The difference between the time of production and working time admits of many variations, as we have seen. The circulating capital may be in the period of production, before it enters into the working period proper (production of lasts); or, it is still in the period of production, after it has passed through the working period (wine, seed grain); or, the period of production is occasionally interrupted by the working period (agriculture, timber raising). A large portion of the product, fit for circulation, remains incorporated in the active process of production, while a much smaller part enters into the annual circulation (timber and cattle raising); the longer or shorter time for which a circulating capital must be invested in the form of potential productive capital, hence also the larger or smaller amount of this capital to be advanced at one time, depends partly on the nature of the productive process (agriculture), and partly on the proximity of markets, etc., in short on circumstances connected with the sphere of circulation.

We shall see later (Volume III), what senseless theories were advanced by MacCulloch, James Mill, etc., in the attempt of identifying the diverging time of production with the working time, an attempt which is due to a misinterpretation of the theory of value.

The cycle of turn-over, which we considered in the foregoing, is determined by the durability of the fixed capital advanced in the process of production. Since this process extends over a series of years, we have a series of annual, or less than annual, successive turn-overs of fixed capital.

In agriculture, such a cycle of turn-over arises out of the system of crop rotation. "The duration of the lease must certainly not be figured less than the time of rotation of the adopted system of crop succession. For this reason, one always calculates with 3, 6, 9, in the three plat system. In the three plat system with complete fallow, a field is cultivated only four times in six years, being planted with both winter and summer grain in the years of cultivation, and, if the condition of the soil permits it, wheat and rye, barley and oats, are likewise introduced into the rotation. Every species of grain, however, differs in its yields from others on the same soil, every one of them has a different value and is sold at a different price. For this reason, the yield of the same field is different in every year in which it is cultivated, and different in the first half of the rotation (the first three years) from that of the second. Even the average yield of one period of rotation is not equal to that of another, for its fertility does not depend merely on the good condition of the soil, but also on the weather of the various seasons, just as prices depend on a multitude of circumstances. Now, if one calculates the income from one field on the average of the crops for the entire rotation of six years and the average prices of those years, one finds the total income of one year in either period of rotation. But this is not so, if the income is calculated only for half of the period of rotation that is to say, for three years, for then the total yields would be unequal. It follows from the foregoing that the duration of a lease in a system of three fields must be chosen for at least six years. It would be still more desirable for tenants and owners that the duration of the lease should be a multiple of the duration of the lease (!), in other words, that it should be 12, 18, or more years instead of 6 years, in a system of three fields, and 14, 28 years instead of 7 in a system of seven fields." (Kirchhof, pages 117, 118.)

(The manuscript at this place contains the note: "The English system of crop rotation. Make a note here.")

Part II, Chapter XIV
THE TIME OF CIRCULATION.

All circumstances considered so far, which distinguish the periods of rotation of different capitals invested in different branches of industry and the periods for which capital must be advanced, have their source in the process of production itself, such as the difference between fixed and circulating capital, the difference in the working periods, etc. But the period of turn-over of capital is equal to the sum of its time of production plus its time of circulation. It is, therefore, a matter of course that a difference in the time of circulation changes the time of turn-over and to that extent the length of the period of turn-over. This becomes most plainly apparent, either in comparing the different investments of capital in which all circumstances modifying the turn-over are equal, except the time of circulation, or in selecting a given capital with a given composition of fixed and circulating parts, a given working time, etc., permitting only the time of circulation to vary hypothetically.

One of the sections of the time of circulation—relatively the most decisive—consists of the time of selling, the period during which capital has the form of commodity-capital. According to the relative length of this time, the time of circulation, and to that extent the period of turn-over, are lengthened or shortened. An additional outlay of capital may become necessary as a result of expenses of storage. It is evident from the outset that the time required for the sale of finished products may differ considerably for the individual capitalists in one and the same branch of industry; and this does not refer merely to the grand totals of capital invested in the various departments of industry, but also to the different individual capitals, which are in fact individual parts of the aggregate capital invested in the same department of production. Other circumstances remaining equal, the period of selling for the same individual capital will vary with the general fluctuations of the market conditions, or with their fluctuations in that particular business department. We do not tarry over this point any longer. We merely state the simple fact that all circumstances which produce differences in the periods of turn-over of the capitals invested in different business departments, also carry in their train differences in the turn-over of the various individual capitals existing in the same departments, provided these circumstances have any individual effects (for instance, if one capitalist has an opportunity to sell more rapidly than his competitor, if one employs more methods shortening the working periods than the other, etc.).

One cause which acts continuously in differentiating the time of selling, and thus the periods of turn-over in general, is the distance of the market, in which a commodity is finally sold from its regular place of sale. During the entire time of its trip to the market, capital finds itself fettered in the form of commodity-capital. If goods are made to order, this condition lasts up to the time of delivery; if they are not made to order, the time of the trip to the market is further increased by the time during which the goods are on the market waiting to be sold. The improvement of the means of communication and transportation abbreviates the wandering period of the commodities absolutely, but does not abolish the relative difference in the time of circulation of different commodity-capitals arising from their wanderings nor that of different portions of the same commodity-capital which wander to different markets. The improved sailing vessels and steamships, for instance, which shorten the wanderings of commodities, do so equally for near and for distant ports. But the relative differences may be altered by the development of the means of transportation and communication in a way that does not correspond to the natural distances. For instance, a railroad, which leads from a place of production to an inland center of population, may relatively or absolutely prolong the distance to a nearer point inland not connected with a railroad, compared to the one which is naturally more distant. In the same way, the same circumstances may alter the relative distance of places of production from the larger markets, which explains the running down of old and the rise of new places of production through changes in the means of communication and transportation. (In addition to these circumstances, there is the greater relative cheapness of transportation for long than for short distances.) Moreover, it is not alone the velocity of the movement through space, and the consequent reduction of distance in space, but also in time, which is brought about by the development of the means of transportation. It is not only the quantity of means of communication which is developed, so that, for instance, many vessels sail simultaneously for the same port, or several trains travel simultaneously on different railways between the same two points, but freight vessels may, for instance, clear on different successive days of the week from Liverpool for New York, or freight trains may start at different times of the day from Manchester to London. It is true, that the absolute velocity, or this part of the time of circulation, is not modified by this latter circumstance, a certain definite capacity of the means of transportation, being given. But successive quantities of commodities can start on their passage in shorter succession of time and thus reach the market one after another without accumulating as potential commodity-capital in large quantities before shipping. Hence the return movement likewise is distributed over shorter successions of time, so that a part is continually transformed into money-capital, while another circulates as commodity-capital. By means of this distribution of the return movement over several successive periods the total time of circulation is abbreviated and thereby also the turn-over. On one hand, the greater or lesser frequency of the function of means of transportation, for instance the number of railroad trains, develops first to the extent that a place of production produces more and becomes a greater center of production, and this development tends in the direction of the existing market, that is to say, toward the great centers of production and population, export places, etc. But on the other hand this special facilitation of traffic and the consequent acceleration of the turn-over of capital (to the extent that it is conditioned on the time of circulation) give rise to a hastened concentration of the center of production and of its market. Along with this hastened concentration of masses of men and capital, the concentration of these masses of capital in a few hands likewise progresses. Simultaneously there is a movement, which shifts and displaces the center of commercial gravity as a result of changes in the relative location of centers of production and markets caused by transformations in the means of communication. A place of production which once had a special advantage by its favored location on some highway or canal then finds itself set aside on a single side-track, which runs trains only at relatively long intervals, while another place, which formerly lay removed from the main roads of traffic, then finds itself located at the crossing point of several railroads. This second point is built up, the former goes down. A transformation in the means of transportation thus causes a local difference in the time of circulation of commodities, the opportunity to buy, to sell, etc., or an already existing local differentiation is distributed differently. The significance of this circumstance for the turn-over of capital is shown in the disputes of the commercial and industrial representatives of the various places with the railroad managers. (See, for instance, the above quoted bluebook of the Railway Committee.)

All branches of production which are dependent on local consumption by the nature of their product, such as breweries, are therefore developed to greatest dimensions in the main centers of population. The more rapid turn-over of capital compensates in this case for the eventual increase in the price of some elements of production, such as building lots, etc.

While on one hand, the development of the means of transportation and communication by the progress of capitalist production reduces the time of circulation for a given quantity of commodities, the same progress, on the other hand, coupled to the growing possibility of reaching more distant markets to the extent that the means of transportation and communication are improved, leads to the necessity of producing for ever more remote markets, in one word, for the world market. The mass of commodities in transit for distant places grows enormously, and with it also grows absolutely and relatively that part of social capital which remains constantly for longer periods in the stage of commodity-capital, within the time of circulation. Simultaneously that portion of social wealth increases, which, instead of serving as direct means of production, is invested in the fixed and circulating capital required for operating the means of transportation and communication.

The mere relative length of the transit of the commodities from their place of production to their market causes a difference, not only in the first part of the time of circulation, the selling time, but also in its second part, the reconversion of money into the elements of productive capital, the buying time. For instance, some commodities are shipped to India. This requires, say, four months. Let us assume that the selling time is equal to zero, that is to say, the commodities are made to order and are paid for on delivery to the agent of the producer. The return of the money (no matter what may be its form) requires again four months. Thus it takes eight months, before the same capital can again serve as productive capital and renew the same operations. The differences in the turn-over thus caused are one of the material bases of the various terms of credit. Trans-oceanic commerce in general, for instance in Venice and Genoa, is one of the sources of the credit system—strictly so called. The London Economist of July 16, 1866, wrote that the crisis of 1847 enabled the banking and trading business of that time to reduce the Indian and Chinese usage (for the running time of checks between those countries and Europe) from ten months after sight to six months, and the lapse of twenty years with its acceleration of the trip and the institution of telegraphs renders necessary a further reduction from six months after sight to four months after date as a preliminary step toward four months after sight. The trip of a sailing vessel from Calcutta around the cape of London lasts on an average less than 90 days. A usage of four months after sight would be equivalent to a running time of 150 days, approximately. The present usage of six months after sight is equivalent to a running time of 210 days. On the other hand, we read in the issue of June 30, 1866, of the same paper, that the Brazilian usage is still fixed at two and three months after sight, checks of Antwerp on London are drawn for three months after date, and even Manchester and Bradford draw on London for three months and longer dates. By a tacit understanding, the merchant is thus given sufficient opportunity to realize on his goods by the time the checks are due, if not before. For this reason, the usage of Indian checks is not excessive. Indian products, which are sold in London generally on three months' time, cannot be realized upon in much less than five months, if some time for the sale is allowed, while another five months pass on an average between the purchase in India and the delivery to an English warehouse. Here we have a period of ten months, while the checks drawn against the goods do not run above seven months. And again, on July 7, 1866, we read that, on July 2, 1866, five great London banks, dealing especially with India and China, and the Paris Comptoir d'Escompte, gave notice that, beginning with January 1, 1867, their branch banks and agencies in the Orient would buy and sell only such checks as were not drawn for more than four months after sight. However, this reduction miscarried and had to be revoked. (Since then the Suez canal has revolutionized all this.)

It is a matter of course that with the longer time of circulation the risk of a change of prices in the selling market increases, since it increases the period in which changes of price may take place.

A difference in the time of circulation, partly individually between the various individual capitals of the same branch of business, partly between different branches of business according to different usages, when payment is not made in spot cash, arises from the different dates of payment in buying and selling. We do not linger for the present over this point, which is important for the credit business.

Other differences in the period of turn-over arise from the size of contracts for the delivery of goods, and their size grows with the extent and scale of capitalist production. Such a contract, being a transaction between buyer and seller, is an operation belonging to the market, the sphere of circulation. The differences in the time of turn-over arising from it have their source for this reason in the sphere of circulation, but react immediately on the sphere of production, apart from all dates of payment and conditions of credit including cash payment. For instance, coal, cotton, yarn, etc., are discontinuous products. Every day supplies its quantity of finished product. But if the spinner or the mine owner accepts contracts for the delivery of large quantities, which require, say, a period of four or six weeks of successive working days, then this is the same, so far as the time of investment of advanced capital is concerned, as though a continuous working period of four or six weeks had been introduced in this labor-process. It is of course assumed in this case that the entire quantity ordered is to be delivered in one bulk, or at least is only paid after all of it has been delivered. Individually considered, every day had furnished its definite quantity of finished product. But this finished product is only a part of the quantity contracted for. Although the portion finished so far is no longer in the process of production, it is still in the warehouse as a potential capital.

Now let us take up the second epoch of the time of circulation, the buying time, or that epoch in which capital is converted from money back into the elements of productive capital. During this epoch, it must remain for a shorter or longer time in its condition of money-capital, so that a certain portion of the total capital advanced is all the time in the form of money-capital, although this portion consists of continually changing elements. For instance, of the total capital advanced in a certain business, n times 100 pounds sterling must be available in the form of money-capital, so that, while all the constituent parts of these n times 100 pounds sterling are continually converted into productive capital, this sum is nevertheless just as continually supplemented by new additions from the circulation, out of the realized commodity-capital. A definite part of the value of the advanced capital is, therefore, continually in the condition of money-capital, a form not belonging to its sphere of production, but to its sphere of circulation.

We have already seen that the prolongation of time caused by the distance of the market, by which capital is fettered in the form of commodity-capital, directly retards the return movement of the money and, consequently, the transformation of capital from its money into its productive form.

We have furthermore seen (chapter VI) with reference to the purchase of commodities, that the time of buying, the greater or smaller distance from the main sources of the raw material, makes it necessary to purchase raw material for a longer period and keep it on hand in the form of a productive supply, of latent or potential productive capital; in other words, that it increases the quantity of capital to be advanced at one time, and the time for which it must be advanced, the scale of production remaining otherwise the same.

A similar effect is produced in various businesses by the longer or shorter periods, in which large quantities of raw material are thrown on the market. In London, for instance, great auction sales of wool take place every three months, and the wool market is controlled by them. The cotton market, on the other hand, is on the whole restocked continuously, if not uniformly, from harvest to harvest. Such periods determine the principal dates of buying for these raw materials and affect especially the speculative purchases requiring longer or shorter advances of these elements of production, just as the nature of the produced commodities exerts an influence on the premeditated speculative retention of the product for a longer or shorter term in the form of potential commodity-capital. "The farmer must also be to a certain extent a speculator, and, therefore, hold back the sale of his products according to prevailing conditions..." Here follow a few general rules. "...However, in the sale of the products, success depends mainly on the personality, the product itself, and the locality. A man with sufficient business capital, won by ability and good luck (!), will not be blamed, if he keeps his grain crop stored for a year when prices happen to be unusually low. On the other hand, a man who lacks business capital, or enterprise in general (!), will try to get the average prices and be compelled to sell as soon and as often as opportunity presents itself. It will almost always bring losses to keep wool stored longer than a year, while grain and rape seed may be stored for several years without injury to their condition and quality. Such products as are generally subject to a large rise and fall in short intervals, for instance, rape seed, hops, teasel, etc., may be to good advantage stored during the years in which the market price is far below the price of production. It is least permissible to postpone the sale of such articles as require daily expenses for their preservation, such as fatted cattle, or which spoil easily, such as fruit, potatoes, etc. In some localities, a certain product has its lowest average price at a certain season, its highest at another. For instance, the average price of grain in some localities is lower about August than in the time between Christmas and Easter. Furthermore, some products sell well in certain localities only at certain periods, as is the case, for instance, with wool in the wool markets of those localities, where the wool trade is dull at other times, etc." (Kirchhof, page 302.)

In the study of the second half of the time of circulation, in which money is reconverted into the elements of productive capital, it is not only this conversion itself which is important in itself, not only the time in which the money flows back according to the distance of the market on which the product is sold. It is also above all the volume of that part of the advanced capital to be held always available in the form of money, in the condition of money-capital, which must be considered.

Making exception of all speculation, the volume of the purchases of those commodities which must always be available as a productive supply depends on the time of the renewal of this supply, in other words, on circumstances which in their turn depend on market conditions and which are, therefore, different for different raw materials. In these cases, money must be advanced from time to time in larger quantities in one sum. It flows back more or less rapidly, but always in instalments, according to the turn-over of capital. One portion, namely that invested in wages, is continually re-expended in short intervals. But another part, namely that which is to be reconverted into raw material, etc., must be accumulated for long periods, as a reserve fund to be used either for buying or paying. Therefore it exists in the form of money-capital, although the volume which it has as such changes.

We shall see in the next chapter that other circumstances, whether they arise from the process of production or circulation, necessitate this existence of a certain portion of the advanced capital in the form of money. In general it must be noted that economists are very prone to forger that a part of the capital required for business not only passes alternately through the three stages of money-capital, productive capital, and commodity-capital, but that different portions of it have continuously and simultaneously these forms, although the relative size of these portions varies all the time. It is especially the portion always available as money-capital which is forgotten by economists, although this circumstance is very important for the understanding of capitalist economy and makes its importance felt in practice.

Part II, Chapter XV
INFLUENCE OF THE TIME OF CIRCULATION ON THE MAGNITUDE OF AN ADVANCE OF CAPITAL.

In this chapter and in the next we shall treat of the influence of the time of circulation on the utilization of capital.

Take the commodity-capital which is the product of a certain working period, for instance, of nine weeks. Let us leave aside the question of that portion of value which is transferred to the product by the average wear and tear of the fixed capital, also that of the surplus-value added to it during the process of production. The value of this product is then equal to that of the circulating capital advanced for its production, that is to say, of the wages, raw and auxiliary materials consumed in its production. Let this value be 900 pounds sterling, so that the weekly outlay is 100 pounds sterling. The periodic time of production, which here coincides with the working time, is nine weeks. It is immaterial whether it is assumed that this working period produces a continuous product, or whether it is a continuous working period for a discontinuous product, so long as the quantity of discontinuous product, which is brought to market at one time, costs nine weeks of labor. Let the time of circulation be three weeks. Then the entire time of turn-over is twelve weeks. At the end of nine weeks, the advanced productive capital is converted into a commodity-capital, but now it exists for three weeks in the period of circulation. The new time of production, therefore, cannot commence until the beginning of the thirteenth week, and production would be at a standstill for three weeks, or for a quarter of the entire period of turn-over. It is again immaterial whether it is assumed that it takes so long on an average to sell the product, or that this term is conditioned on the distance of the market or on the terms of payment for the sold goods. Production would be at a standstill for three weeks every three months, or four times three, or twelve weeks, in a year, which means three months or one quarter of the annual period of turn-over. Hence, if production is to be continuous and to be carried along on the same scale week after week, there are only two possibilities.

Either the scale of production must be reduced, so that those 900 pounds sterling will suffice to keep the work going during the working period as well as during the time of circulation of the first turn-over. A second working period is then commenced with the tenth week, hence also a new period of turn-over, before the first period of turn-over is completed, for the period of turn-over is twelve weeks, the working period nine weeks. A sum of 900 pounds sterling distributed over twelve weeks makes 75 pounds per week. It is evident in the first place that such a reduced scale of business presupposes changed dimensions of the fixed capital, and therefore a general reduction of the entire business. In the second place, it is questionable whether such a reduction can take place at all, for the development of production in the various businesses establishes a normal minimum for the investment of capital, below which an individual business is unable to sustain competition. This normal minimum grows continually with the advance of capitalist production, hence it is not a fixed magnitude. There are numerous gradations between the existing normal minimum and the ever increasing normal maximum, and this intermediate gradation permits of many different degrees of capital investment. Within the limits of this intermediate scale, a reduction may take place, its lowest limit being the normal minimum.

In case of an obstruction of production, an overstocking of the markets, an increase in the price of raw materials, etc., there is a reduction of the normal outlay of circulating capital, compared to a given scale of fixed capital, by the reduction of the working time, work being carried on, say, for only half a day. On the other hand, in times of prosperity, the fixed capital, remaining the same, there is an abnormal expansion of the circulating capital, partly by the prolongation of the working time, partly by its intensification. In businesses which are adjusted from the outset to such fluctuations, recourse is either taken to the above-named measures, or a greater number of laborers are simultaneously employed, combined with an investment of reserve capital, such as reserve locomotives of railroads, etc. However, such abnormal fluctuations are not considered here, where we assume normal conditions.

In order to make production continuous, it is necessary, in the present case, to distribute the expenditure of the same circulating capital over a longer period, over twelve weeks instead of nine. In any section of time, a reduced productive capital is therefore employed. The circulating portion of the productive capital is reduced from 100 to 75, or one quarter. The total amount by which the productive capital serving for a working period of nine weeks is reduced is 9 times 25, or 225 pounds sterling, or one quarter of 900 pounds. But the proportion of the time of circulation to that of turn-over is likewise three twelfth, or one quarter. It follows, therefore: If production is not to be interrupted during the time of circulation of the productive capital transformed into commodity-capital, if it is rather to be continued parallel with circulation and continuously week after week, and if no special circulating capital is available, it can be done only by curtailing the productive operations, reducing the circulating portions of the productive capital in service. The portion of circulating capital thus set free for production during the time of circulation is proportioned to the total circulating capital invested as the time of circulation is to the time of turn-over. We repeat, that this applies only to branches of production in which the labor-process is continued on the same scale week after week, in other words, where no different amounts of capital are invested at different working periods as is done, for instance in agriculture.

If, on the other hand, we assume that the nature of the business excludes the idea of a reduction of the scale of production and thus of the circulating capital to be invested weekly, then the continuity of production can be secured only by additional circulating capital, in the above-named case of 300 pounds sterling. During the period of turn-over of twelve weeks, 1,200 pounds sterling are successively invested in twelve weeks, and 300 is one quarter of this sum as three weeks is of twelve. At the end of the working time of nine weeks, the capital-value of 900 pounds sterling has been converted from the form of productive into that of commodity-capital. Its working period is concluded, but it cannot be re-opened with the same capital. During the three weeks in which it exists in the sphere of circulation, performing the functions of commodity-capital, it is in a condition, so far as the process of production is concerned, as though it did not exist at all. We make exception, at present, of all conditions of credit, and assume that the capitalist operates only with his own money. But while the capital advanced for the first working period, having completed its process of production, remains for three weeks in the process of circulation, an additional capital of 300 pounds sterling enters into service, so that the continuity of the production is not interrupted.

Now, the following must be noted in this connection:

First: The working period of the capital first invested, of 900 pounds sterling, is completed at the close of nine weeks, and it does not flow back until after three weeks, that is to say, in the beginning of the thirteenth week. But a new working period is immediately begun with the additional capital of 300 pounds. By this means the continuity of production is secured.

Secondly: The functions of the original capital of 900 pounds sterling, and those of the additional capital of 300 pounds sterling added at the close of the first working period of nine weeks, inaugurating the second working period after the conclusion of the first, without any interruption, are clearly distinguished in the first period of turn-over, or at least they may be, while they cross one another in the course of the second period of turn-over.

Let us give this matter a tangible form.

First period of turn-over of 12 weeks: First working period of 9 weeks; the turn-over of the capital advanced for this is completed at the beginning of the 13th week. During the last 3 weeks, the additional capital of 300 pounds sterling performs its service, opening up the second working period of 9 weeks.

Second period of turn-over. At the beginning of the 13th week, 900 pounds sterling have flown back and are able to begin a new turn-over. But the second working period has already been opened by the additional 300 pounds in the 10th week. At the commencement of the 13th week, this capital has already completed one third of its working period and 300 pounds sterling have been converted from a productive capital into a product. Seeing that only 6 weeks are required for the completion of the second working period, only two-thirds of the returned capital of 900 pounds sterling, or 600 pounds, can take part in the productive process of the second working period. Thus 300 pounds of the original 900 are set free and may play the same role, which the additional capital of 300 pounds played in the first working period. At the close of the 6th week of the second period of turn-over, the second working period is completed. The capital of 900 pounds sterling advanced in it flows back after 3 weeks, or at the end of 9th week of the second period of turn-over which comprises 12 weeks. During the 3 weeks of its period of circulation, the free capital of 300 pounds sterling comes into action. This begins the third working period of a capital of 900 pounds sterling in the 7th week of the second period of turn-over, which is the 19th running week.

Third period of turn-over. At the close of the 9th week of the second period of turn-over, there is a new reflux of 900 pounds sterling. But the third working period has already commenced in the 7th week of the second period of turnover, and at the beginning of the third period of turn-over, 6 weeks of the third working period have already elapsed. The third working period, then, lasts only 3 weeks longer. Hence only 300 pounds of the returned 900 take part in the productive process of the second period of turn-over, while the next 300 close the last three weeks of the third working period and thus open the first three weeks of the third period of turn-over. The fourth working period fills out the remaining 9 weeks of this period of turn-over, and thus the 37th running week begins simultaneously the fourth period of turn-over and fifth working period.

In order to simplify this case for the calculation, we shall assume a working period of 5 weeks and a period of circulation of 5 weeks, making a period of turn-over of 10 weeks. Let the year be one of fifty working weeks, and the capital invested per week 100 pounds sterling. A working period then requires a circulating capital of 500 pounds sterling, and the period of turn-over an additional capital of 500 pounds sterling. The working periods and periods of turn-over then are as follows:

1. wrkg. prd. 1—5. week (500 p. stlg. of goods) returned end of 10.

2. wrkg. prd. 6—10. week (500 p. stlg. of goods) returned end of 15.

3. wrkg. prd. 11—15. week (500 p. stlg. of goods) returned end of 20.

4. wrkg. prd. 16—20. week (500 p. stlg. of goods) returned end of 25.

5. wrkg. prd. 21—25. week (500 p. stlg. of goods) returned end of 30. etc.

If the time of circulation is zero, so that the period of turn-over is equal to the working time, then the number of turn-overs is equal to the working periods of the year. In the case of a working period of 5 weeks, this would make 10 periods of turn-over per year, and the value of the capital turned over would be 500 times 10, or 5,000. In our table, in which we have assumed a time of circulation of 5 weeks, the total value of the commodities produced per year would also be 5,000 pounds sterling, but one tenth of this, or 500 pounds, would always be in the form of commodity-capital, which would not flow back until after 5 weeks. At the end of the year, the product of the tenth working period (the 46th to the 50th working week) would have completed its period of turn-over only by half, because its time of circulation would fall within the first five weeks of the year.

Now let us take a third illustration: Working period 6 weeks, time of circulation 3 weeks, weekly advance of capital 100 pounds sterling.

1.Working period: 1—6th week. At the end of the 6th week, a commodity-capital of 600 pounds sterling, returned at the end of the 9th week.

2. Working period: 7—12th week. During the 7—9th week 300 pounds sterling of additional capital is advanced. At the end of the 9th week, return of 600 pounds sterling. Of this, 300 pounds sterling are advanced during the 10—12th week. At the end of the 12th week, therefore, 300 pounds sterling are available, and 600 pounds sterling are in the form of commodity-capital, returnable at the end of the 15th week.

3. Working period: 13—18th week. During the 13—15th week, advance of above 300 pounds sterling, then reflux of 600 pounds, 300 of which are advanced for the 16—18th week. At the end of the 18th week, 300 pounds sterling available in cash, 600 on hand as commodity-capital, which flows back at the end of the 21st week. (See the detailed illustration of this case under II, farther along.)

In other words, during 9 working periods (54 weeks) a total of 600 times 9, or 5,400 pounds sterling is produced. At the end of the ninth working period, the capitalist has 300 pounds in cash and 600 pounds worth of commodities, which have not yet completed their time of circulation.

A comparison of these three illustrations shows first, that a successive release of capital I of 500 pounds sterling and of additional capital II of likewise 500 pounds sterling takes place only in the second illustration, so that these two portions of capital move independently of one another. But this is so only because we have made the exceptional assumption that the working time and the time of circulation are two equal halves of the period of turn-over. In all other cases, whatever may be the difference of the two terms of the period of turn-over, the movements of the two capitals cross one another, as they do in the first and third illustration, beginning with the second period of turn-over. The additional capital II, with a portion of capital I, then forms the capital serving in the second period of turn-over, while the remainder of capital I is set free for the original function of capital II. The capital serving during the time of circulation of the commodity-capital is not identical, in this case, with the capital II originally advanced for this purpose, but it is of the same value and forms the same aliquot portion of the advanced total capital.

Secondly: The capital which served during the working period, lies fallow during the time of circulation. In the second illustration, the capital performs its function during 5 weeks of the working period, and lies fallow during a circulation period of 5 weeks. The entire time during which capital I here lies fallow amounts to one-half of the year. During this time, the additional capital II takes the place of capital I, which in its turn lies fallow during the other half of the year. But the additional capital required for insuring the continuity of the production during the time of circulation is not determined by the aggregate volume, or the sum, of the times of circulation during the year, but only by the proportion of the time of circulation to the time of turn-over. (We assume, of course, that all the turn-overs take place under the same conditions.) For this reason, 500 pounds sterling are required in the second illustration, not 2,500 pounds. This is simply due to the fact that the additional capital enters just as well into the turnover as the capital originally advanced, and that it, therefore, reproduces its volume the same as the other by the number of its turn-overs.

Thirdly: It does not alter the circumstances here described, whether or not the time of production is longer than the working time. True, the aggregate of the periods of turn-over is prolonged thereby, but this prolongation does not imply any additional capital for the labor-process. The additional capital serves merely the purpose of filling up the fallow places left by the time of circulation. Its mission is simply to protect production against interruption by the time of circulation. Interruptions arising from the conditions of production itself are compensated for in another way, which we do not discuss at this point. There are, however, some businesses, in which work is carried on only in intervals and to order, so that there may be interruptions in the working periods. In such cases, the necessity of additional capital is eliminated to that extent. On the other hand, in most cases of season work, there is a limit for the time of reflux. The same work cannot be renewed next year with the same capital, if the time of circulation of this capital is not completed. Still, the time of circulation may be shorter than the intervals between two periods of production. In such an eventuality, capital lies fallow, unless it is employed otherwise in the meantime.

Fourthly: The capital advanced for a certain working period, for instance, the 600 pounds sterling in the third illustration, is invested partly in raw and auxiliary materials, in a productive supply for the working period, in constant circulating capital, partly in variable circulating capital, in the payment of labor itself. The portion invested in constant circulating capital may not exist for the same length of time in the form of a productive supply, the raw material, for instance, may not be on hand for the entire working period, coal may be purchased only every two weeks. However, credit being out of the question, according to our assumption, this portion of capital, to the extent that it is not available in the form of a productive supply, must be kept on hand in the form of money in order to be converted into a productive supply when needed. This does not alter the magnitude of the constant circulating capital-value advanced for 6 weeks. The wages, on the other hand, are generally paid weekly, making exception of the money supply for unforeseen expenses, the strict reserve fund for the compensation of disturbances. Unless the capitalist, therefore, compels the laborer to advance his labor for a longer time, the money required for the payment of wages must be on hand. During the reflux of the capital, a portion must, therefore, be reserved in the form of money for the payment of labor, while the remaining portion may be converted into a productive supply.

The additional capital is subdivided exactly like the original. But it is distinguished from capital I by the fact that (apart from conditions of credit), in order to be available for its own period of labor, it must be advanced during the entire duration of the first working period of capital I, in which it does not take part. During this time, it may be converted into constant circulating capital, at least in part, being advanced for the entire period of turn-over. To what extent it will assume this form, or persist in the form of additional money-capital, up to the time where this conversion becomes necessary will depend partly on the special conditions of production of definite lines of business, partly on the fluctuations in the prices of raw material, etc. Looking at it from the point of view of the aggregate social capital, there will always be a more or less considerable part of this additional capital for a rather long time in the form of money-capital. But as for that portion of capital II which is to be advanced for wages, it is always gradually converted into labor-power to the extent that small working periods are closed and paid for. This portion of capital II, then, is available in the form of money-capital for the entire working period, until it is converted into labor-power and thus takes part in the function of productive capital.

The advent of the additional capital required for the transformation of the time of circulation of capital I into a time of production increases not only the magnitude of the advanced capital and length of time for which the aggregate capital must be necessarily advanced, but it also increases specifically that portion of the advanced capital which exists in the form of a money-supply, which persists in the condition of money-capital, and has the form of potential capital.

The same takes also place, as concerns both the advance in the form of a productive supply and in that of a money supply, when the separation of capital into two parts required by the time of circulation, namely, capital for the first working period and reserve capital for the time of circulation, is not caused by the increase of the invested capital, but by a decrease of the scale of production. In proportion to the scale of production, the increase of the capital tied up in the form of money is apt to grow still more in this case.

It is the continuous succession of the working periods, the continuous function of an equal portion of the advanced capital as productive capital, which is insured by this separation of capital into an original productive and a reserve capital.

Let us look at the second illustration. The capital continuously employed in the process of production amounts to 500 pounds sterling. The working period being 5 weeks, it works ten times during a working year of 50 weeks. Hence its product, apart from surplus-value, is 10 times 500 or 5,000 pounds sterling. From the point of view of a directly and uninterruptedly working capital in the process of production, a capital-value of 500 pounds sterling, the time of circulation seems entirely eliminated. The period of turn-over coincides with the working period, the time of circulation being assumed as equal to zero.

But if the capital of 500 pounds sterling were interrupted in its productive activity by regular times of circulation covering 5 weeks, so that it could not become productively active until after the close of the entire period of turn-over of 10 weeks, we should have 5 turn-overs of ten weeks each in 50 running weeks. These would comprise 5 periods of production of 5 weeks each, or 25 productive weeks with a total product of 5 times 500, or 2,500 pounds sterling; and 5 times of circulation of 5 weeks each, or a total period of circulation of 25 weeks. If we say in this case that the capital of 500 pounds sterling has been turned over 5 times in the year, it is evident and obvious that this capital of 500 pounds sterling did not serve at all as a productive capital during one-half of each period of turn-over, and that, taking all in all, it performed its function only during one half of the year, while it did not serve at all during the other half.

In our illustration, the reserve capital of 500 pounds sterling comes to the rescue during those five periods of circulation, and the turn-over is thus expanded from 2,500 to 5,000 pounds. But now the advanced capital is 1,000 instead of 500 pounds sterling. Hence there are only five turn-overs instead of ten. This is indeed the way in which people count. But when it is said that the capital of 1,000 pounds has been turned over five times in the year, the recollection of the time of circulation disappears in the hollow skulls of the capitalists, and a confused idea is formed that this capital has served continuously in the process of production during the successive five turn-overs. As a matter of fact, if we say that the capital of 1,000 pounds has been turned over five times in a year, we include both the time of circulation and the time of production. For, indeed, if 1,000 pounds sterling had actually been continuously active in the process of production, the product would have to be 10,000 pounds sterling instead of 5,000, according to our assumptions. But in order to have 1,000 pounds sterling continuously in the process of production, 2,000 pounds would have to be advanced. The economists, who as a general rule have nothing clear to say in reference to the mechanism of the turn-over, always overlook this main point, to-wit, that only a part of the industrial capital can actually be engaged in the process of production, if production is to proceed uninterruptedly. While one part is busy in the process of production, another must always be engaged in the process of circulation. Or in other words, one part can perform the functions of productive capital only on condition that another part is withdrawn from production in the form of commodity or money-capital. In overlooking this, the significance and role of money-capital is entirely ignored.

We have now to ascertain to what extent differences in the turn-over are caused according to whether the two sections of the period of turn-over, the working period and the circulating period, are equal to one another, or the working period greater or smaller than the circulating period, and furthermore, what effect this has on the retention of capital in the form of money-capital.

We assume, that the capital advanced weekly is in all cases 100 pounds sterling, and the period of turn-over 9 weeks, so that the capital invested in each period of turnover is 900 pounds sterling.

I. The Working Period Equal to the Period of Circulation.

Although this case occurs in reality only accidentally, as an exception, it must serve as our point of departure in this analysis, because conditions here shape themselves in the simplest and most intelligible way.

The two capitals (capital I advanced for the first working period, and reserve capital II advanced during the time of circulation of capital I) relieve one another in their movements without crossing. With the exception of the first period, either of the two capitals is therefore advanced only for its own period of turn-over. Let the period of turnover be 9 weeks, as indicated in the two following illustrations, so that the working period and the time of circulation are each of them 4½ weeks. Then we have the following annual diagram:

Table I.
CAPITAL I.
  Periods of Turn-Over. Working Periods. Advance. Periods of Circulation.
32 The weeks falling within the second year of turn-over are placed in parentheses.
I. 1-9. week 1-4. 5. week 450 p. st. 4. 5-9. week
II. 10-18. " 10-13. 5. " 450 p. st. 13. 5-18. "
III. 19-27. " 19-22. 5. " 450 p. st. 22. 5-27. "
IV. 28-36. " 28-31. 5. " 450 p. st. 31. 5-36. "
V. 37-45. " 37-40. 5. " 450 p. st. 40. 5-45. "
VI. 46-(54) " 46-49. 5. " 450 p. st. 49. 5-(54) " 32
CAPITAL II.
  Periods of Turn-Over. Working Period. Advance. Periods of Circulation.
I. 4. 5-13. 5. week 4. 5-9. week 450 p. st. 10-13. 5. week
II. 13. 5-22. 5. " 13. 5-18. " 450 p. st. 19-22. 5. "
III. 22. 5-31. 5. " 22. 5-27. " 450 p. st. 28-31. 5. "
IV. 31. 5-40. 5. " 31. 5-36. " 450 p. st. 37-40. 5. "
V. 40. 5-49. 5. " 40. 5-45. " 450 p. st. 46-49. 5. "
VI. 49. 5-(58. 5.) " 49. 5-(54.) " 450 p. st. (54-58. 5.) "

Within the 50 weeks which we here assume to stand for one year, capital I has absolved six full working periods, making 6 times 450, or 2,700 pounds sterling, and capital II making in five full working periods 5 times 450, or 2,250 pounds sterling's worth of commodities. In addition there-to, capital II has produced, within the last one and a half weeks of the year (middle of the 50th to the end of the 51st week) an extra 150 pounds sterling's worth, making the aggregate product 5,100 pounds sterling. So far as the direct production of surplus-value is concerned, which is produced only during the working period, the aggregate capital of 900 pounds sterling would have been turned over 5 2-3 times (5 2-3 times 900 equal to 5,100 pounds sterling). But if we consider the actual turn-over, then capital I has been turned over 5 2-3 times, since at the close of the 51st week it still has to absolve 3 weeks of its sixth period of turn-over; 5 2-3 times 450 make 2,550 pounds sterling; and capital II turned over 5 1-6 times, since it has completed only 1 1-2 week of its sixth period of turn-over, so that 7 1-2 weeks of it fall within the next year; 5 1-6 times 450 make 2,325 pounds sterling; actual aggregate turn-over 4,875 pounds sterling.

Let us regard capital I and capital II as two capitals independent of one another. They are independent in their movements; these movements supplement one another merely because their working and circulating periods directly relieve one another. They may be regarded as two entirely independent capitals belonging to different capitalists.

Capital I has completed five full turn-overs and two-thirds of its sixth period of turn-over. At the end of the year it has the form of commodity-capital, which lacks three weeks of its normal realization. During this time, it cannot take part in the process of production. It performs the function of commodity-capital, it circulates. It has completed only two-thirds of its last period of turn-over. This is expressed in the words: It has been turned over only two-thirds, only two-thirds of its total value have completed their turn-over. We say that 450 pounds sterling complete their turn-over in 9 weeks, hence 300 do in 6 weeks. But in this expression, the organic conditions of the two specifically different portions of the period of turn-over are neglected. The exact meaning of the expression, that the advanced capital of 450 pounds sterling has made 5 2-3 turn-overs, is merely that it has completed five turn-overs fully and of the sixth only two-thirds. On the other hand, the expression that the turned-over capital is equal to 5 2-3 of the advanced capital, or, in the above case, 5 2-3 times 450 pounds sterling, making 2,550, is correct only in so far as it means that unless this capital of 450 pounds sterling were supplemented by another capital of 450 pounds sterling, one portion of it would have to be in the process of circulation while another is in the process of production. If the period of turn-over is to be expressed in the quantity of the turned-over capital, it can be expressed only in a quantity of existing values (embodied in the finished product). The fact that the advanced capital is not in a condition in which it may reopen the process of production is due to the circumstance that only a part of it is in a condition suitable for production, or that, in order to be in a condition suitable for continuous production, it would have to be divided into a portion which would be continually in the period of production and into another which would be continually in the period of circulation, according to the mutual relation of these periods. It is the same law which determines the quantity of the continually serving productive capital by the proportion of the time of circulation to the period of turn-over.

As for capital II, 150 pounds sterling of it are advanced in the production of unfinished goods at the close of the 51st running week, which we regard here as the last of the year. Another part exists in the form of circulation constant capital—raw materials, etc.,—that is to say, in a form, in which it can serve as productive capital in the process of production. But a third part of it exists in the form of money, namely at least the amount of the wages for the remainder of the working period (3 weeks), which is not paid, however, until the end of each week. Now, although this portion of capital, in the beginning of a new year, and of a new cycle of turn-over, is not in the condition of productive capital, but in that of money-capital, in which it cannot take part in the process of production, there is, nevertheless, circulating variable capital, namely labor-power, active in the process of production at the opening of the new cycle of turn-over. This is due to the fact that labor-power is not paid until at the end of the week, although it was bought at the beginning of the working period, say, per week, and so consumed. Money serves here as a means of payment. For this reason, it is still in the hands of the capitalist, while on the other hand labor-power is already busy in the process of production. so that the same capital-value here appears twice.

If we look merely at the working periods, then there has been produced:

By capital I, 5 2-3 times 450, or 2,550 pounds sterling,
By capital II, 5 1-3 times 450, or 2,400 pounds sterling,
Total, 5 2-3 times 900, or 5,100 pounds sterling.

Hence the advanced capital of 900 pounds sterling has performed the function of productive capital 5 2-3 times per year. It is immaterial for the production of surplus-value, whether there are always 450 pounds sterling in the process of production and always 450 pounds sterling in the process of circulation, or whether 900 pounds sterling serve 4 1-2 weeks in the process of production and 4 1-2 weeks in the process of circulation.

On the other hand, if we consider the periods of turn-over, there has been produced:

By capital I, 5 2-3 times 450, or 2,550 pounds sterling,
By capital II, 5 1-6 times 450, or 2,325 pounds sterling,

Or, by the aggregate capital, 5 5-12 times 900, or 4,875 pounds sterling, in the total turn-over. For the turn-over of the total capital is equal to the sum of the quantities turned over by capital I and II, divided by the sum of I and II.

It is to be noted, that capital I and II, if they were independent of one another, would nevertheless be merely different independent portions of the social capital advanced for the same sphere of production. Hence, if the social capital within this sphere of production were solely composed of I and II, the same calculation would apply to the turn-over of the social capital, which here applies to the two constituent parts I and II, of the same private capital. In a wider generalization, every portion of the entire social capital invested in any special sphere of production may be so calculated. But in the last analysis, the amount of the turn-over of the entire social capital is equal to the sum of the capitals turned over in the various spheres of production, divided by the sum of the capitals advanced in those spheres.

It must be further noted that just as the capitals I and II in the same private business have, strictly speaking, different years of turn-over (the cycle of turn-over of capital II beginning 4 1-2 weeks later than that of capital I, so that the year of capital I closes 4 1-2 weeks earlier than that of capital II), just so the various private capitals in the same sphere of production begin their activities at totally different sections of time and, therefore, conclude their years of turn-over at different times of the year. The same calculation of averages, which we employed above for capitals I and II, suffices also for the reduction of the years of turn-over of the various independent portions of the social capital to one uniform year of turn-over.

II. The Working Period Greater Than the Period of Circulation.

The working and circulating periods of capitals I and II cross one another instead of relieving one another. Simultaneously some capital is set free. This was not so in the previously considered case.

But this does not alter the fact that, as before, (1) the number of working periods of the advanced total capital is equal to the sum of the values of the annual products of both advanced portions of capital divided by the advanced total capital, and (2) the amount turned over by the total capital is equal to the sum of the two amounts turned over, divided by the sum of the two advanced capitals. Here, again, we must regard both portions of capital as though they performed movements of turn-over entirely independent of one another.

We assume once more, then, that 100 pounds sterling are advanced weekly in the working process. Let the working period last 6 weeks, requiring every time an advance of 600 pounds sterling (capital I). Let the time of circulation be 3 weeks, so that the period of turn-over is 9 weeks, as before. Let a capital of 300 pounds sterling step in as a substitute during the three weeks of the time of circulation of capital I. Considering both capitals as independent of one another, we find the diagram of the annual turn-over to be as follows:

Table II.
CAPITAL I, 600 POUNDS STERLING.
  Periods of Turn-Over. Working Periods. Advance. Periods of Circulation.
I. 1-9. week 1-6. week 600 p. st. 7.-9. week
II. 10-18. " 10-15. " 600 p. st. 16.-18. "
III. 19-27. " 19-24. " 600 p. st. 25.-27. "
IV. 28-36. " 28-33. " 600 p. st. 34.-36. "
V. 37-45. " 37-42. " 600 p. st. 43.-45. "
VI. 46-(54) " 46-51. " 600 p. st. (52.-54). "
ADDITIONAL CAPITAL II, 300 POUNDS STERLING.
  Periods of Turn-over. Working Periods. Advance. Periods of Circulation.
I. 7-15. week 7-9. week. 300 p. st. 10-15. week.
II. 16-24. " 16-18. " . 300 p. st. 19-24. " .
III. 25-33. " 25-27. " . 300 p. st. 28-33. " .
IV. 34-42. " 34-36. " . 300 p. st. 37-42. " .
V. 43-51. " 42-45. " . 300 p. st. 46-51. " .

The process of production continues uninterruptedly all year on the same scale. The two capitals I and II remain entirely separate. But in order to represent them thus as separate, we had to tear apart their actual interrelations and intersections, and thus also to change the amount of turnover. For according to the above diagram, the amounts turned over would be:

Capital I, 2 2-3 times 600... or 3,400 p. st.
Capital II, 5 times 300... or 1,500 p. st.
Total capital...5 4-9 times 900, or 4,900 p. st.

But this is not correct, for we shall see that the actual periods of production and circulation do not absolutely coincide with the above diagrams, in which it was mainly a question of presenting capitals I and II as independent of one another.

Now, in reality, capital II has no working and circulating periods separate and distinct from capital I. The working period is 6 weeks, the circulation period 3 weeks. Since capital II amounts to only 300 pounds sterling, it can fill out only a part of the working period. This is indeed the case. At the close of the 6th week, a product valued at 600 pounds sterling passes into circulation and flows back in money at the close of the 9th week. Then capital II begins its activity at the opening of the 7th week and responds to the requirements of the next working period for the 7th to 9th week. But according to our assumption, the working period is only half completed at the end of the 9th week. Hence, in the beginning of the 10th week, capital I of 600 pounds sterling, having just returned, comes once more into activity and advances 300 pounds sterling for the requirements of the 10th to 12th week. This completes the second working period. Products valued at 600 pounds sterling are once again in circulation and will return in money at the close of the 15th week. Furthermore, 300 pounds sterling are set free, equal to the original amount of capital II, and are enabled to serve in the first half of the following working period, that is to say, in the 13th to 15th week. After the lapse of these, the 600 pounds sterling flow back; 300 of them suffice for the remainder of the working period, 300 are set free for the following working period.

The course of events is, therefore, as follows:

I. Period of turn-over 1-9. week.

1. Working period: 1-6. week. Capital I, of 600 p. st., performs its function.

1. Period of circulation: 7-9. week. After the lapse of the 9th week, 600 p. st. flow back in money.

II. Period of turn-over: 7-15 week.

2. Working period: 7-12. week.

First half: 7-9. week. Capital II, of 300 p. st., performs its function. After the lapse of the 9th week, 600 p. st. (capital I) flow back in money.

Second half: 10-12. week. 300 p. st. of capital I perform their function. The other 300 p. st. of capital I remain free.

2. Period of circulation: 13-15. week.

After the close of the 15. week, 600 p. st. (one half belonging to capital I, the other to capital II) flow back in money.

III. Period of turn-over: 13-21. week.

3. Working period: 13-18. week.

First half: 13-15. week. The free 300 p. st. perform their function. After the close of the 15th week, 600 p. st. flow back in money.

Second half: 16-18. week, 300 of the returned 600 perform their function, the other 300 again remain free.

3. Period of circulation: 19-21. week. After the close of the 21st week, 600 p. st. flow back in money. In this amount of 600 p. st., capital I and II are amalgamated and indistinguishable.

In this way, there are eight full periods of turn-over of a capital of 600 p. st. (I: 1-9. week; II: 7-15. week; III: 13-21; IV: 19-27.; V: 25-33.; VI: 31-39.; VII: 37 -45.; VIII: 43-51) to the end of the 51st week. But as the 49-51st weeks fall within the eighth period of circulation, the 300 p. st., of free capital must step in and keep production moving. Thus the turn-over at the end of the year is as follows: 600 p. st. have completed their cycle eight times, making 4,800 p. st. In addition thereto we have the product of the last 3 weeks (49-51.), which, however, has completed but one third of its cycle of 9 weeks, so that it counts in the amount turned over only with one third of its value, 100 p. st. If, then, the annual product of 51 weeks is 5,100 p. st., the capital actually turned over is only 4,800 plus 100, or 4,900 p. st. The advanced total capital of 900 p. st. has, therefore, been turned over 5 4-9 times, somewhat more than in the first case.

In the present example, we had assumed a case, in which the working time was 2-3, the circulation time 1-3, of the period of turn-over, so that the working time was a simple multiple of the circulation time. The question is now, whether capital is likewise set free, in the same way as shown before, when this assumption is not made.

Let us assume a working time of 5 weeks, a circulation time of 4 weeks, and a capital advance of 100 p. st. per week.

I. Period of turn-over: 1-9. week.

1. Working period: 1-5. week. Capital I, of 500 p. st., performs its function.

1. Circulation period: 6-9. week. After the close of the 9th week, 500 p. st. flow back in money.

II. Period of turn-over: 6-14. week.

2. Working period: 6-10. week.

First section: 6-9. week. Capital II, of 400 p. st., performs its function. After the close of the 9th week, capital I, of 500 p. st., flows back in money.

Second section: 10. week. 100 of the returned 500 p. st. performs their function. The remaining 400 p. st. are set free for the following working period.

2. Circulation period: 11-14. week.

After the close of the 14. week, 500 p. st. flow back in money.

Up to the end of the 14th week (11-14.), the free 400 p. st. perform their function; 400 of the 500 p. st. then returned fill the requirements of the third working period (11-15. week), so that 400 p. st. are once more set free for the fourth working period. The same phenomenon is repeated in every working period; in its beginning, 400 p. st. are ready at hand, sufficing for the requirements of the first 4 weeks. After the close of the 4th week, 500 p. st. flow back in money, only 100 of which are needed for the last week, while the remaining 400 are set free for the next working period.

Let us furthermore assume a working period of 7 weeks, with a capital I of 700 p. st.; a circulation period of 2 weeks, with a capital II of 200 p. st.

In that case, the first period of turn-over lasts from the 1st to the 9th week; its first working period from the 1st to the 7th week, with an advance of 700 p. st., its first circulation period from the 8th to the 9th week. After the close of the 9th week, 700 p. st. flow back in money.

The second period of turn-over, from the 8th to the 16th week, contains the second working period of the 8th to 14th week. The requirements of the 8th and 9th week of this period are covered by capital II. After the close of the 9th week, the above 700 p. st. flow back. Up to the close of this working period (10-14.), 500 p. st. of this sum are used up. 200 p. st. remain free for the next working period. The second circulation period lasts from the 15th to the 16th week. After the close of the 16th week, 700 p. st. flow back once more. From now on, the same phenomenon is repeated in every working period. The demand in capital of the first two weeks is covered by the 200 p. st. set free at the close of the preceding working period; after the close of the second week, 700 p. st. flow back in money; but the working period lasts only 5 weeks longer, so that only 500 p. st. can be consumed; therefore, 200 p. st. always remain free for the next working period.

We find, then, that in this case, where the working period has been assumed greater than the circulation period, there is under all circumstances a money-capital set free at the close of each working period, and this money-capital is of the same magnitude as capital II, which is advanced for the circulation time. In our three illustrations, capital II was 300 p. st., in the first, 400 p. st., in the second, 200 p. st. in the third example. Corresponding thereto, the capital set free at the close of each working period was 300, 400, and 200 p. st.

III. The Working Period Smaller Than The Circulation Period.

We begin by assuming once more a period of turn-over of 9 weeks. Let the working period be 3 weeks, with an available capital I of 300 p. st. Let the circulation period be 6 weeks. For these 6 weeks, an additional capital of 600 p. st. is required. We may divide this in turn into two portions of 300 p. st. each, so that each portion meets the requirements of one working period. We have, then, three capitals of 300 p. st. each, 300 of which are always busy in production, while 600 are circulating.

Table III.
CAPITAL I.
  Periods of Turn-Over. Working Periods. Periods of Circulation.
I. 1-9. week. 1-3. week. 4-9. week.
II. 10-18. " . 10-12. " . 13-18. " .
III. 19-27. " . 19-21. " . 22-27. " .
IV. 28-36. " . 28-30. " . 31-36. " .
V. 37-45. " . 37-39. " . 40-45. " .
VI. 46-(54.) " . 46-48. " . 49-(54.) " .
CAPITAL II.
  Periods of Turn-Over. Working Periods. Periods of Circulation.
I. 4-12. week. 4-6. week. 7-12. week.
II. 13-21. " . 13-15. " . 12-21. " .
III. 22-30. " . 22-24. " . 16-30. " .
IV. 31-39. " . 31-33. " . 25-39. " .
V. 40-48. " . 40-42. " . 24-48. " .
VI. 49-(57.) " . 49-51. " . (52-57.) " .
CAPITAL III.
I. 7-15. week. 7-9. week. 10-15. week.
II. 16-24. " . 16-18. " . 19-24. " .
III. 25-33. " . 25-27. " . 28-33. " .
IV. 34-42. " . 34-36. " . 37-42. " .
V. 43-51. " . 43-45. " . 46-51. " .

We have, here, the exact opposite of case I, only with the difference that now three capitals relieve one another instead of two. There is no intersection or intermingling of capitals. Each one of them can be traced separately to the end of the year. Capital is no more set free in this instance than in case one, at the close of a working period. Capital I is entirely consumed at the end of the 3rd week, flows back entirely at the end of 9th, and resumes its functions in the beginning of the 10th week. Similarly in the case of capitals II and III. The regular and complete relief excludes any release of capital.

The total turn-over is calculated as follows:

Capital I, 300 times 5 2-3, or 1,700 p. st.
Capital II, 300 times 5 1-2, or 1,600 p. st.
Capital III, 300 times 5    , or 1,500 p. st.
Total capital 900 times 5 1-3, or 4,800 p. st.

Let us now choose also an illustration, in which the circulation period is not an exact multiple of the working period. For instance, let the working period be 4 weeks, the circulation period 5 weeks. The corresponding amounts of capital would then be: Capital I, 400 p. st.; capital II, 400 p. st.; capital III, 100 p. st. We present only the first three turn-overs.

Table IV.
CAPITAL I.
Periods of Turn-Over. Working Periods. Periods of Circulation.
I. 1-9. week. 1-4. week. 5-9. week.
II. 9-17. " . 9. 10-12. " . 13-17. " .
III. 17-25. " . 17. 18-20. " . 21-25. " .
CAPITAL II.
I. 5-13. week. 5-8. week. 9-13. week.
II. 13-21. " . 13. 14-16. " . 17-21. " .
III. 21-29. " . 21. 22-29. " . 25-29. " .
CAPITAL III.
I. 9-17. week. 9. week. 10-17. week.
II. 17-25. " . 17. " . 17-21. " .
III. 25-33. " . 25. " . 26-33. " .

There is in this case an intermingling of capitals to the extent that the working period of capital III, which has no independent working period, because it lasts only for one week, coincides with the first working period of capital I. On the other hand, an amount of 100 p. st., equal to capital III, is set free by capital I and II at the close of the working period. For when capital III fills out the first week of the second, and of all following working periods of capital I, and the entire capital I of 400 p. st. flows back at the close of this first week, then only 3 weeks and a corresponding capital of 300 p. st. remain for the rest of the working period of capital I. The 100 p. st. thus set free suffice for the first week of the immediately following working period of capital II; at the close of this week, the entire capital of 400 p. st. then flows back (capital II). But since the new working period can absorb only 300 p. st. more, there are once more 100 p. st. disengaged at its close. And so forth. There is, then, a setting free of capital at the close of a working period, as soon as the circulation period is not a simple multiple of the working period. And this released capital is equal to that portion of capital which has to fill out the excess of the circulating period over the working period, or over a multiple of working periods.

In all cases investigated by us it was assumed that both the working period and the circulation period remain the same throughout the year in any of the businesses selected. This assumption was necessary, if we wished to ascertain the influence of the time of circulation on the turn-over and advance of capital. It does not alter the matter, that this assumption is not borne out unconditionally in reality, and that it frequently does not apply at all.

In this entire section, we have discussed only the turn-overs of the circulating capital, not those of the fixed. The reason is that this question has nothing to do with the fixed capital. The means of production employed in the process of production form fixed capital only to the extent that their time of employment exceeds the period of turn-over of circulating capital, so long as the time during which these instruments of labor continue to serve in continually repeated labor processes, is greater than the period of turn-over of circulating capital, in other words, comprises n periods of turn-over of circulating capital. Whether the total time represented by these n periods of turn-over of circulating capital, is long or short, that portion of productive capital which was advanced for this time in fixed capital is not advanced anew during its course. It continues its functions in its old use-form. The difference is merely this: According to the different lengths of the individual working periods of each period of turn-over of circulating capital, the fixed capital yields a greater or smaller portion of its original value to the product of this working period, and according to the duration of the time of circulation of each period of turn-over, this value yielded by the fixed capital to the product flows back in money rapidly or slowly. The nature of the topic which we discuss in this section—the turn-over of the circulating portion of productive capital—is determined by the nature of this portion itself. The circulating capital employed in a working period cannot be invested in a new working period, until it has completed its turn-over, until it has been converted into commodity-capital, then into money-capital, and then back into productive capital. In order that the first working period may be immediately followed by a second, additional capital must be advanced and converted into the circulating elements of productive capital, and its quantity must be sufficient to fill out the void left by the circulation of the capital advanced for the first working period. This is the source of the influence exerted by the duration of the working period of the circulating capital over the scale of the process of production and the division of the advanced capital, or eventually the advance of new portions of capital. It is precisely this which we had to examine in this section.

IV. Conclusions

From the preceding analyses, it follows that,

A. The different portions, into which capital must be divided in order that one part of it may be continually in the working period while others are in the period of circulation, relieve one another like different independent private capitals, in two cases: First, when the working period is equal to the period of circulation, so that the period of turn-over is divided into two equal sections; secondly, when the period of circulation is longer than the working period, but at the same time represents a simple multiple of the working period, so that one period of circulation is equal to n working periods, in which case n must be a whole number. In these cases, no portion of the successively advanced capital is set free.

B. On the other hand, in all cases in which, (1) the period of circulation is longer than the working period without being a simple multiple of it, and (2) in which the working period is longer than the circulation period, a portion of the circulating total capital is continually set free periodically at the close of each working period, beginning with the second turn-over. This free capital is equal to that portion of the total capital which has been advanced to fill out the time of circulation, provided the working period is longer than the period of circulation, and equal to that portion of capital which has to fill out the excess of the time of circulation over one working period, or over a multiple of one working period, provided the time of circulation is longer than the working time.

C. It follows that for the aggregate social capital, so far as its circulating capital is concerned, the setting free of capital must be the rule, while the mere relieving of portions of capital following successively in the process of production must be the exception. For the equality of the period of work and circulation, or the equality of the period of circulation with a simple multiple of the working period, in other words, a similar proportion of the two portions of the period of turn-over has nothing to do with the nature of the case, and for this reason it cannot be found in general, but only in rare instances.

A very considerable portion of the social circulating capital, which is turned over several times per year, will therefore exist periodically in the form of released capital during the annual cycle of turn-over.

It is furthermore evident that, all other circumstances being equal, the magnitude of the released capital grows with the volume of the labor-process, or with the scale of production, or with the development of capitalist production in general. In the case cited under B (2), this will be so, because the advanced total capital increases, in B (1), because the length of the period of circulation grows with the development of capitalist production, hence the period of turn-over is lengthened in cases where the working period is extended, without a regular proportion between the two periods.

In the first case, for instance, we had to invest 100 p. st. per week. This required 600 p. st. for a working period of 6 weeks, 300 p. st. for a circulation period of 3 weeks, together 900 p. st. In that case, 300 p. st. are released continually. On the other hand, if 300 p. st. are invested weekly, we have 1,800 p. st. for the working period and 900 p. st. for the circulation period. Hence 900 instead of 300 p. st. are periodically released.

D. The total capital, for instance 900 p. st., must be divided into two portions, for instance, 600 p. st. for the working period and 300 p. st. for the period of circulation. That portion, which is really invested in the labor-process, is thus reduced by one third, or from 900 to 600 p. st. The scale of production is thus reduced by one third. On the other hand, the 300 p. st. perform their function only to make the working period continuous, in order that 100 p. st. may be invested every week of the year in the labor-process.

Abstractly speaking, it is the same, whether 600 p. st. work during 6 times 8, or 48 weeks (product 4,800 p. st.), or whether the total capital of 900 p. st. is expended during 6 weeks in the labor-process and then kept fallow during the period of circulation of 3 weeks. In the latter case, it would be working, in the course of the 48 weeks, 5 1-3 times 6, or 32 weeks (product 5 1-3 times 900, or 4,800 p. st.), and be fallow for 16 weeks. But, apart from the greater decay of the fixed capital during the fallow of 16 weeks, and apart from the appreciation of labor, which must be rapid during the entire year, although it is employed only during a part of it, such a regular interruption of the process of production is irreconcilable with the operations of modern great industry. This continuity is itself a productive power of labor.

Now, if we take a closer look at the released, or rather suspended, capital, we find that a considerable part of it must always be in the form of money-capital. Let us adhere to our illustration: Working period 6 weeks, period of circulation 3 weeks, expenditure per week 100 p. st. In the middle of the second working period, after the close of the 9th week, 600 p. st. flow back, and 300 of them must be invested for the remainder of the working period. After the close of the second working period, 300 p. st. are then released. In what condition are these 300 p. st.? We will assume that 1-3 is invested for wages, 2-3 for raw materials and auxiliary substances. Then 200 of the returned 600 p. st. exist in the form of money for wages, and 400 p. st. in the form of a productive supply, in the form of elements of the constant circulating productive capital. But since only one half of this productive supply is required for the second half of the second working period, the other half is for 3 weeks in the form of a surplus, that is to say, of a productive supply exceeding the requirements of one working period. The capitalist, on the other hand, knows that he needs only one-half (200 p. st.) of this portion (400 p. st.) of the returned capital for the current working period. It will, therefore, depend on market conditions, whether he will immediately reconvert these 200 p. st. entirely or partially into a surplus productive supply, or reserve them entirely or partially in the form of money in the expectation that the conditions of the market will improve. It goes without saying, that the portion of capital to be used for the payment of wages (200 p. st.) is reserved in the form of money. The capitalist cannot store labor-power in warehouses after he has bought it, as he may do with the raw material. He must incorporate it in the process of production and he pays for it at the end of the week. At least these 100 p. st. of the released capital of 300 p. st. will, therefore, have the form of money not required for the working period. The capital released in the form of money-capital must therefore be at least equal to the variable portion of capital invested in wages. At a maximum, it may comprise the entire released capital. In reality it fluctuates continually between this minimum and maximum.

The money-capital released by the mere mechanism of the movement of turn-over (together with the successive reflux of fixed capital and the money-capital required in every labor-process for variable capital) must play an important role, as soon as the credit system develops, and must at the same time be one of its foundations.

Let us assume that the time of circulation in our illustration is contracted from 3 weeks to 2. This is not to be a normal change, but due, say, to prosperous times, shortened terms of payment, etc. The capital of 600 p. st., which is expended during the working period, flows back one week earlier than needed, it is therefore released for this week. Furthermore, in the middle of the working period, as before, 300 p. st. are released (a portion of those 600 p. st.), but in this case for 4 weeks instead of 3. There are then on the money market 600 p. st. for one week, and 300 p. st. for 4 weeks instead of 3. As this concerns not one capitalist alone, but many, and occurs at various periods in different businesses, it brings more available money-capital on the market. If this condition last for a long time, production will be expanded, wherever feasible. Capitalists working with borrowed money will bring less demand to bear on the money-market, whereby it is relieved as much as it is by an increased supply. Or, finally, the sums made superfluous by the mechanism are thrown definitely on the money-market.

In consequence of the contraction of the period of turnover from 3 weeks to 2, and thus of the period of turn-over from 9 weeks to 8, one ninth of the advanced total capital becomes superfluous. The working period of 6 weeks can now be kept going as continuously with 800 p. st. as formerly with 900. One portion of the value of the commodity-capital, equal to 100 p. st., therefore persists in the form of money-capital without performing any more functions as a part of the capital advanced for the process of production. While production is continued on the same scale and with other conditions, such as prices, etc., remaining equal, the value of the advanced capital is reduced from 900 to 800 p. st. The remainder of the originally advanced value, to the amount of 100 p. st., is released in the form of money-capital. As such it passes over into the money-market and forms an additional portion of the capitals serving in that capacity.

This shows the way in which a plethora of money may arise—quite apart from the reason that the supply of money may be greater than the demand for it; this eventuality causes always but a relative plethora, which occurs, for instance, in the "melancholy period" opening a new cycle after a commercial crisis. In our case we speak of a plethora in the sense that a definite portion of the capital advanced for the promotion of the entire process of social reproduction, including the process of circulation, becomes superfluous and is, therefore, released in the form of money-capital. This plethora comes about by the mere contraction of the period of turn-over, while the scale of production and prices remain the same. The amount of money in the circulation, whether great or small, did not exert the least influence on this.

Let us assume, on the other hand, that the period of circulation is prolonged from 3 weeks to 5. In that case, the reflux of the advanced capital takes place 2 weeks too late at the very next turn-over. The last part of the process of production of this working period cannot be carried on, the mechanism of the turn-over of the advanced capital itself interfering. In case of a longer duration of this condition, a contraction of the process of production, a reduction of its volume, might take place, just as an extension did in the previous case. But in order to continue the process on the same scale, the advanced capital would have to be increased by 2-9, or 200 p. st., for the entire duration of the prolongation of the circulation period. This additional capital can be obtained only from the money-market. If, then, the prolongation of the period of circulation applies to one or more great lines of business, it may cause a pressure on the money-market, unless this effect is compensated by some counter-effect from some other direction. In this case likewise it is evident and obvious that such a pressure is not in the least due to a change in the prices of the commodities nor to the quantity of the existing means of circulation.

(The preparation of this chapter for publication has given me no small amount of difficulties. Expert as Marx was in algebra, the handling of figures in arithmetic nevertheless gave him a great deal of trouble and he lacked especially the practice of commercial calculation, although he left behind a ponderous volume of computations in which he had practiced by many examples the entire variety of commercial reckoning. But a knowledge of the various modes of calculation and a practice in the daily practical calculations of the merchant are by no means the same. Consequently Marx entangled himself to such an extent in his computation of turn-overs, that the result, so far as he completed his work, contained various errors and contradictions. In the diagrams given above, I have preserved only the simplest and arithmetically correct data, and my reason for so doing was mainly the following:

The indefinite results of this tedious calculation have led Marx to attribute an undeserved importance to a circumstance, which, in my opinion, has actually little significance. I refer to that which he calls the "release" of money-capital. The actual state of affairs, based on the above premises, is this:

No matter what may be the proportion in the magnitude of the working and circulation periods, or of capital I and II, there is returned to the capitalist, in the form of money, at the end of the first turn-over, in regular intervals of the duration of one working period, the capital required for each working period, a sum equal to capital I.

If the working period is 5 weeks, the circulation period 4 weeks, and capital I 500 p. st., then a sum of money equal to 500 p. st. flows back periodically at the end of the 9th, 14th, 19th, 24th, 29th, etc., week.

If the working period is 6 weeks, the circulation period 3 weeks, and capital I 600 p. st., then 600 p. st. flow back periodically at the end of the 9th, 15th, 21st, 27th, 33rd, etc., week.

Finally, if the working period is 4 weeks, the circulation period 5 weeks, and capital I 400 p. st., then 400 p. st. are periodically returned at the end of the 9th, 13th, 17th, 21st, 25th, etc., week.

Whether any of this returned money is superfluous, and thus released, for the current working period, and how much of it, makes no difference. It is assumed that production continues uninterruptedly on the same scale, and in order that this may be possible, money must be available and must, therefore, flow back, whether "released" or not. If production is interrupted, release stops likewise.

In other words: There is indeed a release of money, a formation of latent, or merely potential, capital in the form of money. But it takes place under all circumstances, and not only under the conditions enumerated especially in the above analysis; and it takes place on a larger scale than that assumed there. So far as circulating capital I is concerned, the industrial capitalist, at the end of each turn-over, is in the same situation as at the establishment of his business: he has all of it in his hands in one bulk, while he can convert it only gradually back into productive capital.

The essential point in the above analysis is the demonstration that, on one hand, a considerable portion of the industrial capital must always be available in the form of money, and, on the other hand, a still more considerable portion must temporarily assume the form of money. This proof is, if anything, still more emphasized by these additional remarks of mine.—F. E.)

V. The Effect of a Change of Prices

We had assumed that prices remained the same and the scale of production remained unaltered, while, on the other hand, the time of circulation was either contracted or expanded. Now let us assume, on the contrary, that the period of turn-over remains the same, likewise the scale of production, while prices change, that is to say, either the prices of the raw materials, auxiliaries, and labor-power rise or fall, or those of the two first-named elements alone. Take it, that the price of raw materials, auxiliaries, and labor-power falls by one half. In that case, the capital to be advanced in our above examples would be 50 instead of 100 p. st. per week, and that for the period of turn-over of 9 weeks, 450 p. st., instead of 900. A sum of 450 p. st. of the advanced capital is released in the form of money-capital, but the process of production continues on the same scale and with the same period of turn-over, and with the same sub-division as before. The quantity of the annual product likewise remains the same, but its value has fallen by one half. This change, which is at the same time accompanied by a change in the demand and supply of money-capital, is due neither to an acceleration of the turn-over, nor to a change in the quantity of money in circulation. On the contrary. A fall in the value, or price, of the elements of productive capital by one half would first have the effect of reducing by one half the capital-value to be advanced for the continuation of the business of X in the same scale, so that only one half of the money would have to be thrown on the market by the business of X, since the business of X advances this capital-value first in the form of money, of money-capital. The amount of money thrown into circulation would have decreased, because the prices of the elements of production had fallen. This would be the first effect.

In the second place, one half of the originally advanced capital of 900 p. st. or 450 p. st., which (a) passed alternately through the forms of money-capital, productive capital, and commodity-capital, and (b) existed simultaneously and continuously side by side partly in the form of money-capital, partly in the form of productive capital, partly in the form of commodity-capital, would be eliminated from the rotation of the business of X, and thus come into the money market as an additional capital, affecting it as such. These released 450 p. st. serve as money-capital, not because they have become superfluous for the operation of the business of X, but because they were a constituent portion of the original capital-value, so that they are intended for further service as capital, not as mere means of circulation. The next form in which they may serve as capital is that of money on the money-market. Or, the scale of production (apart from fixed capital) might be doubled. In that case a productive process of double the previous volume would be carried on with a capital of 900 p. st.

If, on the other hand, the prices of the circulating elements of productive capital were to increase by one half, it would require 150 p. st. per week instead of 100 p. st., or 1,350 instead of 900 p. st. An additional capital of 450 p. st. would be needed to carry on production on the same scale, and this would exert a pressure to that extent, according to the condition of the money-market, on the quotations of money. If all the capital available on this market were then engaged, there would be an increased competition for available capital. If a portion of it were unemployed, it would to that extent be called into action.

But, in the third place, given a certain scale of production, the velocity of the turn-over and the prices for the circulating elements of productive capital remaining the same, the price of the product of the business of X may rise or fall. If the price of the commodities supplied by the business of X falls, the price of his commodity-capital of 600 p. st., which it threw continually into circulation, sinks, for instance, to 500 p. st. In that case, one sixth of the value of the advanced capital does not flow back from the process of circulation, (the surplus-value contained in the commodity-capital is not considered here), and it is lost in circulation. But since the value, or price, of the elements of production remains the same, this reflux of 500 p. st. suffices only to replace 5-6 of the capital of 600 p. st. engaged in the process of production. It requires therefore an addition of 100 p. st. of money-capital to continue production on the same scale.

Vice versa, if the price of the product of the business of X were to rise, then the price of the commodity-capital of 600 p. st. would be increased, say to 700 p. st. One seventh of this price, or 100 p. st., does not come from the process of production, has not been advanced in it, but flows from the process of circulation. But only 600 p. st. are needed to replace the elements of production. Therefore 100 p. st. are set free.

It does not fall within the scope of the present analysis to ascertain why, in the first case, the period of turn-over is abbreviated or prolonged, why, in the second case, the prices of raw materials and auxiliaries, in the third case, those of the products supplied by the business, rise or fall.

But the following points fall under this analysis:

I. CASE.—A CHANGE IN THE PERIOD OF CIRCULATION, AND THUS OF TURN-OVER, WHILE THE SCALE OF PRODUCTION, AND THE PRICES OF THE ELEMENTS OF PRODUCTION AND OF PRODUCTS REMAIN THE SAME.

According to the assumptions of our example, one ninth less of the advanced total capital is needed after the contraction of the period of circulation, so that the total capital is reduced from 900 to 800 p. st. and 100 p. st. of money-capital are released.

The business of X supplies the same as ever a six weeks' product of the same value of 600 p. st., and as work continues without interruption during the entire year, the same quantity of products, valued at 5,100 p. st., is supplied in 51 weeks. There is, then, no change so far as the quantity and price of the product thrown into circulation by this business are concerned, nor in the terms of time in which it throws its product on the market. But 100 p. st. are released, because the requirements of the productive process are satisfied with 800 instead of 900 p. st., after the contraction of the period of circulation. The released 100 p. st. of capital exist in the form of money-capital. But they do not by any means represent that portion of the advanced capital, which would have to serve continually in the form of money-capital. Let us assume that 4-5, or 480 p. st. of the advanced circulating capital are continually invested in material elements of production, and 1-5, or 120 p. st., in labor-power. Then the weekly investment in materials of production would be 80 p. st., and in labor-power 20 p. st. Of course, capital II, of 300 p. st., must also be divided into 4-5, or 240 p. st., for materials of production, and 1-5, or 60 p. st., for wages. The capital invested in wages must always be advanced in the form of money. As soon as the commodity-product to the amount of 600 p. st. has been reconverted into money, 480 p. st. of it may be transformed into materials of production (productive supply), but 120 p. st. retain their money-form, in order to serve in the payment of wages for six weeks. These 120 p. st. are the minimum of the returning capital of 600 p. st., which must always be renewed in the form of money-capital and so replaced, and therefore this minimum must always be kept on hand as that portion of the advanced capital which serves in its money-form.

Now, if 100 p. st. of the capital of 300 p. st. periodically released for three weeks, and likewise divided into 240 p. st. of a productive supply and 60 p. st. of wages, are entirely eliminated in the form of money-capital by the contraction of the circulation time, if they are completely removed from the mechanism of the turn-over, where does the money for these 100 p. st. of money-capital come from? This amount consists only one fifth of money-capital periodically released within the turn-overs. But four fifths, or 80 p. st., are already replaced by an additional productive supply of the same value. In what manner is this additional productive supply converted into money, and whence comes the money for this conversion?

If the contraction of the period of circulation has become a fact, then only 400 p. st. of the above 600, instead of 480, are reconverted into a productive supply. The other 80 p. st. are retained in their money-form and constitute, together with the above 20 p. st. for wages, the 100 p. st. eliminated from the process. Although these 100 p. st. come from the circulation by means of the purchase of the 600 p. st. of commodity-capital and are now withdrawn from it, because they are not re-invested in wages and materials of production, yet it must not be forgotten that, in their money-form, they are once more in that form in which they were originally thrown into circulation. In the beginning 900 p. st. were invested in a productive supply and wages. Now only 800 p. st. are required in order to carry along the same productive process. The 100 p. st. thus withdrawn in money now form a new money-capital seeking investment, a new constituent part of the money-market. True, they were previously periodically in the form of released money-capital and of additional productive capital, but these latent forms were the conditions for the promotion and continuity of the process of production. Now they are no longer needed for this purpose, and for this reason they form a new money-capital and a constituent part of the money-market, although they are neither an additional element of the existing social money-supply (for they existed at the beginning of the business and were thrown by it into the circulation), nor a newly accumulated hoard.

These 100 p. st. are now indeed withdrawn from circulation inasmuch as they are a portion of the advanced money-capital and are no longer employed in the same business. But this withdrawal is possible only because the conversion of the commodity-capital into money, and of this money into productive capital, in the metamorphosis C'—M—C, is accelerated by one week, so that the circulation of the money engaged in this process is likewise hastened. This sum is withdrawn from circulation, because it is no longer needed for the turn-over of the capital of X.

It has been assumed here, that the capital belongs to him who invests it. But if he had borrowed it, nothing would be altered in these conditions. With the contraction of the period of circulation, he would need only 800 p. st. of borrowed money instead of 900. This sum of 100 p. st., if returned to the lender, forms nevertheless 100 p. st. of new money-capital, only in the hands of Y instead of X. If the capitalist X receives his materials of production to the amount of 480 p. st. on credit, so that he has only to advance 120 p. st. for wages out of his own pocket, then he would now have to purchase 80 p. st.'s worth of goods less on credit, so that this sum would constitute an excess of commodity-capital for the capitalist giving it on credit, while the capitalist X would have released 20 p. st. of his money.

The additional supply for production is now reduced by one-third. It consisted of 240 p. st.'s worth of goods, constituting four-fifths of additional capital II of 300 p. st., but now it consists only of 160 p. st.'s worth of goods. It is an additional productive supply for 2 instead of 3 weeks. It is now renewed every 2 weeks, instead of every 3, but only for the next 2 instead of the next 3 weeks. The purchases, for instance, on the cotton market, are repeated more frequently and in smaller portions. The same portion of cotton is withdrawn from the market, for the quantity of the product remains the same. But the withdrawal is distributed differently in time, extending over a longer period. Take it that it is a question of 3 months or 2. If the annual consumption of cotton amounts to 1,200 bales, the sales in the first case will be:

January 1, 300 bales, remaining in storage 900 bales.
April 1, 300 bales, remaining in storage 600 bales.
July 1, 300 bales, remaining in storage 300 bales.
October 1, 300 bales, remaining in storage 0 bales.

But in the second case, the situation would be:

January 1, sold 200, remaining in storage 1,000 bales.
March 1, sold 200, remaining in storage 800 bales.
May 1, sold 200, remaining in storage 600 bales.
July 1, sold 200, remaining in storage 400 bales.
September 1, sold 200, remaining in storage 200 bales.
November 1, sold 200, remaining in storage 0 bales.

In other words, the money invested in cotton flows back completely one month later, in November instead of October. If, therefore, one-ninth of the advanced capital, or 100 p. st., is eliminated in the form of money by the contraction of the period of circulation, and if these 100 p. st. are composed of 20 p. st. of periodically released money-capital for the payment of wages, and of 80 p. st. existing periodically as a released productive supply for one week, then the reduction of the productive supply in the hands of the manufacturer, so far as these 80 p. st. are concerned, corresponds to an increase of the cotton supply in the hands of the cotton dealer. The same cotton retains as much longer in his warehouse the form of a commodity as it stays a shorter time in the hands of the manufacturer under the form of a productive supply.

Hitherto we assumed that the contraction of the time of circulation was due to the fact that X sold his articles more rapidly, received his money for them in a shorter time, or, in the case of credit, that his time of payment was reduced. In that case, the contraction was attributed to the sale of the commodities, to the conversion of commodity-capital into money-capital, C'—M, the first phase of the process of circulation. But it might also be due to the second phase, M—C, and hence to a simultaneous change, either in the working period, or in the time of circulation of the capitals Y, Z, etc., which supply the capitalist X with the elements of production of his circulating capital.

For instance, if cotton, coal, etc., with the old methods of transportation, are three weeks in transit from their place of production or storage to the location of the factory of the capitalist X, then the minimum supply of X up to the arrival of new transports must last for three weeks. So long as cotton and coal are in transit, they cannot serve as means of production. They are then rather an object of labor in the transportation industry and of the capital invested in it, they represent for the producer of coal or the dealer in cotton a commodity-capital in process of circulation. Now let improvements in transportation reduce the transit to two weeks. Then the productive supply can be transformed from a three-weekly into a fortnightly supply. This releases the additional capital of 80 p. st. set aside for the purchase of the weekly supply, and likewise the 20 p. st. for wages, because the turned-over capital of 600 p. st. returns one week earlier.

On the other hand, if the working period of the capital invested in raw materials is contracted (examples of this case were given in the preceding chapter), so that the possibility of renewing the productive supply in a shorter time is given, then the productive supply may be reduced, the interval between the periods of renewal being shortened.

If, vice versa, the time of circulation and thus the period of turn-over are prolonged, then advance of additional capital is necessary. This must come out of the pockets of the capitalist himself, provided he has any additional capital. If he has, it will be invested in some way, in some portion of the money-market. In order to make it available, it must be detached from its old form, for instance, stocks must be sold, deposits withdrawn, so that there is indirectly an effect on the money-market, also in this case. Or, he must borrow it. As for that portion of the additional capital which is to be invested in wages, it must under normal conditions always be advanced in the form of money, and the capitalist X exerts to that extent his share of a direct pressure on the money-market. But so far as that portion is concerned which must be invested in materials of production, money is indispensable only if he must pay for them in cash. If he can get them on credit, this does not exert any direct influence on the money-market, because the additional capital then is directly advanced in the form of a productive supply, not in the first instance in money. But if the lender throws the note received from X directly on the market and discounts it, this would to that extent influence the money-market indirectly.

II. CASE.—A CHANGE IN THE PRICE OF MATERIALS OF PRODUCTION, ALL OTHER CIRCUMSTANCES REMAINING THE SAME.

We just assumed that the total capital of 900 p. st. was four-fifths invested in materials of production (720 p. st.) and one-fifth in wages (180 p. st.).

If the price of the materials of production drops by one-half, then a working period of 6 weeks requires only 240 p. st. instead of 480 for their purchase, and an additional capital of only 120 p. st. instead of 240 p. st. Capital I is then reduced from 600 p. st. to 240 plus 120, or 360 p. st., and capital II from 300 to 120 plus 60, or 180 p. st. The total capital of 900 is therefore reduced to 360 plus 180, or 540 p. st. A sum of 360 p. st. is eliminated.

This eliminated and now unemployed capital, which seeks investment in the money-market, is nothing but a portion of the originally advanced capital of 900 p. st. This portion has become superfluous by the fall in the price of the materials of production, so long as the business is carried along on the same scale and not expanded. If this fall in prices is not due to accidental circumstances, such as a rich harvest, over-supply, etc., but to an increase of productive power in the line which supplies the raw materials, then this money-capital is an absolute addition to the money-market, or in general to the capital available in the form of money-capital, because it no longer constitutes an integral portion of the capital already invested.

III. CASE.—A CHANGE IN THE MARKET PRICE OF THE PRODUCTS THEMSELVES.

In this case, a fall in prices means a loss of a portion of capital, which must be made good by a new advance of additional money-capital. This loss of the seller may be recovered by the buyer. It is recovered by the buyer directly, if the market price of the product has fallen merely through an accidental fluctuation of the market and rises once more to its normal level. It is recovered indirectly, if the change of prices is caused by a change of value reacting on the product, and if this product passes as an element of production into another sphere of production and there releases capital to that extent. In either case, the capital lost by X, for the replacement of which he touches the money-market, may be introduced by his business friends as a new additional capital. Then there is a simple transfer of capital.

If, on the other hand, the price of the product rises, then a portion of the capital which was not advanced is taken away from the circulation. This is not an organic portion of the capital advanced in this process of production and constitutes, therefore, eliminated money-capital, unless production is expanded. As we assumed that the prices of the elements of production were fixed before the product came upon the market, an actual change of value might have caused the rise of prices to the extent that it is retroactive, causing a subsequent rise in the price of raw material. In such an eventuality, the capitalist X would realize a gain on his product circulating as a commodity-capital and on his available productive supply. This gain would give him an additional capital, which would be needed for the continuation of his business with the new and higher prices of the elements of production.

Or, the rise of prices is but temporary. To the extent that additional capital is then needed on the side of the capitalist X, the same amount is released on another side, inasmuch as his product is an element of production for other lines of business. What the one has lost, the other wins.

Part II, Chapter XVI
THE TURN-OVER OF THE VARIABLE CAPITAL.

I. THE ANNUAL RATE OF SURPLUS-VALUE.

We start out with a circulating capital of 2500 p. st., four-fifths of which, or 2000 p. st., are constant capital (materials of production), and one-fifth of which, or 500 p. st., is variable capital invested in wages.

Let the period of turn-over be 5 weeks; the working period 4 weeks, the period of circulation 1 week. Then capital I is 2000 p. st., consisting of 1600 p. st. of constant capital and 400 p. st. of variable capital; capital II is 500 p. st., 400 of which are constant and 100 variable. In every working week, a capital of 500 p. st. is invested. In a year of 50 weeks an annual product of 50 times 500, or 25,000 p. st., is manufactured. The capital I, continuously invested in one working period and amounting to 2000 p. st., is turned over 12½ times. 12½ times 2000 make 25,000 p. st. Of this sum of 25,000 p. st., four-fifths, or 20,000 p. st., are constant capital invested in materials of production, and one-fifth, or 5000 p. st., is variable capital invested in wages. The total capital of 2500 p. st. is turned over 10 times, which is 25,000 divided by 2500.

The variable circulating capital expended in production can serve afresh in the process of circulation only to the extent that the product in which its value is reproduced is sold, converted from a commodity-capital into a money-capital, in order to be once more expended in the payment of labor-power. But the same is true of the constant circulating capital invested in production for materials, the value of which reappears as a portion of the value of the product. That which is common to these two portions of the circulating capital, the variable and constant capital, and which distinguishes them from the fixed capital, is not that the value transferred from them to the product is circulated by the commodity-capital, circulated as a commodity through the circulation of the product. For one portion of the value of the product, and thus of the product circulating as a commodity, the commodity-capital, always consists of the wear of the fixed capital, that is to say, of that portion of the value of the fixed capital which is transferred to the product during the process of production. The difference is rather this: The fixed capital continues to serve in the process of production in its old natural form for a longer or shorter cycle of periods of turn-over of the circulating capital (which consists of constant circulating plus variable circulating capital), while every single turn-over is conditioned on the reproduction of the entire circulating capital passing from the sphere of production in the form of commodity-capital into the sphere of circulation. The constant and variable circulating capital both have in common the first phase of the circulation, C'—M'. But in the second phase they separate. The money, into which the commodity is reconverted, is in part transformed into a productive supply (constant circulating capital). According to the different terms of purchase of this material, a portion may be sooner, another later, converted from money into materials of production, but finally it is wholly consumed that way. Another portion of the money realized by the sale of the commodity is held in the form of a money-supply, in order to be gradually expanded in the payment of labor-power incorporated in the process of production. This portion constitutes the variable circulating capital. Nevertheless the entire reproduction of either portion is due to the turn-over of the capital, to their conversion into a product, from a product into a commodity, from a commodity into money. This is the reason why, in the preceding chapter, the turn-over of the circulating constant and variable capital was discussed separately and simultaneously without any regard to the fixed capital.

For the purposes of the question which we have to discuss now, we must go a step farther and proceed with the variable portion of the circulating capital as though it constituted the circulating capital by itself. In other words, we leave out of consideration the constant circulating capital which is turned over together with it.

A sum of 2500 p. st. has been advanced, and the value of the annual product is 25,000 p. st. But the variable portion of the circulating capital is 500 p. st. The variable capital contained in 25,000 p. st. therefore amounts to 25,000 divided by 5, or 5000 p. st. If we divide these 5000 p. st. by 500, we find that 10 is the number of turn-overs, just as it is in the case of the total capital of 2500 p. st.

Here, where it is only a question of the production of surplus-value, it is quite correct to make this average calculation, according to which the value of the annual product is divided by the value of the advanced capital, not by the value of that portion of this capital which is employed continually in one working period (in the present case not by 400, but by 500, not by capital I, but by capital I plus II). We shall see later, that, from another point of view, this is not quite exact. In other words, this calculation serves well enough for the practical purposes of the capitalist, but it does not express exactly or appropriately all the real circumstances of the turn-over.

We have hitherto ignored one portion of the commodity-capital, namely the surplus-value contained in it, which was produced during the process of production and incorporated in the product. We have now to direct our attention to this.

Take it, that the variable capital of 100 p. st. expended weekly produces a surplus-value of 100%, or 100 p. st., then the variable capital of 500 p. st., advanced for a period of turn-over of 5 weeks, produces 500 p. st. of surplus-value, in other words, one-half of the working day consists of surplus-labor.

If 500 p. st. of variable capital produce a surplus-value of 500 p. st., then 5000 p. st. produce ten times 500, or 5000 p. st. of surplus-value. The proportion of the total quantity of surplus-value produced during one year to the value of the advanced variable capital is what we call the annual rate of surplus-value. In the present case, this is as 5000 to 500, or 1000%. If we analyze this rate more closely, we find that it is equal to the rate of surplus-value produced by the advanced variable capital during one period of turn-over, multiplied by the number of turn-overs of the variable capital (which coincides with the number of turn-overs of the entire circulating capital).

The variable capital advanced in the present case for one period of turn-over is 500 p. st. The surplus-value produced during this period is likewise 500 p. st. The rate of surplus-value for one period of turn-over is, therefore, as 500 s to 500 v, or 100%. This 100%, multiplied by 10, the number of turn-overs in one year, makes 1000%, a rate of 5000 to 500.

This applies to the annual rate of surplus-value. As for the quantity of surplus-value obtained during a certain period of turn-over, it is equal to the value of the variable capital advanced for this period, in the present case 500 p. st., multiplied by the rate of surplus-value, in the present case, therefore, 500 times 100-100, or 500 times 1, or 500 p. st. If the advanced variable capital were 1500 p. st., with the same rate of surplus-value, then the quantity of surplus-value would be 1500 times 100-100, or 1500 p. st.

The variable capital of 500 p. st., which is turned over ten times per year, producing a surplus-value of 5000 p. st., and thus having a rate of surplus-value amounting to 1000%, shall be called capital A.

Now let us assume that another variable capital, B, of 5000 p. st., is advanced for one whole year (that is to say for 50 working weeks), so that it is turned over only once a year. We assume furthermore that, at the end of the year, the product is paid for on the same day that it is finished, so that the money-capital, into which it is converted, flows back on the same day. The circulation time is then zero, the period of turn-over equal to the working period, that is to say, one year. As in the preceding case, so there is now in the labor-process of each week a variable capital of 100 p. st., or of 5000 p. st., in 50 weeks. Let the rate of surplus-value be likewise the same, or 100%, that is to say, one-half of the working day of the same length as before consists of surplus-labor. If we study a period of 5 weeks, then the advanced variable capital is 500 p. st., the rate of surplus-value 100%, the quantity of surplus-value produced in 5 weeks likewise 500 p. st. The quantity of labor-power, which is here exploited, and the intensity of its exploitation, are assumed to be the same as those of capital A.

In each week, the invested variable capital of 100 p. st. produces a surplus-value of 100 p. st., hence in 50 weeks the total invested capital produces a surplus-value of 50 times 100, or 5000 p. st. The quantity of the surplus-value produced per year is the same as in the previous case, 5000 p. st., but the annual rate of surplus-value is entirely different. It is equal to the surplus-value produced in one year, divided by the advanced variable capital, that is to say it is as 5000 s to 5000 v, or 100%, while in the case of capital A it was 1000%.

In the case of both capitals A and B, we have invested a variable capital of 100 p. st. per week. The rate of surplus-value per week, or the intensity of self-expansion, is likewise the same, 100%, so is the magnitude of the variable capital the same, 100 p. st. The same quantity of labor-power is exploited, the volume and intensity of exploitation are equal in both cases, the working days are the same and subdivided in the same way in necessary labor and surplus-labor. The quantity of variable capital employed in the course of the year is 5000 p. st. in either case, sets the same amount of labor in motion, and extracts the same amount of surplus-value from the labor power set in motion by these two equal capitals, namely 5000 p. st. Nevertheless, there is a difference of 900% in the annual rate of surplus-value of the two capitals A and B.

This phenomenon makes indeed the impression as though the rate of surplus-value were not only dependent on the quantity and intensity of exploitation of the labor-power set in motion by the variable capital, but also on inexplicable influences arising from the process of circulation. It has actually been so interpreted, and has completely routed the Ricardian school since the beginning of the twenties of the 19th century, at least in its more complicated and disguised form, that of the annual rate of profit, if not in the simple and natural form indicated above.

The strangeness of this phenomenon disappears at once, when we place capital A and B in exactly the same conditions, not seemingly, but actually. These equal circumstances are present only when the variable capital B is expended in the payment of labor-power in its entire volume and in the same period of time as capital A.

In that case, the 5000 p. st. of capital B are invested for 5 weeks. 1000 p. st. per week makes an investment of 50,000 p. st. per year. The surplus-value is then likewise 50,000 p. st., according to our assumption. The turned-over capital of 50,000 p. st., divided by the advanced capital of 5000 p. st., makes the number of turn-overs 10. The rate of surplus-value, 5000 to 5000, or 100%, multiplied by the number of turn-overs, 10, makes the annual rate of surplus-value as 50,000 to 5000, or 10 to 1, or 1000%. Now the annual rates of surplus-value for A and B are alike, namely 1000%, but the quantities of surplus-value are 50,000 p. st. in the case of B, and 5000 p. st. in the case of A. The quantities of the produced surplus-values now are proportioned to one another as the advanced capital-values of B and A, to-wit: as 50,000 to 5000, or 10 to 1. But at the same time, capital B has set in motion ten times as much labor-power as capital A has in the same time.

It is only the capital actually invested in the working process which produces any surplus-value and for which all laws relating to surplus-value are in force including for instance the law according to which the quantity of surplus-value is determined by the relative magnitude of the variable capital if the rate of surplus-value is given.

The labor-process itself is determined by the time. If the length of the working period is given (as it is here, where we assume all circumstances relating to A and B to be equal, in order to elucidate the difference in the annual rate of surplus-value), the working week consists of a certain number of working days. Or, we may consider any working period, for instance this working period of 5 weeks, as one single working day of 300 hours, if the working day has 10 hours and the working week 6 days. We must further multiply this number with the number of laborers who are employed every day simultaneously in the same labor-process. If there were 10 laborers, there would be 60 times 10, or 600 working hours in one week, and a working period of 5 weeks would have 600 times 5, or 3000 working hours. Variable capitals of equal magnitude are, therefore, employed, the rate of surplus-value and the working days being the same if equal quantities of labor-power are set in motion in the same time (a labor-power of the same price multiplied with the same number).

Let us now return to our original illustrations. In both cases, A and B, equal variable capitals, of 100 p. st. per week, are invested every week during the year. The invested variable capitals actually serving in the labor-process are, therefore, equal, but the advanced variable capitals are very unequal. For A, 500 p. st. are advanced for every 5 weeks, and 100 p. st. of this are consumed every week. In the case of B, 5000 p. st. must be advanced for first period of 5 weeks, but only 100 p. st. per week, or 500 in 5 weeks, or one-tenth of the advanced capital is employed. In the second period of 5 weeks, 4500 p. st. must be advanced, but only 500 of this is employed, etc. The variable capital advanced for a certain period of time is converted into employed, actually serving and active, variable capital only to the extent that it actually steps into the period of time taken up by the labor-process, to the extent that it actually takes part in it In the intermediate time in which a certain portion of this capital is advanced, with a view to being employed at a later time, this portion is practically non-existing for the labor-process and has, therefore, no influence on the formation of either value or surplus-value. Take, for instance, capital A, of 500 p. st. It is advanced for 5 weeks, but only 100 p. st. enter successively week after week into the labor process. In the first week, one-fifth of this capital is employed; four-fifths are advanced without being employed, although they must be available, and therefore advanced, for the labor-processes of the following 4 weeks.

The circumstances which differentiate the relations of the advanced to the employed capital, influence the production of surplus-value—the rate of surplus-value being given—only to the extent that they differentiate the quantity of variable capital which can be actually employed in a certain period of time, for instance in one week, 5 weeks, etc. The advanced variable capital serves as variable capital only for the time that it is actually employed, not for the time in which it is held available without being employed. But all the circumstances which differentiate the relations between the advanced and the employed variable capital, are comprised in the difference of the periods of turn-over (determined by the difference in the working period, the circulation period or both). The law of the production of surplus-value decrees that equal quantities of employed variable capital produce equal quantities of surplus-value, if the rate of surplus-value is the same. If, then, equal quantities of variable capitals are employed by the capitals A and B in equal periods of time with an equal rate of surplus-value, they must produce equal quantities of surplus-value in equal periods of time, no matter what may be the proportion of this variable capital, employed during definite periods of time to the variable capital advanced for the same time and no matter, therefore, what may be the proportion of the quantities of surplus-value produced, not to the employed, but to the total advanced variable capital in general. The difference of this proportion, so far from contradicting the laws of the production of surplus-value demonstrated by us, rather corroborates them and is one of their inevitable consequences.

Let us consider the first productive section of 5 weeks of capital B. At the end of the fifth week, 500 p. st. have been employed and consumed. The value of the product is 100 p. st., hence the rate as 500 s to 500 v or 1100%, the same as in the case of capital A. The fact that, in the case of capital A, the surplus-value is realized together with the advanced capital, while in the case of B it is not, does not concern us here, where it is merely a question of the production of surplus-value and of its proportion to the variable capital advanced during its production. But if we calculate the proportion of surplus-value in B, not as compared to that portion of the advanced capital of 5000 p. st. which has been employed and consumed in its production, but to this total advanced capital itself, we find that it is as 500 s to 5000 v, or as 1 to 10, or 10%. In other words, it is 10% for capital B and 100% for capital A, ten times more. If any one were to say that this difference in the rate of surplus-value for equal capitals, setting in motion equal quantities of labor which is equally divided into paid and unpaid labor, is contrary to the laws of the production of surplus-value, then the answer would be simple and prompted by the mere inspection of the actual conditions: In the case of A, the actual rate of surplus-value is expressed, that is to say, the proportion of a surplus-value of 500 p. st., to a variable capital of 500 p. st., which produced it in 5 weeks. In the case of B, on the other hand, we are dealing with a calculation which has nothing to do either with the production of surplus-value, or with the determination of its corresponding rate of surplus-value. For the 500 p. st., of surplus-value produced by a variable capital of 500 p. st. are not calculated with reference to the 500 p. st. of variable capital advanced in their production, but with reference to a capital of 5000 p. st., nine-tenths of which, or 4500 p. st., have nothing whatever to do with the production of this surplus-value of 500 p. st., but are rather intended for gradual service in the following 45 weeks, so that they do not exist at all so far as the production of the first 5 weeks is concerned, which is alone significant in this instance. Under these circumstances, the difference in the rate of surplus-value of A and B is no problem at all.

Let us now compare the annual rates of surplus-value for capitals A and B. For B it is as 5000 s to 5000 v, or 100%; for A it is as 5000 s to 500 v, or 1000%. But the proportion of the rates of surplus-value toward one another is the same as before. There we had

(Rate of Surplus-Value of Capital B)/(Rate of Surplus-Value of Capital A) = 10%/100%.

Now we have

(Annual Rate of Surplus-Value of Capital B)/(Annual Rate of Surplus-Value of Capital A) = 100%/1000%

But 10% is to 100% as 100% is to 1000%, so that the ratio is the same.

But now the problem is reversed. The annual rate of capital B is as 5000 s to 5000 v, or 100%, offering not the slightest deviation, nor even the semblance of a deviation, from the laws of production known to us and the rate of surplus-value corresponding to this production. 5000 v have been advanced and consumed productively during the year, and they have produced 5000 s. The rate of surplus-value is, therefore the same as shown in the above proportion, 5000 s to 5000 v, or 100%. The annual rate agrees with the actual rate of surplus-value. In this case, it is not capital B, but capital A, which presents an anomaly that is to be explained.

In the case of A, we have the rate of surplus-value as 5000 s to 500 v, or 1000%. But while in the case of B, a surplus-value of 500 p. st., the product of 5 weeks, was calculated with reference to an advanced capital of 5000 p. st., nine-tenths of which were not employed in its production, we have now a surplus-value of 5000 s calculated on a variable capital of 500 v, that is to say, on only one-tenth of the variable capital of 5000 p. st. actually employed in the production of 5000 s. For the 5000 s are the product of a variable capital of 5000 v, productively consumed during 50 weeks, not that of a capital of 500 p. st. productively consumed in one working period of 5 weeks. In the former case, the surplus-value produced in 5 weeks had been calculated for a capital advanced for 50 weeks, a capital ten times larger than the one consumed during the 5 weeks. In the present case, the surplus-value produced in 50 weeks is calculated for a capital advanced for only 5 weeks, a capital ten times smaller than the one consumed in 50 weeks.

Capital A, of 500 p. st., is never advanced for more than 5 weeks. At the end of this time it has flown back and may repeat the same process in the course of the year ten times, by ten turn-overs. Two conclusions follow from this:

First. The Capital advanced in the case of A is only five times larger than that portion of capital which is continually employed in the productive process of one week. Capital B, on the other hand, which is turned over only once in 50 weeks, is fifty times larger than that one of its portions which can be used only in continuous successions of one week. The turn-over, therefore, modifies the relations of the capital advanced during the year for the process of production to the capital employed continuously for a certain period of production, say, for one week. And this is illustrated by the first case, in which the surplus-value of 5 weeks is not calculated for the capital employed during these 5 weeks, but for a capital ten times larger and employed for 50 weeks.

Second. The period of turn-over of 5 weeks of capital A comprises only one-tenth of the year, so that one year contains ten such periods of turn-over, in which capital A of 500 p. st. is successively reinvested. The employed capital is here equal to the capital advanced for 5 weeks, multiplied by the number of periods of turn-over per year. The capital employed during the year is 500 times 10, or 5000 p. st. The capital advanced during the year is 5000 divided by 10, or 500 p. st. Indeed, although the 500 p. st. are always re-employed, the sum advanced for 5 weeks never exceeds these same 500 p. st. On the other hand, in the case of capital B, it is true that only 500 p. st. are employed for 5 weeks and advanced for these 5 weeks. But as the period of turn-over is in this case 50 weeks, the capital employed in one year is equal to the capital advanced for 50 weeks, not to that advanced for every 5 weeks. But the annual quantity of surplus-value depends, given the rate of surplus-value, on the capital employed during the year, not on the capital advanced for the year. Hence it is not larger for this capital of 5000 p. st., which is turned over once a year, than it is for the capital of 500 p. st., which is turned over ten times per year. And it has this size only because the capital turned over once a year is ten times larger than the capital turned over ten times per year.

The variable capital turned over during one year—and hence that portion of the annual product, or of the annual expenditure, which is equal to that portion—is the variable capital employed and productively consumed during the year. It follows that, assuming the variable capital A turned over annually and the variable capital B turned over annually to be equal, and to be employed under equal conditions of investment, so that the rate of surplus-value is the same for both of them, the quantity of surplus-value produced annually must likewise be the same for both of them. Hence the annual rate of surplus-value must also be the same for them so far as it is expressed by the formula

(Quantity of Surplus-Value Produced Annually)/(Variable Capital Turned-Over Annually.)

Or, generally speaking: Whatever may be the relative magnitude of the turned over variable capitals, the rate of the surplus-value produced by them in the course of the year is determined by the rate of surplus-value at which the respective capitals have been employed in average periods (for instance the average of a week or a day).

This is the only result following from the laws of the production of surplus-value and the determination of the rate of surplus-value.

Let us now consider what is expressed by the ratio of the

(Capital Turned-Over Annually)/(Capital Advanced)

taking into account, as we have said before, only the variable capital. The division shows the number of turn-overs made by the capital advanced in one year.

In the case of capital A, we have:

(5000 p. st. of Capital Turned-Over Annually)/(500 p. st. of Capital Advanced)

In the case of capital B, we have:

(5000 p. st. of Capital Turned Over Annually)/(5000 p. st. of Capital Advanced)

In both ratios, the numerator expresses the capital advanced multiplied by the number of turn-overs, in the case of A, 500 times 10, in the case of B 5000 times 1. Or, it may be multiplied by the inverted time of turn-over calculated for one year. The time of turn-over for A is 1-10 year; the inverted time of turn-over is 10-1 year, hence we have 500 times 10-1, or 5000. In the case of B, 5000 times 1-1. The denominator expresses the turned over capital multiplied by the inverted number of turn-overs; in the case of A, 5000 times 1-10, in the case of B, 5000 times 1-1.

The respective quantities of labor (the sum of the paid and unpaid labor), which is set in motion by the two variable capitals turned over annually, are equal in this case, because the turned-over capitals themselves are equal and their rate of self-expansion is likewise equal.

The ratio of the variable capital turned over annually to the variable capital advanced indicates (1) the ratio of the capital intended for investment to the variable capital employed during a definite working period. If the number of turn-overs is 10, as in the case of A, and the year is assumed to have 50 working weeks, then the period of turn-over is 5 weeks. For these 5 weeks, variable capital must be advanced, and the capital advanced for 5 weeks must be 5 times as large as the variable capital employed during one week. That is to say, only one-fifth of the advanced capital (in this case of 500 p. st.) can be employed in the course of one week. On the other hand, in the case of capital B, where the number of turn-overs is 1-1, the time of turn-over is 1 year of 50 weeks. The ratio of the advanced capital to the capital employed weekly is, therefore, as 50 to 1. If matters were the same for B as they are for A, then B would have to invest 1000 p. st. per week instead of 100. (2). It follows, that B has employed ten times as much capital (5000 p. st.) as A, in order to set in motion the same quantity of variable capital and, the rate of surplus-value being the same, of labor (paid and unpaid), and thus to produce the same quantity of surplus-value during one year. The current rate of surplus-value expresses nothing but the ratio of the variable capital employed during a certain period to the surplus-value produced in the same time; or, the quantity of unpaid labor set in motion by the variable capital employed during this time. It has absolutely nothing to do with that portion of the variable capital which is advanced for a time in which it is not employed. Hence it has nothing to do, in the case of different capitals, with the ratio, determined and differentiated by the period of turn-over, of that portion of capital which is advanced for a definite time and that portion which is employed in the same time.

The essential result of the preceding analysis is that the annual rate of surplus-value coincides only in one single case with the current rate of surplus-value which expresses the intensity of exploitation, namely in the case that the advanced capital is turned over only once a year, so that the capital advanced is equal to the capital turned over in the course of the year, so that the ratio of the quantity of surplus-value produced during the year to the capital employed during the year in this production coincides with and is identical with the ratio of the quantity of surplus-value produced during the year to the capital advanced during the year.

(A) The annual rate of surplus-value is equal to
(the Quantity of Surplus-Value Produced during the Year)/(Variable Capital Advanced)

But the quantity of the surplus-value produced during the year is equal to the current rate of surplus-value multiplied by the variable capital employed in its production. The capital employed in the production of the annual quantity of surplus-value is equal to the advanced capital multiplied by the number of its turn-overs, which we shall call n in the present case. Substituting these terms in formula (A) we obtain:

(B) The annual rate of surplus-value is equal to the
(Cur. Rate of Surpl.Val. mltpl.b. the Var.Cap. Adv. mltpl. b n)/(Var. Cap. Adv.)

For instance, in the case of capital B, we should have

(100 times 5000 times 1)/5000, or 100%.

Only when n is equal to 1, that is to say when the variable capital advanced is turned over once a year, so that it is equal to the capital employed or turned over, the annual rate of surplus-value is equal to the current rate of surplus-value.

Let us call the annual rate of surplus-value S', the current rate of surplus-value s', the advanced variable capital v, the number of turn-overs n. Then

S' is equal to s'vn/v, or s'n.

In other words, S' is equal to s'n, and it is equal to s' only when n is 1, so that then S' is s' times 1, or s'.

It follows furthermore that the annual rate of surplus-value is always equal to s'n, that is to say, always equal to the current rate of surplus-value produced in one period of turn-over by the variable capital consumed during that period multiplied by the number of turn-overs of this variable capital during one year, or, what amounts to the same, multiplied with its inverted time of turn-over calculated for one year. (If the variable capital is turned over ten times per year, then its time of turn-over is 1-10 year, its inverted time of turn-over therefore 10-1 year, or 10 years.)

We have seen that S' is equal to s', when n is 1. S' is greater than s', when n is greater than 1, that is to say, when the advanced capital is turned over more than once a year, or the turned-over capital is greater than the capital advanced.

Finally, S' is smaller than s', when n is smaller than 1, that is to say, when the capital turned over during one year is only a part of the advanced capital, so that the period of turn-over is longer than one year.

Let us linger a moment over this last case.

We retain all the premises of our former illustration, only the period of turn-over is to be 55 weeks instead of 50 weeks. The labor-process requires a variable capital of 100 p. st. per week, so that 5500 p. st. are needed for the period of turn-over, and every week 100 s is produced, s' is, therefore, smaller than 100%. Indeed, if the annual rate turn-overs, n, is then 50/55 or 10/11, because the time of turn-over is 1 plus 1-10 year (of 50 weeks), or 11-10 year.

S' is equal to

(100% times 5500 times 10-11)/5500

equal to 100 times 10-11, or 1000-11, or 90 10-11%. It is, therefore, smaller than 100%. Indeed, if the annual rate of surplus-value were 100%, then 5500 v would have to produce 5500 s, while 11-10 years are required for that. The 5500 v produce only 5000 s during one year, therefore the annual rate of surplus-value is (5000 s)/(5500 v), or 10-11, or 90 10-11%.

The annual rate of surplus-value, or the comparison between the surplus-value produced during one year and the variable capital advanced (as distinguished from the variable capital turned over during one year), is therefore not merely a subjective matter, but the actual movement of capital causes this juxtaposition. So far as the owner of capital A is concerned, his advanced variable capital of 500 has returned to him at the end of the year, and it has produced 5000 p. st. of surplus-value in addition. It is not the quantity of capital employed by him during the year, but the quantity returning to him periodically, that expresses the magnitude of his advanced capital. It is immaterial for the present question, whether the capital exists at the end of the year partly in the form of a productive supply, or partly in that of money or commodity-capital, and what may be the proportions of these different parts. On the other hand, so far as the owner of capital B is concerned, his advanced capital of 5000 p. st. has returned to him, with an additional surplus-value of 5000 p. st. And as for the owner of capital C (the last mentioned 5500 p. st.), surplus-value to the amount of 5000 p. st. has been produced for him (advanced 5000 p. st., rate of surplus-value 100%), but his advanced capital has not yet returned to him nor has he pocketed his surplus-value.

The formula S' equal to s'n indicates that the rate of surplus-value in force for the employed variable capital, to wit,

(Quantity of S.-V. produced in one Period of T.-O.)/(Var. Cap employed in one Period of T.-O.)

must be multiplied with the number of periods of turn-over, or of the periods of reproduction of the advanced variable capital, that number of periods in which it renews its cycle.

We have seen already in volume I, chapter IV (The Transformation of Money into Capital), and furthermore in volume I, chapter XXIII (Simple Reproduction), that the capital value is not all spent, but advanced, as this value, having passed through the various phases of its cycle, returns to its point of departure, enriched by surplus-value. This fact shows that it has been merely advanced. The time consumed from the moment of its departure to the moment of its return is the one for which it was advanced. The entire rotation of capital-value, measured by the time from its advance to its return, constitutes its turn-over, and the duration of this turn-over is a period of turn-over. When this period has elapsed and the cycle is completed, the same capital-value can renew the same rotation, can expand itself some more, create some more surplus-value. If the variable capital is turned over ten times in one year, as in the case of capital A, then the same advance of capital creates in the course of one year, ten times the quantity of surplus-value created in one period of turn-over.

One must come to a clear conception of the nature of this advance from the standpoint of capitalist society.

Capital A, which is turned over ten times in one year, is advanced ten times during one year. It is advanced anew for every new period of turn-over. But at the same time, A never advances more than this same capital-value of 500 p. st., and disposes never of more than these 500 p. st. for the productive process considered by us. As soon as these 500 p. st. have completed one cycle, A starts them once more on the same cycle. In short, capital by its very nature preserves its character as capital only by means of continued service in successive processes of production. In the present case, it was never advanced for more than 5 weeks. If the turn-over lasts longer, this capital is inadequate. If the turn-over is contracted, a portion of this capital is released. Not ten capitals of 500 p. st. are advanced, but one capital of 500 p. st. is advanced ten times in successive intervals. The annual rate of surplus-value is, therefore, not calculated on ten advances of a capital of 500 p. st., not on 5000 p. st., but on one advance of a capital of 500 p. st. It is the same in the case of one dollar which circulates ten times and yet represents never more than one single dollar in circulation, although it performs the function of 10 dollars. But in the hand, which holds it after each change of hands, it remains the same value of one dollar as before.

Just so the capital A indicates at each successive return, and likewise at its return at the end of the year that its owner has operated always with the same capital-value of 500 p. st. Hence only 500 p. st. flow back into his hand at each turn-over. His advanced capital is never more than 500 p. st. Hence the advanced capital represents the denominator of the fraction which expresses the annual rate of surplus-value. We had for it the formula

S' equal to s'vn/v, or s'n.

As the current rate of surplus-value, s', is equal to s/v, equal to the quantity of surplus-value divided by the variable capital which produced it, we may substitute the value of s' in s'n, that is to say s/v, in our formula, thus making it

S' equal to sn/v.

But by its tenfold turn-over, and thus the tenfold renewal of its advance, the capital of 500 p. st. performs the function of a ten times larger capital, of a capital of 5000 p. st., just as 500 dollar coins, which circulate ten times per year, perform the same function as 1000 dollar coins which circulate once a year.

II. THE TURN-OVER OF THE INDIVIDUAL VARIABLE CAPITAL.

"Whatever the form of the process of production in a society, it must be a continuous process, must continue to go periodically through the same phases...When viewed, therefore, as a connected whole, and as flowing on with incessant renewal, every social process of production is, at the same time, a process of reproduction...As a periodic increment of the capital advanced, or periodic fruit of capital in process, surplus-value acquires the form of a revenue flowing out of capital." (Volume I, chapter XXIII, pages 619, 620.)

In the case of capital A, we have 10 periods of turn-over of 5 weeks each. In the first period of turn-over, 500 p. st. of variable capital are advanced, that is to say, 100 p. st. are converted into labor-power every week, so that 500 p. st., have been converted into labor power at the end of the first period of turn-over. These 500 p. st., originally a part of the total capital advanced, have then ceased to be capital. They are paid out in wages. The laborers in their turn pay them out in the purchase of means of subsistence, consuming subsistence to the amount of 500 p. st. A quantity of commodities of that value is therefore annihilated (what the laborer may save up in money, etc., is not capital). This quantity of commodities has been consumed unproductively from the standpoint of the laborer, except in so far as it preserves his labor-power, an indispensable instrument of the capitalist. In the second place, these 500 p. st. have been converted, from the standpoint of the capitalist, into labor-power of the same value (or price). Labor-power is consumed by him productively in the labor-process. At the end of 5 weeks, a product valued at 1,000 p. st. has been created. Half of this, or 500 p. st., is the reproduced value of the variable capital paid out for wages. The other half, or 500 p. st., is newly produced surplus-value. But 5 weeks of labor-power, by the consumption of which a portion of a capital was transformed into variable capital, is likewise expended, consumed, although productively. The labor which was active yesterday is not the one which is active today. Its value, together with that of the surplus-value created by it, exists now as the value of a thing separate from labor-power, to wit, a product. But by converting the product into money, that portion of it, which is equal to the value of the variable capital advanced, may once more be transformed into labor-power and thus perform again the functions of variable capital. It is immaterial that the same laborers, that is to say, the same bearers of the labor-power may be employed not only with the reproduced, but also with the reconverted capital-value in the form of money. It might be possible that the capitalist might hire different laborers for the second period of turn-over.

It is, therefore, a fact that a capital of 5,000, and not of 500 p. st., is paid out for labor-power in the ten periods of turn-over of 5 weeks each. The capital of 5,000 p. st. so advanced is consumed. It does not exist any more. On the other hand, labor-power to the value of 5,000, not of 500, p. st. is incorporated successively in the productive process and reproduces not only its own value of 5,000 p. st., but also a surplus value of 5,000 p. st. over and above its value. The variable capital of 500 p. st., which is advanced for the second period of turn-over, is not the identical capital of 500 p. st., which had been advanced for the first period of turn-over. This has been consumed, expended in labor-power. But it is replaced by new variable capital of 500 p. st., which was produced in the first period of turn-over in the form of commodities and reconverted into money. This new money-capital is, therefore, the money-form of the quantity of commodities newly produced in the first period of turn-over. The fact that an identical sum of 500 p. st. is again in the hands of the capitalist, apart from the surplus-value, a sum equal to the one which he had originally advanced, disguises the circumstance that he now operates with a newly produced capital. (As for the other constituents of value of the commodity-capital, which replace the constant parts of capital, their value is not newly produced, but only the form is changed in which this value exists.) Let us take the third period of turn-over. Here it is evident that the capital of 500 p. st., advanced for a third time, is not an old, but a newly produced capital, for it is the money-form of the quantity of commodities produced in the second, not in the first, period of turn-over that is to say, of that portion of this quantity of commodities, whose value is equal to that of the advanced variable capital. The quantity of commodities produced in the first period of turn-over is sold. Its value, to the extent that it was equal to the variable portion of the value of the advanced capital, was transformed into the new labor-power of the second period of turn-over and produced a new quantity of commodities, which were sold in their turn and a portion of whose value constitutes the capital of 500 p. st. advanced for the third period of turn-over.

And so forth during the ten periods of turn-over. In the course of these, newly produced quantities of commodities are thrown upon the market every 5 weeks, in order to incorporate ever new labor-power in the progress of production. (The value of these commodities, to the extent that it replaces variable capital, is likewise newly produced, and does not merely appear so, as in the case of the constant circulating capital.)

That which is accomplished by the tenfold turn-over of the advanced variable capital of 500 p. st., is not that this capital can be productively consumed ten times, nor that a capital lasting for 5 weeks can be employed for 50 weeks. Ten times 500 p. st. of variable capital are rather employed in those 50 weeks, and the capital of 500 p. st. lasts only for 5 weeks at a time and must be replaced at the end of the 5 weeks by a newly produced capital of 500 p. st. This applies equally to capital A and B. But at this point, the difference begins.

At the end of the first period of 5 weeks, a variable capital of 500 p. st. has been advanced and expended by both capitalists A and B. Both B and A have transformed its value into labor-power and replaced it by that portion of the value of the new product created by this labor-power which is equal to the value of the advanced variable capital of 500 p. st. And for both B and A, the labor-power has not only reproduced the value of the expended variable capital of 500 p. st. by a new value of the same amount, but also added a surplus-value, which, according to our assumption, is of the same magnitude.

But in the case of B, the product which replaces the advanced variable capital and adds a surplus-value to it, is not in the form in which it can serve once more as a productive, or a variable, capital. On the other hand, it is in such a form in the case of A. B, however, does not possess the variable capital consumed in the first 5 and every subsequent 5 weeks up to the end of the year, although it has been reproduced by newly created value with a superadded surplus-value, in the form in which it may once more perform the function of productive, or variable, capital. Its value is indeed replaced, or reproduced, by new value, but the form of its value (in this case the absolute form of value, its money-form) is not reproduced.

For the second period of 5 weeks (and so forth for every succeeding 5 weeks of the year), 500 p. st. must again be available, the same as for the first period. Making exception of the conditions of credit, 5,000 p. st. must, therefore, be available at the beginning of the year as a latent advanced capital, although they are expended only gradually for labor-power in the course of the year.

But in the case of A, the cycle, the turn-over of the advanced capital, being completed, the reproduced value is after the lapse of 5 weeks in the precise form in which it may set new labor-power in motion for another term of 5 weeks, in its original money-form.

Both A and B consume new labor-power in the second period of 5 weeks and expend a new capital of 500 p. st. for the payment of this labor-power. The means of subsistence of the laborer paid with the first 500 p. st. are gone, their value has in every case disappeared from the hands of the capitalist. With the second 500 p. st., new labor-power is bought, new means of subsistence withdrawn from the market. In short, it is a new capital of 500 p. st. which is expended, not the old. But in the case of A, this new capital of 500 p. st. is the money-form of the newly produced substitute for the value of the formerly expended 500 p. st.; while in the case of B, this substitute is in a form, in which it cannot serve as variable capital. It is there but not in the form of variable capital. For the continuation of the process of production for the next 5 weeks, an additional capital of 500 p. st. must, therefore, be available in the form of money, which is indispensable in this case, and must be advanced. Thus both A and B expend an equal amount of variable capital, pay for and consume an equal quantity of labor-power, during 50 weeks. Only, B must pay for it with an advanced capital equal to its total value of 5,000 p. st., while A pays for it successively by the ever renewed money-form of the substitute produced in every 5 weeks for the capital of 500 p. st. advanced for every 5 weeks. In no case more capital is advanced by A than is required for 5 weeks, that is to say, 500 p. st. These 500 p. st. last for the entire year. It is, therefore, evident that, the intensity of exploitation and the current rate of surplus-value being the same for the two capitals, the annual rates of A and B must hold an inverse ratio to one another than the magnitudes of the variable money-capitals, which had to be advanced in order to set in motion the same quantity of labor-power during the year. The rate of A is as 5,000 s to 500 v, or 1,000%; that of B is as 5,000 s to 5,000 v, or 100%. But 500 v is to 5,000 v as 1 to 10, or as 100% to 1,000%.

The difference is due to the difference of the periods of turnover, that is to say, to the period in which the substitute for the value of a certain variable capital employed for a certain time can renew its function of capital, can serve as a new capital. In the case of both B and A, the same reproduction of value of the variable capital employed during the same periods take place. There is also the same increment of surplus-value during the same periods. But in the case of B, while there is every 5 weeks a reproduction of the value of 500 p. st. and a surplus-value of 500 p. st., these values do not yet make a new capital, because they are not in the form of money. In the case of A, on the other hand, the value of the old capital is not only reproduced by a new value, but it is rehabilitated in its money-form, so that it may at once assume the functions of a new capital.

So far as the mere production of surplus-value is concerned, the rapid or slow transformation of the substitute for the value advanced into money, and thus into the form in which the variable capital is advanced, is an insignificant circumstance. This production depends on the magnitude of the employed variable capital and the intensity of exploitation. But the more or less rapid transformation referred to does modify the magnitude of the money-capital which must be advanced in order to set a definite quantity of labor-power in motion during the year, and therefore it determines the annual rate of surplus-value.

III. THE TURN-OVER OF THE VARIABLE CAPITAL, CONSIDERED FROM THE POINT OF VIEW OF SOCIETY.

Let us look for a moment at this matter from the point of view of society. Let the wages of one laborer be 1 p. st. per week, the working day 10 hours. Both A and B employ 100 laborers per week (100 p. st. for 100 laborers per week, or 500 p. st. for 5 weeks, or 5,000 p. st. for 50 weeks), and each one of them works 60 hours per week of 6 days. Then 100 laborers work 6,000 hours per week, and 300,000 hours in 50 weeks. This labor-power is engaged by A and B, and cannot be expended by society for anything else. To this extent, the matter is the same socially that it is in the case of A and B. Furthermore: Both A and B pay their respective 100 laborers 5,000 p. st. in wages per year (or together for 200 laborers 10,000 p. st.) and withdraw from society means of subsistence to that amount. So far, the matter is socially likewise the same as in the case of A and B. Since the laborers in either case are paid by the week, they weekly withdraw their means of subsistence from society and throw in either case a weekly equivalent in money into the circulation. But here the difference begins.

First. The money, which the laborer of A throws into the circulation, is not only, as it is for the laborer of B, the money-form for the value of the labor-power (an actual payment for labor already performed); it is also, beginning with the second period of turn-over since the opening of the business, the money form of the value of his own product (price of labor-power plus surplus-value) created during the first period of turn-over, by which his labor during the second period of turn-over is paid. This is not the case with the laborer of B. The money is here indeed a medium of payment for labor already performed by the laborer, but this labor is not paid for with its own product turned into money (the money-form of the value produced by itself). This cannot be done until the beginning of the second year, when the laborer of B is paid with the money-form of the value of his product of the preceding year.

The shorter the period of turn-over of capital—the shorter, therefore, the intervals in which the periods of reproduction are renewed—the quicker is the variable portion of the capital, advanced by the capitalist in the form of money, transformed into the money-form of the product (including surplus-value) created by the laborer in place of the variable capital; the shorter is the time for which the capitalist must advance money out of his own funds, the smaller is the capital advanced by him compared to the given scale of production; and the greater is the proportionate quantity of surplus-value which he realizes with a given rate of surplus-value during the year, because he can buy the laborer so much more frequently with the money-form of the product created by the labor of that laborer and set his labor into motion.

Given the scale of production, the absolute magnitude of the advanced variable capital (and of the circulating capital in general) decreases in proportion as the period of turn-over is shortened, and so does the annual rate of surplus-value increase. Given the magnitude of the advanced capital, and the rate of surplus-value, the scale of production and the absolute quantity of surplus-value created in one period of turnover increases simultaneously with the rise in the annual rate of surplus-value due to the contraction of the periods of reproduction. It follows in general from the preceding analysis that, according to the different length of the periods of turn-over, money-capital of considerably different quantity must be advanced, in order to set in motion the same quantity of productive circulating capital and the same quantity of labor-power with the same intensity of exploitation.

Second. It is due to the first difference, that the laborers of B and A pay for the means of subsistence which they buy with the variable capital that has been transformed into a medium of circulation in their hands. For instance, they do not only withdraw wheat from the market, but also leave in its place an equivalent in money. But since the money, with which the laborer of B pays for his means of subsistence and draws them from the market is not the money-form of the value of a product which he has thrown on the market during the year, as it is in the case of the laborer of A, he supplies the seller of his means of subsistence only with money, but not with products—be they materials of production or means of subsistence—which this seller might buy with the money received from the laborer, as he may in the case of the laborer of A. The market is therefore stripped of labor-power, means of subsistence for this labor-power, fixed capital, in the form of instruments of production used by B, and materials of production, and an equivalent in money is thrown on the market in their place, but no product is thrown on the market during the year by which the material elements of productive capital withdrawn from it might be replaced. If we assumed that society were not capitalistic, but communistic, then the money-capital would be entirely eliminated, and with it the disguises which it carries into the transactions. The question is then simply reduced to the problem that society must calculate beforehand how much labor, means of production, and means of subsistence it can utilize without injury for such lines of activity as, for instance, the building of railroads, which do not furnish any means of production or subsistence, or any useful thing, for a long time, a year or more, while they require labor, and means of production and subsistence out of the annual social production. But in capitalist society, where social intelligence does not act until after the fact, great disturbances will and must occur under these circumstances. On one hand there is a pressure on the money-market, while on the other an easy money-market creates just such enterprises in mass, that bring about the very circumstances by which a pressure is later on exerted on the market. A pressure is exerted on the money-market, since an advance of money-capital for long terms is always required on a large scale. And this is so quite apart from the fact that industrials and merchants invest the money-capital needed for the carrying on of their business in railroad speculation, etc., and reimburse themselves by borrowing in the money-market. On the other hand, there is a pressure on the available productive capital of society. Since elements of productive capital are continually withdrawn from the market and only an equivalent in money is thrown on the market in their place, the demand of cash payers for products increases without supplying any elements for purchase. Hence a rise in prices, of means of production and of subsistence. To make matters worse, swindling operations are always carried on at this time, involving a transfer of great capitals. A band of speculators, contractors, engineers, lawyers, etc., enrich themselves. They create a strong demand for consumption on the market, wages rising at the same time. So far as means of subsistence are concerned, it is true that agriculture is thus stimulated. But as these means of subsistence cannot be suddenly increased within the year, their importation increases, as does the importation of exotic food stuffs, such as coffee, sugar, wine, and articles of luxury. Hence we then have a surplus importation and speculation in this line of imports. Furthermore, in those lines of business in which production may be rapidly increased, such as manufacture proper, mining, etc., the rise in prices causes a sudden expansion, which is soon followed by a collapse. The same effect is produced on the labor-market, where large numbers of the latent relative over-population, and even of the employed laborers, are attracted toward the new lines of business. In general, such enterprises on a large scale as railroad building withdraw a certain quantity of labor-powers from the labor-market, which can come only from such lines of business as agriculture, etc., where strong men are needed. This still continues even after the new enterprises have become established lines of business and the wandering class of laborers needed for them has already been formed. A case in point is the temporary increase in the scale of business of railroads beyond the normal. A portion of the reserve army of laborers who kept wages down is absorbed. Wages rise everywhere, even in the hitherto engaged parts of the labor-market. This lasts until the inevitable crash throws the reserve army of labor out of work, and wages are once more depressed to their minimum or below it. 33

To the extent that the greater or smaller length of the period of turn-over depends on the working period, strictly so called, that is to say on the period which is required to get the product ready for the market, it rests on the existing material conditions of production of the various investments of capital. In agriculture, they partake more of the character of natural conditions of production, in manufacture and the greater part of the extractive industry they vary with the social development of the process of production itself.

Furthermore, to the extent that the length of the working period is conditioned on the size of the orders (the quantitative volume in which the product is generally thrown upon the market), this point depends on conventions. But convention itself depends for its material basis on the scale of production, and it is accidental only when considered individually.

Finally, so far as the length of the period of turn-over depends on that of the period of circulation, the latter is, indeed, conditioned on the incessant change of market combinations, the greater or smaller ease of selling, and the resulting necessity to throw a part of the product to more or less remote markets. Apart from the volume of the general demand, the movement of prices plays here one of the main roles, since sales are intentionally restricted when prices are falling, while production proceeds; vice versa, production and sale keep step, when prices are rising, and sales may even be made in advance. But we must consider the actual distance of the place of production from the market as the real material basis.

For instance, English cotton goods or yarn are sold to India. The export merchant may pay the English cotton manufacturer. (The export merchant does so willingly only when the money-market stands well. If the manufacturer replaces his money-capital by operating credit on his own part, matters are already in a bad state). The exporter sells his cotton goods later in the Indian market, whence his advanced capital is returned to him. Until the time of this return the case is identical with the one in which the length of the working period necessitates the advance of new money-capital, in order to maintain the process of production on a certain scale. The money-capital with which the manufacturer pays his laborers and renews the other elements of his circulating capital, is not the money-form of the yarn produced by him. This cannot be the case until the value of this yarn has returned to England in the form of money or products. It is additional capital as before. The difference is only that it is advanced by the merchant instead of the manufacturer, and that it reaches the merchant by means of manipulations of credit. Furthermore, before this money is thrown on the market, or simultaneously with it, no additional product has been thrown on the English market, to be bought with this money and to be consumed productively or individually. If this condition occurs for a long period on a large scale, it must cause the same effects as a prolongation of the working period, previously mentioned.

Now it may be that the yarn is sold even in India on credit. With this credit, products are bought in India and sent back to England, or drafts are remitted to this amount. If this condition is prolonged, there is a pressure on the Indian money-market, and its reaction may cause a crisis in England. This crisis, even if combined with an export of precious metals to India, causes a new crisis in that country on account of the bankruptcy of English business houses and their Indian branch houses, who had received credit from the Indian banks. Thus a crisis occurs simultaneously on the market which is credited with the balance of trade and on the one which is charged with it. This phenomenon may be still more complicated. Take it, for instance that England has sent silver ingots to India, but the English creditors of India now collect their debts in that country, and India will soon after have reshipped its silver ingots to England.

It is possible that the export trade to India and the import trade from India might approximately balance one another, although the imports (with the exception of peculiar circumstances, such as arise in the price of cotton), will be determined as to their volume and stimulated by the export trade. The balance of trade between England and India may seem to be squared, or may show but slight fluctuations on either side. But as soon as the crisis appears in England it is seen that unsold cotton goods are stored in India (and have not been transformed from commodity capital into money-capital—an overproduction to this extent), and that, on the other hand, there are in England not only unsold supplies of Indian goods, but that a considerable portion of the sold and consumed goods is not yet paid for. Hence, that which appears as a crisis on the money-market, is in reality an expression of abnormal conditions in the process of production and reproduction.

Third. So far as the employed circulating capital (constant and variable) is concerned, the length of the period of turn-over, to the extent that it is due to the working period, makes this difference: In the case of several turn-overs during one year, an element of the variable or constant circulating capital may be supplied by its own product, for instance in the production of coal, the tailoring business, etc. Otherwise, this cannot take place, at least not within the same year.

Part II, Chapter XVII
THE CIRCULATION OF SURPLUS-VALUE.

We have just seen that a difference in the period of turn-over causes a difference in the annual rate of surplus-value, even if the quantity of the annually produced surplus-value is the same.

But there is furthermore necessarily a difference in the capitalization of surplus-value, the accumulation, and to that extent also in the quantity of surplus-value produced during the year, while the rate of surplus-value remains the same.

To begin with, we remark that capital A (in the illustration of the preceding chapter) has a current periodical revenue, so that with the exception of the period of turn-over beginning the business, it pays for its own consumption within the year out of its production of surplus-value, and need not cover it by advances out of its own funds. But B has to do this. While he produces as much surplus-value in the same time as A, he does not realize on it and cannot consume it either productively or individually. So far as individual consumption is concerned, the surplus-value is discounted in advance. Funds for that purpose must be advanced.

One portion of the productive capital, which is difficult to classify, namely the additional capital required for the repair and maintenance of the fixed capital, is now likewise seen in a new light.

In the case of A, this portion of capital—in full or for the greater part—is not advanced at the beginning of production. It need not be available, or even in existence. It comes out of the business itself by a direct transformation of surplus-value into capital by its direct employment as capital. One portion of the surplus-value which is not only periodically produced but also realized may cover the expenditures required for repairs, etc. A portion of the capital needed for carrying on the business on its original scale is thus produced in the course of business by the business itself by means of capitalization of a portion of surplus-value. This is impossible for the capitalist B. This portion of capital must in his case form a part of the capital originally advanced. In both cases this portion will figure in the books of the capitalists as an advanced capital, which it really is, since according to our assumption it is a part of the productive capital required for maintaining the business on a certain scale. But it makes a great difference out of which funds it is advanced. In the case of B, it is actually a part of the capital to be originally advanced or held available. On the other hand, in the case of A, it is a part of the surplus-value, if used as capital. This last case shows that not only the accumulated capital, but also a portion of the originally advanced capital, may be capitalized surplus-value.

As soon as the development of credit interferes, the relation between originally advanced capital and capitalized surplus-value is still more complicated. For instance, A borrows a portion of the productive capital, with which he starts his business and continues it during the year, from banker C, not having sufficient capital of his own for this purpose. Banker C lends him the required sum, which consists only of surplus-value deposited with the banker by capitalists D; E, F, etc. From the standpoint of A, there is as yet no question of any accumulated surplus-value. But from the point of view of D, E, F, etc., A is merely their agent capitalizing surplus-value appropriated by them.

We have seen in volume I, chapter XXIV, that accumulation, the conversion of surplus-value into capital, is substantially a process of reproduction on an enlarged scale, no matter whether this expansion is expressed extensively in the form of an addition of new factories to the old ones, or intensively by the expansion of the existing scale of production.

The expansion of the scale of production may proceed in small portions, a part of the surplus-value being used for improvements which either increase simply the productive power of the labor employed, or permit at the same time of its more intensive exploitation. Or, in places where the working day is not legally restricted, an additional expenditure of circulating capital (in materials of production and wages) suffices to expand production without an extension of the fixed capital, whose daily time of employment is thus merely lengthened, while its period of turn-over is correspondingly abbreviated. Or, capitalized surplus-value may, under favorable market combinations, permit of speculation in raw materials, an operation for which the capital originally advanced would not have been sufficient, etc.

However, it is evident that in cases, where the greater number of the periods of turn-over carries with it a more frequent realization of surplus-value within the year, there will be periods, in which there can be neither a prolongation of the working day, nor an introduction of improvements in details, while, on the other hand, there is only a limited scope in which it is possible to expand the entire business on a proportional scale, partly, by a reorganization of the entire plan of business, buildings, etc., partly by an expansion of the funds for labor, as in agriculture, and a volume of additional capital is required, such as can be supplied only by several years of accumulation of surplus-value.

Along with the actual accumulation, or conversion of surplus-value into productive capital, (and a corresponding reproduction on an enlarged scale), there is, then, an accumulation of money, a hoarding of a portion of the surplus-value in the form of latent money-capital, which is not intended for service as additional productive capital until later.

This is the aspect of the matter from the point of view of the individual capitalist. But simultaneously with the development of capitalist production, the credit system also develops. The money-capital, which the capitalist cannot as yet employ in his own business, is employed by others, who pay him an interest for its use. It serves for him as money-capital in its specific meaning, that is to say as a kind of capital distinguished from productive. But it serves as capital in another's hands. It is plain, that, with the more frequent realization of surplus-value and the rising scale on which it is produced, there must also be an increase in the proportion of new money-capital, or money in the form of capital, thrown upon the money-market and withdrawn from it for the purpose of expanding production.

The simplest form, in which the additional latent money-capital may be represented, is that of a hoard. It may be that this hoard is additional money or silver, secured directly or indirectly in exchange with countries producing precious metals. And only in this manner does the hoarded money in a country grow absolutely. On the other hand, it may be—and is so in the majority of cases—that this hoard is nothing but money withdrawn from inland circulation and has assumed the form of a hoard in the hands of individual capitalists. It is furthermore possible that this latent money-capital consists only of tokens of value—we ignore credit money at this point—or of mere claims (titles) on third persons conferred by legal documents. In all such cases, whatever may be the form of this additional money-capital, it represents, so far as it is prospective capital, nothing but additional and reserved legal titles of capitalists on future additional products of society.

"The mass of the actually accumulated wealth, considered as to magnitude,...is absolutely insignificant compared to the productive forces of society to which it belongs, whatever may be its stage of civilization; or even compared to the actual consumption of this same society in the course of but a few years; so insignificant, that the attention of the legislators and political economists should be mainly directed to the forces of production and their free development in the future, not, as heretofore, to the mere accumulated wealth which strikes the eye. By far the greater part of the so-called accumulated wealth is only nominal and does not consist of actual objects, such as ships, houses, cotton goods, real estate improvements, but of mere legal titles, claims on the future annual productive forces of society titles generated and perpetuated by the devices or institutions of insecurity...The use of such articles (accumulations of physical things, or actual wealth) as a mere means of appropriating for their owners a wealth which the future productive forces of society are as yet to create, this use would be gradually withdrawn from them without any force by the natural laws of distribution; with the assistance of co-operative labor, it would be withdrawn from them within a few years." (William Thompson, Inquiry into the Principles of the Distribution of Wealth, London, 1850, page 453. This book appeared for the first time in 1827.)

"It is little understood, nor even suspected by most people, what an utterly insignificant portion, whether it be in quantity or effectiveness, the actual accumulations of society constitute of the human productive forces, yea, even of the ordinary consumption of a single generation of men during a few years. The reason for this is obvious, but the effect is very injurious. The wealth which is consumed annually, disappears as it is being used; it stands before the eye only for a moment, and makes an impression only while it is enjoyed or consumed. But the slowly consumable portion of wealth, furniture, machines, buildings, from our childhood to our age they are standing before our eyes, lasting monuments of human exertion. By virtue of the ownership of this fixed, lasting, slowly consumed portion of public wealth—of the soil and the raw materials on which, the instruments with which, work is done, the houses which give shelter while the work is being done—by virtue of this ownership the owners of these objects control for their own advantage the annual productive forces of all really productive laborers of society, insignificant as those objects may be in proportion to the ever recurring products of this labor. The population of Great Britain and Ireland is 20 millions; the average consumption of every man, woman, and child is about 20 p. st., making a total wealth of 400 million p. st., the product of labor annually consumed. The total amount of the accumulated capital of those countries does not exceed, according to estimates, 1,200 million p. st., or thrice the annual product of labor; if equally divided, 60 p. st. of capital per capita. We have here to deal more with the proportion than with the more or less inaccurate absolute amounts of these estimated sums. The interest on this total capital would suffice to maintain the total population in its present style of living for about two months of one year, and the entire accumulated capital (if buyers could be found for it) would maintain them without labor for a whole three years! At the end of which time, without houses, clothing, and food, they would have to starve, or become the slaves of those who have maintained them during these three years. As three years are to the life time of one healthy generation, say to 40 years, so the magnitude and importance of the actual wealth, the accumulated capital of even the richest country, is to its productive forces, to the productive forces of a single human generation; not to what they might really produce under intelligent institutions of equal security, and especially with co-operative labor, but to what they are actually producing under the imperfect and discouraging makeshifts of insecurity.... And in order to maintain this apparently tremendous mass of existing capital, or rather the control and monopoly of the annual product of labor in its present condition of compulsory division this entire machinery the vices, the crimes, the sufferings of insecurity, are to be perpetuated. Nothing can be accumulated, unless the necessary wants are first satisfied, and the great current of human desires flows after enjoyment; hence the comparatively insignificant amount of actual wealth of society at any given moment. It is an eternal circulation of production and consumption. In this immense mass of annual production and consumption, the handful of actual accumulation would hardly be missed, and yet attention has been mainly directed, not to that mass of productive forces, but to this handful of accumulation. But this handful has been appropriated by a few, and transformed into an instrument for the appropriation of the ever recurring annual products of the labor of the great masses. Hence the vital importance of such an instrument for these few.... About one-third of the annual national product is now taken from the producers under the name of public taxes, and unproductively consumed by people that do not give any equivalent for it, that is to say, none that is accepted as such by the producer.... The eye of the crowd looks with astonishment upon the accumulated masses, especially when they are concentrated in the hands of a few. But the annually produced masses, like the eternal and innumerable waves af a mighty stream, roll by and are lost in the forgotten ocean of consumption. And yet this eternal consumption determines not alone all enjoyments, but the very existence of the human race. The quantity and distribution of this annual product should above all be made the object of study. The actual accumulation is of secondary importance, and receives even this importance almost exclusively by its influence on the distribution of the annual product...The actual accumulation and distribution is here (in Thompson's work) always considered in reference and subordination to the productive forces. In almost all other systems, the productive forces have been considered with reference and in subordination to accumulation and to the perpetuation of existing mode of distribution. Compared with the conservation of this existing mode of distribution, the ever recurring suffering or welfare of the entire human race is not considered worthy of a glance. To perpetuate the results of force, of fraud, and of accident, this has been called security, and for conservation of this lying security, all the forces of production of the human race have been mercilessly sacrificed." (Ibidem, pages, 440-443.)