounts to ten years. It need not be replaced until this period has expired, and performs its function in this natural form until then. Its value circulates in the meantime piecemeal as a part of the value of the commodities which it turns out successively, and it is thus gradually transformed into money, until it has entirely assumed the form of money at the end of ten years and is reconverted from money into a machine, in other words, has completed its turn-over. Until this time arrives, its value is meanwhile accumulated in the form of a reserve fund of money. 186 Capital. The other elements of productive capital consist partly of those elements of constant capital which exist in auxiliary and raw materials, partly of variable capital which is in- vested in labor-power. The analysis of the processes of labor and self-expansion (vol. I, chap. VII) showed that these different elements be- have differently in their role of producers of commodities and values. The value of that part of constant capital which consists of auxiliary and raw materials — the same as of that part which consists of instruments of labor — reappears in the value of the product as transferred value, while labor- power actually adds the equivalent of its value to the prod- uct by means of the labor-process, in other words, actually reproduces its value. Furthermore, a part of the auxiliary material, fuel, gas, etc., is consumed in the process of labor without entering bodily into the product, while another part of them enters bodily into the product and forms a part of its substance. But all these differences are imma- terial so far as the mode of circulation and turn-over is con- cerned. To the extent that auxiliary and raw materials are entirely consumed in the creation of the product, they transfer their value entirely to the product. Hence this value is entirely circulated by the product, transformed into money and from money back into the elements of pro- duction of the commodity. Its turn-over is not interrupted, as that of fixed capital is, but it rather passes uninterrupted through the entire cycle of its transformations, so that these elements of production are continually reproduced in sub- stance. As for the variable part of productive capital, which is invested in labor-power, it buys labor-power for a definite period of time. As soon as the capitalist has bought labor- power and embodied it in his process of production, it forms a component part of his capital, definitely speaking, the variable part of his capital. Labor-power performs its func- tion daily during a period of time, in which it not only re- produces its own daily value, but also adds a surplus-value in excess of it to the product. We do not consider this sur- plus-value for the moment. After labor-power has been bought, say, for a week, and performed its function, its Fixed Capital and Circulating Capital. 187 purchase must be continually renewed within the accus- tomed space of time. The equivalent of its value, which labor-power embodies in its product during its function and which is transformed into money by means of the circula- tion of the product, must be continually reconverted from money into labor-power, must continually pass through the complete cycle of its transformations, in other words, must be turned over, lest the continuous rotation of its production be interrupted. That part of the value of capital, then, which has been advanced for labor-power, is entirely transferred to the prod- uct— we still leave the question of surplus-value out of con- sideration— passes with it through the two metamorphoses belonging to the circulation, and always remains in the process of production by means of this continual reproduc- tion. Whatever may be the differences by which labor- power is distinguished, so far as the formation of value is concerned, from those parts of constant capital which do not represent fixed capital, it nevertheless has this manner of turn-over in common with them, as compared to the fixed capital. It is these elements of productive capital — the val- ues invested in labor-power and in means of production which are not fixed capital — that by their common charac- teristics of turn-over constitute the circulating capital as opposed to the fixed capital. We have already stated that the money which the capital- ist pays to the laborer for the use of his labor-power is but the form of the general equivalent for the means of subsist- ence required by the laborer. To this extent, the variable capital consists in substance of means of existence. But in this case, where we are discussing the turn-over, it is a ques- tion of form. The capitalist does not