2. The turn-over of the fixed part of capital and therefore also its time of turn-over, comprises several turn-overs of the circulating parts of capital. In the same tine, in which the fixed capital turns over once, the circulating capital turns over several times. One of the component parts of the value of productive capital acquires the definite form of fixed capital only in the case that the instrument of production in which it is embodied is not worn out in the time required for the finishing of the product and its removal from the process of production as a commodity. One part of its value must remain tied up in the form of the old use-value, while another part is circulated by the finished product, and this circulation simultaneously carries with it the entire value of the circulating parts of productive capital.

3. The value invested in the fixed part of productive capital is advanced in a lump-sum for the entire period of employment of that part of the instrument of labor which constitutes the fixed capital. Hence this value is thrown into the circulation by the capitalist all at one time. But it is withdrawn from the circulation only in portions corresponding to the degree in which those values are realized which the fixed capital yields successively to the commodities. On the other hand, the means of production themselves, in which a portion of the productive capital becomes fixed, are withdrawn from the circulation in one bulk and embodied in the process of circulation for the entire period which they last. But they do not require reproduction, they need not be replaced by new specimens of the same kind, until this time is gone by. They continue for a shorter or longer period to contribute to the creation of the commodities to be thrown into circulation, without withdrawing from circulation the elements of their own reproduction. Hence they do not require from the capitalist a renewal of his advances during this period. Finally, the capital-value invested in fixed capital passes through the cycle of its transformations, not in its bodily substance, but only with its ideal value, and even this it does only in successive portions and gradually. In other words, a portion of its value is continually circulated and converted into money as a part of the value of the commodities, without reconverting itself from money into its original bodily form. This reconversion of money into the natural form of an instrument of labor does not take place until at the end of its period of usefulness, when the instrument has been completely worn out.

4. The elements of circulating capital are as continually engaged in the process of production—provided it is to be uninterrupted—as the elements of fixed capital. But the elements of circulating capital held in this condition are continually reproduced in their natural form (the instruments of production by other specimens of the same kind, and labor-power by renewed purchases) while in the case of the elements of fixed capital, neither the substance has to be renewed during their employment, nor the purchases. There are always raw and auxiliary materials in the process of production, but always new specimens of the same kind, whenever the old elements have been consumed in the creation of the finished product. Labor-power is likewise always in the process of production, but only by means of ever new purchases, and frequently with changed individuals. But the same identical buildings, machinery, etc., continue their function during repeated turn-overs of the circulating capital in the same repeated processes of production.

II. Composition, Reproduction, Repair, and Accumulation of Fixed Capital.

In the same investment of capital, the individual elements of fixed capital have a different life-time, and therefore different periods of turn-over. In a railroad, for instance, the rails, ties, earthworks, station-buildings, bridges, tunnels, locomotives, and carriages have different periods of wear and of reproduction, hence the capital advanced for them has different periods of turn-over. For a long term of years, the buildings, platforms, water tanks, viaducts, tunnels, excavations, dams, in short everything called "works of art" in English railroading, do not require any reproduction. The things which wear out most are the rails, ties, and rolling stock.

Originally, in the construction of modern railways, it was the current opinion, nursed by the most prominent practical engineers, that a railroad would last a century and that the wear and tear of the rails was so imperceptible, that it could be ignored for all financial and practical purposes; from 100 to 150 years was supposed to be the life-time of good rails. But it was soon learned that the life-time of a rail, which naturally depends on the velocity of the locomotives, the weight and number of trains, the diameter of the rails themselves, and on a multitude of other minor circumstances, did not exceed an average of 20 years. In some railway-stations, which are centers of great traffic, the rails even wear out every year. About 1867, the introduction of steel rails began, which cost about twice as much as iron rails but which on the other hand last more than twice as long. The life-time of wooden ties was from 12 to 15 years. It was also found, that freight cars wear out faster then passenger cars. The life-time of a locomotive was calculated in 1867 at about 10 to 12 years.

The wear and tear is first of all a result of usage. As a rule, the rails wear out in proportion to the number of trains. (R.C. No. 17,645,) 27 If the speed was increased, the wear and tear increased faster in proportion than the square of the velocity, that is to say, if the speed of the trains increased twofold, the wear and tear increased more than fourfold. (R. C. No. 17,046.)

Wear and tear are furthermore caused by the influence of natural forces. For instance, the ties do not only suffer from actual wear, but also from mold. The cost of maintenance does not depend so much on the wear and tear incidental to the railway traffic, as on the quality of the wood, the iron, the masonry, which are exposed to the weather. One single month of hand winter will injure the track more than a whole year of traffic. (R. P. Williams, On the Maintenance of Permanent Way. Lecture given at the Institute of Civil Engineers, Autumn, 1867.)

Finally, here as everywhere else in great industry, the virtual wear and tear plays a role. After the lapse of ten years, one can generally buy the same quantity of cars and locomotives for 30,000 pounds sterling, which would have coat 40,000 pounds sterling at the beginning of that time. Thus one must calculate on a depreciation of 25 per cent on the market price of this material, even though no depreciation of its use-values taken place. (Lardner, Railway Economy.)

Tubular bridges in their present form will not be renewed, writes W. P. Adams in his "Roads and Rails," London, 1862. Ordinary repairs of them, removal and replacing of single parts, are not practicable. (There are now better forms for such bridges.) The instruments of labor are largely modified by the constant progress of industry. Hence they are not replaced in their original, but in their modified form. On the one hand, the quantity of the fixed capital invested in a certain natural form and endowed with a certain average vitality in that form constitutes one reason for the gradual pace of the introduction of new machinery, etc., and therefore an obstacle to the rapid general introduction of improved instruments of labor. On the other hand, competition enforces the introduction of new machinery before the old is worn out, especially in the case of important modifications. Such a premature reproduction of the instruments of labor on a large social scale is generally enforced by catastrophes or crises.

By wear and tear (excepting the so-called virtual wear) is meant that part of value which is yielded gradually by the fixed capital to the product in course of creation in proportion to the average degree in which it loses its use-value.

This wear and tear takes place partly in such a way that the fixed capital has a certain average life-time. It is advanced for this entire period in one sum. After the lapse of this period, it must be replaced. So far as living instruments of labor are concerned, for instance horses, their reproduction is timed by nature itself. Their average lifetime as means of production is determined by laws of nature. As soon as this term has expired, the worn-out specimens must be replaced by new ones. A horse cannot be replaced piecemeal, it must be replaced by another horse.

Other elements of fixed capital permit of a periodical or partial renewal. In this instance, the partial or periodical renewal must be distinguished from the gradual extension of the business.

The fixed capital consists in part of homogeneous elements, which do not, however, last the same length of time, but are renewed from time to time and piecemeal. This is true, for instance, of the rails in railway stations, which must be replaced more frequently than those of the remainder of the track. It also applies to the ties, which for instance on the Belgian railroads in the fifties had to be renewed at the rate of 8 per cent, according to Lardner, so that all the ties were renewed in the course of 12 years. Hence we have here the following proposition: A certain sum is advanced for a certain kind of fixed capital for, say, ten years. This expenditure is made at one time. But a certain part of this fixed capital, the value of which has been transferred to the value of the product and converted with it into money, is bodily renewed every year, while the remainder persists in its original natural form. It is this advance in one sum and the reproduction in natural form by small degrees, which distinguishes this capital in the role of fixed from circulating capital.

Other parts of the fixed capital consist of heterogeneous elements, which wear out in unequal periods of time and must be so replaced. This applies particularly to machines. What we have just said concerning the different life-times of different parts of fixed capital applies in this case to the life-time of different parts of the same machine, which performs a part of the function of this fixed capital.

With regard to the gradual extension of the business in the course of the partial renewal, we make the following remarks: Although we have seen that the fixed capital continues to perform its functions in the process of production in its natural state, a certain part of its value, proportionate to the average wear and tear, has circulated with the product, has been converted into money, and forms an element in the money reserve fund intended for the renewal of the capital pending its reproduction in the natural form. This part of the value of fixed capital transformed into money may serve to extend the business or to make improvements in machinery with a view to increasing the efficiency of the latter. Thus reproduction takes place in larger or smaller periods of time, and this is, from the standpoint of society, reproduction on an enlarged scale. It is extensive expansion, if the field of production is extended; it is intensive expansion, if the efficiency of the instruments of production is increased. This reproduction on an enlarged scale does not result from accumulation—not from the transformation of surplus-value into capital—but from the reconversion of the value which has detached itself in the form of money from the body of the fixed capital and has resumed the form of additional, or at least of more efficient, fixed capital of the same kind. Of course, it depends partly on the specific nature of the business, to what extent and in what proportion it is capable of such expansion, and to what amount, therefore, a reserve-fund must be collected, in order to be invested for this purpose; also, what period of time is required, before this can be done. To what extent, furthermore, improvements in the details of existing machinery can be made, depends, of course, on the nature of these improvements and the construction of the machine itself. That this is well considered from the very outset in the construction of railroads, is apparent from a statement of Adams to the effect that the entire construction should follow the principle of a beehive, that is to say, it should have a faculty for unlimited expansion. All oversolid and preconceived symmetrical structures are impracticable, because they must be torn down in the case of an extension. (Page 123 of the above-named work).

This depends largely on the available space. In the case of some buildings, additional stories may be built, in the case of others lateral extension and more land are required. Within capitalist production, there is on one side much waste of wealth, on the other much impractical lateral extension of this sort (frequently to the injury of labor-power) in the expansion of the business, because nothing is under-taken according to social plans, but everything depends on the infinitely different conditions, means, etc., with which the individual capitalist operates. This results in a great waste of the productive forces.

This piecemeal re-investment of the money-reserve fund, that is to say of that part of fixed capital which has been reconverted into money, is easiest in agriculture. A field of production of a given space is capable of the greatest possible absorption of capital. The same applies also to natural reproduction, for instance to stock raising.

The fixed capital requires special expenditures for its conservation. A part of this conservation is provided by the labor-process itself; the fixed capital spoils, if it is not employed in production. (See vol. I, chap. VIII; and chap. XV, on wear and tear of machinery when not in use.) The English law therefore explicitly regards it as a waste, if rented land is not used according to the custom of the country. (W. A. Holdsworth, barrister at law. "The Law of Landlord and Tenant." London, 1857, p. 96.) The conservation due to use in the labor-process is a natural and free gift of living labor. And the conservating power of labor is of a twofold character. On the one hand, is preserves the value of the materials of labor, by transferring it to the product, on the other hand it preserves the value of the instruments of labor, provided it does not transfer this value in part to the product, by preserving their use-value by means of their activity in the process of production.

The fixed capital requires also a positive expenditure of labor for its conservation. The machinery must be cleaned from time to time. This is additional labor, without which the machinery would become useless; it is labor required to ward off the injurious influences of the elements, which are inseparable from the process of production; it is expended for the purpose of keeping the machinery in perfect working order. The normal life-time of fixed capital is, of course, so calculated that all the conditions are fulfilled under which it can perform its functions normally during that time, just as we assume in placing a man's average life at 30 years that he will wash himself. Nor is it here a question of reproducing the labor contained in the machine, but of labor which must be constantly added in order to keep it in working order. It is not a question of the labor performed by the machine itself, but of labor spent on it in its capacity of raw material, not of an instrument of production. The capital expended for this labor belongs to the circulating capital, although it does not enter into the actual labor-process to which the product owes its existence. This labor must be continually expended in production, hence its value must be continually replaced by that of the product. The capital invested in it belongs to that part of circulating capital, which has to cover the general expenses and is distributed over the produced values according to an annual average. We have seen that in industry, properly so-called, this labor of cleaning is performed gratis by the working men during pauses, and thus frequently during the process of production itself, and many accidents are due to this custom. This labor is not counted in the price of the product. The consumer receives it free of charge to this extent. On the other hand, the capitalist thus receives the conservation of his machinery for nothing. The laborer pays this expense in his own person, and this is one of the mysteries of the self preservation of capital, which constitute in point of fact a legal claim of the laborer on the machinery, on the strength of which he is a part-owner of the machine even from the legal standpoint of the bourgeoisie. However, in various branches of production, in which the machinery must be taken out of the process of production for the purpose of cleaning, and where this labor of cleaning cannot be performed between pauses, for instance in the case of locomotives, this labor of conservation counts with the running expenses and is therefore an element of circulating capital. A locomotive must be taken to the shop after a maximum of three days' work in order to be cleaned; the boiler must cool off before it can be washed out without injury. (R. C. No. 17,823.)

The actual repairs, the small jobs, require expenditures of capital and labor, which are not contained in the originally advanced capital and cannot therefore be reproduced and covered, in the majority of cases, by the gradual replacement of the value of fixed capital. For instance, if the value of the fixed capital is 10,000 pounds sterling, and its total life-time 10 years, then these 10,000 pounds, having been entirely converted into money after the lapse of ten years, will replace only the value of the capital originally invested, but they do not replace the value of the capital, or labor, added in the meantime for repairs. This is an element of additional value which is not advanced all at one time, but rather whenever occasion arises for it, so that the terms of its various advances are accidental from the very nature of the conditions. All fixed capital demands such additional and occasional expenditures of capital for materials of labor and labor-power.

The injuries to which individual parts of the machinery are exposed are naturally accidental, and so are therefore the necessary repairs. Nevertheless two kinds of repairs are to be distinguished in the general mass, which have a more or less fixed character and fall within various periods of life of the fixed capital. These are the diseases of childhood and the far more numerous diseases in the period following the prime of life. A machine, for instance, may be placed in the process of production in ever so perfect a condition, still the actual work will always reveal shortcomings which must be remedied by additional labor. On the other hand, the more a machine passes beyond the prime of life, when, therefore, the normal wear and tear has accumulated and has rendered its material worn and weak, the more numerous and considerable will be the repairs required to keep it in order for the remainder of its average life-time; it is the same with an old man, who needs more medical care to keep from dying than a young and strong man. In spite of its accidental character, the labor of repairing is therefore unequally distributed over the various periods of life of fixed capital.

From the foregoing, and from the otherwise accidental character of the labor of repairing, we make the following deductions.

In one respect, the actual expenditure of labor-power and labor-material for repairs is an accidental as the conditions which cause these repairs; the amount of the necessary repairs is differently distributed over the various life-periods of fixed capital. In other respects, it is taken for granted in the calculation of the average life of fixed capital that it is constantly kept in good working order, partly by cleaning (including the cleaning of the rooms), partly by repairs such as the occasion may require. The transfer of value through wear and tear of fixed capital is calculated on its average life, but this average life itself is based on the assumption that the additional capital required for keeping machine in order is continually advanced.

On the other hand it is also evident that the value added by this extra expenditure of capital and labor cannot be transferred to the price of the products simultaneously as it is made. For instance, a manufacturer of yarn cannot sell his yarn dearer this week than last, merely because one of his machines broke a wheel or tore a belt this week. The general expenses of the spinning industry have not been changed by this accident in some individual factory. Here as in all determinations of value, the average decides. Experience teaches the average extent of such accidents and of the necessary labors of conservation and repair during the average life-time of the fixed capital invested in a given branch of industry. This average expense is distributed over the average life-time. It is added to the price of the product in corresponding aliquot parts and hence also reproduced by means of its sale.

The extra capital which is thus reproduced belongs to the circulating capital, although the manner of its expenditure is irregular. As it is highly important to remedy every injury to a machine immediately, every large factory employs in addition to the regular factory hands a number of other employees, such as engineers, wood-workers, mechanics, smiths, etc. The wages of these special employees are a part of the variable capital, and the value of their labor is distributed over their product. On the other hand, the expenses for means of production are calculated on the basis of the above-mentioned average, according to which they form continually a part of the value of the product, although they are actually advanced in irregular periods and therefore transferred in irregular periods to the product or the fixed capital. This capital, invested in regular repairs, is in many respects a peculiar capital, which can be classed neither with the circulating nor the fixed capital, but still belongs with more justification to the former, since it is a part of the running expenses.

The manner of bookkeeping does not, of course, change in any way the actual condition of the things of which an account is kept. But it is important to note that it is the custom of many businesses to class the expenses of repairing with the actual wear and tear of the fixed capital, in the following manner: Take it that the advanced fixed capital is 10,000 pounds sterling, its life-time 15 years; the annual wear and tear 666 and 2/3 pounds sterling. But the wear and tear is calculated at only ten years, in other words, 1,000 pounds sterling are added annually for wear and tear of the fixed capital to the prices of the produced commodities, instead of 666 and 2/3 pounds sterling. Thus 333 and 1/3 pounds sterling are reserved for repairs, etc. (The figures 10 and 15 are chosen at random.) This amount is spent on an average for repairs, in order that the fixed capital may last 15 years. This calculation does not alter the fact that the fixed capital and the additional capital invested in repairs belong to different categories. On the strength of this mode of calculation it was, for instance, assumed that the lowest estimate for the conservation and reproduction of steamship was 15 per cent, the time of reproduction therefore equal to 6 2/3 years. In the sixties, the English government indemnified the Peninsular and Oriental Co. for it at the rate of 16 per cent, making the time of reproduction equal to 6 1/3 years. On railroads, the average life-time of a locomotive is 10 years, but the wear and tear including repairs is assumed to be 12½ per cent, reducing the life-time down to 8 years. In the case of passenger and freight cars, 9 per cent are estimated, or a life-time of 11 1/9 years.

Legislation has everywhere made a distinction, in the leases of houses and other things, which represent fixed capital for their owners, between the normal wear and tear which is the result of time, the influence of the elements, and normal use and between those occasional repairs which are required for keeping up the normal life-time of the house during its normal use. As a rule, the former expenses are borne by the owner, the latter by the tenant. The repairs are further distinguished as ordinary and substantial. The last-named are partly a renewal of the fixed capital in its natural form, and they fall likewise on the shoulders of the owner, unless the lease explicitly states the contrary. For instance, the English law, according to Holdsworth (Law of Landlord and Tenant, pages 90 and 91), prescribes that a tenant from year to year is merely obliged to keep the buildings water-and-wind proof, so long as this is possible without substantial repairs, and to attend only to such repairs as are known as ordinary. And even in this respect the age and the general condition of the building at the time when the tenant took possession must be considered, for he is not obliged to replace either old or worn-out material by new, or to make up for the inevitable depreciation incidental to the lapse of time and normal usage.

Entirely different from the reproduction of wear and tear and from the work of preserving and repairing is the insurance, which relates to destruction caused by extraordinary phenomena of nature, fire, flood, etc. This must be made good out of the surplus-value and is a deduction from it. Or, considered from the point of view of the entire society, there must be a continuous overproduction, that is to say, a production on a larger scale than is necessary for the simple replacement and reproduction of the existing wealth, quite apart from an increase of the population, in order to be able to dispose of the means of production required for making good the extraordinary destruction caused by accidents and natural forces.

In point of fact, only the smallest part of the capital needed for making good such destruction consists of the money-reserve fund. The most important part consists in the extension of the scale of production itself, which is either actual expansion, or a part of the normal scope of the branches of production which manufacture the fixed capital. For instance, a machine factory is managed with a view to the fact that on the one side the factories of its customers are annually extended, and that on the other hand a number of them will always stand in need of total or partial reproduction.

In the determination of the wear and tear and of the cost of repairing, according to the social average, there are necessarily great discrepancies, even for investments of capital of equal size and in equal conditions, in the same branch of production. In practice, a machine lasts in the case of one capitalist longer than its average time, while in the case of another it does not last so long. The expenses of the one for repairs are above, of the other below the average, etc. But the addition to the price of the commodities resulting from wear and tear and from repairs is the same and is determined by the average. The one therefore gets more out of this additional price than he really spent, the other less. This as well as other circumstances which produce different gains for different capitalists in the same branch of industry with the same degree of the exploitation of labor-power renders an understanding of the true nature of surplus-value difficult.

The boundary between regular repairs and replacement, between expenses of repairing and expenses of renewal, is more or less shifting. Hence we see the continual dispute, for instance in railroading, whether certain expenses are for repairs or for reproduction, whether they must be paid from running expenses or from the capital itself. A transfer of expenses for repairs to capital-account instead of revenue-account is the familiar method by which railway managements artificially inflate their dividends. However, experience has already furnished the most important clues for this. According to Lardner, page 49 of the previously quoted work, the additional labor required during the first period of life of a railroad is not counted under the head of repairs, but must be regarded as an essential factor of railway construction, and is to be charged, therefore, to the account of capital, since it is not due to wear and tear or to the normal effect of the traffic, but to the original and inevitable imperfection of railway construction. On the other hand, it is the only correct method, according to Captain Fitzamaurice (Committee of Inquiry of Caledonian Railway, published in Money Market Review, 1867), to charge the revenue of each year with the depreciation, which is the necessary concomitant of the transactions by which this revenue has been earned, regardless of whether this sum has been spent or not.

The separation of the reproduction and conservation of fixed capital becomes practically impossible and useless in agriculture, at least in so far as it does not operate with steam. According to Kirchhoff (Handbuch der landwirthschaftlichen Betriebslehre, Berlin, 1862, page 137), "it is the custom to estimate on a general average the annual wear and tear and conservation of the implements, according to the differences of existing conditions, at from 15 to 20 per cent of the purchasing capital, wherever there is a complete, though not excessive, supply of implements on the farm."

In the case of the rolling stock of a railroad, repairs and reproduction cannot be separated. According to T. Gooch, Chairman of the Great Western Railway Co. (R. C. No. 17, 327-29), his company maintained its rolling stock numerically. Whatever number of locomotives they might have would be maintained. If one of them became worn out in the course of time, so that it was more profitable to build a new one, it was built at the expense of the revenue, in which case the value of the material remaining from the old locomotive was credited to the revenue. There always was a good deal of material left. The wheels, the axles, the boilers, in short, a good part of the old locomotive remained.

"To repair means of renew; for me there is no such word as 'replacement';...once that a railway company has bought a car or a locomotive, they ought to keep them in such repair that they will run for all eternity (17,784). We calculate 8½ d. per English freight mile for locomotive expenses. Out of this 8½ d. we maintain the locomotives forever. We renew our machines. If you want to buy a machine new, you spend more money than is necessary.... You can always find a few wheels, an axle, or some other part of an old machine in condition to be used, and that helps to construct cheaply a machine which is just as good as an entirely new one (17,790). I now produce every week one new locomotive, that is to say, one that is as good as new, for its boiler, cylinder, and frame are new." (17,843.) Archibald Sturrock, locomotive superintendent of Great Northern Railway, in R. C., 1867.

Lardner says likewise about cars, on page 116 of his work, that in the course of time, the supply of locomotives and cars is continually renewed; at one time new wheels are put on, at another a new frame is constructed. Those parts on which the motion is conditioned and which are most exposed to wear and tear are gradually renewed; the machines and cars may then undergo so many repairs that not a trace of the old material remains in them.... Even if the old cars and locomotives get so that they cannot be repaired any more, pieces of them are still worked into others, so that they never disappear wholly form the track. The rolling stock is therefore in process of continuous reproduction; that which must be done at one time for the track, takes place for the rolling stock gradually, from year to year. Its existence is perennial, it is in process of continuous rejuvenation.

This process, which Lardner here describes relative to a railroad, is not typical for an individual factory, but may serve as an illustration of continuous and partial reproduction of fixed capital intermingled with repairs, within an entire branch of production, or even within the aggregate production considered on a social scale.

Here is a proof, to what extent clever managers may manipulate the terms repairs and replacement for the purpose of making dividends. According to the above quoted lecture of R. B. Williams, various English railway companies deducted the following sums from the revenue-account, as averages of a period of years, for repairs and maintenance of the track and buildings, per English mile of track per year:

London 8 North Western... £370
Midland... £225
London 8 South Western... £257
Great Northern... £360
Lancashire 8 Yorkshire... £377
South Eastern... £263
Brighton... £266
Manchester 8 Sheffield... £200

These differences arise only to a minor degree from differences in the actual expenses; they are due almost exclusively to different modes of calculation, according to whether expenses are charged to the account of capital or revenue. Williams says in so many words that the lesser charge is made, because this is necessary for a good dividend, and a high charge is made, because there is a greater revenue which can bear it.

In certain cases, the wear and tear, and therefore its replacement, is practically infinitesimal, so that nothing but expenses for repairs have to be charged. The statements of Lardner relative to works of art, which are given in substance below, also apply in general to all solid works, docks, canals, iron and stone bridges, etc. According to him, pages 38 and 39 of his work, the wear and tear which is the result of the influence of long periods of time on solid works, is almost imperceptible in short spaces of time; after the lapse of a long period, for instance of centuries, such influences will nevertheless require the partial or total renewal of even the most solid structures. This imperceptible wear and tear, compared to the more perceptible in other parts of the railroad, may be likened to the secular and periodical inequalities in the motions of world-bodies. The influence of time on the more massive structures of a railroad, such as bridges, tunnels, viaducts, etc., furnishes illustrations of that which might be called secular wear and tear. The more rapid and perceptible depreciation, which is compensated by repairs in shorter periods, is analogous to the periodical inequalities. The compensation of the accidental damages, such as the outer surface of even the most solid structures will suffer from time to time, is likewise included in the annual expenses for repairs; but apart from these repairs, age does not pass by such structures without leaving its marks, and the time must inevitably come, when their condition will require a new structure. From a financial and economic point of view, this time may indeed be too far off to be taken into practical consideration.

These statements of Lardner apply to all similar structures of a secular duration, in the case of which the capital advanced for them need not be reproduced according to their gradual wear and tear, but only the annual average expenses of conservation and repairs are to be transferred to the prices of the products.

Although, as we have seen, a greater part of the money returning for the compensation of the wear and tear of the fixed capital is annually, or even in shorter periods, reconverted into its natural form, nevertheless every capitalist requires a sinking fund for that part of his fixed capital, which becomes mature for complete reproduction only after the lapse of years and must then be entirely replaced. A considerable part of the fixed capital precludes gradual production by its composition. Besides, in cases where the reproduction takes place piecemeal in such a way that every now and then new pieces are added in compensation for worn-out ones, a previous accumulation of money is necessary to a greater or smaller degree, according to the specific character of the branch of production, before replacement can proceed. It is not any arbitrary sum of money which suffices for this purpose; a sum of a definite size is required for it.

If we study this question merely on the assumption that we have to deal with the simple circulation of commodities, without regard to the credit system, which we shall treat later, then the mechanism of this movement has the following aspect: We showed in Volume I, chapter III, 3a, that the proportion in which the total mass of money is distributed over a hoard and means of production varies continually, if one part of the money available in society lies fallow as a hoard, while another performs the functions of a medium of circulation or of an immediate reserve-fund of the directly circulating money. Now, in the present case, the money accumulated in the hands of a great capitalist in the form of a large-sized hoard is set free all at once in circulation for the purchase of mixed capital. It is on its part again distributed over the society as medium of circulation and hoard. By means of the sinking fund, through which the value of the fixed capital flows back to its starting point in proportion to its wear and tear, a part of the circulating money forms again a hoard, for a longer or shorter period, in the hands of the same capitalist whose hoard had been transformed into a medium of circulation and passed away from him by the purchase of fixed capital. It is a continually changing distribution of the hoard existing in society, which performs alternately the function of a medium of exchange and is again separated as a hoard from the mass of the circulating money. With the development of the credit-system, which necessarily runs parallel with the development of great industries and capitalist production, this money no longer serves as a hoard, but as capital, not in the hands of its owner, but of other capitalists who have borrowed it.

Part II, Chapter IX
THE TOTAL TURN-OVER OF ADVANCED CAPITAL.
CYCLES OF TURN-OVER.

We have seen that the fixed and circulating parts of productive capital turn over in different ways and at different periods, also that the different constituents of the fixed capital of the same business have different periods of turn-over according to their different durations of life and, therefore, of their different periods of reproduction. (As concerns the actual or apparent difference in the turn-over of different constituents of circulating capital in the same business, see the close of this chapter, under No. 6.)

1. The total turn-over of advanced capital is the average turn-over of its constituent parts; the mode of its calculation is given later. Inasmuch as it is merely a question of different periods of time, nothing is easier than to compute their average. But

2. It is a question, not alone of a quantitative, but also of a qualitative difference.

The circulating capital entering into the process of production transfers its entire value to the product and must, therefore, be continually reproduced in its natural form by the sale of the product, if the process or production is to proceed without interruption. The fixed capital entering into the process of production transfers only a part of its value (the wear and tear) to the product and continues despite this wear and tear, to perform its function in the process of production. Therefore it need not be reproduced until after the lapse of intervals of various duration, at any rate not as frequently as the circulating capital. This necessity of reproduction, this term of reproduction, is not only quantitatively different for the various constituent parts of fixed capital, but, as we have seen, a part of the perennial fixed capital may be replaced annually or at shorter intervals and added in natural form to the old fixed capital. In the case of fixed capital of a different composition, the reproduction can take place only all at once at the end of its life-time.

It is, therefore, necessary to reduce the specific turn-overs of the various parts of fixed capital to a homogeneous form of turn-over, so that they remain only quantitatively different so far as the duration of their turn-over is concerned.

This quantitative homogeneity does not materialize, if we take for our starting point P...P, the form of the continuous process of production. For definite elements of P must be continually reproduced in their natural form, while others need not to be. This homogeneity of turn-over is found, however, in the form M—M'. Take, for instance, a machine valued at 10,000 pounds sterling, which lasts ten years and one tenth, or 1,000 pounds of which are annually reconverted into money. These 10,000 pounds have been converted in the course of one year from money-capital into productive capital and commodity-capital, and then reconverted into money-capital. They have returned to their original money-form, just as did the circulating capital, if we study it from this point of view, and it is immaterial whether this money-capital of 1,000 pounds sterling is once more converted, at the end of the year, into the natural form of a machine or not. In calculating the total turn-over of the advanced productive capital, we, therefore, fix all its elements in the mold of money, so that the return to the money-form concludes the turn-over. We assume that value has always been advanced in money, even in the continuous process of production, where this money-form of value exists only as calculating money. Then we are enabled to compute the average.

3. It follows that the capital-value turned over during one year may be larger than the total value of the advanced capital, on account of the repeated turn-overs of the circulating capital within the same year, even if by far the greater part of the advanced productive capital consists of fixed capital, whose period of reproduction, and therefore of turn-over, comprises a cycle of several years.

Take it that the fixed capital is 80,000 pounds sterling, its period of reproduction 10 years, so that 8,000 pounds of this capital annually return to their money-form, or complete one-tenth of its turn-over. Let the circulating capital be 20,000 pounds sterling, and its period of turn-over be five times per year. The total capital would then be 100,000 pounds sterling. The turned over fixed capital is 8,000 pounds, the turned-over circulating capital five times 20,000, or 100,000 pounds sterling. Then the capital turned over during one year is 108,000 pounds sterling, or 8,000 pounds more than the advanced capital. 1+2.25 of the capital have turned over.

4. The turn-over of the values of the advanced capital therefore is to be distinguished from its actual time of reproduction, or from the actual time of turn-over of its component parts. Take, for instance, a capital of 4,000 pounds sterling and let it turn over five times per year. The turned over capital is then five times 4,000, or 20,000 pounds sterling. But that which returns at the end of its turn-over and is advanced anew is the original capital of 4,000 pounds sterling. Its magnitude is not changed by the number of its periods of turn-over, during which it performs anew its functions as capital. (We do not consider the question of surplus-value here.)

In the illustration under No. 3, then, the sums returned at the end of one year into the hands of the capitalist are (a) a sum of values in the form of 20,000 pounds sterling, which he invests again in the circulating parts of the capital, and (b) a sum of 8,000 pounds, which have been set free by wear and tear from the advanced fixed capital; at the same time, this same fixed capital remains in the process of production, but with the reduced value of 72,000 pounds, instead of 80,000 pounds sterling. The process of production, therefore, would have to be continued for nine years longer, before the advanced fixed capital would have outlived its term and ceased to perform any service as a creator of products and values, so that it would have to be replaced. The advanced capital-value, then, has to pass through a cycle of turn-overs, in the present case a cycle of ten years, and this cycle is determined by the life-time, in other words by the period of reproduction, or turn-over of the invested fixed capital.

To the same extent that the volume of the value and the duration of the fixed capital develop with the evolution of the capitalist mode of production, does the life of industry and of industrial capital develop in each particular investment into one of many years, say of ten years on an average. If the development of fixed capital extends the length of this life on one side, it is on the other side shortened by the continuous revolution of the instruments of production, which likewise increases incessantly with the development of capitalist production. This implies a change in the instruments of production and the necessity of continuous replacement on account of virtual wear and tear, long before they are worn out physically. One may assume that this life-cycle, in the essential branches of great industry, now averages ten years. However, it is not a question of any one definite number here. So much at least is evident that this cycle comprising a number of years, through which capital is compelled to pass by its fixed part, furnishes a material basis for the periodical commercial crises in which business goes through successive periods of lassitude, average activity, overspeeding, and crisis. It is true that the periods in which capital is invested are different in time and place. But a crisis is always the starting point of a large amount of new investments. Therefore it also constitutes, from the point of view of society, more or less of a new material basis for the next cycle of turn-over. 28

5. On the mode of calculation of the turn-overs, Scrope, an American economist, says in substance the following in his work on political economy (published by Alonzo Potter, New York, 1841, pages 141 and 142): In some lines of business the entire capital advanced is turned over, or circulated, several times inside of a year. In some others, one portion is turned over more than once a year, another portion not so often. It is the average period required by the entire capital for the purpose of passing through the hands of the capitalist, or in order to turn over once, which must furnish the basis on which the capitalist figures his profits. Take it, that a certain individual engaged in a certain business has invested half of his capital for buildings and machinery, which are replaced once in every ten years; one-quarter for tools, etc., which are replaced in two years; and the last quarter, invested in wages and raw materials, which quarter is turned over twice per year. Let his entire capital be $50,000. Then his annual expenditure will be:

50,000-2, or $25,000 in 10 years, or $2,500 in one year.
50,000-4, or $12,500 in 2 years, or $6,250 in one year.
50,000-4, or $12,500 in ½ year, or $25,000 in one year.
$33,750 in one year.

The average time, then, in which his capital is turned over once, is 16 months. Take another case: One quarter of the entire capital of $50,000 circulates in 10 years; another quarter in one year; the other half twice in one year. The annual expenditure will then be:

12,500-10... 1,250
12,500... 12,500
25,000×2... 50,000
Turned over in one year... 63,750

6. Real and apparent differences in the turn-over of the various component parts of capital. Scrope also says in the same place that the capital invested by a manufacturer, landlord, or merchant in wages circulates most rapidly, as it is probably turned over once a week, if he pays his laborers weekly, by the weekly receipts from his sales or from paid bills. The capital invested in raw materials and finished supplies does not circulate so fast; it may be turned over two or four times per year, according to the time passing between the purchase of the one and the sale of the other, provided that the capitalist buys and sells on equal terms of credit. The capital invested in tools and machinery circulates still more slowly, as it is turned over, that is to say consumed and circulated, probably on an average of once in five or ten years; many tools, however, are used up in one single series of manipulations. The capital invested in buildings, for instance, in factories, stores, storerooms, barns, streets, irrigation works, etc., circulates almost imperceptibly. But of course these structures are likewise worn out just the same as the others, so long as they serve in production, and must be replaced, in order that the producer may be able to continue his operations. They are merely consumed and reproduced more slowly than the others. The capital invested in them is probably turned over in twenty or fifty years. So far Scrope.—

Scrope here confounds the differences in the flow of certain parts of the circulating capital, caused by terms of payment and conditions of credit so far as the individual capitalist is concerned, with the turn-overs due to the nature of capital. He says that wages are paid weekly on account of the weekly receipts from paid sales or bills. We must note in the first place, that certain differences occur relative to wages, according to the length of the term of payment, that is to say the length of time for which the laborer must give credit to the capitalist, whether it be a week, a month, three months, six months, etc., In this case, the rule stated in volume I, chapter III, 3b, page 158, holds good, to the effect that "the quantity of the means of payment required for all periodical payments (in this case the quantity of the money-capital to be advanced at one time) is in inverse proportion to the length of their periods."

In the second place, it is only the entire new value added to the product by means of one week's labor which enters completely into the weekly product, but also the value of the raw and auxiliary material consumed by the weekly product. These values circulate with the product containing them. They assume the form of money by the sale of the product and must be reconverted into the same elements of production. This applies as well to the labor-power as to the raw and auxiliary materials. But we have already seen (chapter IV, 2, A) that the continuity of the production requires a supply of means of production, different for various branches of industry, and different within one and the same branch for the various component parts of the circulating capital, for instance, for coal and cotton. Hence, although these materials must be continually replaced in their natural form, they need not be bought continually. How often new purchases of them must be made, depends on the magnitude of the available supply, on the times it takes to use it up. In the case of the labor-power, there is no such storing of a supply. The reconversion into money of the capital invested in labor-power goes hand in hand with that of the capital invested in raw and auxiliary materials. But the reconversion of the money, on one side into labor-power, on the other into raw materials, proceeds separately on account of the special terms of purchase and payment of these two constituents of productive capital, one of them being bought as a productive supply for long terms, the other, labor-power, for shorter terms, for instance, for terms of one week. On the other hand, the capitalist must keep a supply of finished commodities besides a supply of materials for production. Apart from the difficulties of selling, etc., a certain quantity must be produced, say for instance, on order. While the last portion of this quantity is being produced, the finished product is waiting in storage until the order can be completely filled. Other differences in the turn-over of circulation capital arise as soon as some of its individual elements must stay in some preliminary stage of the process of production, such as the drying of wood, etc., longer than others.

The credit-system, to which Scrope here refers, and commercial capital, modify the turn-over for the individual capitalist. They modify the turn-over on a social scale only in so far as they do not accelerate merely production, but also consumption.

Part II, Chapter X
THEORIES OF FIXED AND CIRCULATING CAPITAL, THE PHYSIOCRATS AND ADAM SMITH.

In Quesnay's analysis, the distinction between fixed and circulating capital assumes the form of avances primitives and avances annuelles. He correctly represents this distinction as one to be made with regard to productive capital, to capital directly engaged in the process of production. But owing to the fact that he regards the capital invested in agriculture, the capital of the capitalist farmer, as the only really productive capital, he makes these distinctions only for the capital of this farmer. This also accounts for the annual period of turn-over of one part of the capital, and the more than annual (decennial) of the other part. Incidentally it may be noted, that in the course of their development the physiocrats applied these distinctions also to other kinds of capital, to industrial capital in general. The distinction between annual advances and others extending over a longer period retained such lasting value for social science that many economists, even after Adam Smith, returned to it.

The distinction between these two kinds of advances is not made, until money has been transformed into the elements of productive capital. It is a distinction which applies solely to the divisions of productive capital. Quesnay, therefore, never thinks of classing money either among the primitive or the annual advances. In their capacity as advances on production, these two categories confront on one side the money, on the other the commodities existing on the market. Furthermore, the distinction between these two elements of productive capital is correctly defined as resting on the different manner in which they enter into the value of the finished product, and this implies the different way in which their values are circulated together with those of the products. From this, again, follows the different method of their reproduction, the value of the one being entirely replaced annually, that of the other only partially and in longer intervals. 29

The only progress made by Adam Smith is the generalization of the categories. He no longer applies them to one special form of capital, the tenant's capital, but to every form of productive capital. Hence it follows as a matter of fact that the distinction between an annual period of turn-over and one of longer duration, derived from agriculture, is replaced by the general distinction of the different periods of turn-over, so that one turn-over of the fixed capital always comprises more than one turn-over of the circulating capital, regardless of the periods of turn-over of the circulating capital, whether they be annual, more than annual, or less. Thus Adam Smith transforms the annual advances into circulating capital, and the primitive advances into fixed capital. But his progress is confined to this generalization of the categories. His analyses are far inferior to those of Quesnay.

His unclearness is manifested at the very outset by the crudely empirical manner in which he broaches the subject: "There are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer." (Wealth of Nations. Book II, Chap. I, page 189, Aberdeen addition, 1848.)

As a matter of fact, the ways in which value may be employed so as to perform the functions of capital and yield surplus-value to its owner are as different and varies as the spheres of investment of capital. It is a question of the different spheres of production in which capital may be invested. If put in this way, the question implies still more. It includes the other question of the way in which value, even if it is not employed as productive capital, may perform the functions of capital for its owner, for instance, as interest-bearing capital, merchants' capital, etc. At this point we are already far away from the real object of the analysis, that is to say from the question: How does the division of productive capital into its various elements affect their periods of turn-over, leaving out of consideration their different spheres of investment?

Adam Smith continues immediately: "First, it may be employed in raising, manufacturing, or purchasing goods, and selling them again with a profit." He does not tell us anything else in this statement than that capital may be employed in agriculture, manufacture, and commerce. He speaks only of the different spheres of investment of capital, including commerce, in which capital is not directly embodies in the process of production and does not perform the functions of productive capital. In so doing he abandons the foundation on which the physiocrats base the distinctions of the elements of productive capital and their influence on its periods of turn-over. He goes still farther and uses merchants' capital as an illustration of a problem, which concerns exclusively differences of productive capital in the process of production and the creation of value, which differences cause those of its turn-over and reproduction.

He continues: "The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession or continues in the same shape." The capital employed in this manner! Smith is referring to capital invested in agriculture, in industry, and he tells us later on that a capital so employed is divided into fixed and circulating capital! But the investment of capital "in this manner" cannot make fixed or circulating capital of it.

Or does he mean to say that capital employed in the production of commodities and their sale at a profit must again be sold after its transformation into commodities and must pass in the first place from the possession of the seller into that of the buyer, and in the second place from its commodity-form into the money-form, so that it is of no use to its owner so long as it retains the same form in his hands? In that case, the problem amounts to this: The same capital-value, which formerly performed the functions of productive capital in a form typical of the process of production, neo performs those of commodity-capital and money-capital in forms typical of the process of circulation, where it is no longer either fixed or circulating capital. And this applies equally to those elements of value which are added by means of raw and auxiliary material, in other words to circulating capital, and to those which are added by the consumption of instruments of production, or to fixed capital. We do not get any nearer to the distinction between fixed and circulating capital in this way.

Adam Smith says furthermore: "The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another, and it is only by means of such circulation, or successive exchanges, that it can yield him any profit. Such capitals, therefore, may very properly be called circulating capital."

That which Adam Smith here calls circulating capital, is a thing which I shall call capital of circulation, that is to say, capital in a form characteristic of the process of circulation, changes of form due to exchange (a change of substance and of hands), in other words, commodity-capital and money-capital, as distinguished from the form of productive capital, which is characteristic of the process of production. These are not special divisions made by the industrial capitalist of his capital, but different forms assumed and discarded by the advanced capital-value during its course of life, in ever renewed cycles. The great backward step of Adam Smith as compared with the physiocrats is that he does not discriminate between these forms and those which arise in the circulation of capital-value through its successive metamorphoses while it exists in the form of productive capital, and which are due to different ways in which the various elements of productive capital take part in the formation of values and transfer their own value to the products. We shall see the consequences of confounding these fundamentals, productive capital and capital in the sphere of circulation (commodity-capital and money-capital) on one side, and fixed and circulating capital on the other. The capital-value advanced in fixed capital is as much circulated by the product as that which has been advanced in the circulating capital, and both are equally transformed into money-capital by the circulation of commodity-capital. The difference arises only from the fact that the value of fixed capital circulates piece-meal and is, therefore, reproduced in the same way in shorter or longer intervals in its natural form.

That Adam Smith means nothing else by this term of circulating capital in the above passage but capital of circulation, that is to say, capital in the form of commodity-capital and money-capital characteristic of the process of circulation, is shown by his singularly ill-chosen illustration. He selects for this purpose a kind of capital which does not belong to the process of production, but to the sphere of circulation. This is merchants' capital, which consists only of capital of circulation.

How absurd it is to start out with an illustration, in which capital does not perform the functions of productive capital, is immediately shown by himself,. "The capital of a merchant is altogether a circulating capital." But later on we learn that the difference between circulating and fixed capital arises out of the essential differences within the productive capital itself. On one side, Adam Smith has the distinction of the physiocrats in mind, on the other the different forms assumed by capital-value in its cycles. And these things are jumbled together by him without any discrimination.

But it is quite incomprehensible how profit should arise by the transformation of money and commodities, by the mere exchange of one of these forms for the other. And an explanation becomes impossible for Adam Smith, because he starts out with merchants' capital which moves only in the sphere of circulation. We shall return to this later. Let us first hear what he has to say about fixed capital.

"Secondly, it (capital) may be employed in the improvement of land, in the purchase of useful machines and instruments of trade, or in such like things as yield a revenue or profit without changing masters, or circulating any further. Such capitals, therefore, may very properly be called fixed capitals. Different occupations require very different proportions between the fixed and circulating capitals employed in them.... Some part of the capital of every master artificer or manufacturer must be fixed in the instruments of his trade. This part, however, is very small in some, and very great in others.... The far greater part of the capital of all such master artificers (such as tailors, shoemakers, weavers) however, is circulated, either in the wages of their workmen, or in the price of their materials, and to be repaid with a profit by the price of the work."

Apart from the naive determination of the source of profit, the weakness and confusion of these statements becomes at once apparent, when we consider, e.g., that, for a machine manufacturer, a machine is his product, which circulates as commodity-capital, or in Adam Smith's words, "is parted with, changes masters, circulates farther." According to his own definition, therefore, this machine would not be fixed, but circulating capital. This confusion is due to the fact that Smith confounds the distinction between fixed and circulating capital, which arises out of the different circulation of the various elements of productive capital, with differences of form successively assumed by the same capital when performing the functions of productive capital within the sphere of production, while in the circulation it becomes capital of circulation, that is to say commodity-capital and money-capital. According to the place which the same things occupy in the life-processes of capital, they may, in the opinion of Adam Smith, perform the functions of fixed capital (means of production, elements of productive capital), or of "circulating" commodity-capital (products transferred from the sphere of production to that of circulation).

But Adam Smith suddenly changes the entire basis of his division, and contradicts the statements with which he had opened his analysis a few lines previously. This is done especially by the statement that "there are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer," that is to say as circulating or as fixed capital. These two categories would, therefore, be different methods of employment of different capitals independent of one another, some being employed in industries, others in agriculture. But immediately he says: "Different occupations require very different proportions between the fixed and circulating capitals employed in them." Here fixed and circulating capital are no longer different independent investments of different capitals, but different proportions of the same productive capital, which represent different portions of the total value of this capital in different spheres of investment. They are here differences arising from the appropriate division of the productive capital itself and valid only with respect to it. But this is contrary to the distinction of commercial capital, which according to him is circulating capital as compared to fixed capital, when he says: "The capital of a merchant is altogether a circulating capital." It is indeed a capital performing its functions entirely within the sphere of circulation, and is for this reason distinguished from productive capital embodied in the process of production. But for this every reason it cannot be regarded as a constituent part of the circulating portion of productive capital, as distinguished from its fixed portion.

In the illustrations given by Adam Smith, he defines the instruments of trade as fixed capital, and the portion of productive capital invested in wages and raw materials, including auxiliary materials, as circulating capital, "repaid with a profit by the price of the work."

He starts out, then, from the various constituents of the labor-process, from labor-power (labor) and raw materials on one side, and instruments of labor on the other. And these are constituents of capital, because a quantity of values is invested in them for the purpose of performing the functions of capital.

To this extent they are material elements, modes of existence of productive capital, that is to say, of capital serving in the process of production. But why is one of these constituents called fixed? Because "some parts of the capital must be fixed in the instruments of trade." But the other parts are also fixed in wages and raw materials. Machines, however, and "instruments of trade...such like things...yield a revenue or profit without changing masters or circulating any further. Such capitals, therefore, may very properly be called fixed capitals."

Take, for instance, the mining industry. No raw material at all is used there, because the object of labor, such as copper, is the product of nature, which must be obtained first of all by labor. The copper to be obtained, the product of the process, which circulates later on as a commodity, or commodity-capital, does not form an element of productive capital. No part of its value is thus invested. On the other hand, the other elements of the productive process, such as labor-power, and auxiliary materials such as coal, water, etc., do not enter bodily into the product. The coal is entirely consumed and only its value enters into the product, just as a part of the value of the machine is transferred to it. The laborer, finally, remains just as independent so far as the product, the copper, is concerned, as the machine. Only the value which he produces by his labor becomes a part of the value of the copper. But in this illustration, not a single constituent part of productive capital changes masters, nor do any of them circulate further, because none of them enter bodily into the product. What becomes of the circulating capital in this case? According to Adam Smith's own definition, the entire capital employed in mining would consist only of fixed capital.

On the other hand, let us look at some other industry, which utilizes raw materials that form the substance of its product, and auxiliary materials that enter bodily into the product, instead of only so far as their value is concerned, as in the case of coal for fuel. Simultaneously with the product, for instance with the yarn, the raw material composing it, the cotton, likewise changes masters, and passes from the process of production to that of consumption. But so long as the cotton performs the function of an element of productive capital, its owner does not sell it, but manipulates it for the purpose of making it into yarn. He does not take his hand from it. Or, to use Smith's crudely erroneous and trivial terms, he does not make any profit by parting with it, by its changing masters, or by circulating it. He does not permit his materials to circulate any more than his machines. They are fixed in the process of production, the same as the spinning machines and the factory buildings. Indeed, a part of the productive capital in the form of coal, cotton, etc., must be just as continually fixed as that in the form of instruments of labor. The difference is only that the cotton, coal, etc., required for the process of production, say, for one week, is always entirely consumed in the manufacture of the weekly product, so that new specimens of cotton, coal, etc., must be supplied; in other words, these elements of productive capital consist continually of new specimens of the same species, identical only so far as the species is concerned, while the same individual spinning machine, the same individual factory-building, continue their participation in a whole series of weekly productions without being replaced by new specimens of their kind. All the elements of productive capital constituting its parts must be continually fixed in the process of production, for it cannot proceed without them. And all the elements of productive capital, whether fixed or circulating, are equally distinguished as productive capital from capital of circulation, that is to say, commodity-capital and money-capital.

It is the same with labor-power. A part of the productive capital must be continually fixed in it, and the same identical labor-powers, just as in the case of the machines, are everywhere employed for a certain length of time by the same capitalist. The difference between labor-power and machines in this case is not that the machines are bought once for all (which is not even the case when they are paid for in instalments), while the laborer is not. The difference is rather that the labor expended by the laborer enters wholly into the value of the product, while the value of the machines enters piecemeal into it.

Smith confounds different definitions, when he says of circulating capital as compared to fixed: "The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession or continues in the same shape." He places the merely formal metamorphosis of the commodity, which the product in the form of commodity-capital, undergoes in the sphere of circulation and which brings about the change of masters of the commodities, on the same level with the bodily metamorphosis, which the different elements of productive capital undergo during the process of production. He unceremoniously jumbles together the transformation of commodities into money, of money into commodities, or purchase and sale, with the transformation of elements of production into products. His illustration for circulating capital is merchants' capital which is transformed from commodities into money and from money into commodities—the metamorphosis C—M—C belonging to the circulation of commodities. But this metamorphosis within the circulation signifies for the industrial capital in action that the commodities into which the money is retransformed are elements of production (means of production and labor power), in other words, that it renders the function of industrial capital continuous, that it makes of the process of production a continuous one, a process of production. This entire metamorphosis takes place in circulation. It is the process of circulation which brings about the bodily transition of the commodities from one master to another. On the other hand, the metamorphoses experienced by productive capital within the process of production take place in the labor-process and are necessary for the purpose of transforming the elements of production into the desired product. Adam Smith clings to the fact that a part of the means of production (the instrument of labor, strictly speaking) serve in the labor process (yield a profit to their master, as he erroneously expresses it) without changing their natural form and wear out only by decrees; while another part, the materials, change their form and fulfill their duty as means of production by virtue of this very fact. This difference in the behavior of the elements of productive capital in the labor-process, however, serves only as the point of departure for the difference between fixed capital and capital which is not fixed, but it is not this difference itself. This is evident from the mere fact that this different behavior is common to all modes of production, whether they are capitalist or not. But on the other hand, this different behavior of the substances is accompanied by a different yield of value to the product, and this in its turn corresponds to a different reproduction of value by the sale of the product. And this is what constitutes the difference in question. Hence capital is not fixed capital, because it is fixed in the means of production, but because a part of the value invested in means of production remains fixed in them, while another part circulates as a part of the value of the product.

"If it (the stock) is employed in procuring future profit, it must procure this profit by staying with him (the employer), or by going from him. In the one case it is a fixed, in the other it is a circulating capital." (Page 189.)

In this statement, it is the crudely empirical conception of profit derived from the ideas of the ordinary capitalist, which is remarkable, being contrary to the better esoteric understanding of Adam Smith. Not only the price of the materials, but also that of the labor-power is reproduced by the price of the product, and so is that part of value which is transferred by wear and tear from the instruments of labor to the product. Under no circumstances does this reproduction yield any profits. Whether a value advanced for the production of a commodity is reproduced entirely or in part, at one time or gradually, by the sale of that commodity, cannot change anything except the manner and time of its reproduction. But it can in no way transform that which is common to both, the reproduction of value, into a production of surplus-value. We meet here once more the common idea that surplus-value arises only through sale, in the circulation, because it is not realized until the product is sold, until it circulates. As a matter of fact, the different genesis of the profit is in this case but a mistaken phrase for the truth that the different elements of productive capital are differently employed, and have a different effect in the labor-process as different productive elements. In the final analysis, the difference is not attributed to the process of production or self-expansion, not to the function of productive capital itself, but it is supposed to apply only subjectively to the individual capitalist, whom one part of capital serves a useful purpose in one way, while another does in a different way.

Quesnay, on the other hand, had derived this difference from the process of reproduction and its requirements. In order that this process may be continuous, the value of the annual advances must be annually reproduced in full by the value of the annual product, while the value of the capital stock is reproduced only by degrees, for instance, in ten years, and is not fully worn out to the point of replacement by another specimen of the same kind until then. Adam Smith here falls far below Quesnay.

Nothing remains therefore to Adam Smith for the determination of the fixed capital but the fact that it is represented by instruments of production which do not change their form in the process of production and continue to serve in production until they are worn out, as distinguished from the product, in the formation of which they co-operate. He forgets that all elements of productive capital are continually confronted in their natural form (instruments of labor, materials, and labor-power) by the product and by the circulating commodity, and that the difference between the part consisting of materials and labor-power and that consisting of instruments of labor is this: Labor-power is always purchased afresh, not bought for good like the instruments of labor; the materials manipulated in the labor-process are not the same identical specimens throughout, but always new specimens of the same kind. At the same time the false impression is created that the value of the fixed capital does not participate in the circulation, although Adam Smith has previously analyzed the wear and tear of fixed capital as a part of the price of the product.

In mentioning the circulating capital as distinguished from the fixed, he does not emphasize the fact, that this distinction rests on the circumstance that circulating capital is that part of productive capital which must be fully reproduced by the value of the product and must therefore fully share in its metamorphoses, while this is not so in the case of the fixed capital. On the contrary, he jumbles it together with those forms which capital assumes in its transition from the sphere of production to that of circulation, that is to say, commodity-capital and money-capital. But both forms, commodity-capital as well as money-capital, are bearers of the value of the fixed and the circulating parts of productive capital. Both of them are capitals of circulation, as distinguished from productive capital, but they do not represent circulating capital as distinguished from fixed capital.

Finally, owing to the entirely confused idea of the making of profit by the staying of the fixed capital in the process of production, and the passing from it and circulating of the circulating capital, the essential difference between the variable capital and the circulating parts of the constant capital in the process of self-expansion and the formation of surplus-value is hidden under the identity of form, so that the entire secret of capitalist production is obscured still more; by the application of the common term "circulating capital" this essential difference is abolished; political economy subsequently went still farther by neglecting the distinction between variable and constant capital and dwelling on the difference between fixed and circulating capital as the essential and typical distinction.

After Adam Smith has defined fixed and circulating capital as two different ways of investing capital, each of which yields a profit by itself, he says: "No fixed capital can yield any revenue but by means of a circulating capital. The most useful machines and instruments of trade will produce nothing without the circulating capital which affords the materials they are employed upon, and the maintenance of the workmen who employ them." (Page 188.)

Here it becomes apparent what the previously used phrases "yield a revenue, make a profit, etc.," signify, viz., that both parts of capital serve in the formation of the product.

Adam Smith then gives the following illustration: "That part of the capital of the farmer which is employed in the implements of agriculture is a fixed, that which is employed in the wages and maintenance of his laboring servants is a circulating capital." (Here the difference of fixed and circulating capital is correctly applied as referring to the different circulation, the turn-over of different constituent parts of productive capital.) "He makes a profit of the one by keeping it in his own possession, and of the other by parting with it. The price or value of his laboring cattle is a fixed capital" (here he is again correct in that it is the value, not the material substance, which determines the difference), "in the same manner as that of the instruments of husbandry; their maintenance" (meaning that of the laboring cattle) "is a circulating capital, in the same way as that of the laboring servants. The farmer makes his profit by keeping the laboring cattle and parting with their maintenance." (The farmer keeps the fodder of the cattle, he does not sell it. He uses it to feed the cattle, while he exploits the cattle themselves as instruments of labor. The difference is only this: The feed used for the maintenance of the cattle is wholly consumed and must be continually reproduced by new feed, either by means of the products of agriculture or by their sale; while the cattle themselves are reproduced only to the extent that each specimen becomes worn out.) "Both the price and the maintenance of the cattle which are bought in and fattened, not for labor, but for sale, are a circulating capital. The farmer makes his profit by parting with them." (Every producer of commodities, hence the capitalist producer likewise, sells his product, the result of his process of production, but this is not a means of constituting this product a part of either the fixed or the circulating part of his productive capital. The product has now rather that form, in which it is released from the process of production and compelled to perform the function of commodity-capital. The fattened stock serve in the process of production as raw material, not as instruments of labor like the laboring cattle. Hence the fattened cattle enter bodily into the product, and their whole value enters into it, just as that of the auxiliary material, the feed, does. The fattened cattle are, therefore, a circulating part of the productive capital, but they are not so, because the sold product, these same cattle, have the same natural form as the raw material, that is to say these cattle when not yet fattened. This is a mere coincidence. At the same time Adam Smith might have seen by this illustration that it is not the material form of the elements of production, but their function within the process of production, which determines the value contained in them as a fixed or circulating one.) "The whole value of the seed, too, is a fixed capital.... Though it goes backwards and forwards between the ground and the granery, it never changes masters, and therefore it does not properly circulate. The farmer makes his profit not by its sale, but by its increase."

At this point, the utter thoughtlessness of smith's distinction reveals itself. According to him, the seeds would be fixed capital, if there would be no change of masters, that is to say, if the seeds were directly reproduced out of the annual product by subtracting them from it. On the other hand, they would be circulating capital, if the entire product were sold and a part of its value employed for the purchase of another's seed. In the one case, there would be a change of masters, in the other there would not. Smith once more confounds circulating and commodity-capital at this point. The product is the material bearer of the commodity-capital, but of course only that part of it which actually enters into the circulation and does not re-enter directly into the process of production, from which it came as a product.

Whether the seed is directly subtracted as a part of the product, or whether the entire product is sold and a part of its value converted in the purchase of another man's seed, in either case it is mere reproduction which takes place, and no profit is produced by it. In the one case, the seed enters into circulation with the remainder of the product as a commodity, in the other it figures only in bookkeeping as a part of the value of the advanced capital. But in both cases, it remains a circulating part of the productive capital. It is entirely consumed in getting the product ready, and it must be entirely reproduced by means of it, in order to make self-expansion possible.

According to Adam Smith, raw and auxiliary materials lose their independent form, which they carried as use-values into the labor-process. Not so the instruments of labor proper. An instrument, a machine, a factory-building, a vessel, etc., serve in the labor-process only so long as they preserve their original form and enter the labor-process to-morrow in the same form in which they did yesterday. Just as they preserve their independent form as compared to the product during life, in the labor-process, so they do after death. The corpses of machines, shops, factory-buildings, still exist independently of the products, which they helped to form. (Book I, chapter VIII, page 227.)

These different ways in which means of production are used in the formation of the product, some of them preserving their independent form as compared to the product, others changing or losing it entirely,—this difference pertaining to the labor-process itself, regardless of whether it is carried on for home use, without exchange, without any production of commodities, as it was, for instance, in the patriarchal family, is falsified by Adam Smith, (1) by vitiating it with the irrelevant definition of profit, saying that some of the elements of production yield a profit to their owner by preserving their form, while others do so by losing it; (2) by jumbling together the changes of a part of the elements of production in the labor-process with that metamorphosis in the circulation of commodities which consists of the exchange, the sale and purchase, of products and involves a change of masters of the circulating commodities.

The turn-over presumes the reproduction by the intervention of the circulation, by the sale of the product, by its conversion into money and its reconversion from money into elements of production. But to the extent that a part of the product of the capitalist producer serves him directly as his own means of production, he figures as its seller to himself, and this transaction is so entered in his books. This part of the reproduction is not accomplished by the intervention of the circulation, but proceeds directly. But a part of the product thus re-employed as means of production replaces circulating, not fixed, capital, to the extent, (1) that its value passes wholly into the product, and (2) that it is itself wholly reproduced in its natural form by means of the new product.

Adam Smith, however, tells us what circulating and fixed capital consist of. He enumerates the things, the material elements, which form fixed, and those which form circulating capital, just as though this character were due to the natural substance of those things, instead of to their definite function within the capitalist process of production. And yet in book II, chapter I, he makes the remark that although a certain thing, for instance, a residence, which is reserved for direct consumption, "may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of the people can never be in the smallest degree increased by it." (Page 186.) Here, then, Adam Smith clearly states that the character of capital is not inherent in the things themselves, but is a function with which they may or may not be invested, according to circumstances. But what is true of capital in general, is also true of its subdivisions.

The same things form constituent parts of the circulating or fixed capital, according to whether they perform this or that function in the labor-process. A domestic animal, for instance, as a laboring animal (instrument of labor), represents the material mode of existence of fixed capital, while as stock for fattening (raw material) it is a constituent part of the circulating capital of the farmer. On the other hand, the same things serve either as constituent parts of productive capital, or belong to the fund for direct consumption. A house, for instance, when performing the function of a workshop, is a fixed part of productive capita; when serving as a residence, it is not at all a form of productive capital. The same instruments of labor may in many cases serve now as means of reproduction, now as means of consumption.

It was one of the errors following from the conception of Smith that the capacity of fixed and circulating capital was regarded as vested in the things themselves. The mere analysis of the labor-process on his part, in book I, chapter V, shows that the capacity of instruments of labor, materials of labor and products changes according to the different role played by one and the same thing in the process. The determination of what is fixed or circulating capital, in its turn, is based on the definite roles played by these elements in the labor-process, and therefore also in the process of the formation of value.

In the second place, in enumerating the things of which fixed and circulating capital may consist, Smith plainly discloses the fact that he jumbles together the distinction between fixed and circulating capital, applicable and justified only with reference to productive capital (capital in its productive form), with the distinction between productive capital and those of its forms which belong to the process of circulation, viz., commodity-capital and money-capital. He says in the same place (pages 187,188): "The circulating capital consists...of the provisions, materials, and finished work of all kinds that are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them, etc." Indeed, if we look closer, we observe that he has here, contrary to previous statements, used circulating capital as being equivalent to commodity-capital and money-capital, that is to say to two forms of capital which do not belong to the process of production at all, which are not circulating capital as opposed to fixed, but capital of circulation as opposed to productive capital. It is only in co-ordination with these that those constituents of productive capital, which are advanced in materials (raw materials or partly finished products) are actually embodied in the process of production, play a role. He says:

"...The third and last of the three portions into which the general stock of society naturally divides itself, is the circulating capital, of which the characteristic is, that it affords a revenue only by circulating or changing masters. This is composed likewise of four parts: first, of the money..." (but money is never a form of productive capital, of capital performing its function in the productive process; it is always merely one of the forms assumed by capital within its process of circulation.)..."secondly, of the stock of provisions which are in the possession of the butcher, the grazier, the farmer...and from the sale of which they expect to derive a profit... Fourthly and lastly, of the work which is made up and completed, but which is still in the hands of the merchant and manufacturer. And, thirdly, of the materials, whether altogether rude or more or less manufactured, of clothes, furniture, and buildings, which are not yet made up into any of those three shapes but which remain in the hands of the growers, the manufacturers, the mercers and drapers, the timber-merchants, the carpenters and joiners, the brick-makers, etc."

His second and fourth count contain nothing but products, which have been released by the process of production and must be sold; in short, they are products which now perform the function of commodities, or commodity-capital, and which, therefore, have a form and occupy a place in the process, in which they are not elements of productive capital, no matter what may be their destination, whether they answer their final purpose as use-values in individual or productive consumption. The products mentioned under secondly are foodstuffs, those under fourthly all other finished products, which in their turn consist only of finished instruments of labor or finished articles of consumption not included in the foodstuffs under count two.

The fact that Smith at the same time speaks of the merchant, shows his confusion. To the extent that the producer transfers his product to the merchant, it does no longer form any part of his capital. From the social point of view, it is indeed still a commodity-capital, although in other hands than those of its producer; but for the very reason that it is a commodity-capital, it is neither a circulating nor a fixed capital.

Under every mode of production not carried on for direct home-consumption the product must circulate as a commodity, that is to say, it must be sold, not in order to make a profit out of it, but that the producer may be able to live at all. Under the capitalist mode of production we have the further fact that the surplus-value embodied in a certain commodity is realized by its sale. In its capacity as a commodity, the product leaves the process of production and is, therefore, neither a fixed nor a circulating element of this process.

By the way, Smith here testifies against himself. The finished products, whatever may be their material form, their use-value, their utility, are all commodity-capital, that is to say capital in a form typical of the process of circulation. Being in this form, they are not constituent parts of any productive capital which their owner may have. Of course, this does not argue against the fact that, after their sale, they may become constituent parts of productive capital in the hands of their purchaser, and then represent either fixed or circulating capital. This shows that the same things, which at a certain time appear on the market as commodity-capital distinct from productive capital, may or may not perform the function of productive capital after they have been removed from the market.

The product of the cotton spinner, yarn, is the commodity-form of his capital, is a commodity-capital from his point of view. It cannot again perform the function of some constituent part of his productive capital, neither as raw material nor as an instrument of labor. But in the hands of the weaver who buys it, it is embodied in his productive capital as one of its circulating parts. For the spinner, on the other hand, the yarn is the bearer of the value of his fixed and circulating capital (not considering the surplus-value). So is a machine, the product of a machine maker, the commodity-form of his capital, commodity-capital from his point of view. And so long as it persists in this form, it is neither fixed nor circulating capital. But if it is sold to a manufacturer for use in his production, it becomes a fixed part of his productive capital. Even if a certain product re-enters as a use-value for the purpose of production into the same process from which it emanated, for instance coal in the production of coal, even then that part of the output of coal which is intended for sale represents neither fixed nor circulating capital, but commodity-capital.

On the other hand, the utility-form of a certain product may be such that it is incapacitated for service as an element of productive capital, either as raw material or an instrument of labor. This is the case, for instance, with articles of food. Nevertheless it is a commodity-capital for its producer, in which the value of his fixed as well as his circulating capital is incorporated; and it is the representative of the value of either the one or the other of these two forms according to whether the capital employed in its production has to be reproduced in full or partially, in other words, according to whether this capital transfers its full or its partial value to the product.

With Smith, in his count No. 3, the raw material (raw material, partly finished product, auxiliary material), does not figure as a part embodied in the productive capital, but merely as a special kind of use-values of which the social product generally consists, a mass of commodities existing apart from the other material elements, foodstuffs, etc., enumerated under Nos. 2 and 4. On the other hand, these materials are indeed incorporated in the productive capital and therefore also classed as its elements in the hands of the producer. The confusion arises from the fact that they are partly regarded as performing a function in the hands of the producer (in the hands of the growers, the manufacturers, etc.), and partly in the hands of merchants (mercers, drapers, timber-merchants), where they are merely commodity-capital, not elements of productive capital.

Indeed, Adam Smith forgets here, in the enumeration of the elements of circulating capital, all about the fact that the distinction of fixed and circulating capital applies only to the productive capital. He rather places commodity-capital and money-capital, the two forms of capital typical of the process of circulation, opposite of the productive capital, but quite unconsciously.

Finally, it is worthy of note that Adam Smith forgets to mention labor-power as one of the elements of productive capital. And there are two reasons for this.

We have just seen that, apart from money-capital, circulating capital is only another name for commodity-capital. But to the extent that labor-power circulates on the market, it is not capital, not a form of commodity-capital. It is not capital at all; the laborer is not a capitalist, although he brings his commodity to market, namely his own skin. Not until labor-power has been sold and incorporated in the process of production, in other words, until it has ceased to circulate as a commodity, does it became an element of productive capital, variable capital and the source of surplus-value, a circulating part of productive capital so far as the turn-over of the capital-value invested in it is concerned. Since Smith here confounds the circulating capital with commodity-capital, he cannot place labor-power under his category of circulating capital. Hence the commodity-capital here appears in the form of commodities which the laborer buys with his wages, that is to say, means of subsistence. In this form, the capital-value invested in wages is supposed to belong to the circulating capital. That which is incorporated in the process of production is labor-power, the laborer himself, not the means of subsistence by which the laborer maintains himself. True, we have seen in volume I, chapter XXIII, that, from the point of view of society, the reproduction of the laborer himself by means of his individual consumption belongs to the process of reproduction of social capital. But this does not apply to the individual and isolated process of production which we are studying here. The "acquired and useful abilities" which Smith mentions under the head of fixed capital, are on the contrary elements of circulating capital, when they are abilities of the wage-worker and have been sold by him with his labor.

It is a great mistake on the part of Smith to divide the entire social wealth into (1) a fund for immediate consumption, (2) fixed capital, and (3) circulating capital. According to this, wealth would have to be classified as (1) a fund for consumption, which would not represent a part of social capital engaged in the performance of its functions, although some parts of it may continually assist in this performance; and (2) as capital. In other words, a part of the wealth would be performing the functions of capital, another those of non-capital or a fund for consumption. And it seems that it is here an indispensable requirement for all capital to be either fixed or circulating, about in the same way that it is a natural necessity for a mammal to be either male or female. But we have seen that the distinction of being fixed or circulating applies solely to the elements of productive capital, that, therefore, there is also a considerable quantity of capital—commodity-capital and money-capital—existing in a form which does not permit of its being either fixed or circulating.

Seeing that the entire mass of social products, under capitalist production, circulates on the market as commodity-capital, with the exception of that part of the product which is directly consumed by the individual capitalist producers in its natural form as means of production without being sold or bought, it is evident that not only the fixed and circulating elements of productive capital, but also all the elements of the fund for consumption are derived from the commodity-capital. This is equivalent to saying that, on the basis of capitalist production, both means of production and of consumption first appear as commodity-capital, even though they are intended for later use as means of production or consumption. Labor-power itself is likewise found on the market as a commodity, if not as commodity-capital.

This accounts for the following confusion in Adam Smith: "Of these four parts" (meaning circulating capital, that is to say capital in its forms of commodity-capital and money-capital typical of the process of circulation, which Adam Smith transforms into four parts by making distinctions between the substantial parts of commodity-capital) "three—provisions, materials, and finished work, are either annually or in a longer or shorter period, regularly withdrawn from it, and placed either in the fixed capital, or in the stock reserved for immediate consumption. Every fixed capital is both originally derived from, and requires to be continually supported by, a circulating capital. All useful machines and instruments of trade are originally derived from a circulating capital, which furnishes the materials of which they are made and the maintenance of the workmen who make them. They require, too, a capital of the same kind to keep them in constant repair." (Page 188.)

With the exception of that part of the product which is immediately consumed as means of production, the following general rule applies to capitalist production: All products are taken to market as commodities and, therefore, circulate as capital in the form of commodities, as the commodity-capital of the capitalist, regardless of whether these products must or may serve in their natural form, as use-values, in the performance of their function as elements of productive capital in the process of production, in other words, as means of production and, therefore, as fixed or circulating parts of productive capital, or whether they can serve only as means of individual, not of productive, consumption. All products are thrown upon the market as commodities; all means of production or consumption, all elements of productive and individual consumption, must therefore be released from the market by purchasing them as commodities.

Of course, this truism is correct. It applies for this reason to the fixed as well as the circulating elements of productive capital, for instruments of labor as well as raw material in all its forms. (This, moreover, is leaving aside the fact that there are certain elements of productive capital which are furnished ready by nature and are not products.) A machine is bought on the market as well as cotton. But this implies by no means that every fixed capital comes originally from some circulating capital; it is only through the confusion, on the part of Smith, of capital of circulation with circulating capital, with capital that is not fixed, that this erroneous conclusion is reached. And to cap the climax, Smith refutes himself. According to him, machines, as commodities, form a part of No. 4, the circulating capital. To say that they come from the circulating capital means that they were performing the function of commodity-capital before they performed the function of machines, but that substantially they are derived from themselves; so is cotton, as the circulating element of some spinner's capital, derived from the cotton on the market. But as for deriving fixed capital from circulating capital for the reason that labor and raw material are required for the making of machines, as Adam Smith is doing in his further arguments, we say that in the first place, fixed capital is also required for the making of machines, and in the second place, fixed capital, such as machinery, is likewise required for the making of raw materials, since the productive capital always includes instruments of labor, but not always raw materials. He says himself immediately afterwards: "Lands, mines, and fisheries, require all both a fixed and circulating capital to cultivate them;"—thus he admits that not only circulating, but also fixed capital is required for the production of raw materials—"and"—renewed confusion at this point—"their produce replaces with a profit, not only those capitals, but all the others in society." (Page 188.) This is entirely wrong. Their produce furnishes the raw materials, auxiliary substances, etc., for all other branches of industry. But their value does not reproduce the value of all other social capitals; it reproduces merely the value of their own capital (plus the surplus-value). Adam Smith is here stampeded by his recollection of the physiocrats.

Socially speaking, it is true that that part of the commodity capital which consists of products available for immediate or later service as instruments of labor—unless they are produced uselessly and cannot be sold—must in fact perform this service whenever they cease to be commodities and become actual elements of the productive capital, in stead of being merely its prospective ones.

But there is a distinction arising from the natural form of the product.

A spinning machine, for instance, has no use-value, unless it is consumed in spinning, so that it performs its function as an element of production and, from the point of view of the capitalist, constitutes a fixed part of his capital. But a spinning machine is movable. It may be exported from the country in which it was produced and sold in a foreign country directly or indirectly, for raw materials, etc., or even for champagne. In that case it has served only as commodity-capital in the country in which it was produced, but never as fixed capital, not even after its sale.

But products which are localized by being imbedded in the soil, and therefore can be consumed only locally, such as factory buildings, railroads, bridges, tunnels, wharves, etc., improvements of the soil, etc., cannot be bodily exported. They are not movable. They are either useless, or they must serve as fixed capital, in the country that produced them, as soon as they have been sold. From the point of view of their capitalist producer, who builds factories or improves land for speculation and sale, these things are forms of his commodity-capital, or, according to Adam Smith, a form of circulating capital. But from the point of view of society, these things must finally serve in the same country as fixed capital in some process of production fixed by their own locality, unless they are to be useless. This does not imply by any means that immovable things are fixed capital of themselves. They may belong to the fund for consumption, for instance residence houses, and in that case they do not belong to the social capital at all, although they are an element of the social wealth, of which capital is only a part. The producer of these things, to use the language of Smith, makes a profit by their sale. In other words, circulating capital! Their user, their final purchaser, can use them only by utilizing them in the process of production. Therefore, fixed capital!

Titles to property, for instance railroad shares, may change hands every day, and their owner may even make a profit by their sale to foreign countries, so that the title may be exported, if not the railroad. But nevertheless these things themselves must either lie fallow in the country that produced them, or serve as a fixed part of some productive capital. In the same way the manufacturer A may make a profit by the sale of his factory to the manufacturer B, but this does not prevent the factory from serving as fixed capital, the same as before.

However, it does not follow that fixed capital necessarily consists of immovable things, because the locally fixed instruments of labor, which cannot be detached from the soil, must to all intents and purposes serve at some time as fixed capital in the same country, even though they may serve as commodity-capital for their producer and do not constitute any elements of his fixed capital, which is made up of the instruments of labor required by him for the building of factories, railroads, etc. A ship and a locomotive produce their effects only by motion; yet they serve as fixed capital for the owner who uses them, although not for him who produced them. On the other hand, some things which are very decidedly fixed in the process of production, which live and die in it and never leave it any more after they have entered it, are circulating parts of the productive capital. Such are, for instance, the coal consumed by the machine in the process of production, the gas used for lighting the factory, etc. They are circulating capital not because they bodily leave the process of production together with the product and circulate as commodities, but because their entire value is transferred to that of the product in whose production they assisted, so that their value must be entirely reproduced by the sale of the product.

In the last quotation from Adam Smith, notice must furthermore be taken of the following phrase: "A circulating capital which furnishes...the maintenance of the workmen who make them" (meaning machines, etc.).

In the works of the physiocrats, that part of capital which is advanced for wages figures correctly under the Avances annuelles as distinguished from the Avances primitives. On the other hand it is not the labor-power used as a part of the productive capital of the farmer which figures in their accounts, but the foodstuffs given to the farm laborers (the maintenance of workmen, as Smith calls it). This corresponds exactly to their specific doctrine. For according to them the value added to the product by labor (like the value added to the product by raw material, instruments of labor, etc., in short by all the substantial parts of constant capital) is equal only to the value of the articles of consumption paid to the laborers and necessary for the maintenance of their labor functions. Their doctrine stands in the way of their discovering the distinction between constant and variable capital. If it is labor that produces surplus-value in addition to the reproduction of its own price, then it does so in industry as well as in agriculture. But since, according to their system, surplus-value arises only in one branch of production, namely, agriculture, it does not come out of labor, but out of the special activity (assistance) of nature in this branch. And only for this reason agricultural labor is for them productive labor, as distinguished from other kinds of labor.

Adam Smith classes the maintenance of laborers among the circulating capital as distinguished from fixed.

1. Because he confounds circulating capital as distinguished from fixed with forms of capital belonging to the sphere of circulation, with capital of circulation; this mistake persisted after him without being criticized. He therefore confounds the commodity-capital with the circulating part of the productive capital, and in that case it is a matter of course that, whenever the social product assumes the form of commodities, the maintenance of the laborers as well as that of the non-laborers, the materials as well as the instruments of labor, must be taken out of the commodity-capital.

2. But the physiocratic conception likewise intermingles with the analysis of Smith, although it contradicts the esoteric—really scientific—part of his own deductions.

The advanced capital is universally converted into productive capital, that is to say it assumes the form of elements of production which are themselves the products of past labor. Labor-power is included in them. Capital can serve in the process of production only in this form. Now, if instead of labor-power itself we take the laborer's necessities of life into which the variable part of capital has been converted, it is evident that these necessities of life are not essentially different, so far as the formation of values is concerned, from the other elements of productive capital, from the raw materials and the food of the laboring cattle, with whom Smith, after the manner of the physiocrats, places the laborers on the same level, in one of the passages quoted above. The necessities of life cannot expand their own value or add any surplus-value to it. Their value, like that of the other elements, can re-appear only in that of the product. They cannot add any more to their value than they have themselves. They, like raw materials, partly finished articles, etc., differ from fixed capital composed of instruments of labor only in that they are entirely consumed in the product of the capitalist who pays for them and uses them in the manufacture of this product, so that their value must be entirely reproduced by this product, while in the case of the fixed capital this takes place gradually and piecemeal. The part of productive capital advanced for labor-power (or for the laborer's articles of consumption) differs here only in the matter of material from the other material elements of productive capital, not in the matter of the process of production or self-expansion. It differs only in so far as it falls into the same category, namely, that of circulating capital, with one part of the objective elements active in the formation of the product (materials, Adam Smith calls them), while another part of these belongs in the category of fixed capital.

The fact that the capital invested in wages belongs to the circulating part of productive capital and shares this circulating quality, as distinguished from the fixed character of productive capital, with a part of the material objects, the raw materials, etc., instrumental in creating the product, has nothing whatever to do with the role played by this variable part of capital in the process of self-expansion, as distinguished from the constant part of capital. It refers merely to the manner in which this part of the invested capital-value is reproduced out of the value of the product by way of the circulation. The purchase and repeated purchase of labor-power belongs in the process of circulation. But it is only within the process of production that the value invested in labor-power (not for the benefit of the laborer, but that of the capitalist) is converted from a definite constant into a variable magnitude, and only thus the advanced value is converted into capital-value, into self-expanding value. But by classing the value advanced for articles of consumption among the circulating elements of productive capital, as Smith does, instead of the value invested in labor-power, the understanding of the difference between variable and constant capital, and thus the understanding of the capitalist process of production in general, is rendered impossible. The mission of this part of capital of being variable as distinguished from the constant capital invested in material objects instrumental in production, is hidden under the mission of the capital invested in labor-power of serving in the turn-over as a circulating part of productive capital. And the obscurity is made complete by enumerating the laborer's maintenance among the elements of productive capital, instead of his labor-power. It is immaterial, whether the value of labor-power is advanced in money or immediately in articles of consumption. However, under capitalist production, the last-named eventuality can be but an exception. 30

By thus emphasizing the role of the circulating capital as the determining element of the capital-value invested in labor-power, by using this physiocratic conception without the fundamental premise of the physiocrats, Adam Smith haply rendered the understanding of the role of variable capital as a determinant of capital invested in labor-power impossible for his followers. The more profound and correct analyses given by him in other places did not survive, but this mistake of his did. Other writers after him went even farther. They were not content to make it the essential characteristic of capital invested in labor-power to be circulating as distinguished from fixed capital; they rather made it an essential mark of circulating capital to be invested in articles of consumption for laborers. This resulted naturally in the doctrine of a labor fund of definite magnitude consisting of requirements of life, which on one side established a physical limit for the share of the laborers in the social product, and on the other had to be fully expended in the purchase of labor-power.

Part II, Chapter XI
THEORIES OF FIXED AND CIRCULATING CAPITAL. RICARDO.

Ricardo mentions the distinction between fixed and circulating capital merely for the purpose of illustrating the exceptions to the law of value, namely, in cases where the rate of wages affects the prices. The discussion of this point is reserved for volume III.

But the original confusion is apparent at the outset in the following indifferent parallel: "This difference in the degree of durability of fixed capital, and this variety in the proportions in which the two sorts of capital may be combined." (Principles, page 25.)

And if we ask him which two sorts of capital he is referring to, we are told: "The proportions too, in which the capital that is to support labor, and the capital that is invested in tools, machinery, and buildings, may be variously combined." (l. c.) In other words, fixed capital consists of instruments of labor, and circulating capital is such as is invested in labor. "Capital that is to support labor" is a senseless term culled from Adam Smith. On one hand, the circulating capital is here confounded with the variable capital, that is to say, with that part of productive capital which is invested in labor. On the other hand, twice confounded conceptions arise for the reason that the distinction is not between variable and constant capital and derived from the process of self-expansion, but from the process of circulation repeating the old confusion of Smith.

1. The difference in the degree of durability of fixed capital and the difference in the proportion in which constant and variable capital may be combined, are conceived as being of equal significance. But the last-named difference determines the difference in the production of surplus-value; the first-named, on the other hand, refers merely to the manner in which a given value is transferred from a means of production to the product, in so far as the process of self-expansion is concerned; and as for the process of circulation, this difference refers only to the period of the reproduction of the advanced capital, or, from another point of view, the time for which it has been advanced. Of course, if one looks upon the capitalist process of production in the light of a completed phenomenon, instead of seeing through its internal machinery, then these differences coincide. In the distribution of the social surplus-value among the various capitals invested in different lines of production, the proportions of the different periods of time for which capital has been advanced (for instance, the different durability of fixed capital) and the different organic composition of capital (and therefore also the different circulation of constant and variable capital) contribute equally toward an equalization of the general rate of profit and the conversion of values into prices of production.

From the point of view of the process of circulation, we have on one side the instruments of labor—fixed capital, on the other the materials of labor and wages—circulating capital. But from the point of view of the process of production and self-expansion, we have on one side means of production (instruments of labor and raw material)—constant capital; on the other, labor-power—variable capital. It is immaterial for the organic composition of capital (Book I, Chap. XXV, 2, page 683) whether the same quantity of constant capital consists of many instruments of labor and little raw material, or of much raw material and few instruments of labor, but everything depends on the proportion of the capital invested in means of production to that invested in labor-power. Vice versa, from the point of view of the process of circulation, of the difference between fixed and circulating capital, it is just as immaterial in what proportions a given amount of circulating capital is divided between raw material and wages. From one of these points of view the raw material is classed in the same category with the instruments of labor, as compared to the capital-value invested in labor-power; from the other the capital-value invested labor-power ranks with that invested in raw material, as compared to that invested in instruments of labor.

For this reason, the capital-value invested in materials of labor (raw and auxiliary materials) does not appear on either side. It disappears entirely. For it does not agree with the side of fixed capital, because its mode of circulation coincides entirely with that of the capital-value invested in labor-power. And on the other hand, it must not be placed on the side of circulating capital, because in that case the identification of the distinction between fixed and circulating capital with that of constant and variable capital, which had been carried over from Adam Smith and tacitly perpetuated, would abolish itself. Ricardo has too much logical instinct not to feel this, and for this reason that part of capital disappears entirely for him.

It is to be noted at this point that the capitalist, to use the language of political economy, advances the capital invested in wages for different periods, according to whether he pays these wages weekly, monthly, or quarterly. But in reality, the reverse takes place. The laborer advances his labor to the capitalist for one week, one month, or three months, according to whether he is paid by the week, by the month, or every three months. If the capitalist really were to buy labor-power, instead of only paying for it, in other words, if he were to pay the laborer in advance for a day, a week, a month, or three months, then he would be justified in claiming that he advanced wages for those periods. But since he does not pay until labor has lasted for days weeks, or months, instead of buying it and paying for the time which it is intended to last, we have here a confusion of terms on the part of the capitalist, who performs the trick of converting an advance of labor made to the capitalist by the laborer into an advance of money made to the laborer by the capitalist. It does not alter the case that the capitalist may not get any returns from his product by way of the circulation in the shape of a reproduction of his product or of its value (increased by the surplus value embodied in it) until after a certain length of time, according to the different periods required for its manufacture, or for its circulation. It does not concern the seller of a commodity what its buyer is going to do with it. The capitalist does not get a machine cheaper, because he must advance its entire value at one time, while this value returns to him only gradually and piecemeal by way of the circulation; nor does he pay more for cotton, because its value is assimilated fully by the product into which it is made over, and is therefore fully recovered at one time by the sale of the product.

Let us return to Ricardo.

1. The characteristic mark of variable capital is that a certain given, and to that extent constant, part of capital representing a given sum of values (supposed to be equal to the value of labor-power, although it is immaterial for this discussion whether wages are equal to the value of labor-power or higher or lower than it) is exchanged for a self-expanding power which creates value, namely, labor-power, which not only reproduces the value paid for it by the capitalist, but produces a surplus-value, a value not previously existing and not paid for by any equivalent. This characteristic mark of the capital-value advanced for wages, which distinguishes it as a variable capital from constant capital, disappears whenever the capital-value advanced for wages is considered solely from the point of view of the circulation, for then it appears as a circulating capital as distinguished from the fixed capital invested in instruments of labor. This is apparent from the simple fact that it is then classed under one head, namely, under that of circulating capital, together with a part of the constant capital, namely, that which is invested in raw materials, and thus distinguished from another part of constant capital, namely, that invested in instruments of labor. The surplus-value, the very fact which converts the advanced sum of values into capital, is entirely ignored under these circumstances. Furthermore, the fact is ignored that the value added to the product by the capital invested in wages is newly produced (and therefore actually reproduced), while the value transferred from the raw material to the product is not newly produced, not actually reproduced, but only preserved in the value of the product and merely reappears as a part of the value of the product. The distinction, as seen from the point of view of the contrast between fixed and circulating capital, consists now simply in this: The value of the instruments of labor used for the production of a certain commodity is transferred only partially to the value of the commodity and is therefore only partially recovered by its sale, is only partially and gradually returned. On the other hand, the value of the labor-power and materials of labor (raw materials, etc.) used in the production of a certain commodity is entirely assimilated by it, and is therefore entirely recovered by its sale. From this stand-point, and with reference to the process of circulation, one part of capital appears as fixed, the other as circulating. In both cases it is a matter of a transfer of definite advanced values to the product and of their recovery by the sale of the product. The only difference which is essential at this point is whether the transfer of values, and consequently their recovery, proceeds gradually or in one bulk. By this means the really decisive difference between the variable and constant capital is blotted out, the whole secret of the production of surplus-value and of capitalist production, namely, the circumstances which transform certain values and the things in which they are contained into capital, are obliterated. All constituent parts of capital are then distinguished merely by their mode of circulation (and, of course, circulation concerns itself solely with already existing values of definite size). And the capital invested in wages then shares a peculiar mode of circulation with a part of capital invested in raw materials, partly finished articles, auxiliary substances, as distinguished from another part of capital invested in instruments of labor.

It is, therefore, easy to understand why the bourgeois political economy instinctively clung to Adam Smith's confusion of the categories of "constant and variable capital" with the categories "fixed and circulating capital," and repeated it parrotlike from generation to generation for a century. The capital invested in wages is not in the least distinguished by bourgeois political economy from capital invested in raw materials, and differs only formally from constant capital to the extent that it is partially or in bulk circulated by the product. In this way the first requirement for an understanding of the actual movement of capitalist production, and thus of capitalist exploitation, is buried at one stroke. It is henceforth but a question of the reappearance of advanced values.

In Ricardo the uncritical adoption of the Smithian confusion is annoying, and not only more so than in the later apologetic writers, in whom the confusion of terms is rather otherwise than annoying, but also more than in Adam Smith himself, because Ricardo is comparatively more consistent and clear in his analysis of value and surplus-value, and indeed rescues the esoteric Adam Smith from the exoteric Adam Smith.

Among the physiocrats this confusion is not found. The distinction between avances annuelles and avances primitives refers only to the different periods of reproduction of the various parts of capital, especially of agricultural capital; while their ideas concerning the production of surplus-value form a part of their theory, apart from these distinctions, being upheld by them as the salient point of this theory. The formation of surplus-value is not explained out of capital as such, but only attributed to one special sphere of production of capital, namely, agriculture.

2. The essential point in the determination of variable capital—and therefore for the conversion of any sum of values into capital—is that the capitalist exchanges a definite given, and to that extent constant, magnitude of values for a power which creates values, a magnitude of values for a production, a self-expansion, of values. It does not alter this essential fact that the capitalist may pay the laborer either in money or in means of subsistence. This alters merely the mode of existence of the value advanced by the capitalist, seeing that in one case it has the form of money for which the laborer himself buys his means of subsistence on the market, in the other case that of means of subsistence which he consumes directly. A developed capitalist production rests indeed on the assumption that the laborer is paid in money and more generally on the assumption that the process of production is promoted by the process of circulation, in other words, by the monetary system. But the production of surplus-value—and consequently the capitalization of the advanced sum of values—has its source neither in the money-form, nor in the natural form, of wages, or of the capital invested in the purchase of labor power. It arises out of the exchange of value for a power creating value, the conversion of a constant into a variable magnitude.

The greater or smaller fixity of the instruments of labor depends on the degree of their durability, on their physical properties. According to the degree of their durability, other circumstances being equal, they will wear out fast or slowly, will serve a long or a short time as fixed capital. The raw material in metal factories is just as durable as the machines used in manufacturing, and more durable than many parts of these machines, such as leather, wood, etc. Nevertheless the metal serving as raw material forms a part of the circulating capital, while the instrument of labor, although probably built of the same metal, is a part of the fixed capital, when in use. Hence it is not the substantial physical nature, not its great or small durability, to which the same metal owes its place, now in the category of the fixed, now of the circulating capital. This distinction is rather due to the role played by it in the process of production, being an object of labor in one case, and an instrument of labor in another.

The function of an instrument of labor in the process of production requires generally, that is should serve for a longer or shorter period in ever renewed labor processes. Its function, therefore, determines the greater or lesser durability of its substance. But it is not the durability of the material of which it is made that gives to it the character of fixed capital. The same material, if in the shape of raw material, becomes a circulating capital, and among those economists who confound the distinction between commodity-capital and productive-capital with that between circulating and fixed capital the same material, the same machine, are circulating capital as products and fixed capital as instruments of labor.

Although it is not the durability of the material of which it is made that gives to an instrument of labor the character of fixed capital, nevertheless its role as such an instrument requires that it should be composed of relatively durable material. The durability of its material is, therefore, a condition of its function as an instrument of labor, and consequently the material basis of the mode of circulation which renders it a fixed capital. Other circumstances being equal, the greater or lesser durability of its material endows it in a higher or lower degree with the quality of fixedness, in other words, its durability is closely interwoven with its quality of being a fixed capital.

If the capital-value advanced for labor-power is considered exclusively from the point of view of circulating capital, in distinction from fixed capital, and if consequently the distinction between constant and variable capital is confounded with that between fixed and circulating capital, then it is natural to attribute the character of circulating capital, in distinction from fixed capital, to the substantial reality of the capital invested in labor-power, just as the substantial reality of the instrument of labor constitutes an essential element of its character of fixed capital, and to determine the circulating capital by the substantial reality of the variable capital.

The real substance of the capital invested in wages is labor itself, active, value creating, living labor, which the capitalist trades for dead, materialized labor and embodies in his capital, by which means alone the value in his hands is transformed into a self-expanding value. But this self expanding power is not sold by the capitalist. It is always solely a constituent part of his productive capital, the same as his instruments of labor; it is never a part of his commodity-capital, as, for instance, the finished product which he sells. Within the process of production, as parts of his productive capital, the instruments of labor are not distinguished from labor-power as fixed capital any more than the raw materials and auxiliary substances are identified with it as circulating capital. Labor confronts both of them as a personal factor, while they are objective things—speaking from the point of view of the process of production. Both of them stand opposed to labor-power, to variable capital, as constant capital—speaking from the point of view of the process of self-expansion. Or, if mention is to be made here of a difference in substance, so far as it affects the process of circulation, it is only this: It follows from the nature of value which is nothing but materialized labor, and from the nature of active labor-power which is nothing but labor in process of materialization, that labor-power continually creates value and surplus-value during the process of its function; that the thing which on the part of labor-power appears as motion and a creation of value, appears on the part of its product as rest and as a created value. If the labor-power has performed its function, then capital no longer consists of labor-power on one side, and means of production on the other. The capital value invested in labor is then value added with a surplus-value to the product. In order to respect the process, the product must be sold, and new labor-power must be bought with the money so obtained, in order to be once more embodied in the productive capital. It is this which then gives to the capital invested in labor-power, and to that invested in raw materials, etc., the character of circulating capital as distinguished from the capital remaining fixed in instruments of labor.

But if the secondary quality of the circulating capital, which it shares with a part of the constant capital (raw and auxiliary materials), is made the essential mark of capital invested in labor-power, to wit, the transfer of the full value invested in it to the product in whose manufacture it is consumed, instead of a gradual and successive transfer such as takes place in the case of the fixed capital, and the consequent total reproduction of this value by the sale of the product, then the value invested in wages must likewise consist, not of active labor-power, but of the material elements which the laborer buys with his wages, in other words, it must consist of that part of the social commodity-capital which passes into the individual consumption of the laborer, of means of subsistence. In that case, the fixed capital would consist of the more durable instruments of labor which are reproduced more slowly, and the capital invested in labor-power would consist of the means of subsistence, which must be more rapidly reproduced.

However, the boundaries of greater or smaller durability pass imperceptibly into one another.

"The food and clothing consumed by the laborer, the buildings in which he works, the implements with which his labor is assisted, are all of a perishable nature. There is, however, a vast difference in the time for which these different capitals will endure: a steam-engine will last longer than a ship, a ship than the clothing of the laborer, and the clothing of the laborer longer than the food which he consumes." (Ricardo, etc., page 27.)

Ricardo does not mention the house, in which the laborer lives, his tools of consumption, such as knives, forks, dishes, etc., all of which have the same quality of durability as the instruments of labor. The same things, the same classes of things, appear in one place as means of consumption, in another as instruments of labor.

The difference, as stated by Ricardo, is this: "According as capital is rapidly perishable and requires to be frequently reproduced or is of slow consumption, it is classed under the heads of circulating or fixed capital."

He remarks in addition thereto: "A division not essential, and in which the line of demarcation cannot be accurately drawn."

Thus we have once more arrived among the physiocrats, where the distinction between avances annuelles and avances primitives was one referring to the period of consumption, and consequently also to the different time of reproduction of the invested capital. Only, that which in their case constitutes a phenomenon important for society and for this reason is assigned in the Tableau Economique a place of interrelation with the process of circulation, becomes here, in Ricardo's own words, a subjective and unessential division.

As soon as the capital-value invested in labor-power differs from that invested in instruments of labor only by its period of reproduction and term of circulation, as soon as one part of capital consists of means of subsistence, another of instruments of labor, so that these differ from those only by the degree of their durability, which durability is further different for the various kinds of each class, it follows as a matter of course that all specific difference between the capital invested in labor-power and that invested in means of production is obliterated.

This runs very much counter to Ricardo's theory of value, likewise to his theory of profit, which is actually a theory of surplus-value. He does not consider the difference between fixed and circulating capital any further than is required by the way in which different proportions of both of them, in equal capitals invested in different branches of production, influence the law of value, particularly the extent to which an increase or decrease of wages in consequence of these conditions affects prices. But even within this restricted analysis, he commits the gravest errors on account of the confusion in the definitions of fixed and circulating, constant and variable capital. Indeed, he starts his analysis on an entirely wrong basis. In the first place, in so far as the capital-value invested in labor-power has to be considered under the head of circulating capital, he gives a wrong definition of circulating capital and misunderstands particularly the circumstances which place the capital-value invested in labor-power under this heading. In the second place, he confounds the definition, according to which the capital-value invested in labor-power is a variable capital, with that according to which it is circulating as distinguished from fixed capital.

It is evident from the beginning that the definition of capital-value invested in labor-power as circulating capital is a secondary one, obliterating its specific difference in the process of production. For on one hand, the values invested in labor-power are identified in this definition with those invested in raw materials. A classification which identifies a part of the constant capital with the circulating capital does not appreciate the specific difference of variable from constant capital. On the other hand, while the values invested in labor-power are indeed distinguished from those invested in instruments of labor, the distinction is based only on the fact that the values incorporated in them are transferred to the product in different periods of time, not on the fact that this transfer is significant for the radically different manner in which either of them passes into the production of values.

In all of these cases, it is a question of the manner in which a given value, invested in the process of production of commodities, whether the investment be made in wages, in the price of raw materials, or in that of instruments of labor, is transferred to the product, then circulated by it, and returned to its starting point by the sale of the product, or reproduced. The only difference lies here in the "how," in the particular manner of the transfer, and therefore also in the circulation of this value.

Whether the price of labor-power previously agreed upon by contract in each case is paid in money or in means of subsistence, does not alter in any way the fact that it is a fixed price. However, it is evident in the case of wages paid in money, that it is not the money which passes into the process of production in the way that the value as well as the material of the means of production do. But if the means of subsistence which the laborer buys with his wages are directly classed in the same category with raw materials, as the material form of circulating capital distinguished from instruments of labor, then the matter assumes a different aspect. While the value of these things, the instruments of labor, is transferred to the product in the process of production, the value of those things, the means of subsistence, reappears in the labor-power that consumes them and is likewise transferred to the product by the exertion of this power. In every one of these cases it is a question of the mere reappearance of the values invested in production by means of transfer to the product. The physiocrats for this reason took this aspect of the matter seriously and denied that industrial labor could create any values. This is shown by a previously quoted passage of Wayland, in which he say that it is immaterial in which form the capital reappears, and that the different kinds of food, clothing, and shelter which are required for the existence and well-being of man are likewise changed, being consumed in the course of time while their value reappears. (Elements of Political Economy, pages 31 and 32.) The capital-values invested in production in the form of means of production and means of subsistence both reappear in the value and means of subsistence both reappear in the value of the product. By this means the transformation of the capitalist process of production into a complete mystery is happily accomplished and the origin of the surplus-value incorporated in the product is entirely concealed.

At the same time, this perfects the fetishism typical of bourgeois political economy, which pretends that the social and economic character of things, arising from the process of social production, is a natural character due to the material substance of those things. For instance, instruments of labor are designated as fixed capital, a scholastic mode of definition which leads to contradictions and confusion. Just as we demonstrated in the case of the process of production (Vol. I, chapter VII), that it depends on the role, the function, performed by the various material substances in a certain process of production, whether they served as instruments of labor, raw materials, or products, just so we now claim that instruments of labor are fixed capital only in cases where the process of production is a capitalist process of production and the means of production are, therefore, capital and possess the economic form and social character of capital. And in the second place, they are fixed-capital only when they transfer their value to the product in a certain peculiar way. Unless they do so, they remain instruments of labor without being fixed-capital. In the same way, auxiliary materials, such as manure, if they transfer their value in the same peculiar manner as the greater part of the instruments of labor, become fixed capital, although they are not instruments of labor. It is not the definitions, which are essential in determining the character of these things. It is their definite functions which express themselves in definite categories.

If it is considered as one of the qualities exhibited by means of subsistence under all circumstances to be capital invested in wages, then it will also be a quality of this "circulating" capital "to support labor." (Ricardo, page 25.) If the means of subsistence were not "capital," then they would not support labor, according to this; while it is precisely their character of capital which endows them with the faculty of supporting capital by means of the labor of others.

If means of subsistence are of themselves capital circulating after being converted into wages, it follows furthermore that the magnitude of wages depends on the proportion of the number of laborers to the existing quantity of circulating capital—a favorite economic law—while as a matter of fact the quantity of means of subsistence withdrawn from the market by the laborer, and the quantity of means of subsistence available for the consumption of the capitalist, depend on the proportion of the surplus-value to the price of labor.

Ricardo as well as Barton 31 everywhere confound the relation between variable and constant capital with that between circulating and fixed capital. We shall see later, to what extent this vitiates Ricardo's analyses concerning the rate of profit.

Ricardo furthermore identifies the distinctions which arise in the turn-over from other causes than the difference between fixed and circulating capital, with these same differences: "It is also to be observed that the circulating capital may circulate, or be returned to its employer, in very unequal times. The wheat bought by a farmer to sow is comparatively a fixed capital to the wheat purchased by a baker to make into loaves. The one leaves it in the ground, and can obtain no return for a year: the other can get it ground into flour, sell it as bread to his customers, and have his capital free, to renew the same, or commence any other employment in a week." (Pages 26 and 27.)

In this passage, it is characteristic that wheat, although not serving as a means of subsistence, but as raw material when used for sowing, is supposed in the first place to be circulating capital, because it is in itself a food, and in the second place a circulating capital, because its reproduction extends over one year. However, it is not so much the slow or rapid reproduction which makes a fixed capital of a means of production, but rather the manner in which it transfers its value to the product.

The confusion caused by Adam Smith has brought about the following results:

1. The distinction between fixed and circulating capital is confounded with that between productive capital and commodity-capital. For instance, a machine is said to be circulating capital when on the market as a commodity, and fixed capital when incorporated in the process of production. Under these circumstances, it is impossible to ascertain why one kind of capital should be more fixed or circulating than another.

2. All circulating capital is identified with capital invested, or about to be invested, in wages. This is the case with John Stewart Mill, and others.

3. The difference between variable and constant capital, which had been previously mistaken by Barton, Ricardo, and others, for that between circulating and fixed capital, is finally identified with this last-named difference, for instance by Ramsay, who calls all means of production, raw materials, etc., including instruments of labor, fixed capital, and only that which is invested in wages circulating capital. But on account of the reduction of the problem to this form, the real difference between variable and constant capital is not understood.

4. The latest English, and especially Scotch, economists, who look upon all things from the inexpressibly petty point of view of a bank clerk, such as MacLeod, Patterson, and others, transform the difference between fixed and circulating capital into one of money at call and money not at call.

Part II, Chapter XII
THE WORKING PERIOD.

Take two branches of production, with equal working days, for instance of ten hours each, one of them a cotton spinnery, the other a locomotive factory. In one of these branches, a definite quantity of finished product, cotton yarn, is completed daily, or weekly; in the other, the productive process may have to be repeated for three months in order that the finished product, a locomotive, may be ready. In one case, the product is made up of separate lots, and the same labor is repeated daily or weekly. In the other case, the labor process is continuous and extends over a prolonged number of daily labor-processes which, in their continuity, result in the finished product. Although the duration of the working day is the same in both cases, there is a marked difference in the duration of the productive act, that is to say, in the duration of the repeated labor-processes, which are required in order to complete the finished product, to get it ready for its role as a commodity on the market, in other words, to convert it from a productive into a commodity-capital. The difference between fixed and circulating capital has nothing to do with this. The difference just indicated would exist, even if the very same proportions of fixed and circulating capital were employed in both branches of production.

These differences in the duration of the productive acts are found not alone in two different spheres of production, but also within one and the same sphere of production, according to the volume of the intended product. An ordinary residence house is built in less time than a large factory and therefore requires a smaller number of consecutive labor-processes. While the building of a locomotive requires three months, that of an ironclad requires one year or more. The production of grain extends over nearly a year, that of horned cattle over several years, and the production of timber may require from twelve to one hundred years. A country road may be completed in a few months, while a railroad requires years. An ordinary carpet is made in about a week, while Gobelins requires years, etc. The differences in the duration of the productive act are, therefore, infinitely manifold.

It is evident that a difference in the duration of the productive act must beget a difference in the velocity of the turn-over, even if the invested capitals are equal, in other words, must make a difference in the time for which a certain capital is advanced. Take it that a cotton spinnery and a locomotive factory employ the same amount of capital, that the proportion between their constant and variable capital is the same, likewise that between fixed and circulating capital, and that finally their working day is of equal length and its division between necessary and surplus-labor the same. In order to eliminate, furthermore, all the external circumstances arising out of the process of circulation, we shall assume that both the yarn and the locomotive are made to order and will be paid on delivery of the finished product. At the end of the week, the cotton spinner recovers his outlay for circulating capital (making exception of surplus-value), likewise the wear and tear of fixed capital incorporated in the value of the yarn. He can, therefore, repeat the same cycle with the same capital. It has completed its turn-over. The locomotive manufacturer, on the other hand, must advance even new capital for wages and raw material every week for three months in succession, and it is only after three months, after the delivery of the locomotive, that the circulating capital gradually invested in one and the same productive act for the manufacture of one and the same commodity once more returns to a form in which it can renew its cycle. The wear and tear of his machinery is likewise covered only at the end of three months. The investment of the one is made for one week, that of the other is the investment of one week multiplied by twelve. All other circumstances being assumed as equal, the one must have twelve times more circulating capital at his disposal than the other.

It is, however, an immaterial condition that the capitals advanced weekly should be equal. Whatever may be the quantity of the invested capital, it is advanced for one week in one case, and for twelve weeks in the other, before the same operation can be repeated with it, or another inaugurated.

The difference in the velocity of the turn-over, or in the length of time for which the capital is advanced before the same capital-value can be employed in a new process of production or self-expansion, arises here from the following circumstances:

Take it that the manufacture of a locomotive, or of any other machine, requires 100 working days. So far as the laborers employed in the manufacture of yarn or of the locomotive are concerned, 100 working days constitute in either case a discontinuous magnitude, representing, according to our assumption, 100 consecutive, but separate labor-processes of ten hours each. But with reference to the product—the machine—these 100 working days are a continuous magnitude, a working day of 1,000 working hours, one single connected act of production. I call such a working day, which is formed by the succession of more or less numerous connected working days, a working period. If we speak of a working day, we mean the length of working time during which the laborer must daily spend his labor-power, must work day by day. But if we speak of a working period, then we mean a number of consecutive working days required in a certain branch of production for the completion of the finished product. In this case, the product of every working day is but a partial one, being elaborated from day to day and receiving its complete form only at the end of a longer or shorter period of labor, when it is at last a finished use-value.

Interruptions, disturbances of the process of social production, for instance, by crises, therefore have very different effects on labor products of a discontinuous nature and those that require for their completion a prolonged and connected working period. In one case, today's production of a certain mass of yarn, coal etc., is not followed by tomorrow's production of yarn, coal, etc. Not so in the case of ships, buildings, railroads, etc. It is not only the work which is interrupted, but also a connected working period. If the work is not continued, the means of production and labor so far expended in its manufacture are wasted. Even if work is resumed, a deterioration has taken place in the meantime.

For the entire duration of the working period, the value daily transferred to the product by the fixed capital accumulates successively until the product is finished. In this way, the difference between the fixed and circulating capital is revealed in its practical significance. The fixed capital is invested in the process of production for a long period, it need not be reproduced until after the expiration of, perhaps, a period of several years. Whether a steam-engine transfers its value daily to some yarn, which is the product of a discontinuous labor-process, or for three months to a locomotive, which is the product of a continuous process, is immaterial for the investment of the capital required for the purchase of the steam-engine. In the one case, its value is recovered in small doses, for instance, weekly, in the other case in larger quantities, for instance, quarterly. But in either case, the reproduction of the steam-engine may not take place until after twenty years. So long as every individual period which returns a part of the value of the steam engine by the sale of the product, is shorter than the lifetime of this engine, the same engine continues its service in successive working periods of the process of production.

It is different with the circulating portions of the invested capital. The labor-power bought for this week is consumed in the course of the same week and transferred to the product. It must be paid for at the end of this week. And this investment of capital in labor-power is repeated every week for three months without enabling the capitalist to use the investment of this part of capital in this week's labor-power for the purchase of next week's. Every week, additional capital must be invested for the payment of labor-power, and, leaving aside the question of credit, the capitalist must be able to advance wages for three months, even if he pays them only in weekly installments. It is the same with the other portion of circulating capital, the raw and auxiliary materials. One shift of labor after another is transferred to the product. It is not alone the value of the expended labor-power which is continually transferred to the product during the labor-process, but also surplus-value. This product, however, is unfinished, it has not yet the form of a finished commodity, it cannot yet circulate. This applies likewise to the capital-value transferred to the product by the raw and auxiliary materials.

According as the working period required by the specific nature of the product, or by the useful effect aimed at, is short or long, a continuous investment of additional circulating capital (wages, raw, and auxiliary materials) is required, none of its parts being in a from adapted for circulation and for the promotion of the repetition of the same operation. Every one of these parts is on the contrary held by the growing product as one of its parts in the sphere of production, in the form of productive capital. Now, the time of turn-over is equal to the sum of the time of production and the time of circulation. Hence a prolongation of the time of production reduces the velocity of the turn-over quite as much as the prolongation of the time of circulation. In the present case, the following must be furthermore noted:

1. The prolonged stay in the sphere of production. The capital invested, for instance, in the labor-power, raw, and auxiliary materials of the first week, the same as the portions of value transferred to the product by the fixed capital, are held in the sphere of production for the entire term of three months, and being incorporated in a growing and as yet unfinished product, cannot pass into the circulation of commodities.

2. Since the working period required for the completion of the productive act lasts three months, and forms one connected labor-process, a new quantity of circulating capital must be continually added week after week to the preceding quantity. The amount of the successively invested additional capital grows, therefore, with the length of the working period.

We have assumed that equal capitals are invested in the spinnery and the machine factory, that these capitals contain equal proportions of constant and variable, fixed and circulating capital, that the working days are equal, in short, that all circumstances are equal with the exception of the duration of the working period. In the first week, the outlay for both is the same, but the product of the spinner can be sold and the returns from the sale employed in the purchase of new labor-power and raw materials, in short, production can be resumed on the same scale. The machine manufacturer, on the other hand, cannot reconvert the circulating capital expended in the first week into money until at the end of three months, when his product is finished and he can begin operation afresh. There is, in other words, first a difference in the return of the same quantity of capital invested. But, in the second place, the same amount of productive capital is employed during the three months in the spinnery and in the machine factory, but the magnitude of the outlay of capital in the case of the yarn manufacturer is different from that of the machine manufacturer. For in the one case, the same capital is rapidly renewed and the same operation can be repeated, while in the other case, the capital is renewed by relatively slow degrees, so that ever new quantities of capital must be added to the old up to the time of the completion of the term of its reproduction. It is, therefore, not only the time of reproduction of definite portions of capital, or the time of investment, which is different, but also the quantity of the capital to be advanced according to the duration of the productive process, although the capital employed daily or weekly is the same. This circumstance is worthy of note for the reason that the time of investment may be prolonged, as we shall see in the cases treated in the next chapter, without thereby increasing the amount of the capital to be invested in proportion to this increase in time. The capital must be advanced for a longer time, and a larger amount of capital is held in the form of productive capital.

In undeveloped stages of capitalist production, enterprises requiring a long working period, and hence a large investment of capital for a long time, such as the building of streets, canals, etc., especially when they can be carried out only on a large scale, are either not managed on a capitalist basis at all, but rather at the expense of the municipality or state (in older times generally by means of forced labor, so far as labor-power was concerned); or, such products as require a long working period are manufactured only for the smaller part by the help of the private resources of the capitalist himself. For instance, in the building of a house, the private person for whose account the house is built advances money in instalments to the contractor. The owner thus pays for his house in instalments to the extent that his productive process proceeds. But in the developed capitalist era, when on the one hand masses of capital are concentrated in the hands of single individuals, while on the other hand associations of capitalists (stock companies) appear by the side of individual capitalists and the credit system is simultaneously developed, a capitalist contractor builds only in exceptional cases for the order of private individuals. He makes it his business to build rows of houses and sections of cities for the market, just as individual capitalists make it their business to build railroads as contractors.

To what extent capitalist production has revolutionized the building of houses in London, is shown by the testimony of a contractor before the banking committee of 1857. When he was young, he said, houses were generally built to order and the payments made in instalments to the contractor when certain stages of the building were completed. Very little was built on speculation. Contractors used to consent to this mainly to give their hands regular employment and thus keep them together. In the last forty years, all this has changed. Very little is now built for order. If a man wants a house, he selects one from among those built on speculation or still in process of building. The contractor no longer works for his customers, but for the market. Like every other industrial capitalist, he is compelled to have finished articles on the market. While fomerly a contractor had perhaps three or four houses at a time building for speculation, he must now buy a large piece of real estate (which, in continental language means rent it for ninety-nine years, as a rule), build from 100 to 200 houses on it, and thus engage in an enterprise which exceeds from twenty to fifty times his resources. The funds are secured by taking up mortgages, and money is placed at the disposal of the contractor to the extent that the building of the individual houses is progressing. Then, if a crisis comes along and interrupts the payment of the advance instalments, the entire enterprise generally collapses. In the best case, the houses remain unfinished until the coming of better times, in the worst case they are sold at auction at half-price. Without building on speculation, and that on a large scale, no contractor can get along nowadays. The profit from building itself is extremely small. The main profit of the contractor comes from raising the ground rent, by a careful selection and utilization of the building lots. By this method of speculation anticipating the demand for houses nearly the whole of Belgravia and Tyburnia, and the countless thousands of villas in the vicinity of London have been built. (Abbreviated from the Report of the Select Committee on Bank Acts. Part I, 1857, Evidence, Question 5413-18; 5535-36.)

The execution of enterprises with considerably long working periods and on a large scale does not fall fully within the province of capitalist production, until the concentration of capitals is very pronounced, and the development of the credit system offers, on the other hand, the comfortable expedient of advancing another's money instead of one's own capital and thus risking its loss. It goes without saying that the fact whether or not the capital advanced in production belongs to the one who uses it or to some one else has no influence on the velocity and time of turn-over.

The circumstances which augment the product of the individual working day, such as co-operation, division of labor, employment of machinery, shorten at the same time the working period of connected acts of production. Thus machinery shortens the building time of houses, bridges, etc., a mowing and threshing machine, etc., shorten the working period required to transform the ripe grain into a finished product. Improved shipbuilding reduces by increased speed the time of turn-over of capital invested in navigation. Such improvements as shorten the working period and thereby the time for which circulating capital must be advanced are, however, generally accompanied by an increased outlay for fixed capital. On the other hand, the working period in certain branches of production may be shortened by the mere extension of co-operation. The completion of a railroad is hastened by the employment of huge armies of laborers and the carrying on of the work in many places at once. The time of turn-over is in that case hastened by an increase of the advanced capital. More means of production and more labor-power must be combined under the command of the capitalist.

While the shortening of the working period is thus mostly accompanied by an increase of the capital advanced for this shortened time, so that the amount of capital advanced increases to the extent that the time for which the advance is made decreases, it must be noted that the essential point, apart from the existing amount of social capital, is the degree in which the means of production or subsistence, or their control, is scattered or concentrated in the hands of individual capitalists, in other words, the degree of concentration of capitals. Inasmuch as credit promotes the concentration of capital in one hand, it hastens and intensifies by its contribution the shortening of the working period and thereby of the time of turn-over.

In branches of production in which the working period is continually, or occasionally, determined by definite natural conditions, no shortening of the working period can take place by the above mentioned means. Says Walter Good, in his "Political, Agricultural, and Commercial Fallacies," (London, 1866, page 325): "The expression, 'more rapid turn-over' cannot be applied to grain crops, as only one turn-over per year is possible. As for cattle, we will simply ask: How is the turn-over of bi- or tri-ennial sheep, and of quardrennial and quinquennial oxen to be hastened?"

The necessity of securing ready money (for instance, for the payment of fixed tithes, such as taxes, groundrent, etc,.) solves this question by selling or killing cattle before they have reached the normal economic age, to the great detriment of agriculture. This also causes finally a rise in the price of meat. We read on pages 12 and 13 of the above named work that the people who formerly were mainly engaged in the raising of cattle for the purpose of supplying the pastures of the midland counties in summer, and the stables of the eastern counties in winter, have been so reduced by the fluctuations and sinking of the corn prices that they are glad to avail themselves of the high prices of butter and cheese; they carry the former every week to the market, in order to cover their running expenses, while they take advance payments on the cheese from some middleman who calls for its as soon as it can be transported and who, of course, makes his own prices. As a result of this, agriculture being ruled by the laws of political economy, the calves, which were formerly taken south from the dairy districts to be raised, are now sacrificed in masses, frequently when they are only eight or ten days old, in the stock yards of Birmingham, Manchester, Liverpool, and other neighboring cities. But if the malt were untaxed, the farmers would not only have made more profits and been able to keep their young cattle until they would have been older and heavier, but the malt would also have served instead of milk for the raising of calves by those who keep no cows: and the present appalling want of young cattle would have been avoided to a large extent. If the raising of calves is now recommended to those small farmers, they replay: "We know very well that it would pay to raise them on milk, but in the first place we should have to lay out money, and we cannot do that, and in the second place we should have to wait long for the return of our money, while in dairying we get returns immediately."

If the prolongation of the turn-over has such consequences for the smaller English farmers, it is easy to see what disadvantages it must produce for the small farmers of the continent.

To the extent that the working period lasts, and thus the period required for the completion of the commodity ready for circulation, the value successively yielded by the fixed capital accumulates and the reproduction of this value is retarded. But this retardation does not cause a renewed outlay of fixed capital. The machine continues its function in the process of production, no matter whether the reproduction of its wear and tear in the form of money takes place slowly or rapidly. It is different with the circulating capital. Not only must capital be tied up for a longer time in proportion as the working period extends, but new capital must also be continually advanced in the form of wages, raw and auxiliary materials. A retardation of the reproduction has therefore a different effect on either capital. No matter whether reproduction proceeds rapidly or slowly, the fixed capital continues its functions. But the circulating capital becomes unable to perform its functions, if the reproduction is retarded, if it is tied up in the form of unsold, or unfinished and as yet unsalable, products, and if no additional capital is at hand for its reproduction in natural form.

"While the farmer is starving, his cattle thrive. There had been considerable rain and the grass pasture was luxuriant. The Indian farmer will starve alongside of a fat ox. The precepts of superstition seem cruel for the individual, but they are preserving society; the preservation of the cattle secures the continuation of agriculture and thereby the sources of future subsistence and wealth. It may sound hard and sad, but it is so: In India a man is easier replaced than an ox." (Return, East Indian. Madras and Orissa Famine. No. 4, page 4.) Compare with the preceding the statement of Manara-Dharma-Sestra, chapter X, page 862; "The sacrifice of life without any reward, for the purpose of preserving a priest or a cow...can secure the salvation of these low-born tribes."

Of course, it is impossible to deliver a quinquennial animal before the lapse of five years. But a thing that is possible is the getting ready of the animals for their destination by changed modes of treatment. This was accomplished particularly by Bakewell. Formerly, English sheep, like the French as late as 1855, were not ready for slaughtering until after four or five years. By the Bakewell system, even a one year old sheep may be fattened, and in every case it is completely grown before the end of the second year. By means of careful sexual selection, Bakewell, a farmer of Dishley Grange, reduced the skeleton of sheep to the minimum required for their existence. His sheep are called the New Leicesters. "The breeder can now supply three sheep for the market in the same time that he formerly required for one, and at that with a broader, rounder, and larger development of the parts giving the most meat. Nearly their entire weight is pure meat." (Lavergne, The Rural Economy of England, etc., 1855, page 22.)

The methods which shorten the working periods are applicable to different branches of industry only to a very different degrees and do not compensate for the differences in the length of time of the various working periods. To stick to our illustration, the working period required for the building of a locomotive may be absolutely shortened by the employment of new implement machines. But if at the same time the finished product turned out daily or weekly by a cotton spinnery is still more rapidly increased, then the length of the working period in machine building, compared with that in spinning, has nevertheless been relatively lengthened.

Part II, Chapter XIII
THE TIME OF PRODUCTION.

The working time is always the time of production, that is to say, the time during which capital is held in the sphere of production. But vice versa, not all time during which capital is engaged in the process of production is necessarily a working time.

It is not in this case a question of interruptions of the labor-process conditioned on natural limitations of labor-power itself, although we have seen to what extent the mere circumstance that fixed capital, factory buildings, machinery, etc., are unemployed during pauses of the labor-process, became one of the motives for an unnatural prolongation of the labor-process and for day and night work. It is rather a question of an interruption independent of the length of the labor-process and conditioned on the nature and the production of the goods themselves, during which the object of labor is for a longer or shorter time subjected to lasting natural processes, causing physical, chemical, or physiological changes and suspending the labor-process entirely or partially.

For instance, grape juice, after being pressed, must ferment for a while and then rest for some time, in order to reach a certain degree of perfection. In many branches of industry the product must pass through a drying process, for instance in pottery, or be exposed to certain conditions which change its chemical nature, for instance in bleaching. Winter grain needs about nine months to mature. Between the time of sowing and harvesting the labor-process is almost entirely suspended. In timber raising, after the sowing and the incidental preliminary work are completed, the seed may require 100 years in order to be transformed into a finished product, and during all this time it requires very insignificant contributions of labor.

In all these cases, additional labor is contributed only occasionally during a large portion of the time of production. The condition described in the previous chapter, where additional capital and labor must be contributed to the capital already tied up in the process of production, is found here only in longer or shorter intervals.

In all these cases, therefore, the time of production of the advanced capital consists of two periods: One period, during which the capital is engaged in the labor-process; a second period, during which its form of existence—being that of an unfinished product—is surrendered to the influence of natural process, without being in the labor-process. It does not alter the case, that these two periods of time may cross and pervade one another here and there. The working period and the period of production do not coincide. The time of production is greater than the working period. But the product is not finished until the time of production is completed, only then it is mature and can be transformed from a productive into a commodity-capital. According to the length of the period of production not consisting of working time, the period of turn-over is likewise prolonged. In so far as the time of production in excess of the working time is not once and for all determined by definite natural laws, such as regulate the maturing of grain, the growth of an oak, etc., the period of turn-over may be more or less shortened by an artificial reduction of the time of production. Such instances are the introduction of chemical bleaching instead of lawn bleaching, the improvement of drying apparatus in drying processes. Or, in tanning, where the penetration of the tannic acid into the skins, by the old method, required from six to eighteen months, while the new method, by means of the air-pump, does it in one and a half to two months. (J. G. Courcelle-Seneuil, Traite theorique et pratique des Entreprises industrielles, etc., Paris, 1857, second edition.) The most magnificent illustration of an artificial abbreviation of the time of production which is taken up with natural processes is furnished by the history of the production of iron, more especially the conversion of raw iron into steel during the last 100 years, from the puddling process discovered about 1780 to the modern Bessemer process and the latest methods introduced since then. The time of production has been enormously abbreviated, but the investment of fixed capital has increased accordingly.

A peculiar illustration of the divergence of the time of production from the working time is furnished by the American manufacture of shoe-lasts. In this case, a considerable part of the expense is due to the fact that the wood must be stored for drying for as much as 18 months, in order that the finished last may not change its form by warping. During this time, the wood does not pass through any other labor-process. The period of turn-over of the invested capital is, therefore, not determined solely by the time required for the manufacture of the lasts, but also by the time during which the wood lies unproductive in the drying process. It is for 18 months in the process of production before it can enter into the labor-process proper. This illustration shows at the same time, how it is that the periods of turn-over of different parts of the total circulating capital may differ in consequence of conditions, which do not owe their existence to the sphere of circulation, but to that of production.

The difference between the time of production and the working time becomes especially apparent in agriculture. In our moderate climates, the land bears grain once a year. The abbreviation or prolongation of the period of production (for winter grain an average of nine months) is itself dependent on the change of good or bad seasons, and for this reason it cannot be as accurately determined before-hand and controlled as in industry properly so called. Only such by-products as milk, cheese, etc., are successively producible and saleable in short periods. On the other hand, the working time meets with the following conditions: "The number of working days in the various regions of Germany, with regard to the climatic and other determining conditions, will permit the assumption of the three following main working periods: For the spring period, from the middle of March or beginning of April to the middle of May, about 50 to 60 working days; for the summer period, from the beginning of June to the end of August, 65 to 80; and for the fall period, from the beginning of September to the end of October, or the middle or end of November, 55 to 75 working days. For the winter, only the chores customary for that time, such as the hauling of manure, wood, market goods, and building materials, are to be noted." (F. Kirchhoff, Handbuch der landwirthschaftlichen Betriebslehre. Dresden, 1852, page 160.)

To the extent that the climate is unfavorable, the working period of agriculture, and thus the outlay for capital and labor, is crammed into a short space of time. Take, for instance, Russia. In some of the northern regions of that country agricultural labor is possible only during 130 to 150 days per year. It may be imagined what would be the losses of Russia, if 50 out of its 65 million of European inhabitants would remain unemployed during six or eight months of the winter, when all field work must stop. Apart from the 200,000 farmers, who work in the 10,500 factories of Russia, local house industries have everywhere developed in the villages. There are some villages in which all farmers have been for generations weavers, tanners, shoemakers, locksmiths, knifemakers, etc. This is particularly the case in the provinces of Moscow, Vladimir, Kaluga, Kostroma, and Petersburg. By the way, this house-industry is being more and more pressed into the service of capitalist production. The weavers, for instance, are supplied with woof and web directly by merchants or middlemen. (Abbreviated from the Reports by H. M. Secretaries of Embassy and Legation, on the Manufactures, Commerce, etc., No 8, 1865, pages 86 and 87.) We see here that the divergence of the period of production from the working period, the latter being but a part of the former, forms the natural basis for the combination of agriculture with an agricultural side-industry, and that this side-industry, on the other hand, offers points of vantage to the capitalist, who intrudes first in the person of the merchant. When capitalist production later accomplishes the separation of manufacture and agriculture, the rural laborer becomes ever more dependent on accidental side-employment and his condition is correspondingly lowered. For the capital, all the differences are compensated in the turn-over. Not so for the laborer.

While in most branches of industry proper, of mining, transportation, etc., the work proceeds uniformly, the working time being the same from year to year, and the outlay for the capital passing daily into circulation being uniformly distributed, making exception of such abnormal interruptions as fluctuations of prices, business depressions, etc.; while furthermore also the recovery of the circulating capital, or its reproduction, is uniformly distributed throughout the year, provided the conditions of the market remain the same—there is, on the other hand, the greatest inequality in the outlay of circulating capital in such investments of capital, in which the working time constitutes only a part of the time of production, while the recovery of the capital takes place in bulk at a time determined by natural conditions. If such a business is managed on the same scale as one with a continuous working period, that is to say, if the amount of the circulating capital to be advanced is the same, it must be advanced in larger doses at a time and for longer periods. The durability of the fixed capital differs here considerably from the time in which it actually performs a productive function. Together with the difference between working time and time of production, the time of investment of the employed fixed capital is, of course, likewise continually interrupted for a longer or shorter time, for instance, in agriculture in the case of laboring cattle, implements and machines. In so far as this fixed capital consists of laboring cattle, it requires continually the same, or nearly the same, amount of expenditure for feed, etc., as it does during its working time. In the case of inanimate instruments of labor, disuse also implies a certain amount of depreciation. Hence there is an appreciation of the product in general, seeing that the transfer of value is not calculated by the time in which the fixed capital performs its function, but by the time in which it depreciates in value. In such branches of production as these, the disuse of the fixed capital, whether combined with current expenses or not, forms as much a condition of its normal employment as, for instance, the waste of a certain quantity of cotton in spinning; and in the same way the labor-power unproductively consumed in any labor-process under normal conditions, and inevitably so, counts as much as its productive consumption. Every improvement which reduces the unproductive expenditure of instruments of labor, raw material, and labor-power, also reduces the value of the product.

In agriculture, both the longer duration of the working period and the great difference between working period and productive period are combined. Hodgskin truly says with regard to this circumstance that the difference in the time (although he does not here distinguish between working time and productive time) required to get the products of agriculture ready and that required for the products of other branches of production is the main cause for the great dependence of farmers. They cannot market their goods in less time than one year. During this entire period they must borrow from the shoemaker, the tailor, the smith, the wagonmaker, and various other producers, whose articles they need, and which articles are finished in a few days or weeks. In consequence of this natural circumstance, and as a result of the more rapid increase of wealth in other branches of production, the real estate owners who have monopolized the land of the entire country, although they have also appropriated the monopoly of legislation, are nevertheless unable to save themselves and their servants, the tenants, from the fate of becoming the most dependent people in the land. (Thomas Hodgskin, Popular Political Economy, London, 1827, page 147, note.)

All methods by which partly the expenditures for wages and instruments of labor in agriculture are distributed more equally over the entire year, partly the turn-over is shortened by the raising of various products making different harvests possible during the course of the year, require an increase of the circulating capital invested in wages, fertilizers, seeds, etc., and advanced for purposes of production, This is the case, for instance, in the transition from the three plat system with fallow land to the system of crop rotation without fallow. It applies furthermore to the cultures dérobées of Flanders. "The root crops are planted in culture dérobée; the same field yields in succession first grain, flax, rape, for the wants of man, and after their harvest root crops are sown for the subsistence of cattle. This system, which permits the keeping of horned cattle in the stables without interruption, yields a considerable amount of manure and thus becomes the fulcrum of crop rotation. More than a third of the cultivated area in sandy districts is taken up with cultures dérobées; it is as though the cultivated area had been increased by one third." Apart from root crops, clover and other leguminous crops are likewise used for this purpose. "Agriculture, being thus carried to a point where it merges into horticulture, naturally requires a relatively considerable investment of capital. In England, a first investment of 250 francs per hectare is assumed. In Flanders, our farmers will probably consider a first investment of 500 francs far too low."(Emile de Laveleye, Essais sur L'Économie Rurale de la Belgique, Paris, 1863, pages 59, 60, 63.)

Take finally timber growing. "The production of timber differs from most of the other branches of production essentially by the fact that in it the force of nature is acting independently and does not require the power of man and capital in its natural propagation. Even in places where forests are artificially propagated the expenditure of human and capital power is inconsiderable compared to the action of natural forces. Besides, a forest will still thrive in soils and locations where grain does no longer give any yield or where its production does not pay. Forestry furthermore requires for its regular economy a larger area than grain culture, because small plats do not permit a system of felling trees in plats, prevents the utilization of by-products, complicates the production of the trees, etc. Finally, the productive process extends over such long periods that it exceeds the aims of private management and even surpasses the age limit of human life in certain cases. The capital invested in the purchase of the real estate" (in the case of communal production there is no capital needed for this, the question being simply how much land the community can spare from its cultivated and pasturing area for forestry) "will not yield returns until after a long period and is turned over gradually, but completely, with forests of certain kinds of wood, only after as much as 150 years. Besides, a consistent production of timber demands itself a supply of living wood which exceeds the annual requirements from ten to forty times. Unless a man has, therefore, still other sources of income and owns vast tracts of forest, he cannot engage in regular forestry." (Kirchhof, page 58.)

The long time of production (which comprises a relatively small amount of working time), and thus the length of the periods of turn-over, makes forestry little adapted for private, and therefore, capitalist enterprise, which is essentially private even if associated capitalists take the place of the individual capitalist. The development of civilization and of industry in general has ever shown itself so active in the destruction of forests, that everything done by it for their preservation and production, compared to its destructive effect, appears infinitesimal.

The following statement in the above quotation from Kirchhof is particularly worthy of note:"Besides, a consistent production of timber demands itself a supply of living wood which exceeds the annual requirements from ten to forty times." In other works, a turn-over occurs one in ten, forty, or more years.

The same applies to stock raising. A part of the herd (supply of cattle) remains in the process of production, while another part of the same is sold annually as a product. In this case, only a part of the capital is turned over every year, just as it is in the case of fixed capital, machinery, laboring cattle, etc. Although this capital is a fixed capital in the process of production for a long time, and thus prolongs the turn-over of the total capital, it is not a fixed capital in the strict definition of the term.

That which is here called a supply—a certain amount of living timber or cattle—serves in a relative sense in the process of production (being simultaneously instruments of labor and raw materials); on account of the natural conditions of its reproduction under normal circumstances of economy, a considerable part of this supply must always be available in this form.

A similar influence on the turn-over is exerted by another kind of supply, which productive capital only potentially, but which owing to the nature of its economy, must be accumulated in a more or less considerable quantity and advanced for purposes of production for a long term, although it is consumed in the actual process of production only gradually. To this class belongs, for instance, manure before it is hauled to the field, furthermore grain, hay, etc., and such supplied of means of subsistence as are employed in the production of cattle. "A considerable part of the productive capital is contained in the supplies of certain industries. But these may lose more or less of their value, if the precautions necessary for their preservation in good condition are not properly observed. Lack of supervision may even result in the total loss of a part of the supplies in the economy. For this reason, a careful inspection of the barns, feed and grain lofts, and cellars, becomes indispensable, the store rooms must always be well closed, kept clear, ventilated, etc. The grain, and other crops held in storage, must be thoroughly turned over from time to time, potatoes and beets must be protected against frost, rain, and fire." (Kirchhof, page 292.) "In calculating one's own requirements, especially for the keeping of cattle, and trying to regulate the distribution according to the nature of the product and its intended use, one must not only take into consideration the covering of one's demand, but also see to it that there is a proportionate reserve for extraordinary cases. If it is then found that the demand cannot be fully covered by one's own production, it becomes necessary to reflect first whether the missing amount cannot be covered by other products (substitutes), or by the cheaper purchase of such in place of the missing ones. For instance, if there should happen to be a lack of hay, this might be covered by root crops and straw. As a general rule, the natural value and market-price of the various crops must be kept in mind in such cases, and dispositions for the consumption must be made accordingly. If, for instance, oats are high, while pease and rye are relatively low, it will pay to substitute pease or rye for a part of the oats fed to horses and to sell the oats thus saved." (Ibidem, page 300.)

It has been previously stated, when discussing the question of the formation of a supply, that a definite, more or less considerable, quantity of potential productive capital is required, that is to say, of means of production intended for use in production, which must be available in proportionate quantities for the purpose of being gradually consumed in the productive process. It has been incidentally remarked, that, given a certain business or capitalist enterprise of definite proportions, the magnitude of this productive supply depends on the greater or lesser difficulties of its reproduction, the relative distance of the supplying markets, the development of means of transportation and communication, etc. All these circumstances influence the minimum of capital, which must be available in the form of a productive supply, hence they influence also the length of time for which the investment of capital must be made and the amount of capital to be advanced at one time. This amount, which affects also the turn-over, is determined by the longer or shorter time, during which a circulating capital is tied up in the form of a productive supply, of mere potential capital. On the other hand, in so far as this stagnation depends on the greater or smaller possibility of rapid reproduction, on market conditions, etc., it arises itself out of the time of circulation, out of circumstances connected with the circulation. "Furthermore, all such parts of the equipment or auxiliary pieces, as hand tools, sieves, baskets, ropes, wagon grease, nails, etc., must be so much the more available for immediate use, the less the opportunity for their rapid purchase is at hand. Finally, the entire supply of implements must be carefully overhauled in winter, and new purchases or repairs found to be necessary must be made at once. Whether or not a man is to keep a great or small supply of articles of equipment is mainly determined by local conditions. Wherever there are no artisans and stores in the vicinity, it is necessary to keep larger supplies than in places where these are in the locality or near it. But if the necessary supplies are purchased in large quantities at a time, then, other circumstances being equal, one profits as a rule by cheap purchases, provided the right time has been chosen for them. True, the rotating productive capital is thus curtailed by a so much larger sum, which cannot always be well spared in the business." (Kirchhof, page 301.)