For the reproduction, only two normal cases are possible, apart from disturbances, which interfere with reproduction even on a given scale.

There is either reproduction on a simple scale.

Or, there is a capitalization of a surplus-value, accumulation.

I. SIMPLE REPRODUCTION.

In the case of simple reproduction, the surplus-value produced or realized annually, or by several turn-overs during the year, is consumed individually, that is to say unproductively, by its owner, the capitalist.

The fact that the value of the product consists in part of surplus-value, in part of that portion of value which is formed by the variable capital reproduced through it plus the constant capital consumed by it, does not alter anything, either in the quantity, or in the value of the total product, which continually passes into circulation and is just as continually withdrawn from it, in order to pass into productive or individual consumption, that is to say, to serve as means of production or consumption. Making exception of the constant capital, only the distribution of the annual product between the laborers and the capitalists is thereby affected.

Even if simple reproduction is assumed, a portion of the surplus-value must, therefore, always exist in the form of money, not of products, because it could otherwise not be converted for purposes of consumption from money into products. This conversion of the surplus-value from its original commodity-form into money must be further analyzed at this place. In order to simplify the matter, we assume the most elementary form of the problem, namely the exclusive circulation of metal coin, of money which is a real equivalent.

According to the laws of the simple circulation of commodities (developed in volume I, chapter III), the mass of the metal coin existing in a country must not only be sufficient for the circulation of the commodities, but must also suffice for the fluctuations of the circulation of money, which arise partly from fluctuations in the velocity of the circulation, partly from a change in the prices of commodities, partly from the various and varying proportions in which the money serves as a medium of payment or as the typical medium of circulation. The proportion in which the existing quantity of money is divided into a hoard and money in circulation, varies continually, but the quantity of money is always equal to the sum of the money hoarded and the money circulating. This quantity of money (quantity of precious metal) is a gradually accumulated hoard of society. To the extent that a portion of this hoard is consumed by wear, it must be replaced annually, the same as any other product. This takes place in reality by a direct or indirect exchange of a part of the annual product of a country for the product of countries producing gold and silver. However, this international character of the transaction disguises its simple course. In order to reduce the problem to its simplest and most transparent expression, it must be assumed that the production of gold and silver takes place in the same country in which the other products are created, so that the production of gold and silver constitutes a part of the total social production within every country.

Apart from the gold and silver produced for articles of luxury, the medium of their annual production must be equal to the wear of metal coin annually occasioned by the circulation of money. Furthermore, if the value of the annually produced and circulating quantity of commodities increases, the annual production of gold and silver must likewise increase, unless the growth of the value of the circulating commodities and the quantity of money required for their circulation (and the corresponding formation of a hoard) is accompanied by a greater velocity in the circulation of money and a more extensive function of money as a medium of payment, that is to say, by a greater mutual balancing of purchases and sales without the intervention of actual money.

A portion of the social labor power and a portion of the social means of production must, therefore, be expended annually in the production of gold and silver.

The capitalists, who are engaged in the production of gold and silver, and who, according to our assumption of simple reproduction, carry on their production only within the limits of the annual average wear and the resulting average consumption of gold and silver, throw their surplus-value, which they consume annually, according to our assumption, without capitalizing any of it, directly into circulation in the form of money, which is the natural form for them, not, as in the case of the other capitalists, the converted form of their product.

Furthermore, as concerns wages, the money form in which the variable capital is advanced, it is not replaced in this case by the sale of the product, by a conversion into money, but by a product whose natural form is from the outset that of money.

Finally, the same applies also to that portion of the product in precious metals which is equal to the value of the periodically consumed constant capital, both the constant circulating and the constant fixed capital consumed during the year.

Let us study the rotation, or the turn-over, of the capital invested in the production of precious metals first in the form of M—C—P—M'. So far as the C in M—C does not only consist of labor-power and materials of production, but also of fixed capital, only a part of whose value is consumed by P, it is evident that the product, M', is a sum of money equal to the variable capital invested in wages plus the circulating constant capital invested in materials of production plus a portion of the value of the fixed constant capital plus a surplus-value. If the sum were smaller, the general value of gold remaining the same, then the mine would be unproductive, or, if this is generally the case, the value of gold, compared with the value of commodities that remains unchanged, would rise; that is to say, the prices of commodities would fall, so that henceforth the amount of money invested in M—C would be smaller.

If we consider at first only the circulating portion of capital advanced in M, the starting point of M—C...P...M', we find that it is a certain sum of money advanced and thrown into circulation for the payment of labor-power and the purchase of materials of production. But this sum is not withdrawn from circulation, by the rotation of this capital, in order to be thrown into it anew. The product is money even in its natural form, there is no need of transforming it into money by means of exchange, by a process of circulation. It passes from the process of production into the process of circulation, not in the form of commodity-capital which has to be converted into money-capital, but as a money-capital which is to be reconverted into productive capital, which is to be fresh labor-power and materials of production. The money-form of the circulating capital consumed in labor-power and materials of production is replaced, not by the sale of the product, but by the natural form of the product itself; not by once more withdrawing its value from circulation in the form of money, but by additional, newly produced money.

Let us assume that this circulating capital is 500 p. st., the period of turn-over is 5 weeks, the working period 4 weeks, the period of circulation only 1 week. From the outset, money must be partly advanced for a productive supply, partly available, for 5 weeks, in order to be paid out gradually for wages. At the beginning of the 6th week, 400 p. st. have flown back and 100 p. st. have been released. This is continually repeated. Here, as in previous cases, 100 p. st. will always find themselves released during a certain time of the turn-over. But they consist of additional, newly produced, money, the same as the other 400 p. st. We have in this case 10 turn-overs per year and the annual product is 5,000 p. st. in gold. (The period of circulation does not arise, in this case, from the time required for the conversion of commodities into money, but for the conversion of money into the elements of production.)

In the case of every other capital of 500 p. st., turned over under the same conditions, it is the ever renewed money-form which is exchanged for the produced commodity capital and thrown into the circulation every 4 weeks and which resumes this form in every new interval by sale, that is to say, by a periodical withdrawal of the quantity of money which entered originally into the process. But here a new additional quantity of money to the amount of 500 p. st. is thrown into circulation by the process of production itself, in order to withdraw from it continually materials of production and labor-power. This money thrown into circulation is not withdrawn from it by the rotation of this capital, but rather continually increased by newly produced quantities of gold.

Let us look at the variable portion of this circulating capital, and assume that it is, as before, 100 p. st. Then these 100 p. st. would be sufficient in the ordinary production of commodities, with 10 turn-overs, to pay continually for the required labor-power. Here, in the production of money, the same amount is likewise sufficient. But the 100 p. st. of the reflux, with which the labor-power is paid every 5 weeks are not a converted form of its product, but a portion of this ever renewed product itself. The producer of gold pays his laborers directly with a portion of the gold produced by them. Thus the 1,000 p. st. invested annually in labor-power and thrown by the laborers into the circulation do not return by the way of this circulation to their starting point.

Furthermore, so far as the fixed capital is concerned, it requires the investment of a large money-capital at the opening of the business, and this capital is thus thrown into the circulation. Like all fixed capital it flows back only piece by piece in the course of years. But it flows back as an immediate portion of the product, of the gold, not by the sale of the product and its consequent monetization. In other words, it receives gradually its money-form, not by a withdrawal of money from circulation, but by an accumulation of a corresponding portion of the product. The money-capital so replaced is not a quantity of money gradually withdrawn from circulation for a compensation of the sum originally thrown into it for fixed capital. It is an additional sum of new money.

Finally, as concerns the surplus-value, it is likewise equal to a certain portion of the new product of gold, which is thrown into circulation in every period of turn-over in order to be unproductively consumed according to our assumption, in means of subsistence and articles of luxury.

But according to our assumption, the entire annual production of gold—which continually withdraws labor-power and materials of production, but no money, from the market, while adding fresh quantities of money to it—replaces only the money worn out during the year, keeps only the quantity of social money complete which exists continually, although it consists in varying portions of the two forms, hoarded money and money in circulation.

According to the law of the circulation of commodities, the quantity of money must be equal to the amount of money required for circulation plus a certain amount held in the form of a hoard, which increases or decreases according to the contraction or expansion of circulation and serves especially for the formation of the reserve funds required as means of payment. That which must be paid in gold—to the extent that there is no balancing of accounts—is the value of the commodities. The fact that a portion of these commodities represents a surplus value, that is to say, did not cost the seller anything, does not alter the matter in any way. Take it that the producers are all independent owners of their means of production, so that circulation takes place between the immediate producers themselves. Apart from the constant portion of their capital, their annual surplus-product might then be divided into two parts, analogous with capitalist conditions: Part a, replacing the necessary means of subsistence, and part b, consumed partly for articles of luxury, partly for an expansion of production. Part a then plays the role of the variable capital, part b that of the surplus-value. But this division would remain without influence on the magnitude of the sum of money required for the circulation of the total product. Other circumstances remaining equal, the value of the circulating mass of commodities would be the same, and thus also the amount of money required for its circulation. The capitalists would also have to keep on hand the same money reserve, the division of the periods of turn-over remaining the same that is to say, the same portion of their capital would have to be held in the form of money, because their production, according to our assumption, would be a production of commodities, the same as before. Hence the fact that a portion of the value of the commodities consists of surplus-value, would change absolutely nothing in the quantity of the money required for the running of the business.

An opponent of Tooke, who clings to the formula M—C—M', asks him how the capitalist manages to always withdraw more money from circulation than he threw into it. Mark well! It is not here a question of the formation of surplus-value. This, the only secret, is a matter of course from the capitalist standpoint. The quantity of value employed would not be capital, if it did not secure an increment of surplus-value. But as it is capital, according to our assumption, there must be surplus-value as a matter of course.

The question, then, is not—where does the surplus-value come from? It is rather: Whence comes the money for which it is exchanged?

But in bourgeois political economy, the existence of surplus-value is self-understood. It is not only assumed, but also connected with the assumption that a portion of the commodities thrown into circulation is a surplus product, which was not thrown into circulation together with the capital of the capitalist. In other words, it is assumed by bourgeois political economists, that the capitalist throws a surplus over and above his capital into the circulation with his product, and that he recovers this surplus from it.

The commodity-capital, which the capitalist throws into the circulation, has a greater value than the productive capital which he withdrew from the circulation in the form of labor-power and means of production (it is neither explained nor understood by the bourgeois economists where this greater value comes from, but it is considered by them as an accomplished fact). On the basis of this assumption it is evident by what means not only the capitalist A, but also B, C, D, etc., manage to always withdraw more value from the circulation by means of the exchange of their commodities than the value of the capital originally and repeatedly advanced by them. A, B, C, D, continually throw a greater value into the circulation in the form of commodity-capital, than they withdraw from it in the form of productive capital—this operation is as manysided as the various independent capitals in action. Hence they have continually to divide among themselves a sum of values (that is to say, every one withdaws from circulation a productive capital) equal to the sum of values of their respective productive capitals; and they furthermore divide among themselves just as continually a sum of values which they all throw into circulation in the form of commodities, representing the excess of the commodity-capital over its elements of production.

But the commodity-capital must be monetized before its conversion into productive capital, or before the surplus-value contained in it can be spent. Where does the money for this purpose come from? This question seems difficult at the first glance, and neither Tooke nor any one else has answered it so far.

The circulating capital of 500 p. st. advanced in the form of money-capital, whatever may be its period of turn-over, may now stand for the total capital of society, that is to say, of the capitalist class. Let the surplus-value be 100 p. st. How can the entire capitalist class manage to draw continually 600 p. st. out of the circulation, when they continually throw only 500 p. st. into it?

After the money-capital of 500 p. st has been converted into productive capital, it transforms itself, within the process of production, into commodities worth 600 p. st. and throws into circulation, not only commodities valued at 500 p. st., equal to the money-capital originally advanced, but also a newly produced surplus-value of 100 p. st.

This additional surplus-value of 100 p. st. is thrown into circulation in the form of commodities. There is no doubt about that. But this same operation does not by any means supply the additional money for the circulation of this new additional value.

It should not be attempted to evade this difficulty by plausible subterfuges.

For instance: So far as the constant circulating capital is concerned, it is obvious that not all invest it simultaneously. While the capitalist A sells his commodities, so that his advanced capital assumes the form of money, there is on the other hand, the available money-capital of the buyer B which assumes the form of his means of production which A is just producing. The same transaction, which restores that of B to its productive form, transforms it from money into materials of production and labor-power; the same amount of money serves in the twosided process as in every simple purchase C—M. On the other hand, when A reconverts his money into means of production, he buys from C, and this man pays B with it, etc., and thus the transaction would be explained.

But none of the laws referring to the quantity of the circulating money, which have been analyzed in the circulation of commodities (volume I, chapter III), are in any way changed by the capitalist character of the process of production.

Hence, when we have said that the circulating capital of society, to be advanced in the form of money, amounts to 500 p. st., we have already accounted for the fact that this is on the one hand the sum simultaneously advanced, and that, on the other hand, it sets in motion more productive capital than 500 p. st., because it serves alternately as the money fund of different productive capitals. This mode of explanation, then, assumes that money as existing whose existence it is called upon to explain.

It might be furthermore said: Capitalist A produces articles which capitalist B consumes unproductively, individually. The money of B therefore monetizes the commodity-capital of A, and thus the same amount serves for the monetization of the surplus-value of B and the circulating constant capital of A. But in that case, the solution of the question to be solved is still more directly assumed, the question: Whence does B get the money for the payment of his revenue? How did he himself monetize this surplus portion of his product?

It might also be answered that that portion of the circulating variable capital, which A continually advances to his laborers, flows back to him continually from the circulation, and only an alternating part stays continually tied up for the payment of wages. But a certain time elapses between the expenditure and the reflux, and mean-while the money paid out for wages might, among other uses, serve for the monetization of surplus-value. But we know, in the first place, that, the greater the time, the greater must be the supply of money which the capitalist A must keep continually in reserve. In the second place, the laborer spends the money, buys commodities for it, and thus monetizes to that extent the surplus-value contained in them. Without penetrating any further into the question at this point, it is sufficient to say that the consumption of the entire capitalist class, and of the unproductive persons dependent upon it, keeps step with that of the laboring class; so that, simultaneously with the money thrown into circulation by the laboring class, the capitalists must throw money into it, in order to spend their surplus-value as revenue. Hence money must be withdrawn from circulation for it. This explanation would merely reduce the quantity of money required, but not do away with it.

Finally, it might be said: A large amount of money is continually thrown into circulation when fixed capital is first invested, and it is not recovered from the circulation until after the lapse of years, by him who threw it into circulation. May not this sum suffice to monetize the surplus-value? The answer to this is that the employment as fixed capital, if not by him who threw it into circulation, then by some one else, is probably implied in the sum of 500 p. st. (which includes the formation of a hoard for needed reserve funds). Besides, it is already assumed in the amount expended for the purchase of products serving as fixed capital, that the surplus-value contained in them is also paid, and the question is precisely, where the money for this purpose came from.

The general reply has already been given: When a mass of commodities valued at x times 1,000 p. st. has to circulate, it changes absolutely nothing in the quantity of the money required for this circulation, whether this mass of commodities contains any surplus-value or not, and whether this mass of commodities has been produced capitalistically or not. In other words, the problem itself does not exist. All other conditions being given, such as velocity of circulation of money, etc., a definite sum of money is required in order to circulate the value of commodities worth x times 1,000 p. st., quite independently of the fact how much or how little of this value falls to the share of the direct producers of these commodities. So far as any problem exists here, it coincides with the general problem: Where does all the money required for the circulation of the commodities of a certain country come from?

However, from the point of view of capitalist production, the semblance of a special problem does indeed exist. It is in the present case the capitalist who appears as the point of departure, who throws money into circulation. The money, which the laborer expends for the payment of his means of subsistence, exists previously as the money form of the variable capital and is, therefore, thrown originally into circulation by the capitalist as a medium of buying labor-power and paying for it. The capitalist furthermore throws into circulation the money which constitutes originally the money-form of his constant, fixed and circulating, capital; he expends it as a medium of purchase, or payment, for materials of production and instruments of labor. But beyond this, the capitalist no longer appears as the starting point of the quantity of money in circulation. Now, there are only two points of departure: The capitalist and the laborer. All third classes of persons must either receive money for their services from these two classes, or, to the extent that they receive it without any equivalent services, they are joint owners of the surplus-value in the form of rent, interest, etc. The fact that the surplus-value does not all stay in the pocket of the industrial capitalist, but must be shared by him with other persons, has nothing to do with the present question. The question is: How does he monetize his surplus-value, not, how does he divide the money later after he has secured it? For the present case, the capitalist may as well be regarded as the sole owner of his surplus-value. As for the laborer, it has already been said that he is but the secondary point of departure, while the capitalist is the primary starting point of the money thrown by the laborer into circulation. The money first advanced as variable capital is going through its second circulation, when the laborer spends it for the payment of means of subsistence.

The capitalist class, then, remains the sole point of departure of the circulation of money. If they need 400 p. st. for the payment of means of production, and 100 p. st. for the payment of labor-power, they throw 500 p. st. into circulation. But the surplus-value incorporated in the product, with a rate of surplus-value of 100%, is equal to the value of 100 p. st. How can they continually draw 600 p. st. out of circulation, when they continually throw only 500 p. st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.

Exception is here made of the fact that the sum of 400 p. st. may, perhaps, suffice, when turned over ten times, to circulate means of production valued at 4,000 p. st. and labor-power valued at 1,000 p. st., and that the other 100 p. st. may likewise suffice for the circulation of 1,000 p. st. of surplus-value. The proportion of the sum of money to the value of the commodities circulated by it does not matter here. The problem remains the same. Unless the same pieces of money circulate several times, a capital of 5,000 p. st. must be thrown into circulation, and 1,000 p. st. would be required to monetize the surplus-value. The question is, where this money comes from, whether it be 1,000 or 100 p. st. There is no doubt that it is in excess of the money, capital thrown into the circulation.

Indeed, paradoxical as it may appear at first sight, it is the capitalist class itself that throws the money into circulation which serves for the realization of the surplus-value incorporated in the commodities. But, mark well, it is not thrown into circulation as advanced money, not as capital. The capitalist class spends it for their individual consumption. The money is not advanced by them, although they are the point of departure of its circulation.

Take some individual capitalist, who opens his business, for instance, a capitalist farmer. During the first year, he advances a money-capital of, say, 5,000 p. st., paying 4,000 p. st. for means of production, and 1,000 p. st. for labor-power. Let the rate of surplus-value be 100%, the amount of surplus-value appropriated by him 1,000 p. st. The above 5,000 p. st. comprise all the money advanced by him. But the man must also live, and he does not get any receipts until the end of the year. Take it that his consumption amounts to 1,000 p. st. These he must have in his possession. He may say to himself that he has to advance these 1,000 p. st. during the first year. But this advance has only a subjective meaning, for it signifies that he must pay for his individual consumption during the first year out of his own pocket, instead of getting the money for it out of the unpaid labor of his employes. He does not advance this money as capital. He spends it, pays it out as an equivalent for means of subsistence which he consumes. This value is spent by him as money, thrown as such into circulation and withdrawn from it as commodities. He has consumed commodities of that amount. He has thus ceased to be in any way related to their value. The money with which he paid for this value is now an element of the circulating money. But he has withdrawn the value of this money from circulation in the form of products, and this value is destroyed with the commodities in which it was incorporated. It has disappeared. But at the end of the year he throws commodities worth 6,000 p. st. into circulation and sells them. By this means he recovers: (1) His advanced money-capital of 5,000 p. st.; (2) the monetized surplus-value of 1,000 p. st. He had thrown 5,000 p. st. into circulation when he advanced capital, and he withdraws from it 6,000 p. st., 5,000 p. st. of which cover his capital, and 1,000 p. st., his surplus-value. The last 1,000 p. st. are monetized with the money which he had himself thrown into circulation, not as a capitalist, but as a consumer, not advanced, but spent. They now flow back to him as the money-form of the surplus-value produced by him. And henceforth this operation is repeated every year. But beginning with the second year, the 1,000 p. st. which he spends are continually the converted form, the money-form of surplus-value produced by him. He spends it annually and it flows back annually.

If his capital were turned over more frequently in one year, it would not alter this condition of things, except so far as the time is concerned, and thus the size of the amount which he would have to throw into circulation, over and above his advanced money-capital, for his individual consumption.

This money is not thrown into circulation by the capitalist as money. It is rather inherent in the character of a capitalist to be able to live on means in his possession until some surplus-value flows back to him.

In the present case we had assumed, that the sum of money, which the capitalist throws into circulation until the first surplus-value flows back to him, is exactly equal to the surplus-value which he is going to produce and monetize. This is obviously an arbitrary assumption, so far as the individual capitalist is concerned. But it must be correct when applied to the entire capitalist class, when simple reproduction is assumed. It expresses the same thing that this assumption does, namely, that the entire surplus-value is consumed unproductively, but it only, not any portion of the original capital stock.

It had been previously assumed, that the entire production of precious metals (500 p. st.) sufficed only for the wear and tear of the money.

The capitalists producing gold possess their entire product in gold, that portion which replaces constant capital as well as that which replaces variable capital and that consisting of surplus-value. A portion of the social surplus-value, therefore, consists of gold, not of a product which is monetized by means of circulation. It consists from the outset of gold and is thrown into circulation in order to draw products out of it. The same applies in this case to wages, to variable capital, and to the part replacing the advanced constant capital. Hence, while a part of the capitalist class throws into circulation commodities greater in value, (by the amount of the surplus-value) than the money-capital advanced by them, another part of the capitalist class throws into circulation money of greater value (by the amount of the surplus-value) than the commodities which they continually withdraw from circulation for the production of gold. While one part of the capitalist class pumps continually more gold out of the circulation than they throw into it, another part of them who produce gold pump continually more gold into it than they take out in means of production.

Although a part of this product of 500 p. st. in gold is surplus-value of the gold-producers, still the entire sum is intended only to replace the money worn out in the circulation of commodities. It is immaterial for this purpose, how much of this gold monetizes the surplus-value incorporated in the commodities, and how much of their other constituents.

By transferring the production of gold from one country to another, nothing is changed in the fundamental condition of the matter. One part of the social labor-power and the social means of production of the country A is converted into a product, for instance, linen, valued at 500 p. st., which is exported to the country B in order to be there traded for gold. The productive capital employed for this purpose by the country A throws no more commodities, as distinguished from money, upon the market of this country than it would if it were directly engaged in the production of gold. This product of A is represented by 500 p. st. in gold, and enters into the circulation of this country only in money. That portion of the social surplus-value which is contained in this product exists directly in the form of money, and never in any other form for the country A. Although, from the point of view of the capitalist, only a part of the product represents surplus-value, and another part replaces capital, still the question as to how much of this gold replaces constant, and how much variable capital, and how much of it represents surplus-value, depends exclusively on the respective proportions which wages and surplus-value constitute of the value of the circulating commodities. That portion which represents surplus-value is distributed among the various members of the capitalist class. Although this surplus-value is continually spent by them for individual consumption and recovered by the sale of new products—it is precisely this purchase and sale which circulates the money required for the monetization of the surplus-value among them—there is nevertheless a portion of the social surplus-value, in the form of money, in varying proportions, in the pockets of the capitalists, just as a portion of the wages stays during a certain part of the week in the pockets of the laborers in the form of money. And this portion is not limited by that portion of the money-product which forms originally the surplus-value of the capitalists producing gold, but, as we have said, by the proportion in which the above product of 500 p. st. is generally distributed between capitalists and laborers, and in which the commodity-supply to be circulated consists of surplus-value and other constituents of value.

However, that portion of surplus-value, which does not exist in other commodities, but outside of them in the form of money, consists of a portion of the annually produced gold only to the extent that a portion of the annual production of gold circulates for the realization of surplus-value. The other portion of money, which is continually in the hands of the capitalists, in varying portions, being the money-form of their surplus-value, is not an element of the annually produced gold, but of the masses of money previously accumulated in the country.

According to our assumption, the annual production of gold just covers the annual wear of money, to the amount of 500 p. st. If we keep in mind these 500 p. st., and make abstraction of that portion of the annually produced mass of commodities which is circulated by means of previously accumulated money, then the surplus-value incorporated in the commodities will find money for its monetization in circulation for the simple reason that surplus-value is annually produced in the form of gold on the other side. The same applies to the other parts of the gold product which replace the advanced money-capital.

Now, two things are to be noted here.

In the first place, it follows that the surplus-value spent by the capitalists as money, as well as the variable and other productive capital advanced by them in money is actually a product of the laborers, namely of those engaged in the production of gold. They produce anew not only that portion of gold which is "advanced" to them as wages, but also that portion of gold in which the surplus-value of the capitalist gold producers is directly embodied. As for that portion of the gold product, which replaces only the constant capital-value advanced for its production, it re-appears in the form of money (or a product in general) only through the annual labor of the working men. In the beginning of the business, it was originally expended in money by the capitalists, and this money was not newly produced, but formed a part of the circulating mass of social money. But to the extent that it is replaced by a new product, by additional money, it is the annual product of the laborer. The advance on the part of the capitalist appears here likewise merely as a form, which owes its existence to the fact that the laborer is neither the owner of his own means of production, nor able to command, during his production, the means of subsistence produced by other laborers.

In the second place, as concerns that mass of money which exists independently of this annual reproduction of 500 p. st., either in the form of a hoard, or of circulating money, things must be, or rather must have been originally just as they still are with reference to these 500 p. st. annually. We shall return to this point at the close of this section. For the present, we wish to make a few other remarks.

We have seen during our study of the turn-over, that, other circumstances remaining equal, a change in the length of the periods of turn-over requires different amounts of money-capital, in order to carry on production on the same scale. The elasticity of the money-circulation must, therefore be sufficient to adapt itself to this fluctuation of expansion and contraction.

If we furthermore assume other circumstances as equal—the length, intensity, and productivity of the working day also remaining unchanged— but a different division of the value of the product, between wages and surplus-value, so that either the former rise and the latter fall, or vice versa, the mass of the circulating money is not touched thereby. This change can take place without any expansion or contraction of the mass of money in circulation. Let us consider particularly the case in which there would be a general rise in wages, so that, under the given assumptions, there would be a general fall in the rate of surplus-value, while there would not be any change, also according to our assumption, in the mass of circulating commodities. In this case, there should be indeed an increase of the money-capital which must be advanced as variable capital in the quantity of money which serves for this purpose. But to the exact extent that the amount of money required for the function of variable capital grows, does the surplus-value decrease, and thus the amount of money required for its realization. The amount of money required for the realization of the values of the commodities is not affected thereby, any more than this value itself. The cost price of the commodity rises for the individual capitalist, but its social price of production remains unchanged. That which is changed is the proportion, in which, apart from the constant portion of its value, the price of production stands to wages and profits.

But, it is argued, a greater outlay of variable capital (the value of the money is, of course, considered the same) means a larger amount of money in the hands of the laborer. This causes a greater demand for commodities on the part of the laborer. This, in turn, leads to a rise in the price of commodities. Or, it is said: If wages rise, the capitalists raise the prices of their commodities. In either case, the general rise in wages causes a rise in the prices of commodities. Hence a greater amount of money is needed for the circulation of commodities, no matter whether the rise in prices is explained in this or that way.

Reply to the first argument: In consequence of a rise in wages, especially the demand of the laborers for the necessities of life will rise. In a lesser degree their demand for articles of luxury will increase, or the demand will be developed for things which did not generally belong to the scope of their consumption. The sudden and increased demand for the necessities of life will doubtless raise their prices momentarily. As a result, a greater portion of the social capital will be invested in the production of the necessities of life, and a smaller portion in the production of articles of luxury, since these fall in price on account of the decrease in surplus-value and the consequent decrease in the demand of the capitalists for these articles. And to the extent that the laborers themselves buy articles of luxury, the rise in their wages—to this degree—does not promote an increase in the prices of necessities of life, but simply fills the place of the buyers of luxuries. More luxuries than before are consumed by laborers, and relatively fewer by capitalists. That is all. After some fluctuations, the value of the circulating commodities is the same as before. As for the momentary fluctuations, they will not have any other effect than to throw unemployed money-capital into the inland circulation, capital which so far had sought employment in speculative enterprises at the stock exchange or in foreign countries.

Reply to the second argument: If it were in the power of the capitalist producers to raise the prices of their commodities at will, they could and would do so without waiting for a rise in wages. Wages would never rise while the prices of commodities were going down. The capitalist class would never resist the trades unions, since the capitalists could always and under all circumstances do what they are now doing exceptionally under definite peculiar, one might say local, circumstances, to wit, to avail themselves of every rise in wages to raise prices much higher and thus pocket greater profits.

The claim that the capitalists can raise the prices of articles of luxury, because the demand for them decreases (in consequence of the reduced demand of the capitalists whose spending money has decreased) would be a very unique application of the law of supply and demand. The prices of articles of luxury fall in consequence of reduced demand to the extent that capitalist buyers are not replaced by laboring buyers, and so far as this replacement takes effect, the demand of the laborers does not result in a rise of the prices of necessities, for the laborers cannot spend that portion of their increased wages for necessities which they spend for luxuries. Consequently capital is withdrawn from the production of luxuries, until their supply in the market is reduced to the measure which corresponds to their altered role in the process of social production. With their production thus reduced, they rise in price, provided their value is otherwise unchanged, to their normal level. So long as this contraction, or this process of compensation, takes place, there is just as constantly, with rising prices of necessities, a migration of capital into the production of these to the degree that it is withdrawn from the other line of business, until the demand is satisfied. Then the balance is restored, and the end of the whole process is that the social capital, including the money-capital, is divided in a different proportion between the production of necessary means of subsistence and that of luxuries.

The entire objection is a scarecrow set up by the capitalists and their apologists in economics.

The facts, which furnish the material for this scarecrow, are of three kinds:

(1). It is the general law of the circulation of money that the quantity of circulating money increases if the total price of the circulating commodities increases, other circumstances remaining the same, regardless of whether this increase of the totality of prices applies to the same quantity of commodities, or to a greater quantity. The effect is then taken for the cause. Wages rise (although rarely and only exceptionally in proportion) with the increasing price of the necessities of life. This rise in wages is a result, not a cause, of the rise in the prices of commodities.

(2). In the case of a partial, or local, rise of wages—that is to say, a rise only in some lines of production—a local rise in the prices of the products of this line may follow. But even this depends on many circumstances, for instance, that wages had not been abnormally depressed previously, so that the rate of profits was abnormally high, that the market is not narrowed by a rise in prices (so that a contraction of its supply previous to the raising of its prices will not be necessary), etc.

(3). In the case of a general rise of wages, the price of the produced commodities rises in lines of business where the variable capital preponderates, but falls, on the other hand, in lines where the constant, or eventually the fixed, capital preponderates.

We found in our study of the simple circulation of commodities (volume I, chapter III, 2), that, even though the money-form of any definite quantity of commodities is infinitesimal within its circulation, still the money in the hand of one man disappears during the transformation of a certain commodity and takes its place in the hands of another, so that commodities are not only exchanged, or replaced by one another, but this mutual exchange of places is also promoted and accompanied by a universal precipitation of money. "When one commodity replaces another, the money commodity sticks to the hands of some third person. Circulation sweats money from every pore." (Vol. I, page 127.) The same fact is expressed, on the basis of capitalist production, of commodities, by the continual existence of a portion of capital in the form of money-capital, and by the retention of a portion of surplus-value in the hands of its owners, likewise in the form of money.

Aside from this, the rotation of money—that is to say, the return of money to its point of departure—so far as it is an element in the turn-over of capital, is a phenomenon entirely different from, or even the reverse of, the circulation of money, 34 which expresses its removal from the point of departure through a number of hands. (Vol. I. page 129.) Nevertheless an accelerated turn-over implies naturally an acceleration of the circulation.

As for the variable capital, if a certain money-capital, say 500 p. st., is turned over ten times in a year, in the form of a variable capital, it is evident that this aliquot part of the quantity of money in circulation circulates ten times its value, or 5,000 p. st. It circulates ten times per year between the capitalist and the laborer. The laborer is paid, and pays, ten times per year with the same aliquot amount of money. If the same variable capital were turned over only once a year, the scale of production remaining the same, there would be only one turn-over of capital per year.

Furthermore: The constant portion of the circulating capital may be, say, 1,000 p. st. If the capital is turned over ten times, the capitalist sells his commodity, and therefore also the constant circulating portion of its value, ten times per year. The same aliquot part of the circulating quantity of money (1,000 p. st.) passes ten times from the hands of its owners into those of the capitalist. This means ten changes of place on the part of this money from one hand into another. In the second place, the capitalist buys means of production ten times per year. This again implies ten turn-overs of the money from one hand into another. With regard to the amount of 1,000 p. st., commodities valued at 10,000 p. st. have been sold by the industrial capitalist, and then commodities valued at 10,000 p. st. purchased. By means of 20 circulations of 1,000 p. st. in money a commodity supply of 20,000 p. st. has been circulated.

Finally, with an acceleration of the turn-over, also that portion of money circulates faster, which realizes the surplus-value.

But, on the other hand, an acceleration in the circulation of money does not necessarily imply a more rapid turnover of capital, and thus of money, that is to say, it does not necessarily imply a contraction and more rapid renewal of the process of reproduction.

A more rapid circulation of money takes place whenever a larger number of transactions are carried on with the same amount of money. This may take place also with the same periods of reproduction of capital, as a result of changes in the technical appliances of the circulation of money. Furthermore, there may be an increase in the number of transactions in which money circulates without expressing actual exchanges, of commodities (marginal business at the stock-exchange, etc.). On the other hand, some circulations of money may be entirely dispensed with. For instance, where the farmer is himself a real estate owner, there is no circulation of money between the capitalist farmer and the real estate owner; where the industrial capitalist is himself the owner of the capital, there is no circulation of money between him and the creditor.

As for the primitive formation of a hoard of money in a certain country, and its appropriation by a few, it is unnecessary to discuss it at this point.

The capitalist mode of production—its basis being wage-labor as well as the payment of the laborer in money and in general the transformation of services for natural products into services for money—cannot develop a larger extension and a greater systematization, unless there is available in this country a quantity of money sufficient for the circulation and the corresponding formation of a hoard (reserve fund, etc.). This is the historical premise. However, this must not be interpreted in the sense that a sufficient hoard must first be formed, before capitalist production can begin. It rather develops simultaneously with the evolution of its foundations and one of these foundations is a sufficient supply of precious metals. Hence the increased supply of precious metals since the 16th century is an essential factor in the history of the development of capitalist production. But so far as the necessary further supply of money material on the basis of capitalist production is concerned, surplus-value incorporated in products is on the one hand thrown into circulation without the money required for its monetization, and on the other hand surplus-value in the form of gold without the previous transformation of products into gold.

The additional commodities which are to be converted into money find the necessary amount of money at hand, because on the other side additional gold (and silver) intended for conversion into commodities is thrown into circulation, not by means of exchange, but by production itself.

II. ACCUMULATION AND REPRODUCTION ON AN ENLARGED SCALE.

To the extent that accumulation takes place in the form of reproduction on an enlarged scale, it is evident that it does not offer any new problem in matters of the circulation of money.

In the first place, the additional money-capital required for the function of the increasing productive capital is supplied by that portion of the realized surplus-value, which is thrown into circulation by the capitalists as money-capital, not as the money-form of their revenue. The money is already present in the hands of the capitalists. Only its employment is different.

Now, by means of the additional productive capital, its product, an additional quantity of commodities, is thrown into circulation. Together with this additional quantity of commodities, a portion of the additional money required for its circulation is thrown into circulation, so far as the value of this mass of commodities is equal to that of the productive capital consumed in their production. This additional quantity of money has precisely been advanced as an additional money-capital, and therefore it flows back to the capitalist through the turn-over of his capital. Here the same question reappears, which we met previously. Where does the additional money come from, by which the additional surplus-value now contained in the form of commodities is to be realized?

The general reply is again the same. The sum total of the prices of the commodities has been increased, not because the prices of a given quantity of commodities have risen, but because the mass of the commodities now circulating is greater than that of the previously circulating commodities, and because this increase has not been offset by a fall in prices. The additional money required for the circulation of this greater quantity of commodities of greater value must be secured, either by greater economy in the circulating quantity of money—whether by means of balancing payments, etc., or by some measure which accelerates the circulation of the same coins—or, by the transformation of money from the form of a hoard into that of a circulating medium. This does not merely imply that barren money-capital becomes active as a means of purchase or payment, or that money-capital which is already actually circulating for the benefit of the society while representing a reserve fund for its owner is thus performing a double service (such as deposits in banks which are continually balanced). It also implies that the stagnating reserve funds of money are economized.

"In order that money should flow continuously as coin, coin must constantly coagulate as money. The continuous flow of coin depends on its constant accumulation in the form of reserve funds of coin which spring up throughout the sphere of circulation and form sources of supply; the formation, distribution, disappearance, and reformation of these reserve funds is constantly changing, their existence constantly disappears, their disappearance constantly exists. Adam Smith expressed this never-ceasing transformation of coin into money and of money into coin by saying that every owner of commodities must always keep in supply, aside from the particular commodity which he sells, a certain quantity of the universal commodity with which he buys. We saw, that in the process C—M—C the second member M—C splits up into a series of purchases which do not take place at once, but at intervals of time, so that one part of M circulates as coin while the other rests as money. Money is in that case only suspended coin and the separate parts of the circulating mass of coins appear now in one form, now in another, constantly changing. This first transformation of the medium of circulation into money represents, therefore, but a technical aspect of money-circulation." (Karl Marx, "A Contribution to the Critique of Political Economy," 1859, page 167-168.)—("Coin" as distinguished from money is here employed to indicate the function of money as a mere medium of circulation as compared to its other functions.)

When all these measures do not suffice, an additional production of gold must take place, or, what amounts to the same, one portion of the additional product is directly or indirectly exchanged for gold—the product of countries in which precious metals are mined.

The entire amount of labor-power and social means of production expended in the annual production of gold and silver, so far as they serve as instruments of circulation, constitutes a bulky item of the dead expense of the capitalist mode of production, or of the production of commodities in general. It deprives social economy of a corresponding amount of potential additional means of production and consumption, that is to say, of actual wealth. To the extent that the cost of this expensive machinery of circulation is decreased at a given scale of circulation or a given scale of its extension, the productive power of society is increased. Hence, so far as the auxiliary means developed with the credit system have any influence in that direction, they increase the social wealth directly, either by running a large portion of the social labor-process without intervention of actual money, or by raising the capacities of the money already in circulation.

This disposes also of the absurd question, whether capitalist production in its present volume would be possible without the credit system (even if analyzed only from this point of view), that is to say, if it were possible with the circulation of metallic coin alone. Evidently this is not the case. It would have found the barriers of the limited production of precious metals in its way. On the other hand, one must not entertain any myths as to the productive power of the credit system, so far as it supplies or releases money-capital. The further analysis of this question is out of place here.

We have now to study the case, in which no actual accumulation, that is to say, no immediate expansion of the scale of production, takes place, but a portion of the realized surplus-value is accumulated for a longer or shorter time as a money reserve, in order to be employed later on as productive capital.

To the extent that money so accumulating is additional money, the matter needs no explanation. It can only be a portion of the surplus-gold imported from gold producing countries. In this connection it must be remembered that the national product, in exchange for which this gold is imported, is no longer in this country. It has been exported to foreign countries in exchange for gold.

But if we assume that the same amount of money is still in the country the same as before, then the accumulated and accumulating money has accrued from the circulation. Only its function is changed. It is converted from circulating money into a gradually accruing latent money capital.

The money which is accumulated in this case is the money-form of sold commodities, and represents that portion of its value which constitutes surplus-value for its owner. (The credit system is not supposed to exist in this case.) The capitalist who accumulates this money has sold to that extent without buying.

If we look upon this transaction merely as a limited phenomenon, there is nothing to explain. A part of the capitalists keep the money realized by the sale of their products without drawing products out of the market in return for it. Another part of them, on the other hand, transform all their money into products, with the exception of the constantly recurring money-capital required for the promotion of production. One portion of the products thrown upon the market as bearers of surplus-value consists of means of production, or of the actual elements of variable capital, the necessary means of subsistence. It can serve immediately for the expansion of production. For it has not been assumed that one part of the capitalists accumulates capital, while the other consumes its surplus-value entirely, but only that one part is engaged in the accumulation of money, in the formation of latent money-capital, while the other part accumulates actually, that is to say, expands the scale of production, really adds to its productive capital. The available quantity of money remains sufficient for the requirements of circulation, even if one part of the capitalists accumulates money, while another expands production, and vice versa. Moreover, the accumulation of money on one side may proceed without cash money by the mere accumulation of outstanding claims.

But the difficulty arises when we assume, not a partial, but a general accumulation of money-capital on the part of the capitalist class. Apart from this class, there is, according to or assumption—the general and exclusive domination of capitalist production—no other class but the working class. All that the working class buys is equal to the sum total of its wages, equal to the sum total of the variable capital advanced by the entire capitalist class. This money flows back to the capitalist class by the sale of their product to the working class. The variable capital thus resumes its money-form. Let the sum total of the variable capital be x times 100 p. st., that is to say, the sum total of the variable capital actually employed, not merely advanced for the current year. It does not alter the question fundamentally, whether we know how much or how little money is actually advanced in this variable capital-value during the year, according to the velocity of the turn-over. The capitalist buys with these x times 100 p. st. a certain amount of labor power, or pays wages to a certain number of laborers—first transaction. The laborers buy with this same amount a certain quantity of commodities from the capitalists, where-by the same x times 100 p. st. flow back into the hands of the capitalist class—second transaction. And this is continually repeated. This amount of x times 100 p. st., then, can never enable the working class to buy that portion of its product in which the constant capital is embodied, much less that in which the surplus-value of the capitalist class is incorporated. The laborers can never buy more with these x times 100 p. st. than a portion of the social product, and the value of this portion is equal to that value of the social product in which the advanced variable capital is embodied.

Apart from the case, in which this universal accumulation of money expresses nothing but the distribution of the additional incoming precious metal, in whatever proportion, among the various individual capitalists, how can the entire capitalist class accumulate money under such circumstances?

They would all have to sell a portion of their product without buying anything in return. It is not at all mysterious that they should all have a certain fund of money which they throw into circulation for their consumption, and a certain portion of which flows back to each one of them. But this fund of money, as a fund for circulation, arises precisely through the monetization of surplus-value and is not by any means latent money-capital.

If we view the matter as it takes place in reality, we find that the latent money-capital, which is accumulated for future use, consists:

(1). Of deposits in banks; and it is a comparatively insignificant sum which is really at the disposal of the bank. Money-capital is but nominally accumulated there. What is actually accumulated are outstanding claims on money which can be monetized (so far as they are really monetized) only because there is a certain balance between the money drawn and the money deposited. It is a relatively small sum that is in the hands of the banker as money.

(2). Of public bonds. These are not capital at all, but mere claims on the annual product of the nation.

(3). Of stocks. So far as they are not bogus, they are titles of ownership of some actual capital belonging to some corporation and drafts on the surplus-value flowing from it.

There is no accumulation of money in any of these cases. What appears on the one side as an accumulation of money-capital, appears on the other as a continual and actual expenditure of money. It does not alter the case, whether the money is expended by its owner, or by others who are his debtors.

On the basis of capitalist production, the formation of a hoard is never an end in itself, but the result, either of a clogging of the circulation—larger amounts of money than is generally the case assuming the form of a hoard—or of accumulations conditioned on the turn-over; or, finally, the hoard is merely a formation of latent money-capital held temporarily and intended for future employment as productive capital.

Hence, while a portion of the money realized in surplus-value is on the one hand always withdrawn from circulation and accumulated as a hoard, another part of the surplus-value is at the same time continually converted into productive capital. With the exception of the distribution of additional precious metals among the members of the capitalist class, accumulation in the form of money never takes place simultaneously at all points.

That which is true of the other portion of the annual product, is also true of that portion of it which represents surplus-value in the form of commodities. A certain sum of money is required for its circulation. This sum of money belongs to the capitalist class quite as much as the annually produced quantity of commodities which represent surplus-value. It is originally thrown into circulation by the capitalist class itself. It is constantly redistributed among them by means of circulation itself. Just as in the case of the circulation of coin in general, so is there a clogging of a portion of this mass at ever varying points, while another portion is continually circulating. Whether a part of this accumulation is made intentionally for the purpose of forming money-capital, or not, does not alter the matter.

Exception has been made here of those adventures of circulation by which one capitalist grasps a portion of the surplus-value, or even of the capital, of another, thereby causing a onesided accumulation and centralization of money-capital as well as of productive capital. For instance, a portion of the appropriated surplus-value accumulated by A as money-capital may be a portion of the surplus-value of B which does not flow back to him.

PART III.
The Reproduction and Circulation of the Aggregate Social Capital.

Part III, Chapter XVIII. 35
INTRODUCTION.

I. THE OBJECT OF THE ANALYSIS.

The immediate process of production of capital is its labor process and self-expansion, the process whose result is the commodity-product, and whose compelling motive is the production of surplus-value.

The process of reproduction of capital comprises this immediate process of production as well as the two phases of the process of circulation, strictly so called, in other words, it comprises the entire cycle, which, as a periodic process, constantly repeated at definite intervals, constitutes the turnover of capital.

No matter whether we study the rotation in the form of M—M' or that of P—P, the immediate process of P itself always forms but one link in the chain of this rotation. In the one form it appears as a promoter of the process of circulation, in the other the process of circulation appears as its promoter. Its continual renewal, the continual rehabilitation of capital as productive capital, is in either case conditioned on its metamorphoses in the process of circulation. On the other hand, the continually renewed process of production is the condition of the metamorphoses which the capital traverses ever anew in the sphere of circulation, its alternate incarnation as money-capital and commodity-capital.

However, every individual capital forms but an individual fraction, endowed with individual life, as it were, of the aggregate social capital, just as every individual capitalist is but an individual element of the capitalist class. The movement of the social capital consists of the totality of the movements of its individualized fractional parts, the turnovers of the individual capitals. Just as the metamorphosis of the individual commodity is a link in the series of metamorphoses of the commodity-world—the circulation of commodities—so the metamorphosis of the individual capital, its turn-over, is a link in the rotation of the social capital.

This total process comprises both the productive consumption (the immediate process of production) together with the metamorphoses (materially considered, exchanges) which promote it, and the individual consumption together with its corresponding metamorphoses, or exchanges. It includes on the one hand the conversion of variable capital into labor-power, and thus the incorporation of labor-power in the process of capitalist production. Here the laborer appears as the seller of his commodity, labor-power, and the capitalist as its buyer. But on the other hand the sale of the commodities implies their purchase by the working class, in other words, their individual consumption. Here the working class appear as buyers and the capitalists as sellers of commodities to the laborers.

The circulation of the commodity-capital implies the circulation of surplus-value, hence also the purchases and sales, by which the capitalists promote their individual consumption, the consumption of surplus-value.

The rotation of individual capitals, then, in their aggregation as social capital, but in their totality, comprises not only the circulation of capital, but also the general circulation of commodities. The last named can originally consist of only two parts: (1) The rotation of the capital itself, and (2) the rotation of the commodities which pass into individual consumption, the commodities for which the laborer expends his wages and the capitalist his surplus-value (or a part of it). True, the rotation of capital comprises also the circulation of surplus-value, so far as it is a part of the commodities, and likewise the conversion of the variable capital into labor-power, the payment of wages. But the expenditure of this surplus-value and wage for commodities does not form a link in the circulation of capital, although at least the expenditure of wages is a requirement for this circulation.

In volume I the process of capitalist production was analyzed as an individual transaction as well as a process of reproduction, the production of surplus-value as well as the production of capital. The changes of form and substance experienced by capital in the sphere of circulation were assumed without lingering over them. It was assumed that, on one hand, the capitalist sells the product at its value, and on the other, that he finds within the sphere of circulation the material means of production required for the renewal or continuation of the process. The only transaction within the sphere of circulation over which we had lingered in the first volume was the sale and purchase of labor-power as the fundamental condition of the capitalist mode of production.

In the first part of volume II, the various forms were considered which capital assumes in its rotation, and the various forms of this rotation itself.

In the second part of this volume, the rotation of capital was studied as a periodical process, as a turn-over. It was shown on one side, in what manner the various constituent parts of capital (fixed and circulating) accomplish the rotation of forms in different periods of time and different ways; and, on the other side, the circumstances were analyzed on which the different duration of the working period and the period of circulation is conditioned. We observed the influence of the period of turn-over and of the different proportions of its component parts upon the volume of the process of production and upon the annual rate of surplus-value. Indeed, while it was the successive forms continually assumed and discarded by capital in its rotation which were studied in part I of volume II, it was shown in part II of this volume, how a capital of a given magnitude is simultaneously divided, within this flow and succession, into the different forms of productive capital, money-capital, and commodity-capital, in varying proportions, so that they do not only relieve one another, but that different portions of the total capital-value are continually side by side and serve in these different forms. Especially money-capital was revealed in its peculiarities, which had not been shown in volume I. Certain laws were found, according to which certain portions of different size of a given capital must be continually advanced and renewed in the form of money-capital, according to the conditions of the turn-over, in order to maintain in service a productive capital of a certain volume.

But in both the first and second parts of this volume, it was only a question of some individual capital, of the movement of some individualized part of social capital.

However, the turn-overs of individual capitals intermingle, are mutually conditioned on one another, are their mutual premises, and form precisely in this interrelation the movement of social capital. Just as in the simple circulation of commodities the total metamorphosis of a certain commodity appeared as a link in the series of metamorphoses of the world of commodities, so now the metamorphosis of individual capital appears as a link in the series of a metamorphoses of the aggregate social capital. But while the simple circulation of commodities did not necessarily imply the rotation of capital—since it may take place on the basis of non-capitalist production—the rotation of the aggregate social capital, as we have seen, implies also the circulation of commodities not belonging to the rotation of some individual capital, in other words, the circulation of commodities which do not represent any capital.

We have now to study the process of circulation of individual capitals in their capacity as component parts of the aggregate social capital (which circulation constitutes in its entirety the process of reproduction), that is to say, the process of rotation of this aggregate social capital.

II. THE ROLE OF MONEY-CAPITAL.

(Although the following belongs in a later part of this section, we shall analyze it immediately, namely, the money-capital considered as a constituent part of the aggregate social capital.)

In the study of the turn-over of the individual capital, the money-capital revealed two sides.

In the first place, it is the form in which every individual capital appears upon the scene and opens its process as capital. It therefore appears as the prime promoter, giving the first impetus to the entire process.

In the second place, according to the different durations of the periods of turn-over and the different proportion of its two parts—the working period and the period of circulation—that portion of the advanced capital-value which must be continually advanced and renewed in the form of money maintains a different proportion to the productive capital which it sets in motion, or in other words, to the continuous scale of production. But whatever may be this proportion, that portion of the active capital-value which can continually serve as productive capital is limited under any circumstances by that portion of the advanced capital-value which must exist continually beside the productive capital in the form of money. It is here merely a question of a normal turn-over, an abstract average. Exception is made of the additional money-capital required for the compensation of the interruptions of the circulation.

In regard to the first point, we have seen that the production of commodities implies the circulation of commodities, and the circulation of commodities implies the materialization of commodities in money, the circulation of money; the duplication of commodities in commodities and money is a law of the transformation of products into commodities. The capitalist production of commodities likewise implies—whether considered socially or individually—that capital in the form of money, or money-capital, is the prime motor of every new business and its continual motor. Especially the circulating capital implies the continuous reappearance of money-capital in short intervals as a motor. The entire advanced capital-value, that is to say, all the elements of capital composed of commodities, labor-power, instruments and materials of production, must be continually bought with money and again bought with money. What is true of the individual capital, is also true of the social capital which functions only in the form of many individual capitals. But, as we showed in volume I, this does not imply that the field of activity of capital, the scale of production, even on a capitalist basis, depends absolutely for its extension on the amount of the money-capital in service.

Elements of production are incorporated in the capital whose expansion within certain limits is independent of the magnitude of the advanced money-capital. The payment of labor-power remaining the same, it can yet be exploited more or less extensively or intensively. If the money-capital is increased with this greater exploitation, that is to say, if wages are raised, it is not proportionately, or, in other words, they are not actually raised.

The productively exploited materials of nature—the soil, the seas, ore, forests, etc.—which do not constitute an element in the value of capital, are intensively or extensively better exploited with an increasing exertion of the same labor-power, without requiring an additional advance of money-capital. The actual elements of productive capital are thus multiplied without requiring a greater advance of money-capital. But so far as such an advance is required for additional auxiliary materials, the money-capital, in which the capital-value is advanced, is not increased proportionately to the augmented effectiveness of the productive capital, so that in reality it is not increased.

The same instruments of labor, and thus the same fixed capital, may be more effectively used by a prolongation of their daily use and by greater intensity of employment, without an additional investment of money for fixed capital. There is, in that case, only a more rapid turn-over of the fixed capital, but the elements of its reproduction are also supplied more rapidly.

Apart from materials of nature, it is possible to incorporate natural forces which do not cost anything as agents of the productive progress with more or less heightened effect. The degree of their effectiveness depends on the methods and scientific progress which do not cost the capitalist anything.

The same is true of the social combination of labor-power in the process of production and of the accumulated skill of the individual laborers. Carey calculates that the real estate owner never receives enough, because he is not paid for all the capital or labor which have been put into the soil since time immemorial in order to give it its present productivity. (Of course, no mention is made of the productivity of which the soil is robbed.) According to this argument, the laborer would have to be paid according to the work which had to be done by the entire human race in order to develop a savage into a modern mechanic. One should rather think: If all the unpaid labor embodied in the soil and appropriated by the real estate owner is counted, then all the capital ever invested in this soil has been paid over and over with usury, so that society has long ago bought the real estate over and over.

The increase in the productive powers of labor, so far as it does not imply an additional investment of capital-value, augments in the first analysis indeed only the quantity of the product, not its value, except the extent to which it is enabled to produce more constant capital with the same labor and thus to preserve its value. But it forms at the same time new material for capital, hence the basis for an increased accumulation of capital.

So far as the organization of social labor itself, and thus the increase in the social productivity of labor, requires a production on a large scale and thus the advance of large quantities of money-capital on the part of individual capitalists, we have shown in volume I that this is accomplished in part by the centralization of capitals in a few hands, without necessarily implying an increase in the volume of the actively engaged capital-values, and consequently in the volume of the money-capital, in which they are advanced.

Finally, we have shown in the preceding part that a contraction of the period of turn-over permits of setting in motion the same productive capital with less money-capital, or to set in motion more productive capital with the same money-capital.

But evidently all this has nothing to do with the real question of money capital. It shows only that the advanced capital, a given sum of values consisting in its free form, in its value-form, of a certain sum of money after its conversion into productive capital, includes productive potentialities whose limits are confined within those of its values, but which may exert themselves extensively or intensively with in a certain playroom. If the prices of the elements of production—the materials of production and labor-power—are given, the magnitude of the money-capital required for the purchase of a definite quantity of these elements of production in the form of commodities is determined. Or, the magnitude of the value of the capital to be advanced is determined. But the extent to which this capital acts as a creator of values and products is elastic and variable.

Now we come to the second point. It is a matter of course, that that portion of the social labor and means of production, which must be annually expended for the production or purchase of money, in order to make up for the wear and tear of coin, is to that extent a reduction of the volume of social production. But as for the money-value which functions partly as a medium of circulation, partly as a hoard, it exists, having once been acquired, it is present apart from the labor-power, the finished means of production, and the natural sources of wealth. It cannot be regarded as a barrier of production. By its transformation into elements of production, by its exchange with other nations, the scale of production might be extended. This implies, however, that the money plays its role as international money the same as ever.

According to the duration of the period of turn-over, a greater or smaller amount of money-capital is required in order to set the productive capital in motion. We have also seen that the division of the period of turn-over into a working period and a period of circulation requires an increase of the capital latent or suspended in the form of money.

So far as the period of turn-over is determined by the duration of the working period, it is determined, other conditions remaining equal, by the material nature of the process of production, not by the specific social character of this process of production. However, on the basis of capitalist production, extensive operations of a long duration require large advances of money-capital for a long time. Production in such spheres is, therefore, dependent on the limits within which the individual capitalist has money-capital at his disposal. This barrier is broken down by the credit system and associations, connected with it, for instance, stock companies. Disturbances in the money-market, therefore, set such businesses out of action, while they, on the other hand cause disturbances in the money-market themselves.

On the basis of capitalist production, it must be ascertained, on what scale those operations which withdraw labor and means of production from it for a long time without furnishing in return any useful product, can be carried on without injuring those lines of production which do not only withdraw continually, or at several intervals, labor-power and means of production from it, but also supply it with means of subsistence and of production. Under social or capitalist production, the laborers in lines with short working periods will always withdraw products only for a short time without giving any products in return; while lines of business with long working periods withdraw products for a long time without any returns. This circumstance, then, is due to the material conditions of the respective labor process, not to its social form. In the case of socialized production, the money-capital is eliminated. Society distributes labor-power and means of production to the different lines of occupation. The producers may eventually receive paper checks, by means of which they withdraw from the social supply of means of consumption a share corresponding to their labor-time. These checks are not money. They do not circulate.

We see, then, that, so far as the need of money-capital is due to the length of the working period, it is determined by two things: First, that money is the general form in which every individual capital (apart from credit) must make its entry in order to transform itself into productive capital; this follows from the nature of capitalist production, or of commodity-production in general. Second: The magnitude of the required money advance is due to the fact that labor-power and means of production must continually be withdrawn from society for a long time without any return of products convertible into money. The first requirement, namely that capital must be advanced in the form of money, is not suspended by the form of this money itself, regardless of whether it is metal-money, credit-money, token-money, etc. The second circumstance is in no way affected by the money-medium or the form of production by means of which labor, means of subsistence, and means of production are withdrawn, without the return of some equivalent into the circulation.

Part III, Chapter XIX. 36
FORMER DISCUSSIONS OF THE SUBJECT.

I. THE PHYSIOCRATS.

Quesnay's Tableau Economique shows in a few broad outlines, how the result of national production in a certain year, amounting to some definite value, is distributed by means of the circulation in such a way, that, other circumstances remaining the same, simple reproduction can take place, that is to say, reproduction on the same scale. The starting point of this period of production is fittingly last years's crop. The innumerable individual acts of circulation are at once viewed in their characteristic social mass movement—the circulation between great social classes distinguished by their economic functions. We are especially interested in the fact that a portion of the total product—which, like every other portion of it is a new result of last year's labor and intended for use—is at the same time the bearer of old capital-values re-appearing in their natural form. It does not circulate, but remains in the hands of its producers, the class of capitalist farmers, in order to begin its service as capital once more for them. In this constant portion of the capital of one year's product, Quesnay includes also some elements that do not belong to it, but he sees the main thing, thanks to the limits of his horizon, in which agriculture is the only productive sphere of investment where human labor produces surplus-value, hence the only productive one from the capitalist point of view. The economic process of reproduction whatever may be its specific social character, intermingles in this sphere of agriculture always with a natural process of reproduction. The obvious conditions of the latter throw light on those of the former, and keep off a confusion of thought, which is due only to the witchery of circulation.

The label of a system differs from that of other articles, among other things, by the fact that it cheats not only the buyer, but often also the seller. Quesnay himself and his immediate disciples believed in their feudal shop sign. So did our school scientists to this day. But as a matter of fact, the system of the physiocrats is the first systematic conception of capitalist production. The representative of capitalist production, the class of capitalist farmers, directs the entire economic movement. Agriculture is carried on capitalistically, that is to say, it is the enterprise of a capitalist farmer on a large scale; the immediate cultivator of the soil is the wage laborer. Production creates not only articles of use, but also their value; its compelling motive is the production of surplus-value, whose birth-place is the sphere of production, not that of circulation. Among the three classes which figure as the bearers of the process of reproduction promoted by the circulation the immediate exploiter of "productive" labor, the producer of surplus-value, the capitalist farmer, is distinguished from those who merely appropriate surplus-value.

The capitalist character of the system of the physiocrats excited opposition even during its flourishing period, on one side on the part of Linguet and Mably, on the other that of the champions of the freeholders of small farms.

The retrogression of Adam Smith 37 in the analysis of the process of reproduction is so much more remarkable, as he manipulates other correct analyses of Quesnay, for instance, by generalizing the "avances primitives" and "avances annuelles" into "fixed" and "circulating" capital, 38 and even relapses entirely into physiocratic errors in some places. For instance, in order to demonstrate that the capitalist farmer produces more value than any other class of capitalists, he says: "No other capital sets a greater quantity of productive labor in motion than that of the capitalist farmer. Not only his laboring servants, but also his laboring cattle, consist of productive laborers." (Fine compliment for the laboring servants!) "In agriculture, nature works as well as human beings; and although its labor does not require any expense, its product nevertheless has a value, the same as that of the most expensive laborer. The most important operations of agriculture seem to aim, not so much to increase the fertility of nature—although they do that, too—as to direct it toward the production of the plants most useful to mankind. A field grown up in thorns and weeds often enough furnishes as large a quantity of plant growth as the best tilled vineyard or corn field. Planting and cultivation serve frequently more to regulate than to stimulate the active fertility of nature; and after those have exhausted all their labors, there still remains a great deal of work to do for the latter. The laborer and the laboring cattle (!) employed in agriculture, therefore, do not only effect, like the laborers in the manufactures, the reproduction of a value which is equal to their own consumption and the capital employing them together with the profit of the capitalist, but that of a far greater value. Over and above the capital of the farmer and all his profits they effect regularly the reproduction of the rent of the land owner. The rent may be regarded as the product of the forces of nature, the use of which the land owner lends to the farmer. It is larger or smaller according to the estimated degree of these forces, in other words, according to the estimated natural or artificially insured fertility of the soil. It is the work of nature which remains after deducting or replacing all that which may be regarded as the work of man. It is rarely less than one quarter and frequently more than one third of the total product. No other equal quantity of labor, employed in manufacture, can ever effect so large a reproduction. In manufacture nature does nothing, man everything; and reproduction must always be proportional to the strength of the agencies that carry it on. Therefore the capital invested in agriculture does not only set in motion a greater quantity of productive labor than any equal capital employed in manufacture; but it also adds, in proportion to the quantity of productive labor employed by it, a far greater value to the annual product of the soil and to the labor of a certain country, to the actual wealth and income of its inhabitants." (Book II, chapter 5, page 242.)

Adam Smith says in Book I, Chapter 6, page 42: "In value of the sowings is likewise a fixed capital in the proper meaning of the word." Here, then, capital is the same as capital-value; it exists in a "fixed" form. "Although the seed passes back and forth between the soil and the barn, yet it never changes owners and therefore does not circulate in reality. The farmer does not make his profit by its sale, but by its increase." (Page 186.) The absurdity lies here in the fact that Smith does not, like Quesnay before him, notice the reappearance of the value of constant capital in a new form, an important element of the process of reproduction, but merely another illustration, and a wrong one at that, of his distinction between circulating and fixed capital. In Smith's translation of "avances primitives" and "avances annuelles" into "fixed capital" and "circulating capital," the progress consists in the term "capital," whose meaning is generalized and made independent of the special consideration for the "agricultural" application of the physiocrats; the retrogression consists in the fact that the terms "fixed" and circulating" are regarded as the fundamental distinction and so maintained.

II. ADAM SMITH.

(1.) THE GENERAL POINT OF VIEW OF ADAM SMITH

Adam Smith says in Book I, Chapter 6, page 42: "In every society the price of every commodity finally dissolves into one or the other of these three parts (wages, profit, ground rent), or into all three of them; and in every advanced society all three of them pass more or less as component parts into the price of by far the greater part of the commodities." 39 Or, as he continues, page 63: "Wages, profit, and ground rent are the three final sources of all income as well as of all exchange value." We shall discuss further along this doctrine of Smith concerning the "component parts of the prices of commodities," or of "all exchange value."

He says furthermore: "As this is true of every single commodity individually, it must also be true of all commodities as a whole, constituting the entire annual product of the soil and the labor of every country. The total price or exchange-value of this annual product must dissolve into the same three parts, and be distributed among the different inhabitants of the land, either as wages of their labor, or as profit of their capital, or as rent of their real estate." (Book II, chapter 2, page 190.)

After Adam Smith has thus dissolved the price of all commodities individually as well as "the total price or exchange-value...of the annual product of the soil and the labor of every country" into three sources of revenue for wage-workers, capitalists, and real estate owners, he must needs smuggle a fourth element into the problem by a circuitous route, namely the element of capital. This is accomplished by the distinction between a gross and a net income. "The gross income of all inhabitants of a large country comprises the entire annual product of their soil and their labor; the net income that portion which remains at their disposal after deducting the cost of maintenance, first of fixed, and second, of their circulating capital; or that portion which they can place in their supply for consumption, or expend for their maintenance, comfort, and pleasure, without touching their capital. Their actual wealth likewise is proportional, not to their gross, but to their net income." (Ibidem, page 190.)

We make the following comment:

(1). Adam Smith expressly deals here only with simple reproduction, not reproduction on an enlarged scale, or accumulation. He speaks only of expenses for maintaining the capital in process. The "net" income is equal to that portion of the annual product, whether of society, or of the individual capitalist, which can pass into the "fund for consumption," but the size of this fund must not encroach upon capital in process. One portion of the value of both the individual and social product, then, is dissolved neither in wages, nor in profit, nor in ground rent, but in capital.

(2). Adam Smith flees from his own theory by means of a word play, the distinction between a gross and net revenue. The individual capitalist as well as the entire capitalist class, or the so-called nation, receive in place of the consumed capital a quantity of commodities, whose value—represented by the proportional parts of this product—replaces on one hand the invested capital-value and thus forms an income, or revenue, but, mark well, a capital revenue; on the other hand, portions of value which are "distributed among the different inhabitants of the land, either as wages of their labor, or as profits of their capital, or as rent of their real estate," a thing commonly called income. Hence the value of the entire product, whether of the individual capitalist, or of the whole country, yields an income for somebody; but it is on one hand an income of capital, on the other a "revenue" different from it. In other words, the thing which is eliminated by the analysis of the commodity in its component parts is brought back through a side door, the ambiguity of the term "revenue." But only such portions of the value of a product can be taken in as previously existed in it. If the capital is to come in as revenue, capital must first have been expended.

Adam Smith says furthermore: "The lowest ordinary rate of profits must always amount to a little more than is sufficient to make good the losses incidental to every investment of capital. It is this surplus alone which represents the clear, or net, profit." (Which capitalist understands by profit necessary investment of capital?) "That which people call gross profit comprises frequently not only this surplus, but also the portion retained for such extraordinary losses." (Book I, chapter 9, page 72.) This means nothing else but that a portion of the surplus-value, considered as a part of the gross profit, must form an insurance fund for the production. This insurance fund is created by a portion of the surplus-labor, which to that extent produces capital directly, that is to say, the fund intended for reproduction. As regards the expense for the "maintenance" of the fixed capital (see the above quotations), the replacement of the consumed fixed capital by a new one is not a new investment of capital, but only a renewal of the value of the old capital. And as far as the repair of the fixed capital is concerned, which Adam Smith counts likewise among the cost of maintenance, this expense belongs to the price of the capital advanced. The fact that the capitalist, instead of investing this all at one time, invests it gradually according to the requirements during the process of capital in service, and that he may invest it out of profits already pocketed, does not change the source of this profit. The portion of value of which it consists proves only that the laborer produces surplus-value for the insurance fund as well as for the repairing fund.

Adam Smith then tells us that he excludes from the net revenue, that is to say, from the revenue in its specific meaning, the entire fixed capital, furthermore that entire portion of the circulating capital which is required for the maintenance and repair of the fixed capital, and for its renewal; as a matter of fact, all capital not in the natural form intended for the fund for consumption.

"The entire expenditure for the maintenance of the fixed capital must evidently be excluded from the net revenue of society. Neither the raw materials by means of which the machines and tools of industry must be kept in condition nor the product of the labor required for the transformation of these raw materials into their intended form can ever constitute a portion of this revenue. The price of this labor may indeed form a portion of that revenue, as the laborers so employed may invest the entire value of their wages in their immediate fund for consumption. But in other kinds of labor the price" (that is to say, the wages paid for this labor) "as well as the product" (in which this labor is incorporated) "enter into the fund for consumption; the price into that of the laborers, the product into that of other people, whose subsistence, comfort, and pleasure are increased by the labor of these workmen." (Book II, chapter 2, page 190, 191.)

Adam Smith here comes upon a very important distinction between the laborers employed in the immediate production of means of production and those employed in the immediate production of articles of consumption. The value of the commodities produced by the first-named contains a part which is equal to the sum of the wages, that is to say, equal to the value of the amount of capital invested in the purchase of labor-power. This value exists bodily as a certain share of the means of production produced by these laborers. The money received by them as wages is their revenue, but their labor has not produced any goods which are consumable, either for them or for others. Hence these products are not an element of that portion of the annual product which is intended for a social fund for consumption, in which a "net revenue" can alone be realized. Adam Smith forgets to add here that the same thing which applies to wages is also true for that portion of the value of the means of production, which forms the revenue (in the first hand) of the industrial capitalist under the categories of profit and rent. These portions of value likewise exist in means of production, articles which cannot be consumed. They cannot secure out of the articles of consumption produced by the second kind of laborers a quantity corresponding to their price until they have been sold; only then can they transfer those articles to the individual fund for consumption of their owner. But so much more Adam Smith should have seen that this excludes the value of the means of production serving within the sphere of production—the means of production which produce means of production—a portion of value equal to the value of the constant capital employed in this sphere and excluded from the portions of value forming a revenue, not only by the natural form in which it exists, but also by its function as capital.

The statements of Adam Smith regarding the second kind of laborers—who produce immediately articles of consumption—are not quite exact. He says that in this kind of labor, both the price of labor and the product go to the fund for immediate consumption, "the price" (that is to say, the money received in wages) "to the stock for the consumption of the laborers, and the product to that of other people, whose subsistence, comfort, and pleasure are increased by the labor of these workmen." But the laborer cannot consume the "price" of his labor directly, the money in which his wages are paid; he makes use of it by buying articles of consumption with it. These may in part consist of classes of commodities produced by himself. On the other hand, his own produce may be such as goes only into the consumption of the exploiters of labor.

After Adam Smith has thus entirely excluded the fixed capital from the "net revenue" of a certain country, he continues:

"While the entire expense for maintaining the fixed capital is thus necessarily excluded from the net revenue of society, the same is not the case with the expense of maintaining the circulating capital. Of the four parts which go to make up this last named capital, money, means of subsistence, raw materials, and finished products, the last three, as we have said, are regularly taken out of it and transferred either to the fixed capital of society, or to the fund intended for immediate consumption. That portion of the consumable articles which is not employed for the maintenance of the former" (the fixed capital) "passes wholly into the latter" (the fund for immediate consumption) "and forms a part of the net revenue of society. Hence the maintenance of these three parts of the circulating capital does not diminish the net revenue of society by any other portion of the annual product than that required for maintaining the fixed capital." (Book II, chapter 2, page 192.)

This is but a tautology, to the effect that that portion of the circulating capital, which does not serve for the production of means of production, passes into that of means of consumption, in other words, passes into that part of the annual product, which is to serve as a fund for the social consumption. However, the immediately following passage is important:

"The circulating capital of society is different in this respect from that of an individual. That of an individual is wholly excluded from his net revenue, and can never form a part of it; it can consist only of his profit. But although the circulating capital of each individual goes to make up a portion of the circulating capital of the society to which he belongs, it is nevertheless not absolutely excluded for this reason from the net revenue of society, and may form a part of it. While all the commodities in the store of some small dealer must not by any means be placed in the supply for his own immediate consumption, still they may belong in the fund for consumption of other people, who, by means of a revenue secured by other funds, may regularly make good for him their value together with his profit, without thereby causing a reduction of either his or their capital." (Ibidem.)

We learn, then, the following facts from him:

(1). Just as the fixed capital, and the circulating capital required for its reproduction (he forgets the function) and maintenance, are absolutely excluded from the net revenue of the individual capitalist which can consist only of his profit, so is also the circulating capital employed in the production of means of consumption. Hence that portion of his commodity-product which reproduces his capital cannot be dissolved into portions of value which yield any revenue for him.

(2). The circulating capital of each individual capitalist constitutes a part of the circulating capital of society, the same as every individual fixed capital.

(3). The circulating capital of society, while representing only the sum of the individual circulating capitals, has a different character than the circulating capital of every individual capitalist. The circulating capital of the individual capitalist can never be a part of his own revenue; but a portion of the circulating capital of society (namely, that consisting of means of consumption) may at the same time be a portion of the revenue of society, or, as he expressed it in the preceding quotation, it must not necessarily reduce the net revenue of society by a portion of the annual product. Indeed, that which Adam Smith here calls circulating capital, consists in the annually produced commodity-capital, which is thrown into circulation annually by the capitalists producing it. This entire annual commodity-product of theirs consists of consumable articles and, therefore, forms the fund in which the net revenue of society (including wages) is realized or expended. Instead of choosing for his illustration the commodities in the store of the small dealer, Adam Smith should have selected the masses of commodities stored away in the warehouses of the industrial capitalists.

Now if Adam Smith had summed up the snatches of thought which forced themselves upon him, first in the study of the reproduction of that which he calls fixed, then of that which he calls circulating capital, he would have arrived at the following result:

I. The annual product of society consists of two divisions; one of them comprises the means of production, the other the means of consumption. Both must be treated separately.

II. The aggregate value of the annual product consisting of means of production is divided as follows: One portion of the value represents but the value of the means of production consumed in the creation of these means of production; it is but capital-value reappearing in a renewed form; another portion is equal to the value of the capital invested in labor-power, or equal to the sum of the wages paid by the capitalists of this sphere of production. A third portion of value, finally is the source of profits, including ground rent, of the industrial capitalists in this sphere.

The first portion of value, according to Adam Smith the reproduced portion of the fixed capital of all the individual capitals employed in this first section, is "evidently excluded and can never form a part of the net revenue," either of the individual capitalist or of society. It always serves as capital, never as a revenue. To that extent the "fixed capital" of each individual capitalist is in no way different from the fixed capital of society. But the other portions of the annual product of society consisting of means of production,—portions of value which also exist in the aliquot parts of this mass of means of production—form indeed revenues for all agents engaged in this production, yielding wages for the laborers, profits and ground rent for the capitalists. But so far as society is concerned, they are capital, not revenue, although the annual product of society consists only of the sums of the products of the individual capitalists belonging to it. These things are generally fit only for service as means of production by their very nature, and even those which may eventually serve as means of consumption are intended for service as raw or auxiliary materials of new production. But they serve as such—as capital—not in the hands of their producers, but in those of their purchasers, namely,

III. The capitalists of the second category, the direct producers of means of consumption. These things reproduce for these capitalists the capital consumed in the production of means of consumption (so far as this capital is not converted into labor-power, so that it consists in the sum of the wages of the laborers of this second class), while this consumed capital, which now exists in the form of means of consumption in the hands of the capitalists producing them, constitutes in its turn—from the point of view of society—the fund intended for consumption, in which the capitalists and laborers of the first category realize their revenue.

If Adam Smith had continued his analysis to this point, then he would have lacked but little for the complete solution of the problem. He was almost on the point of solving it, for he had already observed, that certain values of one kind (means of production) of the commodity-capitals constituting the total product of society yield indeed a revenue for the laborers and capitalists engaged in production, but do not contribute anything toward the revenue of society; while another part of value of another kind (means of consumption), although it is capital for its individual owners, that is to say, for the capitalists engaged in this sphere, is only a part of the social revenue.

So much is evident from the foregoing:

First: Although the social capital is but made up of the sum of the individual capitals, and for this reason the annual product in commodities (or the commodity-capital) equal to the sum of commodities produced by these individual capitals; and although the analysis of the value of commodities into its component parts, applicable to every individual commodity-capital, must also apply to the entire social commodity-capital, and actually does so result in the end, nevertheless the forms which these different component parts assume, when incorporated in the aggregate process of social production, differ.

Second: Even on the basis of simple reproduction, there is not merely a production of wages (variable capital) and surplus-value, but a direct production of new constant capital, although the working day consists only of two parts, one in which the laborer reproduces the variable capital, an equivalent for the purchase price of his labor-power, and another in which he produces surplus-value (profit, rent, etc.). For the daily labor, which is expended in the reproduction of means of production—and whose value is composed of wages and surplus-value—realizes itself in new means of production that take the places of the constant parts of capital consumed in the production of means of consumption.

The main difficulties, the greater part of which has been solved in the preceding analyses, are not offered by a study of accumulation, but by that of simple reproduction. For this reason, Adam Smith (book II) as well as Quesnay (Tableau Economique) take their departure from simple reproduction, whenever it is a question of the movements of the annual product of society and of its reproduction by means of circulation.

II. SMITH RESOLVES EXCHANGE-VALUE INTO V PLUS S.

The dogma of Adam Smith, to the effect that exchangeable value, or the price of any commodity—and therefore of all commodities constituting the annual product of society (since he justly assumes everywhere the existence of capitalist production)—is made up of three component parts, or resolves itself into wages, profit, and rent, may be reduced to the fact that the value of a commodity is equal to v plus s, that is to say, equal to the value of the advanced variable capital plus the surplus-value. And we may undertake this reduction of profit and rent to a common unit called s with the expressed permission of Adam Smith, as shown by the following quotations, in which we leave aside all minor points, especially any actual or apparent deviation from his dogma that the value of the commodities resolves itself exclusively into those elements which we call v plus s.

In manufacture: "The value which the laborers add to the material resolves itself...into two parts, one of which pays their wages, and the other the profit of their employer on the entire capital advanced by him in materials and wages." (Book I, chapter 6, page 41.) "Although the manufacturist gets his wages advanced by his master, he does not cost the latter anything in reality, since as a rule the value of these wages is preserved together with a profit, in the increased value of the object to which the labor was applied." (Book II, chapter 3, page 221). That portion of the stock which is invested "in the maintenance of productive labor...after it has served him (the employer) in the function of a capital...forms a revenue for them" (the laborers). (Book II, chapter 3, page 223.)

Adam Smith says explicitly in the chapter just quoted: "The entire annual product of the soil and the labor of each country...naturally resolves itself into two parts. One of them, and frequently the greater, is intended primarily to replace capital and to reproduce the means of subsistence, raw materials and finished products obtained from some capital; the other is intended to form a revenue either for the owner of this capital, as a profit on his capital, or for some one else, as a rent of his real estate." (Page 222.) Only a portion of the capital, so Adam Smith informed us just awhile ago, also forms a revenue for some one, namely that which is invested in the purchase of productive labor. This portion—the variable capital—performs first "the function of capital" for its employer and in his hands, and then it "forms a revenue" for the productive laborer himself. The capitalist transforms a portion of the value of his capital into labor-power and thereby into variable capital; it is only due to this transformation that not alone this portion of capital, but his entire capital, serve as industrial capital. The laborer—the seller of his own labor-power—receives its value in the form of wages. In his hands, labor-power is but a saleable commodity, a commodity whose sale keeps him alive, which is the sole source of his revenue; laborpower serves as a variable capital only in the hands of its buyer, the capitalist, and the capitalist advances its purchase price only apparently, since its value has been previously supplied to him by the laborer.

After Adam Smith has thus shown that the value of a product in manufacture is equal to v plus s (s standing for the profit of the capitalist), he tells us that, in agriculture, the laborers effect, aside from "the reproduction of a value which is equal to their own consumption and the (variable) capital employing them plus the profit of the capitalist," furthermore, "over and above the capital of the farmer and all his profit regularly the reproduction of the rent of the owner of the real estate." (Book II, chapter 5, page 243.) The fact that the rent passes into the hands of the real estate owner, is immaterial for the question under consideration. Before it can pass into his hands, it must be in those of the farmer, that is to say, of the industrial capitalist. It must form a part of the value of the product, before it can become a revenue for any one. Rent as well as profit are but component parts of surplus-value, even in the opinion of Adam Smith himself, and the productive laborer reproduces them continually together with his own wages, that is to say, with the value of the variable capital. Hence rent and profit are parts of the surplus-value s, and thus, with Adam Smith, the price of all commodities resolves itself into v plus s.

The dogma, that the price of all commodities (also of the annual product in commodities) resolves itself into wages plus profit, plus ground rent, assumes in the interspersed esoteric portion of Smith's work quite naturally the form that the value of every commodity, hence also that of the annual social product in commodities, is equal to v plus s, or equal to the value of the capital invested in labor-power and continually reproduced by the capitalist plus the surplus-value added by the labor of the laborers.

This outcome of the analysis of Adam Smith reveals at the same time—see farther along—the source of this one-sided analysis of the component parts into which the value of a commodity resolves itself. But the determination of the magnitude of these component parts and of the limit of their value has no bearing on the circumstance that they are at the same time different sources of revenue for different classes engaged in production.

Various inconsistencies are jumbled together when Adam Smith says: "Wages, profit, and ground rent are the three primary sources of all revenue as well as all exchange-value. Every other revenue is derived, in the last instance, from one of these." (Book I, chapter 6, page 48.)

(1). All members of society not directly engaged in reproduction, with or without labor, can obtain their share of the annual product of commodities—in other words, their articles of consumption—primarily only out of the hands of those classes who are the first to handle the product, that is to say, productive laborers, industrial capitalists, and real estate owners. To that extent their revenues are substantially derived from wages (of the productive laborers), profit, and ground rent, and appear as indirect derivations when compared to these primary sources of revenue. But, on the other hand, the recipients of these revenues, thus indirectly derived, draw them-by grace of their social functions, for instance that of a king, priest, professor, prostitute, soldier, etc., and they may regard these functions as the primary sources of their revenue.

(2). Here the ridiculous mistake of Adam Smith reaches its climax. After having taken his departure from a correct determination of the component parts of the value of commodities and the sum of values of the product incorporated in them, and having demonstrated that these component parts form so many different sources of revenue; 40 after having in this way deducted the revenues from the value, he proceeds in the opposite way—and this remains the ruling conception with him—and makes of the revenues "primary sources of all exchange-value" instead of "component parts," thereby throwing the doors wide open to vulgar economy. (See, for instance, our Roscher.)

III. THE CONSTANT PORTION OF CAPITAL.

Let us now see, how Adam Smith tries to spirit away the constant portion of the value of commodities.

"In the price of corn, for instance, one portion pays the rent of the land owner." The origin of this portion of value has no more to do with the circumstance that it is paid to the land owner and forms for him a revenue in the shape of rent than the origin of the other portions of value has to do with the fact that they constitute sources of revenue as profit and wages.

"Another portion pays the wages and subsistence of the laborers" (and of the laboring cattle, as he adds) "employed in its production, and the third portion pays the profit of the capitalist farmer. These three portions seem" (they seem indeed) "to constitute either directly, or in the last instance, the entire price of corn." 41 This entire price, that is to say, the determination of its magnitude, is absolutely independent of its distribution among three kinds of people. "A fourth portion may seem necessary in order to reproduce the capital of the farmer, or the wear of his laboring cattle and of his other implements. But it must be considered that the price of any agricultural implement, for instance of a laboring horse, is in its turn composed of the above three parts: the rent of the land on which it is bred, the labor of breeding, and the profit of the farmer who advances both the rent of this land and the wages of this labor. Hence, although the price of the corn may reproduce the price as well as the cost of maintenance of the horse, the entire price still resolves itself, directly or in the last instance, into the same three parts: ground rent, labor," (he means wages) "and profit." (Book I, chapter 6, page 42.)

This is verbatim all that Adam Smith has to say in support of his surprising doctrine. His proof consists simply in the repetition of the same contention. He admits, for instance, that the price of corn does not only consist of v plus s, but contains also the price of the means of production consumed in the production of corn, in other words, the value of a capital not invested in labor-power by the farmer. But, says he, the prices of all these means of production likewise resolve themselves into v plus s, the same as the price of corn. He forgets, however, to add in this case, that they also contain the prices of the means of production consumed in their production. He refers us from one line of production to another, and from that to a third. The contention that the entire price of commodities resolves itself "immediately" or "ultimately" into v plus s would not be a specious subterfuge in the sole case that he could demonstrate that the product in commodities, the price of which resolves itself immediately into c (price of consumed means of production) plus v plus s, is ultimately compensated by products which reproduce those "consumed means of production" completely and which are themselves produced by the investment of mere variable capital, by a mere investment of capital in labor-power. The price of these last products would then be v plus s. And in that case the price of the first products, represented by c plus v plus s, where c stands for the constant portion of capital, could be ultimately resolved into v plus s. Adam Smith himself did not believe that he had furnished such a proof by his example of the collectors of Scotch pebbles, who, according to him, do not produce any surplus-value, but produce only their own wages, and who, in the second place, do not employ any means of production (they do, however, employ them, such as baskets, sacks, and other means of carrying the stones).

We have already seen that Adam Smith later on throws his own theory over, without, however, being conscious of his contradictions. But the source of these is found precisely in his scientific premises. The capital converted into labor produces a greater value than its own. How does it do that? It is due, says Adam Smith, to the laborers, who impregnate, during the process of production, the things on which they work with a value which forms not only an equivalent for their own purchase price, but also a surplus-value, appropriated, not by them, but by their employers (profit and rent). That is all they accomplish, and all that they can accomplish. And what is true of the industrial labor of one day, is true of the labor set in motion by the entire capitalist class during one year. Hence the aggregate mass of the annual social product in values can resolve itself only into v plus s, into an equivalent by which the laborers reproduce the value of the capital expended for the purchase of their labor-power, and into an additional value which they must deliver over and above their own value to their employers. These two elements of value form at the same time sources of revenue for the various classes engaged in reproduction: The first is the source of wages, the revenue of the laborers; the second that of surplus-value, a portion of which is retained by the industrial capitalist in the form of profit, while another is given up by him as rent, the revenue of the real estate owners. Whence, then, should come another element of value, since the value of the annual product contains no other elements but v plus s? We are working on the basis of simple reproduction. Since the entire quantity of annual labor resolves itself into labor required for the reproduction of the value of the capital invested in labor-power, and labor required for the creation of surplus-value, where would the labor required for the production of the value of a capital not invested in labor-power come from?

The situation is as follows:

(1). Adam Smith determines the value of a commodity by the quantity of labor which the wage worker adds to the object of labor. He calls it materials of labor, since he is dealing with manufacture, which is working up products of other labor. But this does not alter the matter. The value which the laborer adds to a thing (and this "adds" is an expression of Adam Smith) is entirely independent of the fact whether or not this thing, to which value is added, had itself any value before this addition took place. The laborer creates a product of value in the form of a commodity; this, according to Adam Smith, is partly an equivalent for his wages, and this part, then, is determined by the value of his wages; according to whether his wages are high or low, he has to add more or less value in order to produce or reproduce an equivalent for his wages. On the other hand, the laborer adds more labor over and above the limit so drawn, and this constitutes the surplus value for the capitalist who employs him. Whether this surplus-value remains entirely in the hands of the capitalist or is yielded by him in portions to third persons, does not alter the qualitative fact that the additional labor of the laborer is surplus-value, not the quantity of this additional value. It is value the same as any other portion of the value of the product, but it differs from other portions by the fact that the laborer has not received any equivalent for it, nor will receive any later on, because it is appropriated by the capitalist without any equivalent. The total value of a commodity is determined by the quantity of labor expended by the laborer in its production; one portion of this total value is determined by the fact that it is equal to the value of the wages, an equivalent for them. The second portion, the surplus-value, is, therefore, likewise determined, for it is equal to the total value of the product minus that portion which is equivalent to the wages; it is equal to the excess of the value created in the manufacture of the product over that portion which is an equivalent for the wages.

(2). That which is true of a commodity produced in some individual industrial establishment by any individual laborer is true of the annual product of all lines of business together. That which is true of the day's work of some individual productive laborer is true of the entire year's work realized by the entire class of productive laborers. It "fixes" (expression of Adam Smith) in the annual product a total value determined by the quantity of the annual labor expended, and this total value resolves itself into one portion determined by that part of the annual labor which reproduces the equivalent of its annual wages, or these wages themselves; and into another portion determined by the additional labor by which the laboring class creates surplus-value for the capitalist class. The value contained in the annual product then consists of but two elements, namely the equivalent of the wages received by the laboring class, and the surplus-value annually created for the capitalist class. Now, the annual wages are the revenue of the working class, and the annual quantity of surplus-value the revenue of the capitalist class; both of them represent the relative shares in the annual fund for consumption (this view is correct when simple reproduction is the premise) and are realized in it. There is, then, no room left anywhere for the value of the constant capital, for the reproduction of the capital serving in the form of means of production. And Adam Smith states explicitly in the introduction of his work that all portions of the value of commodities which serve as revenue coincide with the annual product of labor intended for a social fund for consumption: "In what the revenue of the people consisted generally, or what was the nature of the fund, which...supplied their annual consumption, to explain this is the purpose of these first four books." (Page 12.) And in the very first sentence of the introduction we read: "The annual labor of every nation is the fund, which supplies them originally with all the subsistence which they consume in the course of the year, and which always consist either of the immediate product of this labor, or in articles bought with this product from other nations." (Page 11.)

The first mistake of Adam Smith consists in identifying the value of the annual product with the annual product in values. The latter is only the product of labor of the current year, the former includes furthermore all elements of value consumed in the making of the annual product, but which have been produced in the preceding or even in earlier years, means of production whose value merely re-appears, but which have been neither produced nor reproduced by the labor expended in the current year. By this mistake, Adam Smith spirits away the constant portion of the value of the annual product. His mistake rests on another error in his fundamental conception: He does not distinguish the two-fold nature of labor itself, of labor which creates exchange-value by the expenditure of labor-power, and labor which creates articles of use (use-values) as a concrete, useful, activity. The total quantity of the commodities made annually, in other words, the total annual product, is the product of the useful labor active during the the past year; all these commodities exist only because socially employed labor has been spent in a systematized network of many kinds of useful labor; it is due to this fact alone that the value of the means of production consumed in their production, re-appearing in a new natural form, is contained in their total value. The total annual product, then, is the result of the useful labor expended during the year; but only a portion of the value of the annual product has been created during the year; this portion is the annual product in values, in which the quantity of labor set in motion during the year itself is represented.

Hence, if Adam Smith says in the just cited passage: "The annual labor of every nation is the fund, which supplies them originally with all the subsistence which they consume in the course of the year, etc.," he places himself one-sidedly upon the standpoint of mere useful labor, which has indeed given all these means of subsistence their consumable form. But he forgets that this was impossible without the assistance of instruments and materials of labor supplied by former years, and that, therefore, the "annual labor," so far as it has created any values, did not create all the value of the products finished by it; that the product in values is smaller than the value of the products.

While we cannot reproach Adam Smith for going in this analysis no farther than all his successors (although a step toward a correct solution is already found among the physiocrats), he loses himself, on the other hand, in a chaos further along, mainly because his "esoteric" conception of the value of commodities in general is constantly vitiated by exoteric ideas, which on the whole prevail with him, while his scientific instinct permits his esoteric conception to reappear from time to time.

IV. CAPITAL AND REVENUE IN ADAM SMITH.

That portion of the value of every commodity (and therefore also of the annual product) which is but an equivalent of the wages is equal to the capital advanced by the capitalist for labor-power, in other words, equal to the variable portion of the total capital advanced. The capitalist recovers this portion of the value of his advanced capital through a portion of the value of a commodity newly supplied by the wage laborer. Whether the variable capital is advanced in such a way that the capitalist pays the laborer his share in a product which is not yet ready for sale, or which, though ready, has not yet been sold by the capitalist, or whether he pays him with money obtained by the sale of commodities previously supplied by the laborer, or whether he has drawn this money in advance by means of credit—in all these cases the capitalist expends variable capital, which passes into the hands of the laborer in the form of money, and at the same time he possesses the equivalent of this value of his capital in that portion of the value of his commodities by which the laborer reproduces his share of its total value, in other words, by which he reproduces his own wages. Instead of giving him this portion of the value in its natural form, that of his own product, the capitalist pays him in money. The capitalist then holds the variable portion of his advanced capital in the form of commodities, while the laborer has received the equivalent for his sold labor-power in the form of money.

Now while that portion of the capital advanced by the capitalists, which has been converted by the purchase of labor-power into variable capital, serves in the process of production itself as laboring power and is produced as a new value, or reproduced, by the expenditure of this force, in the form of commodities,—hence a reproduction, or new production of capital—the laborer spends the value or price of his sold labor-power in means of subsistence, in means for the reproduction of his labor-power. A quantity of money equal to the variable capital forms his revenue, which lasts only so long as he can sell his labor-power to the capitalist.

The commodity of the wage laborer—his labor-power—serves as a commodity only to the extent that it is incorporated in the capital of the capitalist and acts as capital; on the other hand, the capital expended by the capitalist as money-capital in the purchase of labor-power serves as a revenue in the hands of the seller of labor-power, the wage laborer.

Various processes of circulation and production intermingle here, which Adam Smith does not clearly distinguish.

First: Processes belonging to circulation. The laborer sells his commodity—labor-power—to the capitalist; the money with which the capitalist buys it is from his point of view money invested for gain, in other words, money-capital; it is not spent, but advanced. (This is the real meaning of "advance"— avance in the language of the physiocrats—no matter where the capitalist gets the money. Every value which the capitalist pays out for the purposes of the productive process, is advanced from his point of view, regardless of whether this takes place before or after the fact; it is advanced for the process of production.) The same takes place here as in every other sale of commodities: The seller gives away a use-value (in this case his labor-power) and receives its value (realizes its price) in money; the buyer gives away his money and receives in turn the commodity itself—in this case labor-power.

Secondly: In the process of production, the purchased labor-power now forms a part of the acting capital, and the laborer himself serves here merely as one particular natural form of this capital, distinguished from the elements existing in the natural form of means of production. During the process, the laborer adds value to the means of production which he converts into products, by expending labor-power to the amount of his wages (without surplus-value); he reproduces for the capitalist that portion of his capital in the form of commodities which has been, or has to be, advanced for wages; hence he produces for the capitalist that capital which he can "advance" once more for the purchase of labor-power.

Thirdly: In the sale of the commodities, one portion of their selling price reproduces the variable capital advanced by the capitalist, whereby he, on the one hand, is enabled to buy more labor-power, and the laborer, on the other hand, to sell more.

In all purchases and sales of commodities—so far as these transactions are merely regarded by themselves,—it is quite immaterial what becomes of the money in the hands of the seller received for his commodities, and what becomes of the article of use in the hands of the buyer received in exchange for this money. Hence, so far as the mere process of circulation is concerned, it is quite immaterial that the labor-power bought by the capitalist reproduces the value of capital for him, and that, on the other hand, the money received by the laborer as a purchase-price of his labor-power serves as his revenue. The magnitude of the value of the commodity of the laborer, his labor-power, is not affected either by serving as a revenue for him or by reproducing, through its use, on the part of the buyer, the value of the capital of the buyer.

Since the value of the labor-power—that is to say, the adequate selling price of this commodity—is determined by the quantity of labor required for its reproduction, and this quantity of labor itself is here determined by that required for the necessary subsistence of the laborer, the wages become a revenue on which the laborer has to live.

It is entirely wrong, when Adam Smith says (page 223): "That portion of capital which is invested in the maintenance of productive labor...after it has served him" (the capitalist) "in the function of a capital...forms a revenue for them" (the laborers). The money with which the capitalist pays for the labor-power purchased by him, "serves him in the function of a capital," to the extent that he thereby incorporates labor-power in the material elements of his capital and thus enables his capital to serve as productive capital. We make this distinction: The labor-power is a commodity, not a capital, in the hands of the laborer, and it constitutes for him a revenue, so long as he can repeat its sale; it serves as capital, after its sale, in the hands of the capitalist, during the process of production itself. That which here serves twice is labor-power; as a commodity which is sold at its value, in the hands of the laborer; as a power creating exchange-values and use-values, in the hands of the capitalist who has bought it. But the money which the laborer receives from the capitalist is not given to him until after he has given the capitalist the use of his labor-power, after it has already been realized in the value of the product of labor. The capitalist holds this value in his hands, before he pays for it. Hence it is not the money which serves twice here; first, as the money-form of the variable capital, and then as wages. It is labor-power which has served twice; first, as a commodity in the sale of labor-power (in stipulating the amount of wages to be paid, the money serves merely as an ideal measure of value and need not even be in the hands of the capitalist); secondly, in the process of production, in which it serves as capital, in other words, as an element in the hands of the capitalist creating exchange-value and use-values. Labor-power first supplies, in the form of commodities, the equivalent which is to be paid to the laborer, and then only is it paid by the capitalist to the laborer in money. In other words, the laborer himself creates the fund out of which the capitalist pays him. But this is not all.

The money, which the laborer receives, is spent by him for the maintenance of his labor-power, or—looking upon the capitalist class and working class as an aggregate mass—is spent to preserve for the capitalist an instrument by means of which alone he can remain a capitalist.

The continuous purchase and sale of labor-power, then, perpetuates on one hand labor-power as an element of capital, by the the grace of which it appears as the creator of commodities, use-values having an exchange-value, by means of which, furthermore, that portion of capital which buys labor-power is continually reproduced by its own product, so that the laborer himself creates the fund of capital out of which he is paid. On the other hand, the sale of labor-power becomes the ever renewed source for the maintenance of the laborer and makes of his labor-power that faculty through which he secures his revenue, by which he lives. Revenue in this case signifies nothing else but an appropriation of values by means of ever repeated sales of a commodity (labor-power), these values serving merely for the continual reproduction of the commodity to be sold. And to this extent Smith is right when he says that that portion of the value of the laborer's product, for which the capitalist pays him an equivalent in the form of wages, becomes a source of revenue for the laborer. But this does not alter the nature or magnitude of this portion of value of the commodity any more than the value of the means of production is changed by the fact that they serve as capital-values, or the nature and magnitude of a straight line are changed by the fact that it serves as a basis for some triangle or as a diameter of some ellipse. The value of labor-power remains quite as independent as that of those means of production. This portion of the value of a commodity neither consists of a revenue as one of its independent constituent factors, nor does it resolve itself into revenue. Because this value, ever renewed by the laborer, constitutes a source of revenue for him, that is no reason why his revenue, on the other hand, should be an element of the new values produced by him. The magnitude of his share in the new value created by him determines the volume of the value of his revenue, not vice versa. The fact that this portion of the new value forms a revenue for him indicates merely what becomes of it, shows the character of its employment, and has no more to do with its formation than with that of any other value. The fact that my receipts are ten dollars a week changes nothing in the nature of the value of the ten dollars nor in the magnitude of their value. As in the case of every other commodity so in that of labor-power its value is determined by the labor necessary for its reproduction; that the quantity of this labor is determined by the value of the necessary subsistence of the laborer, in other words, that it is equal to the labor required for the reproduction of his own life's conditions, is peculiar for this commodity (labor-power), but no more peculiar than the fact that the value of laboring cattle is determined by the subsistence necessary to produce this subsistence.

But it is this category of "revenue" which is to blame for all the confusion in Adam Smith over this question. The various kinds of revenue constitute with him the "component parts" of the annually produced new values of commodities, while, vice versa, the two portions into which these values resolve themselves for the capitalist form sources of revenue—namely the equivalent of his variable capital advanced for the purchase of labor-power and the other portion of value, the surplus-value, which likewise belongs to him but did not cost him anything. The equivalent of the variable capital is once more advanced for labor-power and to that extent forms a revenue for the laborer in the shape of wages; the other portion, the surplus-value, which does not reproduce any advance of capital for the capitalist, may be spent by him in articles of consumption (whether necessary or luxuries), it may be consumed by him as a revenue, instead of forming capital-value of some kind. The first condition of this revenue is the value of the commodities itself, and its component parts differ from the point of view of the capitalist only to the extent that they are an equivalent for, or an excess over the variable portion of the value of the capital advanced by him. Both of them consist of nothing but labor expended and materialized during the production of commodities. They consist of an expenditure, not of an income or revenue—an expenditure of labor.

After this reversion of facts, by which a revenue becomes the source of the value of commodities instead of the value of commodities being the source of revenue, the value of commodities has the appearance of being "composed" of various kinds of revenue; these revenues are determined independently of one another, and the total value of commodities is determined by the addition of the values of these revenues. But now the question is: How is the value of each of these revenues determined, which are supposed to be the sources of the values of commodities? In the case of wages it is done, for wages are the value of the commodity labor-power, and this is determined (the same as that of all other commodities) by the labor required for its reproduction. But surplus-value, or as Adam Smith has it, profit and ground rent, how are they determined? Here Adam Smith has but empty phrases to offer. He either represents wages and surplus-value (or wages and profit) as component parts of the value, or price, of commodities, or, sometimes in the same breath, as component parts into which the price of commodities resolves itself; but this means precisely the reverse of his contention and makes of the value of commodities the primary thing, different parts of which fall as different revenues to the share of different persons engaged in the productive process. This is by no means identical with the composition of value of these three "component parts." If I determine the magnitude of three different straight lines independently and then form a fourth straight line out of these three lines as "component parts" equal to their sum, it is by no means the same process as if I have some given straight line before me and "resolve" it, so to say, into three different parts for some purpose. In the first case, the magnitude of the line changes throughout with the magnitude of the three lines whose sum it is; in the second case, the magnitude of three parts of the line is from the outset limited by the fact that they are parts of a line of given magnitude.

However, if we keep in mind that part of the analysis of Smith which is correct, namely, that the value newly created by the annual labor and contained in the annual social product in commodities (the same as in every individual commodity, or every daily, weekly, etc., product) is equal to the value of the variable capital advanced (in other words, equal to the value intended for the purchase of new labor-power) plus the surplus-value which the capitalist can realize in means of his individual consumption—simple reproduction being assumed, and other circumstances remaining the same, if we keep furthermore in mind that Adam Smith confounds labor which creates values and is an expenditure of labor-power with labor which creates articles of use and is expended in a useful, appropriate, manner, then the entire conception amounts to this: The value of every commodity is the product of labor; hence this is also true of the value of the product of annual labor, or of the value of the annual product of society in commodities. But since all labor resolves itself, (1), into necessary labor time, in which the laborer reproduces merely an equivalent for the capital advanced in the purchase of his labor-power, and, (2), into surplus-labor, by which he supplies the capitalist with a value for which the latter does not give any equivalent, in other words, a surplus-value, it follows that all value of commodities can resolve itself only into these two component parts, so that ultimately it forms a revenue for the laboring class in the form of wages, and for the capitalist class in the form of surplus-value. As for the constant value of the capital, in other words, the value of the means of production consumed in the production of the annual product, it cannot be explained how this value gets into that of the new product (unless we accept the phrase that the capitalist charges the buyer with it in the sale of his goods), but ultimately, seeing that the means of production are themselves products of labor, this portion of value can consist only of an equivalent for variable capital and surplus-value, of a product of necessary labor and surplus-labor. The fact that the values of these means of production serve in the hands of their employers as capital-values does not prevent them from resolving themselves "originally," even though in some other hands, if we go to the bottom of the matter, and at some previous time, into the same two portions of value, hence into two different sources of revenue.

One point is correct in this conception, namely, that the matter has a different aspect from the point of view of the movement of social capital, in other words, of the totality of individual capitals, that it has from the standpoint of the individual capital, considered by itself, or from the standpoint of each individual capitalist. For these, the value of commodities resolves itself, (1), into a constant element (a fourth one, as Adam Smith says), and (2), into the sum of wages and surplus-value, or wages, profit, and ground rent. But from the point of view of society, the fourth element of Adam Smith, the constant value of capital, disappears.

(5). RECAPITULATION.

The absurd formula that the three revenues, wages, profit, and ground rent, form the three "component parts" of the value of commodities, is due in the case of Adam Smith to the more plausible idea that the value of commodities resolves itself into these three parts. However, this is likewise incorrect, even granted that the value of commodities is only divisible into an equivalent of the consumed labor-power and surplus-value created by it. But the mistake rests here again on a deeper and truer basis. The capitalist mode of production is conditioned on the fact that the productive laborer sells his own labor-power, as a commodity, to the capitalist, in whose hands it then serves merely as an element of his productive capital. This transaction, taking place in the circulation,—the sale and purchase of labor-power—does not only inaugurate the process of production, but also determines implicitly its specific character. The production of a use-value, and even that of a commodity (for this can be done eventually by independent productive laborers), is here only a means of producing absolute or relative surplus-value for a capitalist. For this reason we have seen in the analysis of the process of production, that the production of absolute and relative surplus-value determines, (1), the duration of the daily labor-process, (2), the entire social and technical formation of the capitalist process of production. Within this process, there is realized the distinction between the mere conservation of value (the value of the constant capital), the actual reproduction of advanced value (an equivalent of labor-power), and the production of surplus-value, that is to say, of value for which the capitalist has neither advanced an equivalent nor will advance one subsequently.

The appropriation of surplus-value—a value in excess of the equivalent advanced by the capitalist—although it is inaugurated by the purchase and sale of labor-power, is a transaction taking place within the process of production itself, and forms an essential part of it.

The introductory transaction taking place in the circulation, the purchase and sale of labor-power, is itself conditioned on a distribution of the elements of production, which is the premise and prelude of the distribution of the social products, and implies the separation of labor-power, as a commodity of the laborer, from the means of production, as the property of non-laborers.

However, this appropriation of surplus-value, or this separation of the production of values into a reproduction of advanced values and a production of new values (surplus-values) which do not offset any equivalent, does not alter in any way the substance of value itself nor the nature of the production of values. The substance of value is and remains nothing but expended labor-power—labor independent of the specific, useful, character of this labor—and the production of values is nothing but the process of this expenditure. A serf, for instance, expends his labor-power for six days, labors for six days, and the fact of this expenditure is not altered by the circumstances, that he may be working three days for himself, on his own field, and three days for his lord, on the field of the latter. Both his voluntary labor for himself and his compulsory labor for his lord are equally labor; so far as this labor is considered with reference to the values, or even the useful articles, created by it, there is no difference in his six days of labor. The difference refers merely to the distinct conditions by which the expenditure of his labor-power during each half of his labor-time of six days is affected. The same applies to the necessary and surplus-labor of the wage worker.

The process of production ends in a commodity. The fact that labor-power has been expended in its creation now is manifest in its attribute of value; the magnitude of this value is measured by the quantity of labor expended in it; the value of a commodity resolves itself into nothing else and is not composed of anything else. If I have drawn a straight line of definite length, I have "produced" a straight line (true, only symbolically, as I know beforehand) by means of a certain mode of drawing which is determined by certain laws independent of myself. If I divide this line into three sections (which may correspond to a certain problem), every one of these sections remains a straight line, and the entire line, whose sections they are, does not resolve itself, by this division, into anything different from a straight line, for instance, a curve of some kind. Neither can I divide a line of a given magnitude in such a way, that the sum of its divisions is greater than the undivided line itself; hence the magnitude of the undivided line is not determined by any arbitrary division of its parts. Vice versa, the relative magnitudes of these divisions are limited from the outset by the size of the line whose parts they are.

A commodity produced by a capitalist does not differ in itself from that produced by an independent laborer, or by a laboring commune, or by slaves. But in the present case, the entire product of labor as well as its value belong to the capitalist. Like every other producer, he has to convert his commodity by sale into money, before he can manipulate it further; he must convert it into the form of the universal equivalent.

Let us look at the product in commodities before it is converted into money. It belongs wholly to the capitalist. On the other hand, as a useful product of labor, a use-value, it is entirely the product of a past labor-process. Not so its value. One portion of this value is but the value of means of production consumed in the production of the commodities and re-appearing in a new form; this value has not been produced during the process of production of this commodity; for the means of production possessed this value before this process of production, independently of it; they entered into this process as the bearers of their value; it is only the external form of this value which has been renewed and changed. This portion of the value of the commodity serves the capitalist as an equivalent of the constant value of the capital advanced by him and consumed in the production of the commodity. It existed previously in the form of means of production; it exists now as a component part of the value of the newly-produced commodity. As soon as this commodity has been turned into money, the value then existing in the form of money must be reconverted into means of production, into its original form determined by the process of production and its function in it. Nothing is altered in the character of the value of a commodity by the function of this value as capital.

A second portion of the value of a commodity is the value of the labor-power which the wage-worker sells to the capitalist. It is determined, the same as that of the means of production, independently of the process of production into which labor-power is to enter, and it is fixed in a transaction of the circulation, the purchase and sale of labor-power, before it goes to the process of production. By means of his function—the expenditure of labor-power—the wage-laborer produces a value of the commodity equal to the value which the capitalist has to pay him for the use of his labor-power. He gives this value to the capitalist in commodities, and is paid for it in money. The fact that this portion of the value of commodities is for the capitalist but an equivalent for the capital which he has to advance in wages does not alter in any way the truth that it is a value of commodities newly created during the process of production and consisting of nothing but past expenditure of labor, the same as the surplus-value. Neither is this truth affected by the fact that the value paid by the capitalist to the laborer assumes the form of a revenue for the laborer, and that not only labor-power is continually reproduced thereby, but also the class of wage-laborers itself, and thus the basis of the entire capitalist production.

However, the sum of these two portions of value does not constitute all there is to the value of commodities. There remains an excess over both of them, the surplus-value. This, like that portion of value which reproduces the variable capital advanced in wages, is a value newly created by the laborer during the process of production—materialized labor. But it does not cost the owner of the entire product, the capitalist, anything. This circumstance permits the capitalist to consume the surplus-value entirely as his revenue, unless he has to give up some portions of it to other claimants—such as ground rent to land owners, in which case such portions constitute a revenue of third persons. This same circumstance was also the compelling motive, which induced the capitalist to engage in the first place in the manufacture of commodities. But neither his original benevolent intention of securing some surplus-value, nor its subsequent expenditure as revenue, by him or others, affect the surplus-value as such. They do not impair the fact that it is coagulated, unpaid, labor, nor the magnitude of this surplus-value, things which are determined by entirely different conditions.

However, if Adam Smith wanted to occupy himself, as he did, with an analysis of the role of different constituent parts of value in the total process of reproduction, even while he was investigating the question of the value of commodities, then it was evident that, while some particular portions of value served as a revenue, others served just as continually as capital—and, according to his logic, these would likewise have to be regarded as constituent parts of the value of commodities, or parts into which this value resolves itself.

Adam Smith identifies the production of commodities in general with capitalist production; the means of production are to him from the outset "capital," labor is wage-labor, and therefore "the number of the useful and productive laborers is always...proportional to the quantity of capital stock which is employed in setting them to work." (Introduction, page 12.) In short, the various elements of the productive process—both objective and subjective ones—appear from the first with the masks characteristic of the process of capitalist production. The analysis of the value of commodities, therefore, coincides with the reflection, to what extent this value is, on the one hand, a mere equivalent for invested capital, and, on the other, to what extent it forms "free" value, that is to say, value not reproducing any advance of capital, or surplus-value. The proportions of value compared from this point of view transform themselves clandestinely into its independent "component parts," and finally into the "sources of all value." A further consequence of this method is the alternate composition or dissolution of the value of commodities into revenues of various kinds, so that the revenues do not consist of values of commodities, but rather the value of commodities consists of revenues. But the fact that the value of a commodity may serve as a revenue for this or that man does not change the nature of value as such any more than the fact that the value of a commodity as such, or of money as such, may serve as capital changes their nature. The commodity with which Adam Smith is dealing represents from the outset a commodity-capital (which consists of the value of the capital consumed in production plus a surplus-value), it is a commodity produced by capitalist methods, a result of the capitalist process of production. It would have been necessary, then, to analyze first this process, and this would have implied an analysis of the process of self-expansion and of the formation of value, which it includes. Since this process is in its turn conditioned on the circulation of commodities, its description requires also a previous and independent analysis of a commodity. However, even where Adam Smith hits "esoterically" upon the correct thing in a haphazard way, he refers to the formation of values only in the analysis of commodities, that is to say, in the analysis of commodity-capital.

III. THE ECONOMISTS AFTER SMITH. 42

Ricardo reproduces the theory of Smith almost verbatim: "It is agreed that all products of a certain country are consumed, but it makes the greatest imaginable difference, whether they are consumed by those who reproduce another value, or by those who do not. When we say that revenue is saved up and added to the capital, we mean that the portion of revenue added to the capital is consumed by productive laborers, instead of unproductive ones." (Principles, Page 163.)

In fact, Ricardo fully accepted the theory of Adam Smith concerning the separation of the price of commodities into wages and surplus-value (or variable capital and surplus-value). The points in which he differs from him are, 1) the composition of the surplus-value; Ricardo eliminates ground rent as one of its necessary elements; 2), Ricardo starts out from the price of commodities and dissects it into these component parts. In other words, the magnitude of value is his point of departure. The sum of its parts is assumed as given, it is the starting point, while Adam Smith frequently subverts this order and proceeds contrary to his deeper insight, by producing the quantity of value subsequently by an addition of its component parts.

Ramsay makes the following remark against Ricardo: "Ricardo forgets that the total product is not only divided into wages and profits, but that a portion is also required for the reproduction of the fixed capital." (An Essay on the Distribution of Wealth. Edinburgh, 1836, page 174.) Ramsay means by fixed capital the same thing which I call constant capital, for he says on page 53: "Fixed capital exists in a form in which it contributes toward the production of the commodity in process of formation, but not toward the maintenance of laborers."

Adam Smith refuses to accept the logical outcome of his dissolution of the value of commodities, and therefore of the value of the annual product of social labor, into wages and surplus-value, or into mere revenue. This logical outcome would be that the entire annual product might be consumed in that case. It is never the original thinkers that draw the absurd conclusions. They leave that to the Says and Mac-Cullochs.

Say takes the matter indeed easy enough. That which is an advance of capital for one, is, or was, a revenue and net product for another. The difference between the gross and the net product is purely subjective, "and thus the total value of all products in a society is divided as revenue." (Say, Traité d'Economie Politique, 1817, II, page 69.) "The total value of every product is composed of the profits of the land owners, the capitalists, and the industrious people (wages figure here as profits des industrieux! ) who have contributed toward its production. This makes the revenue of society equal to the gross value produced, not equal to the net products of the soil, as was claimed by a sect of economists" (the physiocrats). (Page 63.)

Among others, Proudhon has appropriated this discovery of Say.

Storch, however, who likewise accepts the doctrine of Smith in principle, finds that Say's application of it does not hold water. "If it is admitted, that the revenue of a nation is equal to its gross product, so that no capital" (that is to say, no constant capital) "is to be deducted, then it must also be admitted that this nation may consume unproductively the entire value of its annual product, without in the least reducing its future revenue.... The products which represent the" (constant) "capital of a nation are not consumable." (Storch, Considérations sur la nature du revenu national. Paris, 1824, page 150.)

However, Storch forgot to tell us how the existence of this constant portion of capital agrees with the analysis of prices by Smith, which he has accepted, and according to which the value of commodities consists only of wages and surplus-value, but not of any constant capital. He realizes only through Say that this analysis of prices leads to absurd results, and his own opinion of it is "that it is impossible to dissolve the necessary price into its simplest elements." (Cours d' Economie Politique, Petersburg, 1815, II, page 140.)

Sismondi, who occupies himself especially with the relation of capital and revenue, and makes the peculiar formulation of this relation the specific difference of his Nouveaux Principes, did not say one scientific word, did not contribute one atom toward a clarification of this problem.

Barton, Ramsay and Cherbuliez attempted to surpass the formulation of Smith. They failed, because they conceive the problem in a onesided way, by not making clear the distinction of constant and variable capital-value from fixed and circulating capital.

John Stuart Mill likewise reproduces, with his usual pomposity, the doctrine handed down by Adam Smith to his followers.

As a result, the Smithian confusion of thought persists to this hour, and his dogma is one of the orthodox articles of faith of political economy.

Part III, Chapter XX
SIMPLE REPRODUCTION.

I. THE FORMULATION OF THE QUESTION.

If we study the annual function of social capital 43 —of the total capital whose fractional parts are the individual capitals, the movements of which are simultaneously their individual movements and links in the movements of the total capital—and its results, that is to say, if we study the product in commodities put forth by society during the year, then it must become apparent how the process of reproduction of the social capital proceeds, what characteristics distinguish this process of reproduction from that of an individual capital, and what characteristics are common to both. The annual product includes those portions of the social product which reproduce capital, the social reproduction, as well as those which go to the fund for consumption, which are consumed by capitalists and laborers, in other words, productive and individual consumption. It comprises the reproduction (maintenance) of the capitalist and working classes, and thus the reproduction of the capitalist character of the entire process of production.

It is evidently the circulation formula

lf0445-02-0453-e0001.gif

which we have to analyze, and the consumption necessarily plays a role in it. For the point of departure, C' equal to C plus c, the commodity-capital, comprises the constant and variable capital as well as the surplus-value. Its movements, therefore, include both the individual and productive consumption. In the cycles M—C...P...C'—M', and P...C'—M'—C...P, the movement of the capital is the starting and finishing point. And this implies consumption, for the commodity, the product, must be sold. When these premises are accepted, it is immaterial for the movement of the individual capitals, what becomes of these commodities subsequently. On the other hand, in the movement of C'...C' the conditions of social reproduction are precisely different in this point, since it must be shown what becomes of every portion of value of this total product of C'. In this case, the total process of reproduction includes the process of consumption by way of the circulation quite as much as the process of reproduction of the capital itself.

This process of reproduction, now, must be considered for the purposes of our study both from the point of view of the reproduction of the value and of the substance of the individual component parts of C'. We cannot rest satisfied any longer, as we did in the analysis of the value of the product of the individual capital, with the assumption that the individual capitalist must first convert the component parts of his capital into money by the sale of his commodities, before he is able to reconvert it into productive capital by renewed purchase of the elements of production in the commodity market. Those elements of production, so far as they consist of things, constitute as much a portion of the social capital as the individual finished product, which is exchanged for them and reproduced by them. On the other hand, the movement of that portion of the social product in commodities, which is consumed by the laborer in the expenditure of his labor-power, and by the capitalist in spending his surplus-value, does not only form an integral part of the movement of the total product, but also intermingles with the movements of the individual capitals, and this process cannot be explained by merely assuming it.

The question which we have to face immediately, is this: How is the value of the capital consumed in production re-produced out of the annual product, and how does the movement of this reproduction intermingle with the consumption of surplus-value by the capitalists and of wages by the laborers? We are dealing, then, first with reproduction on a simple scale. It is furthermore assumed that products are exchanged at their value, and that no revolution in the value of the elements of productive capital takes place. Should there be any divergence of prices from values, this would not exert any influence on the movements of social capital. On the whole, there is the same exchange of the same quantity of products, although the individual capitalists would be taking shares in it which would no longer be proportional to their respective advances and to the quantities of value produced by each one. As for revolutions of value, they do not alter anything in the proportions of the elements of value of the various component parts of the total annual product, provided they are universally and uniformly distributed. To the extent that they are limited and unevenly distributed, they are disturbances, which, in the first place, can be understood only as divergences from equal proportions of value; and, in the second place, given the law according to which one portion of the annual product reproduces constant, and another variable capital, a revolution either in the value of the constant or variable capital would not alter this law. It would change merely the relative magnitude of the portions of value which serve in the one or the other capacity, seeing that other values would have taken the places of the original ones.

So long as we looked upon the production of value and the value of products from the point of view of individual capital, it was immaterial for the analysis which was the natural form of the product in commodities, whether it was, for instance that of a machine, of corn, or of looking glasses. It was always but a matter of illustration, and any line of production could serve that purpose. What we had to consider was the immediate process of production itself, which presented itself at every point as the process of some individual capital. So far as reproduction was concerned, it was sufficient to assume that that portion of the product in commodities, which represented capital in the sphere of circulation, found an opportunity to reconvert itself into its elements of production and thus into its form of productive capital. It likewise sufficed to assume that both the laborer and the capitalist found in the market those commodities for which they spend their wages and surplus-value. This merely formal manner of presentation does not suffice in the study of the total social capital and of the value of its products. The reconversion of one portion of the value of the product into capital, the passing of another portion into the individual consumption of the capitalist and working classes, form a movement within the value of the product itself which is created by the total capital; and this movement is not only a reproduction of value, but also of material, and is, therefore, as much conditioned on the relative proportions of the elements of value of the total social product as on its use-value, its material substance. 44

Simple reproduction on the same scale appears as an abstraction; inasmuch as the absence of all accumulation or reproduction on an enlarged scale is an irrelevant assumption in capitalist society, and, on the other hand, conditions of production do not remain exactly the same in different years (as was assumed). The assumption is that a social capital of a given magnitude produces the same quantity of value in commodities this year as last, and supplies the same quantity of wants, although the forms of the commodities may be changed in the process of reproduction. However, while accumulation does take place, simple reproduction is always a part of it and may, therefore, be studied in itself, being an actual factor in accumulation. The value of the annual product may decrease, although the quantity of use-values may remain the same; or, the value may remain the same, although the quantity of the use-values may decrease; or, the quantity of value and of use-values may decrease simultaneously. All this amounts to saying that reproduction takes place either under more favorable conditions than before, or under more difficult ones, which may result in an imperfect reproduction. But all this can refer only to the quantitative side of the various elements of reproduction, not to the role which they are playing as a reproducing capital, or as a reproduced revenue, in the entire process.

II. THE TWO DEPARTMENTS OF SOCIAL PRODUCTION. 45

The total product, and therefore the total production, of society, is divided into two great sections:

1. Means of Production, commodities having a form in which they must, or at least may, pass over into productive consumption.

II. Means of Consumption, commodities having a form in which they pass into the individual consumption of the capitalist and working classes.

In each of these two departments, all the various lines of production belonging to them form one single great line of production, the one that of the means of production, the other that of articles of consumption. The aggregate capital invested in each of these two departments of production constitutes a separate section of the entire social capital.

In each department, the capital consists of two parts:

(1) Variable Capital. This capital, so far as its value is concerned, is equal to the value of the social labor-power employed in this line of production, in other words equal to the sum of the wages paid for this labor-power. So far as its substance is concerned, it consists of the active labor-power itself, that is to say, of the living labor set in motion by this value of capital.

(2) Constant Capital. This is the value of all the means of production employed in this line. These, again, are divided into fixed capital, such as machines, instruments of labor, buildings, laboring animals, etc., and circulating capital, such as materials of production, raw and auxiliary materials, half-wrought articles, etc.

The value of the total annual product created with the capital of each of the two great departments of production consists of one portion representing the constant capital c consumed in the process of production and transferred to the product, and of another portion added by the entire labor of the year. This latter portion, again, consists of one part re-producing the advanced variable capital v, and of another representing an excess over the variable capital, the surplus-value s. And just as the value of every individual commodity, so that of the entire annual product of each department consists of c plus v plus s.

The portion c of the value, representing the constant capital consumed in production, is not identical with the value of the constant capital invested in production. It is true that the materials of production are entirely consumed and their values completely transferred to the product. But of the invested fixed capital, only a portion is consumed and its value transferred to the product. Another portion of the fixed capital, such as machines, buildings, etc., continues to exist and serve the same as before, merely depreciating to the extent of the annual wear and tear. This persistent portion of the fixed capital does not exist for us, when we consider the value of the product. It is a portion of the value of capital existing independently beside the new value in commodities produced by this capital. This was shown previously in the analysis of the value of the product of some individual capital (volume I, chapter VI). However, for the present we must leave aside the method of analysis employed there. We saw in the study of the value of the product of individual capital that the value withdrawn from the fixed capital by wear and tear was transferred to the product in commodities created during the time of wear, no matter whether any portion of this fixed capital is reproduced in its natural form out of the value thus transferred or not. At this point, however, in the study of the social product as a whole and of its value, we must for the present leave out of consideration that portion of value which is transferred from the fixed capital to the annual product by wear and tear, unless this fixed capital is reproduced in natura during the year. In one of the following sections of this chapter we shall return to this point.

We shall base our analysis of simple reproduction on the following diagram, in which c stands for constant capital, v for variable capital, and s for surplus-value, the rate of surplus-value between v and s being assumed at 100 per cent. The figures may indicate millions of francs, marks, pounds sterling, or dollars.

I. Production of Means of Production.
Capital...4000 c+1000 v=5000.
Product in Commodities...4000 c+1000 v+1000 s=6000.

These exist in the form of means of production.

II. Production of Means of Consumption.
Capital...2000 c+500 v=2500.
Product in Commodities...2000 c+500 v+500 s=3000.

These exist in articles of consumption.

Recapitulation: Total annual product in commodities:

I. 4000 c+1000 v+1000 s=6000 means of production.
II. 2000 c+ 500 v+ 500 s=3000 articles of consumption.

Total value 9000, exclusive of the fixed capital persisting in its natural form, according to our assumption.

Now, if we examine the transactions required on the basis of simple reproduction, where the entire surplus-value is unproductively consumed, leaving aside for the present the mediation of the money circulation, we obtain at the outset three great points of vantage.

(1) The 500 v, representing wages of the laborers, and 500 s, representing surplus-value of the capitalists, in department II, must be spent for articles of consumption. But their value exists in the articles of consumption to the amount of 1000, held by the capitalists of department II, which reproduce the 500 v and represent the 500 s. The wages and surplus-value of department II, then, are exchanged within this department for products of this same department. By this means, a quantity of articles of consumption equal to 1000 (500 v plus 500 s) disappear out of the total product of department II.

(2) The 1000 v and 1000 s of department I must likewise be spent for articles of consumption, in other words, for some of the products of department II. Hence they must be exchanged for the remaining 2000 c of constant value, which is equal in amount to them. Department II receives in return an equal quantity of means of production, the product of I, in which the value of 1000 v and 1000 s of I is incorporated. By this means, 2000 c of II and (1000 v + 1000 s) of I disappear out of the calculation.

(3) Nothing remains now but 4000 c of I. These consist of means of production which can be used up only in department I. They serve for the reproduction of its consumed constant capital, and are disposed of by the mutual exchange between the individual capitalists of I, just as are the (500 v + 500 s) in II by an exchange between the capitalists and laborers, or between the individual capitalists, of II.

This may serve for the present to render easier the understanding of the following statements.

III. THE TRANSACTIONS BETWEEN THE TWO DEPARTMENTS. 46
I ( v + s ) versus II c.

We begin with the great exchange between the two departments. The values of (1000 v + 1000 s), consisting of the natural form of means of production in the hands of their producers, are exchanged for 2000 c of II, for values consisting of articles of consumption in their natural form. The capitalist class of II thereby reconverts its constant capital of 2000 from the form of articles of consumption into that of means of production of articles of consumption. In this form it may serve once more as a factor in the labor-process as the value of constant capital in the process of self-expansion. On the other hand, the equivalent of the labor-power of I (1000 v) and of the surplus-value of the capitalists of I (1000 s) is realized in articles of consumption; both of them are converted from their natural form of means of production into a natural form in which they may be consumed as revenue.

Now, this mutual transaction is accomplished by means of a circulation of money, which facilitates it as much as it renders its understanding difficult, but which is of fundamental importance, because the variable portion of capital must ever resume the form of money, of money-capital converting itself from the form of money into labor-power. The variable capital must be advanced in the form of money in all lines of production carried on simultaneously, regardless of whether they belong to department I or II. The capitalist buys the labor-power before it enters into the process of production, but does not pay for it except at stipulated terms, after it has been expended in the production of use-values. He owns, with the remainder of the value of the product, also that portion of it which is an equivalent for the money expended in the payment of labor-power, in other words, that portion of the value of the product which represents variable capital. By this portion of value the laborer has supplied the capitalist with the equivalent for his own wages. But it is the reconversion of commodities into money by their sale which restores to the capitalist his variable capital in the form of money-capital, which he may advance once more for the purchase of labor-power.

In department I, then, the aggregate capitalist has paid 1000 pounds sterling (I use the term pounds sterling merely to indicate that it is value in the form of money), equal to 1000 v, for the v-portion of the already existing value of product I, that is to say, of the means of production created by him. The laborers buy with these 1000 pounds sterling articles of consumption of the same value from the capitalists II, thereby converting one-half of the constant capital II into money; the capitalists II, in their turn, buy with these 1000 pounds sterling means of production, valued at 1000, from the capitalists I; the variable capital-value of 1000 v, which consisted, in the natural form of the product of capitalists I, of means of production, is thus reconverted for them into money and may serve anew in their hands as money-capital, which is transformed into labor-power, the most essential element of productive capital. In this way, their variable capital returns to them in the form of money, as a result of the realization on some of their commodity-capital.

As for the money which is required for the exchange of the s portion of commodity-capital I for the second half of constant capital II, it may be advanced in various ways. In reality, this circulation implies innumerable small purchases and sales of the individual capitals of both departments, the money coming under all circumstances from these capitalists, since we have already disposed of the money thrown into circulation by the laborers. It may be that one of the capitalists of department II buys, with the money-capital he has aside from his productive capital, means of production from capitalists of department I, or that, vice versa, one of the capitalists of department I buys, with funds reserved for individual expenses, not for capital investment, articles of consumption from capitalists of department II. A certain supply of money, to be used either for investment as capital or for expenditure as revenue, must be assumed to exist beside the productive capital in the hands of the capitalists, under all circumstances, as we have shown in section I and II. Let us assume—it is immaterial what proportion we select for our purpose—that one-half of the money is advanced by the capitalists of department II in the purchase of means of production intended for the reproduction of their constant capital, while the other half is spent by the capitalists of department I for articles of consumption. For instance, let department II advance 500 pounds sterling for the purchase of means of production from department I, thereby reproducing (inclusive of the 1000 pounds sterling coming from the laborers of department I) three-quarters of its constant capital in its natural form; department I buys with the 500 pounds sterling so obtained articles of consumption from II, thus completing for one-half of the s-portion of its commodity-capital the circulation c—m—c and realizing on its product in a supply of articles of consumption. By means of this second transaction, the 500 pounds sterling return to the hands of the capitalists of department II, in the form of money-capital existing beside its productive capital. On the other hand, department I expends money to the amount of 500 pounds sterling, in anticipation of the realization on the other half of the s-portion of its still unsold commodity-capital, for the purchase of articles of consumption from department II. With the same 500 pounds sterling, department II buys from I means of production, thereby reproducing in natural form its entire constant capital (1000 + 500 + 500 = 2000), while I realizes its entire surplus-value in articles of consumption. The entire transaction would represent a transfer of commodities valued at 4000 pounds sterling with a circulation of 2000 pounds sterling in money. This last amount is sufficient only because we have assumed that the entire annual product is sold in bulk in a few large transactions. The important point is here that department II has not only reconverted its constant capital, which had been reproduced in the form of articles of consumption, into the form of means of production, but has also recovered the 500 pounds sterling which it had thrown into circulation for the purchase of means of production; and that in the same way department I possesses once more not only its variable capital, which it had produced in the form of means of production, in the form of money-capital, readily convertible into labor-power, but also the 500 pounds sterling expended in the purchase of articles of consumption previously to the sale of the s-portion of its capital in anticipation of its realization. It recovers these 500 pounds sterling, not by this expenditure, but by the subsequent sale of one-half of the s-portion of its commodity-capital.

In both cases, it is not merely the constant capital of department II which is reconverted from the form of a product into the natural form of means of production, in which it can alone serve as capital; nor is it merely the variable portion of the capital of I which is reconverted into its money-form, nor the surplus-portion of the means of production of I which is transformed into its consumable form of revenue. It is also the 500 pounds sterling of money-capital, advanced by department II in the purchase of means of production previously to the sale of the corresponding portion of the value of its constant capital, which return to II; and the 500 pounds sterling expended by I for means of consumption previously to the realization of its surplus-value. The fact that the money advanced by II at the expense of the constant portion of its commodities, and by I at the expense of the surplus-portion of its commodities, returns to them is due to the circumstance that one class of capitalists throws 500 pounds sterling into circulation over and above the constant capital existing in the form of commodities in department II, and another class a like amount over and above the surplus-value existing in the form of commodities in department I. In the last analysis, the two departments have mutually paid one another in full by the exchange of equivalents in the form of their respective commodities. The money thrown into circulation by each department in excess of the value of their commodities, as a means of transacting the exchange of these commodities, returns to each one of them out of the circulation at the same rate in which they had contributed to it. Neither has grown any richer thereby. Department II possessed a constant capital of 2000 in the form of articles of consumption plus 500 pounds sterling in money; now it possesses 2000 in means of production plus 500 pounds sterling in money, the same as before; in the same way, department I possesses, as before, a surplus-value of 1000 (consisting of commodities in the form of means of production, now converted into a supply of articles of consumption) plus 500 pounds sterling. The general conclusion is this: The money which the industrial capitalists throw into circulation for the purpose of accomplishing the mutual exchange of their commodities, either in account with the constant value of the commodities, or in account with the surplus-value existing in the commodities, to the extent that it is spent as revenue, returns into the hands of the respective capitalists in proportion to the amount advanced by them for the circulation of money.

As for the reconversion of the variable capital of department I into the form of money, this capital exists, after the capitalists of I have invested it in wages, first in the form of the commodities produced by the laborers. The capitalists have paid this capital in the form of money to these laborers as the price of their labor-power. The capitalists have to this extent paid for that portion of the value of their commodities, which is equal to the variable capital expended in the form of money. They are, for this reason, the owners of this portion of the commodity-product. But that portion of the working class which is employed by them does not buy the means of production created by it; these laborers buy articles of consumption produced by department II. Hence the variable capital advanced by the capitalists of I in the payment of labor-power does not return to these capitalists directly. It passes by means of the purchases of the laborers of I into the hands of the capitalist producers of the requirements of life of the laborer, or of other commodities accessible to them; in other words, it passes into the hands of capitalists of II. And not until these expend this money in the purchase of means of production does it return by this circuitous route into the hands of the capitalists of department I.

It follows that, on the basis of simple reproduction, the sum of the values of v plus s of the commodity-capital of I (and therefore a corresponding proportional part of the total product in commodities of I) must be equal to the constant capital c of department II, which is likewise disposed of as a proportional part of the entire product in commodities of department II; or I (v + s) = II c.

IV. TRANSACTIONS WITHIN DEPARTMENT II. NECESSITIES OF LIFE AND ARTICLES OF LUXURY.

It remains for us to analyze the portion v plus s of the value of the commodities of department II. This analysis has nothing to do with the most important question which occupies our attention in this chapter, namely the question, to what extent the separation of the value of every individual capitalist product in commodities into c plus v plus s applies also to the value of the entire annual product in commodities, even though this separation may be based on different forms. This question is solved by the transaction between I (v + s) and II c, and, on the other hand, by the analysis of the reproduction of I c in the annual product in commodities of I, to be analyzed later on.

Since II (v + s) exists in the natural form of articles of consumption; since, furthermore, the variable capital advanced in the payment of the labor-power of the laborers is mostly spent by them for articles of consumption; and since, finally, the s-portion of the value of commodities, on the basis of simple reproduction, is practically spent as revenue for articles of consumption, it is evident at the first glance that the laborers of II buy back, with the money received as wages from the capitalists of II, a portion of their own product, corresponding in value to the money-value represented by these wages. The capitalist class of II thereby reconvert the money-capital advanced by them in the payment of labor-power into the form of money. It is as though they had paid the laborers in mere checks on commodities. As soon as the laborers realize on these checks by the purchase of a portion of the commodities produced by them, but belonging to the capitalists, these checks return into the hands of the capitalists. Only, these checks do not merely represent value, but they are actually embodied in gold or silver. We shall analyze later on this sort of reflux of variable capital by means of a process in which the laborer appears as a purchaser and the capitalist as a seller. Here, however, it is a question of a different point, which must be discussed on the occasion of the return of this variable capital to its point of departure.

Department II of the annual production of commodities consists of a great variety of lines of production, which may, however, be divided into two great subdivisions according to their products.

(a) Articles of consumption required for the maintenance of the laboring class, and to the extent that they are material requirements of life, also forming a portion of the consumption of the capitalist class, although they are frequently different in quality and value. We may, for our purposes, comprise this entire subdivision under the name of necessary articles of consumption, regardless of whether a product of this class, such as tobacco, is really a necessary article of consumption from the physiological standpoint or not. It is sufficient that it may be habitually in demand.