If the process C'—M' is prolonged beyond its normal size, so that commodity-capital meets with abnormal obstacles during its transformation into the money-form, or if, after the completion of this transformation, the price of the means of production into which the money-capital is to be transformed has risen above the level occupied by it in the beginning of the cycle, the hoard held as accumulated funds may be used in the place of money-capital, or of a part of such capital. In that case, the accumulated funds of money serve as reserve funds for the purpose of counterbalancing disturbances of the circulation.

When in use as such a reserve fund, accumulated money differs from the fund of purchase or paying media discussed in the cycle P—P'. These media are a part of money-capital performing its functions, they are forms of existence of a part of capital-value in general going through the process of its circulation, and its different parts perform their functions successively at different times. In the continuous process of production, money-capital in reserve is always formed, obligations being incurred today which will not be paid until later, and large quantities of commodities being sold today, while other large quantities are not to be bought until some other day. In these intervals, a part of the circulating capital exists continuously in the form of money. A reserve fund, on the other hand, is not a part of money-capital in the performance of its functions. It is rather a part of capital in a preliminary stage of its accumulation, of surplus-value not yet transformed into active capital.

Of course, it requires no explanation, that the capitalist, when pressed for funds, does not concern himself about the definite functions of the money in his hands. He simply employs whatever money he has for the purpose of keeping the circulation-process of his capital in motion. For instance, in our illustration, M is equal to 422 pounds sterling, M' to 500 pounds sterling. If a part of the capital of 422 pounds sterling exists in the form of money as a fund for paying or buying, it is intended that all of it should enter into circulation, conditions remaining the same, and that it is sufficient for this purpose. The reserve fund, on the other hand, is a part of the 78 pounds sterling of surplus-value. It cannot enter the circulation process of the capital of 422 pounds sterling, unless this circulation takes place under changed conditions; for it is a part of the accumulated funds, and figures here under conditions, where the scale of the reproduction has not been enlarged.

Accumulated money-funds represent latent money-capital, or the transformation of money into money-capital.

The following is the general formula for the cycle of productive capital, combining simple reproduction and reproduction on an enlarged scale:

P...C'—M'. M—C lf0445-02-0032-i0001.gif ...P (P').

If P equals P, then M in 2) is equal to M'—m; if P equals P', then M in 2) is greater than M'—m, that is to say, m has been completely or partially transformed into money-capital.

The cycle of productive capital is that form, under which classical political economy discusses the rotation process of industrial capital.

Part I, Chapter III
THE CIRCULATION OF COMMODITY-CAPITAL.

The general formula for the cycle of commodity-capital is:

C'—M'—C...P...C'.

C' appears not alone as the product, but also as the premise of the two previous cycles, since M—C includes for one capital that which C'—M' includes for the other, at least in so far as a part of the means of production represents the commodity-product of other individual capitals going through their circulation process. In our case, for instance, coal, machinery, etc., represent the commodity-capital of the mine-owner, of the capitalist machine-manufacturer, etc. Furthermore, we have shown in chapter I, IV, that not only the cycle P...P, but also the cycle C'...C' is assumed even in the first repetition of M...M', before this second cycle of money-capital is completed.

If reproduction takes place on an enlarged scale, then the final C' is greater than the initial C' and we shall then call the final one C''.

The difference between the third form and the first two is on the one hand, that in this case the total circulation opens the cycle with its two opposite phases, while in form I the circulation is interrupted by the process of production, and in form II the total circulation with its two complementary phases appears as a connecting link for the process of reproduction, intervening as a mediating movement between P...P. In the case of M...M', the cycle has the form M—C...C'—M'=M—C—M. In the case of P...P it has the opposite form, namely, C'—M'. M—C=C—M—C. In the case of C'—C', it likewise has this last form.

On the other hand, when the cycles I and II are repeated, even if the final points M' and P' are at the same time the starting points of the renewed cycle, the form in which they were originally generated disappears. M'=M plus m, and P'=P plus p, begin the new cycle as M and P. But in form III, the starting point C must be designated as C', also in the case of the renewal of the cycle on the same scale, for the following reason. As soon as M' as such opens a new cycle in the form I, it performs the functions of money-capital M, as an advance in the form of money of the capital value to be utilized. The size of the advanced money-capital, increased by the accumulation resulting from the first cycle, is greater. But whether the size of the advanced money-capital is 422 pounds sterling or 500 pounds sterling, it nevertheless appears merely as a capital-value. M' no longer exists as a utilized capital pregnant with surplus-value, for it is still to be utilized. The same is true of P...P', for P' must always perform the functions of P, of capital-value used for the generation of surplus-value, and must renew its cycle for this purpose.

Now the circulation of commodity-capital does not open with capital-value, but with augmented capital-value in the form of commodities. It includes from the start not only the cycle of capital-value represented by commodities, but also of surplus-value. Hence, if simple reproduction takes place in this form, C' at the starting point is equal to C' at the closing point. If a part of the surplus-value enters into the circulation of capital, C'', an enlarged C', appears at the close, but the succeeding cycle is once more opened by C'. This is merely a larger C' than that of the preceding cycle, and it begins its new cycle with a proportionately increased accumulation of capital-value, which includes a proportionate increase of newly produced surplus-value. In every case, C' always opens the cycle as a commodity-capital which is equal to capital-value plus surplus-value.

C' as C does not appear in the circulation of some individual industrial capital as a form of this capital, but as a form of some other industrial capital, so far as the means of production are its products. What is M—C (or M—Pm) for the first capital, is C'—M' for this second capital.

In the circulation act M—C lf0445-02-0032-i0001.gif the factors L and Pm have identical relations, in so far as they are commodities in the hands of those who sell them; on the one hand the laborers who sell their labor-power, on the other hand the owners of the means of production, who sell these. For the purchaser, whose money here performs the functions of money-capital, L and Pm represent merely commodities, so long as he has not bought them, so long as they confront his money-capital in the form of commodities owned by others. Pm and L here differ only in this respect that Pm may be C', or capital, in the hands of its owner, if Pm is the commodity-form of his capital, while L is always nothing else but a commodity for the laborer, and does not become capital, until it is made a part of P in the hand of its purchaser.

For this reason, C' can never open any cycle as a mere commodity-form of capital-value. As commodity-capital it is always the representative of two things. From the point of view of use-value it is the product of the function of P, in the present case yarn, whose elements L and Pm, coming from the circulation, have been active in creating this product. And from the point of view of exchange-value, commodity-capital is the capital-value P plus the surplus-value m produced by the function of P.

It is only in the circulation of C' itself that C equal to P, and equal to the capital-value, can and must separate from that part of C' in which surplus-value is contained, from the surplus-product representing the surplus-value. It does not matter, whether these two parts can be actually separated, as in the case of yarn, or whether they cannot be separated, as in the case of a machine. They may always be separated, as soon as C' is transformed into M'.

If the entire commodity-product is separable into independent homogeneous parts, as is the case in our 10,000 lbs. of yarn, so that the act C'—M' is performed by means of a number of successive sales, then capital-value in the form of commodities can perform the functions of C and can be separated from C', before the surplus-value, or the entire value of C', has been realized.

In the 10,000 lbs. of yarn at 500 pounds sterling, the value of 8,440 lbs., equal to 422 pounds sterling, is separated from the surplus-value. If the capitalist sells first 8,440 lbs. at 422 pounds sterling, then these 8,440 lbs. of yarn represent C, or the capital-value, in the form of commodities. The surplus-product of 1,560 lbs. of yarn, likewise contained in C', and valued at 78 pounds sterling, does not circulate until later. The capitalist may accomplish C—M—C lf0445-02-0032-i0001.gif before the surplus product c—m—c circulates.

Or, if he sells 7,440 lbs. of yarn at 372 pounds sterling, and then 1,000 lbs. of yarn at 50 pounds sterling, he might replace the means of production (the constant capital c) with the first part of C and the variable capital v, the labor-power, with the second part of C, and then proceed as before.

But if such successive sales take place, and the conditions of the cycle permit it, the capitalist, instead of separating C' into c plus v plus s, may make such a separation also in the case of aliquot parts of C'.

For instance, 7,440 lbs, yarn, valued at 372 pounds sterling, representing a constant capital as parts of C', namely of 10,000 lbs. of yarn valued at 500 pounds sterling, may be separated into 5,535 lbs. of yarn valued at 276.768 pounds sterling, which replace the constant part, the value of the means of production used up in producing 7,440 lbs. of yarn; 744 lbs. of yarn valued at 37.200 pounds sterling, which replace only the variable capital; and 1,160.640 lbs. of yarn valued at 58.032 pounds sterling, which are the surplus-product and represent surplus-value. If he sells his 7,440 lbs. of yarn, he can replace the capital-value contained in them after the sale of 6,279.360 lbs. of yarn at 313.968 pounds sterling, and he can spend as his revenue the value of the surplus-product of 1,160.640 pounds, or 58.032 pounds sterling.

In the same way, he may separate 1,000 lbs. of yarn, valued at 50 pounds sterling, or equal to the variable capital-value, into its aliquot part and sell them successively, as follows: 744 lbs. of yarn at 37.200 pounds sterling, for the constant capital-value of 1,000 lbs. of yarn; 100 lbs. of yarn at 5 pounds sterling, for the variable capital-value; or together 844 lbs. of yarn at 42.2 pounds sterling, for replacing the capital-value contained in 1,000 lbs. of yarn; finally, 156 lbs. of yarn at 7.8 pounds sterling representing the surplus-product contained in 1,000 lbs. of yarn, which may be spent as such.

Finally, the capitalist may divide the remaining 1,560 lbs. of yarn, valued at 78 pounds sterling, provided he succeeds in selling them, in such a way that the sale of 1,160 lbs. of yarn, valued at 58.032 pounds sterling, replaces the value of the means of production contained in those 1,560 lbs. of yarn, and 156 lbs. of yarn, valued at 7.8 pounds sterling, replaces the variable capital-value; or a total of 1,316.640 lbs. of yarn, valued at 65.832 pounds sterling, for replacing the total capital-value; finally, the surplus-product of 243.360 lbs., valued at 12.168 pounds sterling, remains, to be spent as revenue.

Just as all the elements of c, v, and s, contained in the yarn, are divisible into the same component parts, so may every individual pound of yarn, valued at 1 sh., or 12 d., be divided.

c = 0.744 lbs. of yarn = 8.928 d.
v = 0.100 lbs. of yarn = 1.200 d.
s = 0.156 lbs. of yarn = 1.872 d.
c+v+s = 1.00 lb. of yarn = 12.00 d.

If we add the results of the three above partial sales, we obtain the same result as we should when selling the entire 10,000 lbs. at one time.

We have the following parts of constant capital:

In the first lot 5,535.360 lbs. of yarn at £276.768.
In the second lot 744.000 lbs. of yarn at £37.200.
In the third lot 1,160.640 lbs. of yarn at £58.032.
Total...7,440.000 lbs. of yarn at £372.000.

Furthermore, the following parts of variable capital:

In the first lot of 744.000 lbs. of yarn at £37.200.
In the second lot 100.000 lbs. of yarn at £5.000.
In the third lot 156,000 lbs. of yarn at £7.800.
Total...1,000.000 lbs. of yarn at £50.000.

Finally, the following parts of surplus-value:

In the first lot 1,160.740 lbs. of yarn at £58.032.
In the second lot 156.000 lbs. of yarn at £7.800.
In the third lot 343.360 lbs, of yarn at £12.168.
Total...1,560.000 lbs. of yarn at £78.000.
Grand Total:  
Constant capital... 7,450 lbs. of yarn at £372.
Variable capital... 1,000 lbs. of yarn at £50.
Surplus-value... 1,560 lbs. of yarn at £78.
Total... 10,000 lbs. of yarn at £500.

C'—M' stands in itself merely for the sale of 10,000 lbs. of yarn. These 10,000 lbs. of yarn are a commodity like all other yarn. The purchaser is interested in the price of 1 sh. per lb., or 500 pounds sterling for 10,000 lbs. If he analyzes during the negotiations the different values of which this lot is composed, he does so simply with the malignant intention of proving that it can be sold at less than 1 sh. per pound and still leave a fair profit to the seller. But the quantity purchased by him depends on his own requirements. If he is, for instance, the owner of a cloth-factory, the amount of his purchase depends on the composition of his own capital invested in this plant, not on that of the owner of the yarn from whom he buys. The conditions, in which C' has to replace on one side the capital used up in its production (or the component parts of this capital), and on the other to serve as a surplus-product for the spending of surplus-value or for the accumulation of capital, exist only in the cycle of that capital, which exists as a commodity capital in the form of 10,000 lbs. of yarn. These conditions have nothing to do with the sale itself. In the present case we have also assumed the C' is sold at its value, so that it is only a question of its transformation from the commodity-form into that of money. Of course, it is essential for C', when performing a function in the cycle of this individual capital by which the productive capital is to be replaced, that it should be known to what extent, if at all, the price and the value vary in the sale. But this does not concern us here in the discussion of the distinctions of form.

In form I, or M...M', the process of production intervenes midway between the two complementary and opposite phases of the circulation of capital, and is past before the concluding phase C'—M' begins. Money has been advanced as capital, transformed into means of production and labor power, transferred from these to the commodity-product, and this in its turn changed into money. It is a complete cycle of business, which results in money, the universal medium. The renewal of the cycle is then possible, but not necessary. M...P...M' may either be the last cycle, concluding the function of some individual capital withdrawn from business, or the first cycle of some new capital beginning its active function. The general movement is here M...M', from money to more money.

In form II, or P...C'—M'—C...P (P'), the entire circulation process follows after the first P and takes place before the second P; but it takes place in the opposite direction from that of form I. The first P is the productive capital, and its function is the productive process, on which the succeeding circulation process is conditioned. The concluding P, on the other hand, does not stand for the productive process; it is only the return of industrial capital to its form of productive capital. And it has that form by virtue of the last phase of circulation, in which the transformation of capital-value into L plus Pm was accomplished, those subjective and objective factors which combine to form the productive capital. The capital, whether it be P or P', is in the end once more present in a form in which it may again perform the function of productive capital, in which it must go through the productive process. The general form of the movement P...P'(P) is that of reproduction and does not indicate that capital is to be increased by new values, as does M...M'. This enables classic political economy to ignore so much easier the capitalistic form of the process of production end to pretend that production itself is the purpose of this process; just as though it were only a question of producing as much as possible, as cheaply as possible, and of exchanging the product for the greatest variety of other products, either for the renewal of the production (M—C), or for consumption (m—c). It is then quite likely that the peculiarities of money and money-capital may be overlooked, for M and m appear here merely as passing media of circulation. The entire process seems so simple and natural, but natural in the sense of a shallow rationalism. In the same way, the profit is occasionally overlooked in the commodity-capital and it is mentioned merely as a commodity when discussing the productive circulation as a whole. But as soon as the question of the values composing it comes up for discussion, it is spoken of as commodity-capital. Accumulation, of course, is seen in the same light as production.

In form III, or C'—M'—C...P...C', the two phases of the circulation process open the cycle, in the same order which obtains in form II, or P...P; next follows P with its function, the productive process, the same as in form I; the cycle closes with the result of the process of production, C'. While form II closes with P, the return of productive capital to its mere form, so form III closes with C', the return of commodity-capital to its form. Just as in form II the capital, in its concluding form of P, must renew its cycle by beginning with the process of production, so in this case, where the industrial capital re-appears in the form of commodity-capital, the cycle is re-opened by the circulation phase C'—M'. Both forms of the cycle are incomplete, because they do not close with M', that is to say with capital-value retransformed into money and utilized. Both cycles must, therefore, be continued and include the reproduction. The total cycle of form III is represented by C'...C'.

The third form is distinguished from the two first by the fact that it is the only one in which the utilized capital-value appears as the starting point of its utilization, instead of the original value which is to be utilized. C' as a capital-relation is the starting point and has a determining influence on the entire cycle, for it includes the cycle of capital-value as well as that of surplus-value in its first phase, and the surplus-value is compelled to act partly as revenue by going through the circulation c—m—c, partly to perform the function of an element of capital accumulation, at least in the average of the cycles, if not in all of them.

In the form C'...C' the consumption of the entire commodity-product is assumed as the condition of the normal course of the cycles of capital itself. The individual consumption of the laborer and the individual consumption of the unaccumulated part of the surplus-product comprise the entire individual consumption. Hence the consumption in its totality—individual as well as productive consumption—are conditional factors in the cycle C'. Productive consumption, which includes the individual consumption of the laborer as a corollary, since labor-power is a continuous product of the laborer's individual consumption, within certain limits, is performed by every individual capital itself. Individual consumption, in so far as it is not required for the existence of the individual capitalist, is here only regarded as a social act, not as an act of the individual capitalist.

In forms I and II, the aggregate movement appears as a movement of advanced capital-value. In form III, the utilized capital, in the shape of the total commodity-product, is the starting point and has the nature of moving capital, commodity-capital. Not until the transformation into money has been accomplished, does this movement separate into movements of capital and revenue. The distribution of the total social product as well as the special distribution of the product of every individual capital for purposes of individual consumption or for reproduction, is included in the cycle of capital under this form.

In M...M', the possible expansion of the cycle is included, and depends on the volume of m entering into the renewed cycle.

In P...P, the new cycle may be started by P with the same, or even with a smaller, value, and yet may represent a reproduction on an enlarged scale, for instance in the case where certain elements of commodities become cheaper by increased productivity of labor. On the other hand, a productive capital which has increased in value may, in the opposite case, represent a reproduction on a decreased scale with less raw material, for instance, if some elements of production have become dearer. The same is true of C'...C'.

In C'...C' capital in the form of commodities is the premise of production. It re-appears as a premise within this cycle in the second C. If this C has not yet been produced or reproduced, the cycle is arrested in its course. This C must be reproduced, for the greater part as C' of some other industrial capital. In this cycle, C' is found as the point of departure, of transit, and of conclusion; it is always there. It is a permanent condition of the process of reproduction.

C'...C' is distinguished from forms I and II by still another feature. All three cycles have this in common, that capital begins its course in the same form in which it ends the cycle, and thus re-assumes the original form whenever it renews the same cycle. The initial form M,P,C', is always the one in which capital-value (in III together with its increment of surplus-value) is advanced, in other words always the original starting form of this cycle. The concluding form M',P,C', on the other hand, is always a changed form of a functional one, which preceded the final form in the circulation and is not the original one.

Thus M' in I is a changed form of C', the final P in II is a changed form of M, and this transformation is accomplished in I and II by a simple transaction in the circulation of commodities, by a formal change of position of commodity and money; in III, C' is a changed form of the productive capital P. But here, in III, the transformation does not merely concern the functional form of capital, but also its magnitude as a value; and in the second place, the transformation is not the result of a formal change of position pertaining to the circulation process, but of an actual modification experienced by the use-form and value of the commodity parts of productive capital in the process of production.

The forms m,P,C', at the starting end, always precede every one of the cycles I, II, III. The return of these forms at the terminal end is conditioned on the series of metamorphoses in the cycle itself. C', as the terminal product of an individual cycle of industrial capital, presupposes only that form P of the industrial capital which does not belong to the circulation, M', since the terminal point of representing the changed form of C' (C'—M'), presupposes the existence of M in the hand of the buyer, that is to say outside of the cycle M...M', but drawn into it and made it its terminal form by the sale of C'. In the same way, the final P in II presupposes the existence of L and PM(C) outside of II, but incorporated as its final form by means of M—C. But apart from this last extreme, neither the cycle of individual money-capital presupposes the existence of money-capital in general, nor the cycle of individual productive capital that of productive capital, in these cycles. In I, M may be the first money-capital; in II, P may be the first productive capital appearing on the historical scene. But in III,

lf0445-02-0108-e0001.gif

C is presupposed twice outside of the cycle. The first time, it is assumed to exist in the cycle C'—M'—C lf0445-02-0032-i0001.gif . The C in this formula, so far as it consists of Pm, is a commodity in the hands of the seller; it is itself a commodity-capital, in so far as it is the product of a capitalist process of production; and even if it is not, it appears as a commodity-capital in the hands of the merchant. The second time it is assumed in c, in the formula c—m—c, where it must likewise be at hand in the form of a commodity, in order to be available for purchase. At any rate, whether they are commodity-capital or not, L and Pm are commodities as well as C' and maintain towards one another the relation of commodities. The same is true of the second c in the formula c—m—c. Inasmuch as C' is equal to C (L plus Pm), it is composed of commodities and must be replaced by equal commodities in the circulation. In the same way, the second c in c—m—c must be replaced by equal commodities in the circulation.

With the capitalist mode of production for a basis, as the prevailing mode, all commodities in the hands of the seller must be commodity-capital. And they retain this character in the hand of the merchant, or assume it, if they did not have it before. Or they would have to be commodities, such as imported articles, which replace some original commodity-capital by bestowing upon it another form of existence.

The commodity-elements L and Pm, of which the productive capital is composed, do not possess the same form as modes of existence of P, which they have on the various commodity-markets where they are gathered. They are now combined, and so combined they can perform the functions of productive capital.

C appears as the premise of C within the cycle III, because capital in commodity-form is its starting point. The cycle is opened by the transformation of C' (in so far as it performs the functions of capital-value, whether increased by surplus-value or not) into those commodities which are its elements of production. And this transformation comprises the entire process of circulation, C—M—C (equal to L plus Pm), and is its result. C here stands at both extremes, but the second extreme, which receives its form C by means of M—C from the commodity-market on the outside, is not the last extreme of the cycle, but only of its two first stage comprising the process of circulation. Its result is P, which then performs its function, the process of production. It is only as the result of this process, not as that of the circulation, that C' appears as the terminal point of the cycle and in the same form as the starting point, C'. On the other hand, in M...M' and P...P, the final extremes M' and P are the immediate results of the process of circulation. In these instances, it is only M' and P which are supposed to exist at the end in the hands of another. So far as the process of circulation takes place between the extremes, neither M in the hands of another as money, nor P as the productive process of another, are the premises of these cycles. But C'...C' requires the existence of C (equal to L plus Pm) as commodities in the hands of others who are their owners. These commodities are drawn into the cycle by the introductory process of circulation and transformed into productive capital, and as a result of the functions of this capital, C' once more appears at the end of the cycle.

But just because the cycle C'...C' presupposes for its realization the existence of some other industrial capital in the form of C (equal to L plus Pm)—and Pm comprises various other capitals, in our case machinery, coal, oil etc.,—it demands of itself that it be considered not merely as the general form of the cycle, that is to say as a social form common to every industrial capital (except when it is first invested). It is not merely a common mobile form of all industrial capitals, but also the sum of all industrial capitals in action. It is a movement of the aggregate capital of the capitalist class, in which every individual capital appears only as a part whose movements intermingle with those of the others and are conditioned on them. For instance, if we regard the aggregate of commodities annually produced in a certain country, and analyze the movements by which a part of this aggregate product replaces the productive capital in all individual businesses, while another part enters into the individual consumption of the various classes, then we consider C'...C' as the formula indicating the movements of social capital as well as of the surplus-value, or surplus-product, generated by it. The fact that the social capital is equal to the sum of the individual capitals (including the stocks and state capital, so far as governments employ productive wage-labor in mining, railroading, etc., and perform the function of capitalists), and that the aggregate movement of social capital is equal to the algebraic sum of the movements of individual capitals, does not militate against the possibility that this movement, seen as the movement of some individual capital, may present other phenomena than the same movement studied as a part of the aggregate movement of social capital. In the latter case, when studied in connection with all its parts, the movement simultaneously solves problems, the solution of which does not follow from the study of the cycles of some individual capital, but must be taken for granted.

C'...C' is the only cycle, in which the originally advanced capital-value constitutes only a part of the value opening the movement at one extreme, and in which the movement thus reveals itself at the outset as the total movement of the industrial capital. It includes that part of the product which replaces the productive capital as well as that part which creates a surplus-product and which is on an average either spent as revenue or employed as an element of accumulation. In so far as the expenditure of surplus-value in the form of revenue is included in this cycle, the individual consumption is likewise included. The latter is furthermore included for the reason, that the starting point C, commodity, exists in the form of some article of use; but every article produced by capitalist methods is a commodity-capital, no matter whether its use-form destines it for productive or for individual consumption, or for both. M...M' indicates only the quality of value, the utilization of the advanced capital-value for the purposes of the entire process; P...P (P') indicates the process of production of capital in the form of a process of reproduction with a productive capital of the same or of increased value (accumulation); C'...C', while it indicates at the outset that it is a part of the capitalist production of commodities, comprises productive and individual consumption from the start, and productive consumption with its implied generation of more value appears only as one branch of its movement. Finally, since C' may have a use-value which cannot enter any more into any process of production, it follows as a matter of course, that the different elements of value of C' expressed by parts of the product must occupy a different position, according to whether C'...C' is regarded as the formula for the movement of the total social capital, or for the independent movement of some individual industrial capital. All these peculiarities point to the fact that this cycle implies more than the mere cycle of some individual capital.

In the formula C'...C', the movement of the commodity-capital, that is to say of the total product created by capitalist methods, appears simultaneously as the premise of the independent cycle of individual capital and as its effect. If this formula is grasped in its peculiarities, then it is no longer sufficient to be content with the knowledge that the metamorphoses C'—M' and M—C are on the one hand functionally defined sections in the metamorphoses of capital, on the other links in the general circulation of commodities. It becomes necessary to follow the ramifications of the metamorphoses of one industrial capital among those of other individual capitals and with that part of the total product which is intended for individual consumption. In the analysis of an individual industrial capital, we therefore base our studies mainly on the two first formulas.

The cycle C'...C' appears as the movement of an individual and independent capital in the case of agriculture, where calculations are made from crop to crop. In figure II, the sowing is the starting point, in figure III the harvest, or, to speak with the physiocrats, figure II starts out with the avances, and figure III with the reprises. The movement of capital-value in III appears from the outset only as a part of the movement of the general mass of products, while in I and II the movement of C' is only a part of the movement of some individual capital.

In figure III, the commodities on the market are the continuous premise of the processes of production and reproduction. If this formula is regarded as fixed, all elements of the process of production seem to originate in the circulation of commodities and to consist only of commodities. This one-sided conception overlooks those elements of the processes of production, which are independent of the commodity-elements.

Since C'...C' has for its starting point the total product (total value), it follows that (making exception of foreign trade) reproduction on an enlarged scale, productivity remaining otherwise the same, can take place only when the part of the surplus-product to be capitalized already contains the material elements of the additional productive capital; so that a surplus-product is at once produced in that form which enables it to perform the functions of additional capital, so far as the production of one year can serve as the basis of next year's production, or in so far as this can take place simultaneously with the simple process of reproduction in the same year. Increased productivity can increase only the substance of capital, but not its value; of course, it creates additional material for the generation of more value.

C'...C' is the basis of Quesnay's Tableau Economique, and it shows great discrimination on his part that he selected this form instead of P...P as opposed to M...M' (which is the isolated formula retained by the mercantilists).

Part I, Chapter IV
THE THREE DIAGRAMS OF THE PROCESS OF CIRCULATION.

The three diagrams may be formulated in the following manner, using the sign Tc for "total process of circulation":

I. M—C...P...C'—M'

II. P...Tc...P

III. Tc...P (C')

If we take all three diagrams together, all premises of the process appear as its effects, as premises produced by itself. Every element appears as a point of departure, transit, and return to the starting point. The total process appears as the unity of the processes of production and circulation. The process of production mediates the process of circulation, and vice versa.

All three cycles have the following point in common: The creation of more value as the compelling motive. Diagram I expresses this by its form. Diagram II begins with P, the process of creating surplus-values. Diagram III begins the cycle with the utilized value and closes with renewed utilized value, even if the movement is repeated on the same scale.

So far as C—M means M—C from the point of view of the buyer, and M—C means C—M from the point of view of the seller, the circulation of capital presents only the features of the ordinary metamorphosis of commodities, subject to the laws relative to the amount of money in circulation, as analyzed in volume I, chap. III, 2. But if we do not cling to this formal aspect, but rather consider the actual connection of the metamorphoses of the various individual capitals, in other words, if we study the interrelation of the cycles of individual capitals as partial movements of the process of reproduction of the total social capital, them the mere change of form between money and commodities does not explain matters.

In a continuously revolving circle, every point is simultaneously a point of departure and point of return. If we interrupt the rotation, not every point of departure is a point of return. We have seen, for instance, that not only does every individual cycle imply the existence of the others, but also that the repetition of one cycle in a certain form necessitates the rotation of this cycle through its other forms. The entire difference thus assumes a formal aspect, it appears as a mere subjective difference made for the convenience of the observer.

In so far as every one of these cycles is studied as a special form of movement through which various individual industrial capitals are passing, their differences have but an individual nature. But in reality every individual industrial capital is contained simultaneously in all three cycles. These three cycles, the forms of reproduction assumed by the three modes of capital, rotate continuously side by side. For instance, one part of capital value which now performs the function of commodity-capital, is transformed into money-capital, but at the same time another part leaves the process of production and enters the circulation as a new commodity-capital. The cycle C'...C' is thus continuously rotating, and so are the two other forms. The reproduction of capital in each one of its forms and stages is just as continuous as the metamorphoses of these forms and their successive transition through the three stages. The entire circulation is thus actually a unit with these three forms.

We assumed in our analysis that the entire volume of capital-value acts either as money-capital, productive capital, or commodity-capital. For instance, we had those 422 pounds sterling first in the role of money-capital, then we transformed them entirely into productive capital, and finally into commodity-capital, into yarn valued at 500 pounds sterling and containing 78 pounds sterling of surplus-value. Here the various stages are so many interruptions. So long as, for instance, those 422 pounds sterling retain the form of money, that is to say until the purchases M—C (L plus Pm) have been made, the entire capital exists only in the form of money-capital and performs its functions. But as soon as it is transformed into productive capital, it performs neither the functions of money-capital nor of commodity-capital. Its entire process of circulation is interrupted, just as on the other hand its entire process of production is interrupted, as soon as it performs any functions in one of its two circulation stages, either as M or as C. From this point of view, the cycle P...P would not only present a periodical renewal of the productive capital, but also the interruption of its function, the process of production, up to the time when the process of circulation is completed. Instead of proceeding continuously, production took place in jumps and was renewed only in periods of uncertain duration, according to whether the two stages of the process of circulation were completed fast or slowly. This would apply, for instance, to a Chinese artisan, who works only for private customers and whose process of production is interrupted, until he receives a new order.

This is true of every individual part of capital in process of circulation, and all parts of capital pass through this circulation in succession. For instance, the 10,000 lbs, of yarn are the weekly product of some spinner. These 10,000 lbs. of yarn leave the sphere of production in their entirety and enter the sphere of circulation. The capital-value contained in them must all be converted into money-capital, and so long as it retains the form of money-capital, it cannot return into the process of production. It must first go into circulation and be reconverted into the elements of productive capital, L plus Pm. The process of rotation of capital is a succession of interruptions, leaving one stage and entering the next, discarding one form and assuming another. Every one of these stages not only cause the next, but also excludes it.

But continuity is the characteristic mark of capitalist production, conditioned on its technical basis, although not absolutely attainable. Let us see, then, what passes in reality. While the 10,000 lbs. of yarn appear on the market as commodity-capital and are transformed into money (regardless of whether it is a paying, purchasing, or calculating medium), new cotton, coal, etc., take the place of the yarn in the process of production, having been reconverted from the form of money and commodities into that of productive capital and performing its functions. At the time when these 10,000 lbs. of yarn are converted into money, the preceding 10,000 lbs. are going through the second stage of circulation and are reconverted from money into the elements of productive capital. All parts of capital pass successively through the process of rotation and are simultaneously in its different stages. The industrial capital thus exists simultaneously in all the successive stages of its rotation and in the various forms corresponding to its functions. That part of industrial capital, which is for the first time converted from commodity-capital into money, begins the cycle C'...C', while industrial capital as a rotating body of aggregates, has passed through it. One hand advances money, the other receives it. The inauguration of the cycle M...M' at one place coincides with its return to the starting point of another. The same is true of productive capital.

The actual rotation of industrial capital in its continuity is therefore not alone the unity of the processes of production and circulation, but also the unity of its three cycles. But it can be such a unity only, if every individual part of capital can go successively through the various stages of the rotation, pass from one phase and from one functional form to another, so that the industrial capital, being the aggregate of all these parts, is found simultaneously in its various phases and functions and describes all three cycle at the same time. The succession of these parts is conditioned on their simultaneous existence side by side, that is to say, on the division of capital. In a systematized manufacture, the product is as much ubiquitous in the various stages of its process of formation, as it is in the transition from one phase of production to another. As the individual industrial capital has a definite volume which does not merely depend on the means of the capitalist and which has a minimum magnitude for every branch of production, it follows that its division must proceed according to definite proportions. The magnitude of the available capital determines the volume of the process of production, and this, again, determines the size of the commodity-capital and money-capital which perform their functions simultaneously with the process of production. The simultaneous functions, which enable the production to proceed continuously, are only due to the rotation of the various parts of capital which pass successively through their different stages. The simultaneousness is merely the result of the succession. For if the rotation of one phase, for instance of C'—M', is interrupted for one of the parts of capital, if the commodity cannot be sold, then the cycle of this part is broken and the reproduction of its elements of production cannot take place; the succeeding parts, which come out of the process of production in the shape of C', find the conversion of their function blocked by their predecessors. If this is continued for some time, production is restricted and the entire process arrested. Every stop of the succession carries disorder into the simultaneousness of the cycles, every obstruction of one stage causes more or less obstruction in the entire rotation, not only of the obstructed part of capital, but of the total individual capital.

The next form, in which the process presents itself, is that of a succession of phases, so that the transition of capital into a new phase is conditioned on its departure from another. Every special cycle has therefore one of the functional forms of capital for its point of departure or return. On the other hand, the aggregate process is indeed the unity of its three cycles, which are the different forms in which the continuity of the process expresses itself: The total rotation appears as its own specific cycle to every functional form of capital, and every one of these cycles contributes to the continuity of the process. The rotation of one functional form requires that of the others. This is the inevitable requirement for the aggregate process of production, especially for the social capital, that it is at the same time a process of reproduction, and thus a rotation of each one of its elements. Different aliquot parts of capital pass successively through the various stages and functional forms. By this means, every functional form passes simultaneously with the others through its own cycles, although other parts of capital are continuously presented by each form. One part of capital, continually changing, continually reproduced, exists as a commodity-capital which is converted into money; another as money-capital converted into productive capital; and a third as productive capital converted into commodity-capital. The continuous existence of all three forms is brought about by the rotation of the aggregate cycle through these three phases.

Capital as a whole, then, exists simultaneously side by side in its different phases. But every part passes continuously and successively from one phase and functional from into the next one and performs a function in all of them. Its forms are fluid and their simultaneousness is brought about by their succession. Every form follows and precedes another, so that the return of one capital part to a certain form is conditioned on the return of another part to some other form. Every part describes continuously its own cycle, but it is always another part which assumes a certain form, and these special cycles are simultaneous and successive parts of the aggregate rotation.

The continuity of the aggregate process is realized only by the unity of the three cycles, and would be impossible with the above-mentioned interruptions. The social capital always has this continuity and its process always rests on the unity of the three cycles.

The continuity of the reproduction is more or less interrupted so far as the individual capitals are concerned. In the first place, the masses of value are frequently distributed at various periods and in unequal portions over the various stages and functional forms. In the second place, these portions may be differently distributed, according to the character of the commodity, which is to be produced. In the third place, the continuity, may be more or less interrupted in those branches of production, which are dependent on the seasons, either on account of natural causes, such as agriculture, fishing, etc., or on account of conventional circumstance such as the so-called season-work. The process proceeds most regularly and uniformly in the factories and in mining. But this difference of the various branches of production does not cause any difference in the general forms of the process of rotation.

Capital, as a value creating more value, is not merely conditioned on class-relations, on a definite social system resting on the existence of labor in the form of wage-labor. It is also a movement, a rotation through various stages, comprising three different cycles. Therefore it can be understood only as a thing in motion, not as a thing at rest. Those who look upon the self-development of value as a mere abstraction forget that the movement of industrial capital is the realization of this abstraction. Value here passes through various forms in which it maintains itself and at the same time increases its value. As we are here concerned in the form of this movement, we shall not take into consideration the revolutions, which capital-value may undergo during its rotation. But it is clear that capitalist production can only exist and endure, in spite of the revolutions of capital-value, so long as this value creates more value, that is to say, so long as it goes through its cycles as a self-developing value, or so long as the revolutions in value can be overcome and balanced in some way. The movements of capital appear as the actions of some individual industrial capitalist who performs the functions of a buyer of labor-power, a seller of commodities, and an owner of productive capital, and who brings about the process of rotation by his activity. If social capital-value experiences a revolution in value, it may happen, that the capital of the individual capitalist succumbs and fails, because it cannot adapt itself to the conditions of this conversion of values. To the extent that such revolutions in value become acute and frequent, the automatic nature of self-developing value makes itself felt with the force of elementary powers against the foresight and calculations of the individual capitalist, the course of normal production becomes subject to abnormal speculation, and the existence of individual capitals is endangered. These periodical revolutions in value, therefore, prove that which they are alleged to refute, namely, the independent nature of value in the form of capital and its increasing independence in the course of its development.

This succession of the metamorphoses of rotating capital includes the continuous comparison of the changes of value brought about by rotation with the original magnitude of capital. When the growing independence of value as compared to the power of creating value, of labor-power, has been inaugurated by the act M—L (purchase of labor-power) and is realized during the process of production as an exploitation of labor-power, this rise of independence on the part of value does not re-appear in that cycle, in which money, commodities, and elements of production are merely passing forms of rotating capital value, and in which the former magnitude of value compares itself to the present changed value of capital.

"Value," says Bailey, in opposition to the idea of the growing independence of value characteristic of capitalist production, which he regards as an illusion of certain economists, "value is a relation between contemporary commodities, because such only admit of being exchanged with each other." This criticism is directed against the comparison of commodity-values of different periods of time, which amounts to the comparison of the expenditure of productive labor required for the manufacture of equal commodities at different periods, once that the value of money for every period has been fixed. His opposition is due to his general misunderstanding, for he thinks that exchange-value is value itself, that the form of value is identical with the volume of value; so that values of commodities cannot be compared, so long as they do not perform active service as exchange value and are not actually exchanged for each other. He has not the least inkling of the fact that value performs only the functions of capital, in so far as it remains identical with itself and is compared with itself in those different phases of its rotation, which are not at all contemporary, but succeed one another.

In order to study the formula of this rotation in its purity, it is not sufficient to assume that the commodities are sold at their value, but that this takes place under conditions which are otherwise equal. Take, for instance, the cycle P...P and make abstraction of all technical revolutions within the process of production, by which the productive capital of a certain individual capitalist might be depreciated; make abstraction furthermore of all reactions, which a change in the elements of value of productive capital might cause in the value of the existing commodity-capital, which might be increased or lowered, if a stock of it were kept on hand. Take it also, that C', or 10,000 lbs. of yarn, have been sold at their value of 500 pounds sterling; 8,440 lbs., equal to 422 pounds sterling, reproduce the capital-value contained in C'. But if the prices of cotton, coal, etc., have increased (we do not consider mere fluctuations in price), these 422 pounds sterling may not suffice for the full reproduction of the elements of productive capital; in that case, additional money-capital is required and money-value is tied up. The opposite takes place, if those prices fall, and money-capital is set free. The process takes a normal course only so long as the values remain constant; it proceeds practically normal, so long as the disturbances during the repetition of the process balance one another. But to the extent that these disturbances increase in volume, the industrial capitalist must have at his disposal a greater money-capital, in order to tide himself over the period of compensation; and as the scale of each individual process of production and thus the minimum size of the capital to be advanced increase in the process of capitalist production, we have here another circumstance to add to those others which transform the functions of the industrial capitalist more and more into a monopoly of great money-capitalists, who may be individuals or associations.

We remark incidentally that a difference in the form of M—M' on one side, and of P...P and C'...C' on the other appears, if a change in the value of the elements of production occurs.

In the cycle M...M', the formula of newly invested capital, which for the first time appears in the role of money-capital, a fall in the value of elements of production, such as raw materials, auxiliary materials, etc., will require a smaller investment of money-capital than would have been necessary before this fall for the purpose of starting a business of a definite size, because the scale of the process of production depends on the mass and volume of the means of production (provided the productivity remains unchanged), which a given quantity of labor-power can assimilate; but it does not depend on the value of these means of production nor on that of the labor-power (the latter has an influence only on the creation of more value). Take the opposite case. If the value of the elements of production of certain commodities is increased, which are required as elements of a certain productive capital, then more money-capital is required for the establishment of a business of definite proportions. In both cases it is only the quantity of the money-capital required for investment which is affected. In the former case, money-capital is set free, in the latter it is tied up, provided the advent of new industrial capitals proceeds normally in a given branch of production.

The cycles P...P and C'...C' assume the character of M...M' only to the extent that the movement of P and C' is at the same time accumulation, so that additional m, money, is converted into money-capital. Apart from this case, they are differently affected than M...M' by a change of value of the elements of production; here, too, we do not take into consideration the reaction of such changes in value on those parts of capitals which are engaged in the process of production. It is not the original investment, which is here directly affected, not a capital engaged in its first rotation, but one in a process of reproduction; in other words, C'...C lf0445-02-0032-i0001.gif , the reconversion of commodity-capital into its elements of production, so far as they are composed of commodities. In a reduction of value (or price), three cases are possible: The process of reproduction is continued on the same scale; in that case a part of the available money-capital is set free and money-capital is accumulated, although no actual accumulation (production on an enlarged scale), or the transformation of m (surplus-value) into funds for accumulation initiating and accompanying it, has previously taken place. Or, the process of reproduction is renewed on a more enlarged scale than would have been ordinarily the case, provided the technical proportions admit it. Or, finally, a larger stock of raw materials, etc., is laid in.

The opposite takes place if the value of the elements of reproduction of a commodity-capital increases. In that case, reproduction does not take place on its normal scale (work is done in a shorter time, for instance); or additional money-capital must be employed in order to maintain the old scale (money-capital is tied up); or the money-fund of the accumulation, if available, is entirely or partially employed for the enlargement of the process of reproduction to its old scale. This is also tying up money-capital, only the additional money-capital does not come from the outside, from the money-market, but out of the pockets of the industrial capitalist himself.

However, there may be modifying circumstances in P...P and C'...C'. If our cotton spinner has a large stock of cotton (a large proportion of his productive capital in the form of a stock of cotton), a part of his productive capital is depreciated by a fall in the price of cotton; but if this price has risen, this part of his productive capital is enhanced in value. On the other hand, if he had tied up a large part of his capital in the form of commodity-capital, for instance in cotton yarn, a part of his commodity capital or for that matter of any of his rotating capital, is depreciated by a fall in the price of cotton, or enhanced by a rise in that price. Finally take the process C'—M—C lf0445-02-0032-i0001.gif If C'—M, the realization on the commodity-capital, has taken place before a change in the value of the elements of C, then capital is affected only in the way indicated in the first case, that is to say, in the second act of circulation, M—C lf0445-02-0032-i0001.gif but if such a change has occurred before the realization of C'—M, then, other conditions remaining equal, a fall in the price of the cotton causes a corresponding fall in the price of yarn, and a rise in the price of cotton a rise in the price of yarn. The effect on the various individual capitals in the same branch of production may differ widely according to the circumstances in which they find themselves. Money-capital may also be set free or tied up by differences in the duration of the process of circulation, in other words, by the pace of the circulation. But this belongs in the discussion of the periods of turn-over. At this point, we are only interested in the real difference arising from changes of values in the elements of productive capital between M...M' and the other two cycles of the process of rotation.

In the section of circulation indicated by M—C lf0445-02-0032-i0001.gif at a period of developed and prevailing capitalist modes of production, a large portion of the commodities composing Pm, means of production, will be rotating commodity-capital of some one else. From the standpoint of the seller, therefore, the transaction is C'—M', the transformation of commodity-capital into money-capital. But this does not apply absolutely. In the opposite case, in those sections of its process of rotation, where industrial capital performs either the functions of money or of commodities, the cycle of industrial capital, whether as money-capital or as commodity-capital, crosses the circulation of commodities of the most varied social modes of production, so far as they produce commodities. No matter whether a commodity is the product of slavery, of peasants (Chinese, Indian ryots), of communes (Dutch East Indies), or of state enterprise (such as existed in former epochs of Russian history on the basis of serfdom), or of half savage hunting tribes, etc., commodities and money of such modes of production, when coming in contact with commodities and money representing industrial capital, enter as much into its rotation as into that of surplus-values embodied in the commodity-capital, provided the surplus-value is spent as revenue. They enter into both of the cycles of circulation of commodity-capital. The character of the process of production from which they emanate is immaterial. They perform the function of commodities on the market, and enter into the cycles of industrial capital as well as into those of the surplus-value carried by it. It is the universal character of the commodities, the world character of the market, which distinguishes the process of rotation of the industrial capital. What is true of foreign commodities, is also true of foreign money. Just as commodity-capital has only the character of commodities in contact with foreign money, so this money has only the character of money in contact with commodity-capital. Money here performs the functions of world-money.

However, two points must be noted here.

First. As soon as the transaction M—Pm is completed, the commodities (Pm) cease to be such and become one of the modes of existence of industrial capital in its function of productive capital. Henceforth their origin is obliterated. They exist only as forms of industrial capital and are embodied in it. But it still remains necessary to reproduce them, if their places are to be filled, and to this extent the capitalist mode of production is conditioned on other modes of production outside of its own stage of development. But it is the tendency of capitalist production to transform all production as much as possible into a production of commodities. The mainspring, by which this is accomplished, is the implication of other modes of production into the circulation process of capitalist production. And developed commodity-production is capitalist production. The intervention of industrial capital promotes this transformation everywhere, and simultaneously with it also the transformation of all direct producers into wage laborers.

Second. The commodities entering into the process of circulation (including the means of existence necessary for the reproduction of the labor-power of the laborer, who receives variable capital in the form of wages), regardless of their origin and of the social form of the productive process by which they were created, entertain the relation of commodity-capital, in the form of merchandise or merchant's capital, toward industrial capital. Merchant's capital, by its very nature, includes commodities of all modes of production.

Capitalist production does not only imply production on a large scale, but also necessarily sale on a large scale, in other words, sale to the dealer, not to the individual consumer. Of course, so far as a consumer is himself a productive consumer, an industrial capitalist, whose industrial capital produces means of production for some other branch of industry, a direct sale of one industrial capitalist's product to many other capitalists takes place (orders, etc). To this extent, every industrial capitalist is a direct seller and his own dealer, also, when he sells to the merchant.

Trading in commodities as a function of merchant's capital is the premise of capitalist production and develops more and more in the course of development of this mode of production. Therefore we use it occasionally for the illustration of various aspects of the process of capitalist circulation; but in the general analysis of this process, we assume that commodities are sold directly without the intervention of the merchant, because this intervention obscures various points of the movement.

See, for instance, Sismondi, who presents the matter somewhat naively, in the following words: "Commerce employs considerable capital, which at first sight does not seem to be a part of that capital whose movements we have just described. The value of the cloth in the stores of the cloth-merchant seems at first to be entirely foreign to that part of the annual production which the rich give to the poor' as wages in order to make them work. However, this capital has simply replaced the other of which we have spoken. For the purpose of clearly understanding the progress of wealth, we have begun with its creation and followed its movements to their conclusion. We have then seen that the capital employed in manufacture, for instance in the manufacture of cloth, was always the same; and when it was exchanged for the income of the consumer, it was merely divided into two part; one of them serving as revenue for the capitalist in the form of the product, the other serving as revenue to the laborers in the form the wages while they were manufacturing new cloth.

But it was soon found that it would be to the advantage of all to replace the different parts of this capital one by another and, if 10,000 dollars were sufficient for the entire circulation between the manufacturer and the consumer, to divide them equally between the manufacturer, the wholesale dealer, and the retail merchant. The first then did the same work with only one-third of this capital which he had formerly done with the entire capital, because, as soon as his work of manufacturing was completed, he found that the merchant bought from him much more readily than he could have found the consumer. On the other hand, the capital of the wholesale dealer was much sooner replaced by that of the retail merchant.... The difference between the sums advanced for wages and the purchase price paid by the last consumer was considered the profit of those capitals. It was divided between the manufacturer, the wholesale dealer, and the retail merchant, from the moment that they had divided their functions, and the work accomplished was the same, although it had required three persons and three parts of capital instead of one (Nouveaux Principes, I, pages 159, 160). All the merchants contributed indirectly to production; for having consumption for its object, production cannot be regarded as completed, until the product is placed into the reach of the consumer (Ibidem, page 157)."

We operate in the discussion of the general forms of the rotation, in short in the entire second volume, with money as metallic money, to the exclusion of symbolic money, of mere tokens of value, which are the specialties of certain states, and of credit-money, which is not yet developed. In the first place, this is the historical order; credit-money plays only a very minor role, or none at all, during the first epoch of capitalist production. In the second place, the necessity of this order is demonstrated theoretically by the fact, that everything which Tooke and others have hitherto produced of a critical nature in regard to the circulation of credit-money was compelled to hard back to the question, what would be the aspect of the matter if nothing but metal-money were in circulation. But it must not be forgotten, that metal-money may serve as a purchase medium and as a paying medium. For the sake of simplicity, we consider it in this second volume generally only in its first functional form.

The process of circulation of industrial capital, which is only a part of its individual process of rotation, is determined by the general laws outlined in volume I, chapter III, in so far as it is a series of transactions within the general circulation of commodities. The same mass of money, for instance 500 pounds sterling, starts successively so many more industrial capitals or eventually individual capitals in the form of commodity-capitals) in circulation, the greater the velocity of rotation of money is, and the more rapidly therefore every individual capital passes through the metamorphoses of commodities or money. One and the same volume of capital-value therefore requires so much less money for its circulation, the more this money performs the functions of a paying medium; the more, for instance, in the reproduction of some commodity-capital by its corresponding means of production, nothing but balances have to be squared; and the shorter the time of the payments is, for instance in paying wages. On the other hand, assuming that the velocity of the circulation and all other conditions remain the same, the volume of money required for the circulation of money-capital is determined by the sum of the prices of commodities (price multiplied by the volume of commodities), or, if the volume and value of the commodities are given, by the value of money itself.

But the laws of the general circulation of commodities apply only to the extent that the process of circulation of capital consists of a series of simple transactions in circulation; they do not apply to the extent that such transactions are definite functional sections in the rotation of individual industrial capitals.

In order to make this plain, it is best to study the process of circulation in its uninterrupted and connected form, such as it appears in the following two formulas:

lf0445-02-0129-e0001.gif

As a series of transaction, in circulation, the process of circulation, whether in the form of C—M—C or of M—C—M, represents merely the two opposite lines of metamorphoses of commodities, and every individual metamorphosis in its turn includes its opposite on the part of the commodity or money in the hands of another.

C—M on the part of the owner of some commodity means M—C on the part of its buyer; the first metamorphosis of the commodity in C—M is the second metamorphosis of the commodity appearing in the form of M; the opposite applies to M—C. The statements concerning the intermingling of the metamorphosis of a certain commodity in one stage with that of another in another stage apply to the circulation of capital to the extent that the capitalist performs the functions of a buyer and seller of commodities, so that his capital in the form of money meets the commodities of another, or in the form of commodities the money of another. But this intermingling is not identical with the intermingling of the metamorphoses of capitals.

In the first place, M—C(Pm), as we have seen, may represent an intermingling of the metamorphoses of different individual capitals. For instance, the commodity-capital of the cotton-spinner, yarn, is partly replaced by coal. One part of his capital is in the form of money and is transformed into commodities, while the capital of the capitalist producer of coal exists in the form of commodities and is therefore transformed into money; the same transaction of circulation in this case represents opposite metamorphoses of two industrial capitals in different departments of production, the series of metamorphoses of these capitals intermingles in it. But we have also seen, that the Pm into which M is transformed need not be commodity-capital in the strictest sense, that is to say need not be a functional form of industrial capital, need not be produced by a capitalist. It is always a question of M—C on one side, and C—M on the other, but not always of intermingling metamorphoses of capitals. Furthermore M—L, the purchase of labor-power, never intermingles with any metamorphoses of capital, for labor-power, though a commodity from the point of view of the laborer, does not become capital until it is sold to the capitalist. On the other hand, in the process C'—M', it is not necessary that M' should represent transformed commodity-capital; it may be the money-equivalent of labor-power (wages), or of the product of some independent laborer, some slave, serf, or some commune.

In the second place, a definite functional role played by every metamorphosis of some individual capital within the process of circulation, need not represent a corresponding opposite metamorphosis in the rotation of the other capital, provided we assume that the entire production of the world-market is carried on capitalistically. For instance, in the cycle P...P, the M' which pays for C' may be merely the money-form of the surplus-value of the buyer, in case that the commodity is an article for consumption; or, in M'—C' lf0445-02-0032-i0001.gif where accumulated capital is concerned, it may simply replace the advanced capital of the seller of Pm, or it may not return into the rotation of his capital at all by being side-tracked into expenditures as revenue.

This shows that the manner in which the different component parts of the aggregate social capital, of which individual capitals are merely components performing independent functions, mutually replace one another in the process of circulation (in regard to capital as well as surplus-value), is not apparent from the simple intermingling of the metamorphoses in the circulation of commodities. Such intermingling occurs in the transactions of capital circulation as it does in all other circulation of commodities, but it requires a different method of analysis. Hitherto nothing but general phrases have been employed by economists for his purpose, and if we test those phrases, they contain nothing but indefinite ideas borrowed from the intermingling of metamorphoses common to all circulations of commodities.

One of the most obvious peculiarities of the process of rotation of industrial capital, and therefore of capitalist production, is the fact that on the one side, the component elements of productive capital are derived from the commodity-market, are continually renewed out of it, and are sold as commodities; that, on the other side, the product of the labor-process comes forth from it as a commodity and must be continually sold over and over as a commodity. Compare, for instance, a modern tenant of Lower Scotland with an old-fashioned small farmer on the continent. The former sells his entire product and has therefore to reproduce all its elements, even his seeds, by means of the market; the latter consumes the greater part of his product directly, buys and sells as little as possible, fashions tools, clothing, etc., so far as possible himself.

Such comparisons have led to the classification of production into natural economy, the money-system, and the credit-system, as being the three characteristic stages of economy in the development of social production.

But in the first place, these three forms do not represent any equivalent phases of development. The so-called credit-system is itself merely a modification of the money-system, so far as both terms express transactions between the producers themselves. In the developed capitalist production, the money-system appears only as the basis of the credit-system. The money-system and credit-system thus correspond only to different stages in the development of capitalist production, but they are by no means independent modes of economy as compared to natural economy. With the same justification, one might place the various forms of natural economy as equivalents by the side of those two systems.

In the second place, it is not the process of production itself which is emphasized as the distinguishing mark of the two systems of that classification, the money-system, the credit-system, but rather the mode of transaction between the various producers under those systems. Then the same should apply to the natural economy, which should in that case be classified as the exchange-system. A completely rounded system of natural economy, such as the state of the Inkas in Peru, would not fall under any of these classifications.

In the third place, the money-system is common to all production of commodities, and the product appears as a commodity in the most varied organisms of social production. The characteristic mark of capitalist production would then be only the extent to which the product is manufactured for purposes of trade, as a commodity, and the extent to which its own elements of formation enter as commodities into the economy which creates that product.

It is true, that capitalist production has for its general form the production of commodities. But it is so and becomes more so in its development, only because labor itself here appears as a commodity, because the laborer sells labor, that is to say the function of his labor-power, and our assumption is that he sells it at a value determined by its cost of reproduction. To the extent that labor becomes wage-labor, the producer becomes an industrial capitalist. For this reason capitalist production (and the production of commodities) does not reach its full scope, until the agricultural laborer becomes a wage-laborer. In the relation of capitalist and wage-laborer, the relation between the buyer and the seller, the money-relation, becomes an imminent relation of production. And this relation has its foundation in the social character of production, not of circulation. The character of the circulation rather depends on that of production. It is however, quite characteristic of the bourgeois horizon, which is entirely bounded by the craze for making money, not to see in the character of the mode of production the basis of the corresponding mode of circulation, but vice versa. 11

The capitalist throws less value in the form of money into the circulation than he draws out of it, because he throws into it more value in the form of commodities than he had withdrawn from it. To the extent that he is simply a personification of capital, an industrial capitalist, his supply of commodity-value is always larger than his demand for that value. The equality of his supply and demand in this respect would indicate that his capital had not produced any surplus-value; it would not have performed the functions of productive capital; the productive capital would have been converted into commodity-capital which would not be impregnated with surplus-value; it would not have drawn any surplus-value in commodity-form out of labor-power during the process of production, it would not have performed any capital-functions at all. The capitalist must indeed "sell dearer than he has bought," but he succeeds only in doing so, because the capitalist process of production enables him to transform the cheaper commodity, which contains less value, into a dearer commodity with increased value. He sells dearer, not because he gets more than the value of his commodity, but because his commodity contains a greater value than that contained in the natural elements of its production.

The rate at which value is added to the capital of the capitalist increases in proportion to the difference between his supply and his demand, that is to say in proportion as the surplus of the commodities which he places on the market exceeds the value of the commodities which he has taken from it. His aim is not to equalize his supply and demand, but to make the difference between them as much as possible in favor of his supply.

What is true of the individual capital, also applies to the capitalist class.

In so far as the capitalist personifies but his industrial capital, his own demand is only for means of production and labor-power. His demand for Pm, expressed in value, is smaller than his advanced capital; he buys means of production of a value smaller than his capital, and therefore much smaller than the value of the commodity-capital which he takes back to the market.

As regards his demand for labor-power, its value is determined by the proportion of his variable capital to his total capital, as expressed by V÷C. Its proportion in capitalist production decreases continually more than his demand for means of production. His purchases of Pm steadily increase over his purchases of L.

Inasmuch as the laborer generally converts his wages into means of existence, and for the overwhelmingly larger part necessities of life, the demand of the capitalist for labor-power is indirectly also a demand for the articles of consumption assimilated by the working class. But this demand is equal to v and not one atom greater. If the laborer saves a part of his wages—we do not consider any questions of credit at all—he converts a part of his wages into a hoard and does not perform the functions of a purchaser to that extent. The limit of the maximum demand of the capitalist is C, equal to c plus v, but his supply for the market is c plus v plus s. If the composition of his commodity-capital is 80c+20v+20s, his demand is equal to 80c+20v, or one fifth smaller in value than his supply. His demand as compared to his supply decreases in proportion as the percentage of the mass of surplus-value produced by him (his rate of profit) increases. Although the demand of the capitalist for labor-power, and thus indirectly for necessities of life, decreases continually compared to his demand for means of production in the further development of production, it must not be forgotten that day by day his demand for Pm is always smaller than his capital. His demand for means of production must, therefore, be always smaller in value than the commodity-product of the capitalist who, working with a capital of equal value and conditions like his, furnishes him with those means of production. It does not alter the case, if many capitalists instead of one furnish him with means of production. Take it that his capital is 1,000 pounds sterling, and its constant part 800 pounds sterling; then his demand on all the capitalists supplying him is equal in value to 800 pounds sterling. Together they supply for each 1,000 pounds sterling means of production valued at 1,200 pounds sterling, assuming that the rate of profit is the same for all of them, regardless of the rate at which they share in the 1,000 and of the proportion which the share of each one may represent in his total capital. The demand of the buying capitalist covers only two-thirds of the supply of the sellers, while his total demand equals only four-fifths of the value of his own supply to the market.

It still remains to anticipate the analysis of the problem of turn-over. Let the total capital of the capitalist be 5,000 pounds sterling, of which 4,000 pounds is fixed and 1,000 pounds circulating capital; these 1,000 pounds sterling are composed of 800 c plus 200 v, as assumed before. His circulating capital must be turned over five times per year in order that his fixed capital may be turned over once. His commodity-product is then equal in value to 6,000 pounds sterling, it is valued at 1,000 pounds sterling more than his advanced capital, so that the same proportion of surplus-value is obtained as before:

5,000 C÷1,000 s=100(c+v)÷20 s.

This turn-over does not change anything in the proportion of the total demand of the capitalist to his total supply. The former remains one-fifth smaller than the latter.

Take it that his fixed capital must be reproduced in 10 years. Hence he sinks every year one tenth, or 400 pounds sterling, so that he has only a value of 3,600 pounds of fixed capital left plus 400 pounds in money. Inasmuch as repairs are necessary which do not exceed the average, they represent nothing but capital invested later. We may look at the matter from the standpoint that he has allowed for the expenses for repairs when calculating the value of his investment, so far as this enters into the annual commodity-product, so that they are included in that one tenth of sinking fund. If the repairs cost less than the average he is so much money in pocket, and in the reverse case he loses it. At any rate, although his demand, after his total capital has been turned over once a year, still remains at 5,000 pounds sterling which was the value of the original capital advanced, it increases so far as the circulating part of this capital is concerned, while it decreases so far as the fixed part is concerned.

We now come to the question of reproduction. Take it that the capitalist consumes the entire surplus-value composed of money m and reconverts only the original capital-value C into productive capital. Then the demand of the capitalist is equal to his supply; but this does not refer to the movements of his capital. As a capitalist, his demand is only for four-fifths of value of his supply. He consumes one-fifth as a non-capitalist; he consumes it, not in the performance of his function as capitalist, but for his private requirements or pleasure.

His calculation, expressed in percentages, stands as follows:

Demand as capitalist... 100, supply 120.
Demand as man of the world 20, supply 0.
Total demand... 120, supply 120.

This assumption amounts to a non-existence of capitalist production, and thus the non-existence of the industrial capitalist himself. For capitalism is destroyed in its very foundation, if we assume that its compelling motive is enjoyment instead of the accumulation of wealth.

But such an assumption is also technically impossible. The capitalist must not only form a reserve-capital as a protection against fluctuations of value and as a fund enabling him to wait for favorable conditions of the market for sale and purchase; he must also accumulate capital, in order to extend his production and embody the progress of technique in his productive organization.

In order to accumulate capital, he must first withdraw a a part of the surplus-value from circulation which he obtained from that circulation in the form of money, and must hoard it until it has increased sufficiently for the extension of his old business or the opening of a side-line. So long as the formation of the hoard continues, it does not increase the demand of the capitalist. The money is then inactive. It does not withdraw from the commodity-market any equivalent in commodities for the money-equivalent which it withdrew for commodities supplied to it.

Credit is not considered here. And credit includes the depositing, on the part of the capitalist, of accumulating money in a bank on payment of interest as shown by a running account.

Part I, Chapter V
THE TIME OF CIRCULATION. 12

We have seen that the movement of capital through the sphere of production and the two phases of circulation takes place in a succession of time. The duration of its sojourn in the sphere of production is its time of production, that of its stay in the sphere of circulation its time of circulation.

The time of production naturally includes the period of the labor-process, but is not comprised in it. We must first remember that a part of the constant capital exists in the form of instruments of production, such as machinery, buildings, etc., which serve for the repeated labor-processes until they are worn out. Periodical interruptions of the labor-process by night, etc., interrupt the function of these instruments of production, but not their location on the place of production. They belong to this place when they are not in function as well as when they are. On the other hand, the capitalist must have a definite supply of raw material and auxiliary substances in readiness, in order that the process of production may take place for a longer or shorter time on a previously determined scale, without being dependent on the accidents of a daily supply from the market. This supply of raw material, etc., is consumed productively by degrees. There is, therefore, a difference between its time of production 13 and its time of function. The time of production of the means of production in general comprises, therefore, first the time during which they serve as means of production by taking part in the productive process; second, the stops during which a certain process of production, and thus the function of the means of production embodied in it, is interrupted; third, the time during which the means of production are held in readiness as requirements for the process of production, during which they represent productive capital, without having entered into the process of production.

The difference so far discussed is always the difference between the time which the productive capital passes in the sphere of production and that in the process of production. But the process of production itself may require interruptions of the labor-process, and thus of the labor time, and during such pauses the object of labor is exposed to the influence of physical processes without the intervention of human labor. The process of production, and thus the function of the means of production, continue in this case, although the labor-process, and thus the function of the means of production as instruments of labor, have been interrupted. This applies, for instance, to the grain, after it has been sowed, the wine fermenting in the cellar, the labor-material of many manufacturers, such as tanneries, where the material is given over to chemical processes. The time of production is then greater than the labor-time. The difference between the two consists in an excess of the time of production over the labor-time. This excess always arises by the latent existence of productive capital in the sphere of production, without performing its function in the process of production itself, or by the performance of its function in the productive process without taking part in the labor-process.

That part of the latent productive capital, which is held in readiness as a requirement for the productive process, such as cotton, coal, etc., in a spinnery, produces neither products nor value. It is fallow capital, although its fallow condition is a requirement for the uninterrupted flow of the process of production. The buildings, apparatus, etc., necessary for the storage of the productive supply (latent capital) are requirements of the productive process and therefore component parts of the advanced productive capital. They perform their function as conservators of the elements of production in a preliminary stage. Inasmuch as labor-processes are required in this stage, they add to the cost of the raw material, etc., but they are productive labor and produce surplus-value, because a part of this labor, like all wage-labor, is not paid. The normal interruptions of the entire process of production, the pauses in which the productive capital does not perform any functions, create neither value nor surplus-value. Hence the tendency to keep the work going at night (Volume I, chapter X, 4).—The intervals in the labor-time, which the object of labor must endure in the process of production itself, create neither value nor surplus-value. But they advance the product, form a part of its life, a process through which it must necessarily pass. The value of the apparatus, etc., is transferred to the product in proportion to the entire time, during which they perform their function; the product is brought to this stage by labor itself, and the employment of these apparatus is as much a requirement of production as the wasting of a part of the cotton which does not enter into the product, but nevertheless transfers its value to that product. The other parts of latent capital, such as buildings, machinery etc., that is to say those instruments of labor whose function is interrupted only by the regular pauses of the productive process (irregular interruptions caused by the restriction of production, crises, etc., are total losses) create additional values without entering into the creation of the product. The total value which this part of capital adds to the product, is determined by the average time which it lasts, for its own value, being use-value, diminishes during the time that it performs its functions as well as during that in which it does not.

Finally, the value of the constant part of capital, which continues in the productive process although the labor-process is interrupted, re-appears in the result of the productive process. Labor itself has here placed the means of production in a condition, where they pass without further assistance through certain useful processes, the result of which is a definite advantage or a change in the form of the use-values. Labor always transfers the value of the means of production to the product, to the extent that it really consumes them to good effect as means of production. And it does not change the case, whether labor has to be exerted continually on its object in order to produce this effect, or whether it merely gives the first impulse for it by placing the means of production in a condition wherein they undergo the intended transformation through the influence of natural processes, without further assistance from labor.

Whatever may be the reason for the excess of the time of production over the labor-time—whether it is that the means of production are still latent capital in a stage preliminary to the actual productive process, or that their function is interrupted within the process of production by its pauses, or that the process of production itself requires an interruption of the labor-process—in none of these cases do the means of production assimilate any labor. And if they do not assimilate any labor, they do not imbibe any surplus-labor. Hence the productive capital does not increase its value, so long as it remains in that part of its time of production which exceeds the labor-time, no matter how indispensable these pauses may be for the realization of the process of increasing value. It is plain, that the productivity and increment of a given productive capital in a given time are so much greater, the more nearly the time of production and labor-time are equal. Hence we have the tendency of capitalist production to reduce the excess of the time of production over the labor-time as much as possible. But although the time of production of a certain capital may exceed its labor-time, it always includes the latter, and its excess is a logical condition of the process of production. The time of production, then, is always that time in which a capital produces use-values and surplus-values, and in which it performs the functions of productive capital, although it includes time in which it is either latent or produces without creating surplus-values.

Within the sphere of circulation, capital abides as commodity-capital and money-capital. Its two processes of circulation consist in its transformation from the commodity-form into that of money, and from the money-form into that of commodities. It does not alter the character of these processes as transactions in circulation, of processes in the simple metamorphosis of commodities, that this transformation of commodities into money is at the same time a realization of the surplus-values embodied in the commodities, and that the transformation of money into commodities is at the same time a transformation or reconversion of capital-value into the forms of its elements of production.

The time of circulation and time of production mutually exclude one another. During its time of circulation, capital does not perform the functions of productive capital and therefore produces neither commodities nor surplus-value. If we study the cycle in its simplest form, so that the entire capital-value passes in one bulk from one phase into the other, we can plainly see that the process of production is interrupted and therefore also the production of surplus-value, so long as its time of circulation lasts, and that the renewal of the process of production will take place promptly or slowly, according to the length of the time of circulation. But if the various parts of capital pass through the cycle successively, so that the rotation of the entire capital-value proceeds successively by the rotation of its component parts, then it is evident that the part performing continually the function of productive capital must be so much smaller, the longer the aliquot parts of capital-value remain in the sphere of circulation. The expansion and contraction of the time of circulation are therefore a check on the contraction or expansion of the time of production or of the volume which a given capital can assume for its productive function. To the extent that the metamorphoses of circulation of a certain capital are reduced, to the extent that the time of circulation approaches zero, its productivity and increment of surplus-value will increase. For instance, if a capitalist executes an order, so that he receives payment for his goods on delivery, and if this payment is made in his own elements of production, the time of circulation of his capital approaches zero.

In short, the time of circulation of a certain capital limits its time of production and the process of creating surplus-value. And this limitation is proportional to the duration of the time of circulation. Seeing that this time may increase or decrease in different ratios, it may limit the time of production in various degrees. But political economy sees only the seeming effect, that is to say the effect of the time of circulation on the creation of surplus-values in general. It takes this negative effect for a positive one, because its results are positive. It clings so much the more to this semblance from which surplus-value flows toward it through the circulation, independently of its process of production and the exploitation of labor. We shall see later, that even scientific political economy has been deceived by this appearance of things. Various phenomena contribute to this deception: 1. The capitalist method of calculating profit, in which the negative cause figures as a positive one, seeing that with capitals in different spheres of investment, with different times of circulation only, a longer time of circulation tends toward an increase of prices, in short serves as one of the causes which bring about an equalization of profits. 2. The time of circulation is but a factor in the period of turn-over; and this period includes both the time of production and reproduction. What is really due to the period of turn-over, seems to be due to the time of circulation. 3. The conversion of commodities into variable capital (wages) is conditioned on their previous conversion into money. In the accumulation of capital, the conversion into additional variable capital takes place in circulation, or during the time of circulation. It thus appears as though this accumulation were due to the time of circulation.

Within the sphere of circulation, capital passes through the two opposite phases of C—M and M—C, no matter in what succession. Hence its time of circulation is likewise divided into two parts, viz.: the time required for its conversion from money into commodities, and that required for its conversion from commodities into money. We have already learned from the analysis of the simple circulation of commodities (Vol. I, Chap. III), that C—M, the sale, is the most difficult part of its metamorphosis and that, therefore, under ordinary conditions, it takes up the greater part of its time of circulation. As money, value exists in its ever convertible form. But as a commodity, value must first be transformed into money in order to assume such a directly convertible from of continual readiness. However, in the process of circulation of capital, its phase C—M deals with commodities which constitute definite elements of productive capital in a certain investment. The means of production may not be on the market and must first be produced, or they must be ordered from distant markets, or their ordinary supply is interrupted, or prices change, etc., in short there are a multitude of circumstances which are not visible in the simple change of form from M to C, but which nevertheless require more or less time for this part of the phase of circulation. C—M and M—C may not only be separate in time, but also in space, the selling and the buying market may be located apart. In the case of factories, for instance, the buyer and seller are frequently different persons. In the production of commodities, circulation is as necessary as production itself, so that agents are just as much needed in circulation as in production. The process of reproduction includes both functions of capital, therefore it also includes the necessity of having representatives for both of them, either in the person of the capitalist or of wage-workers, as his agents. But this is no more a good reason for mistaking the agents in circulation for those in production than it is to confound the functions of commodity-capital and money-capital with those of productive capital. The agents of circulation must be paid by the agents of production. And since capitalists who mutually sell and buy do not create either values or products by these transactions, this state of affairs is not changed, if they are enabled or compelled by the expansion of their business to charge others with those transactions.

In some business, the buyers and sellers get their wages in the form of percentages on the profits. It does not alter the matter to use the phrase that they are paid by the consumer. The consumers can pay only inasmuch as they are themselves instrumental in producing an equivalent in commodities as agents of production or appropriate it out of the product of other agents in production, whether it be by means of legal titles or of personal services.

There is difference between C—M and M—C, which has nothing to do with the different forms of commodities and money, but arises from the capitalist character of production. Intrinsically, C—M as well as M—C is merely a conversion of a given value out of one form into another. But C'—M' is at the same time a realization of the surplus-value contained in C'. Not so M—C. For this reason the sale is more important than the purchase. M—C is under normal conditions a necessary act for the creation of more value by means of the value contained in it, but it is not the realization of surplus-value; it is the intimation of its production, not its after-effect.

The form in which a commodity exists, the form of its use-value, prescribes definite limits for the circulation of commodity-capital C'—M'. Use-values are naturally perishable. Hence, if they are not productively or individually consumed within a certain time, in other words, if they are not sold within a certain period, they spoil and thus lose with their use-value also the faculty of being bearers of surplus-value. The capital-value, or eventually the surplus-value, contained in them is lost. The use-values do not remain the bearers of perennial capital-value increasing by the addition of surplus-value, unless they are continually reproduced and replaced by new use-values of the same or of some other order. The sale of the use-values in the form of finished commodities, their transfer to the productive or individual consumption by means of this sale, is the ever recurring requirement for their reproduction. They must change their old use-form within a certain time, in order to continue their existence in a new form. Exchange-value maintains itself only by means of this constant renewal of its substance. The use-values of certain commodities spoil sooner or later; the time between their production and consumption may therefore be long or short; they may retain the form of commodity-capital in phase C—M of the circulation for a shorter or longer term and endure a shorter or a longer time of circulation. The limit of the time of circulation of a certain commodity-capital imposed by the spoiling of the substance of the commodity is the absolute limit of this part of the time of circulation, or of the time of circulation of commodity-capital as such. To the extent that a commodity is perishable, to the extent that it must be sold and consumed as soon as possible after its production, its capacity for removal from its place of production is restricted, the sphere of its circulation is narrowed, its selling market is localized. For this reason a commodity is so much less suited for capitalist production as it is perishable, as its physical composition limits its time of circulation. It is available for this purpose only in thickly populated districts, or to the extent that the improvement of transportation brings places closer together. But the concentration of the production of such articles into a few hands and in a populous district may create a relatively large market even for them, for instance, such as the product of large beer-breweries, dairies, etc.

Part I, Chapter VI
THE EXPENSES OF CIRCULATION.

I. GENUINE EXPENSES OF CIRCULATION.

1. The Time of Purchase and Sale.

The transformations of capital from commodities into money and from money into commodities are at the same time transactions of the capitalist, acts of purchase and sale. The time in which these transformations take place constitutes from the personal standpoint of the capitalist a purchase and selling time, it is the time during which he performs the functions of a buyer and seller on the market. Just as the time of circulation of capital is a necessary part of its time of reproduction, so the time in which the capitalist buys and sells and remains in the market is a necessary part of the time in which he performs the functions of a capitalist, in which he personifies capital. It is a part of his business time.

14 Since we have assumed that commodities are bought and sold at their values, these transformations constitute merely a conversion of the same value from one form into another, from the form of commodities into that of money or vice versa, a change of composition in substance. If commodities are sold at their values, then the magnitude in the hands of the buyer and seller remains unchanged. Only the form of its existence is changed. If the commodities are not sold at their values, then the sum of the converted values remains the same; the plus on one side is offset by a minus on the other.

The metamorphoses C—M and M—C are transactions between buyers and sellers; they require time to perfect the trade, the more so as this represents a struggle in which each seeks to get the best of the other; for to business men applies the statement: "When Greek meets Greek, then comes the tug of war." The conversion of a commodity costs time and labor-power, not for the purpose of creating values, but in order to accomplish the conversion of value from one form into another. The mutual attempt to appropriate an extra share of this value, changes nothing fundamentally. This work, increased by the evil designs on either side, does not create value any more than the work done in a civil process increases the value of the object of contention. It is with this labor, which is a necessary part of the totality of the capitalist process of production, including the circulation or included by it, as it is with the labor of combustion of some element used for the generation of heat. This labor of combustion does not generate any heat, although it is a necessary part in the process of combustion. In order to employ coal as fuel, it must combine with oxygen, and for this purpose coal must be brought to the condition of carbonic acid gas; in other words, a physical change of form must take place. The separation of carbon molecules, which are united into a solid mass, and the breaking up of these molecules into their atoms, must precede the new combination, and this requires a certain effort, which is not transformed into heat, but taken from it. If the owners of commodities are not capitalists, but direct producers, the time required for buying and selling is so much loss of labor time, and for this reason such transactions were deferred in ancient and medieval times to holidays.

Of course, the dimensions acquired by the business in commodities in the hands of the capitalists cannot transform this labor, which does not create any values and promotes merely changes of form, into labor productive of surplus-value. Nor can this miracle of transsubstantiation be accomplished by unloading this work of "combustion" from the shoulders of the industrial capitalists to those of paid employees who attend to it exclusively. These employees will not tender their services out of pure love for the capitalists. The collector of some real-estate owner or the messenger of some bank is indifferent to the fact that their labor does not add any value to the rent or to the money carried to the bank in bags. 15

For the capitalist who has others working for him, selling and buying become primary functions. Seeing that he appropriates the products of many on a large social scale, he must sell on the same scale and then reconvert the money into elements of production. But still neither the sale nor the purchase create any values. An illusion is here created by the function of merchant's capital. But without entering at this point into a detailed discussion of this fact, we can plainly see this much: If a function, which is unproductive in itself, although a necessary link in reproduction, is transformed by a division of labor from an incidental occupation of many into an exclusive occupation of a few, the character of this function is not changed thereby. One merchant, as an agent promoting the transformation of commodities by assuming the role of a mere buyer and seller, may abbreviate by his operations the time of sale and purchase for many producers. To that extent he may be regarded as a machine which reduces a useless expenditure of energy or helps to set free some time of production. 16

In order to simplify the matter, seeing that we shall not discuss the merchant as a capitalist and his capital as merchant's capital until later, we shall assume that this buying and selling agent is a man who sells his labor-power. He expends his labor-power and labor-time in the operations C—M and M—C. And he makes his living that way, just as another does by spinning or by making pills. He performs a necessary function, because the process of reproduction itself includes an unproductive function. He works as well as any other man, but intrinsically his labor creates neither products nor values. He belongs himself to the unproductive expenses of production. His services do not transform an unproductive function into a productive one, nor unproductive into productive labor. It would be a miracle, if such a transformation could be accomplished by a mere transfer of a function. His usefulness consists rather in the fact that a small part of the labor-power and labor-time of society is tied up in this unproductive function. We shall assume that he is a wage-worker, even though better paid than others. Whatever may be his wages, in the role of a wage-worker he always works a part of his time for nothing. He may receive in wages the value of the product of eight working hours, when he performs his functions for ten hours. But his two hours of surplus-labor do not produce any surplus-values any more than his eight hours of necessary labor, although by means of these eight hours of necessary labor a part of the social product is transferred to him. In the first place, looking at it from the standpoint of society, his labor-power is used up for ten hours in a mere function of circulation. It cannot be used otherwise, for productive labor. In the second place, society does not pay for those two hours of surplus-labor, although they are expended by the man who worked during that time. Society does not appropriate any surplus-product or value through them. But the expenses of circulation, which he represents, are thereby reduced by one-fifth, from ten hours to eight. Society does not pay any equivalent for this fifth of this actual time of circulation, of which he is the agent. But if this man is employed by a capitalist, then the non-payment of these two hours reduces the expenses of circulation of his capital, which represent a deduction from his income. For the capitalist this is a positive gain, because the negative limit for the utilization of his capital is thereby reduced. So long as small independent producers of commodities spend a part of their own time in selling and buying, this shows itself either as time spent during the intervals of their productive function, or as a reduction of their time of production.

At all events, the time required for this purpose is an expense of circulation, which does not add any increment to the converted values. It is the expense which is required in order to convert them from commodities into money. Inasmuch as the capitalist producer of commodities appears as an agent of circulation, he differs from the direct producers of commodities only by the fact that he buys and sells on a larger scale and therefore is a greater factor in circulation. And if the expansion of his business compels or enables him to hire his own wage-laborers as agents of circulation, the nature of this phenomenon is not changed in any way. A certain amount of labor-power and labor-time must be expended in the process of circulation, so far as it is merely a change of form. But this now appears as an additional expenditure of capital. A part of the variable capital must be expended in the purchase of these labor-powers active only in circulation. This advance of capital creates neither products nor values. It reduces to that extent the volume of the productive function of capital. It is as though one part of the product were transformed into a machine, which buys or sells the rest of the product. This machine deducts so much from the product. It does not participate in the productive process, although it can reduce the labor-power required for the circulation. It constitutes simply a part of the expenses of circulation.

2. Bookkeeping.

Apart from the actual selling and buying, labor-time is expended in bookkeeping, which assimilates more materialized labor, such as pens, ink, paper, desks, office-expenses. This function, therefore, requires labor-power and materials. It is the same condition of things which we observed in the case of the time of sale and purchase.

As a principle of unity within its cycles, as a value in process of rotation, whether it be in the sphere of production or in both phases of the sphere of circulation, capital exists ideally only in the form of accounting money, principally in the mind of the producer of commodities, more especially the capitalist producer of commodities. This movement is fixed and controlled by bookkeeping, which includes also the determination of prices, or the calculation of the prices of commodities. The movement of production, especially of the production of values—in which the commodities figure as bearers of value, as mere names of things, the ideal existence of which as values is crystallized in accounting money—thus is symbolically reflected in imagination. So long as the individual producer of commodities keeps account only in his head (for instance a farmer; a bookkeeping tenant is not known until capitalist production introduces him), or incidentally, outside of his time of production, makes a note of his expenses, receipts, instalment days, etc., just so long does it appear intelligible that this function, and the materials consumed by it, such as paper, etc., require an additional expenditure of labor-time and materials, which is necessary, but constitutes a deduction from the time available for productive consumption and from the materials which are used in the actual process of production and are embodied in the creation of products and values. 17 The nature of the function itself is not changed. The volume which it assumes by its concentration in the hands of the capitalist producer of commodities, who transforms it from a function of many small producers into that of one single capitalist within a process of large scale production does not alter the case, neither is its nature affected by its separation from those productive functions, which it accompanied incidentally, nor by its modification into an independent function of agents exclusively entrusted with it.

The division of labor, the assuming of independence, does not make a function productive, if it was not so before it became independent. If a capitalist invests his capital anew, then he must invest a part of it in hiring a bookkeeper, etc., and materials for bookkeeping. If his capital is already in active operation, in the process of continual reproduction, then he must continually reconvert a part of his commodity-product by means of its transformation into money, into a bookkeeper, salesman, etc. This part of his capital is withdrawn from production and belongs to the expenses of circulation, deductions from the total product (including the labor-power itself, which is expended wholly for this function).

But there is a certain difference between the expenses incidental to bookkeeping, or the unproductive expenditure of labor-time on one side, and that of mere selling and buying time on the other. The latter arise only from the definite social form of the process of production, they are due to the fact that it is a production of commodities. Bookkeeping, for the control and ideal survey of the process, becomes necessary to the extent that the process assumes a social scale and loses its purely individual character. It is, therefore, more necessary in capitalist production than in scattered handicraft and agricultural production, and still more necessary in co-operative than in capitalist production. But the expenses of bookkeeping are reduced to the extent that production is concentrated and becomes social bookkeeping.

We are here concerned only about the general character of the expenses of circulation, which arise out of the general metamorphoses. It is superfluous to discuss all its details. To what extent phenomena, which are mere incidents in changes of form due to the social character of the process of production, may deceive the eyes when they cease to be imperceptible and incidental accompaniments of individual production, we may observe in the case of the mere handling of money, when it is concentrated into an exclusive function of banks on a large scale, or of a cashier in individual businesses. But it must be remembered, that these expenses of circulation do not change their character by changing their form.

3. Money.

Whether a product is intended for a commodity or not, it is always a materialized form of wealth, a use-value to be productively or individually consumed. If it is a commodity, its value is ideally expressed in its price, which does not change its actual use-value. But the fact that certain commodities, such as gold and silver, may perform the function of money and as such reside exclusively in the process of circulation (even in the form of a hoard, a reserve fund, etc., they remain in the sphere of circulation, although latent), is due to the definite social form of the process of production, which is a production of commodities. Since capitalist production gives to all its products the general form of commodities, and since the overwhelming mass of products are produced for sale and must therefore assume the form of money, and since the commodity-part of the social wealth grows continually in proportion, it follows that the quantity of gold and silver employed as means of circulation, paying medium, reserve fund, etc., must likewise increase. These commodities performing the function of money do not enter either into productive or into individual consumption. They represent social labor fixed in a form in which it may serve as a mere machine in circulation. Apart from the fact that a part of the social wealth is tied up in this unproductive form, the wearing out of the money constantly requires its reproduction, or the conversion of more social labor, in the form of products, into mere gold and silver. These expenses of reproduction are considerable in capitalistically developed nations, because there is a large part of the wealth tied up in the form of money. Gold and silver as money-commodities represent social expenses of circulation, due to the social form of production. They are dead expenses of commodity-production in general, and they increase with the development of this production, especially when capitalized. They represent a part of the social wealth, which must be sacrificed in the process of circulation. 18

II. EXPENSES OF STORAGE.

Expenses of circulation, which are due to a mere change of form in circulation, ideally speaking, do not enter into the value of the commodities. The capital parts expended for them are deductions from the productively expended capital, so far as the capitalist is concerned. Not so the expenses of circulation which we shall consider now. They may arise from processes of production, which are continued only in circulation, the productive character of which is merely concealed by the form of the circulation. Or, on the other hand, they may represent from the standpoint of society mere unproductive expenses of subjective or materialized labor, which for this very reason they may become productive of value for the individual capitalist, by making an addition to the price of his commodities. This follows from the simple fact that these expenses are different in different spheres of production, or even for different individual capitalists in the same sphere of production. When added to the prices of commodities, they are divided in proportion as they fall upon the shoulders of the various individual capitalists. But all labor which adds value can also add surplus-value, and will always do so under capitalist production, the value created by it depending on the amount of the labor, the surplus-value added depending on the amount which the capitalist pays for it. In other words, expenses which increase the price of a commodity without adding anything to its value, which therefore are dead expenses so far as society is concerned, may be a source of profit for the individual capitalist. On the other hand, in so far as the addition to the price of commodities merely distributes these expenses of circulation equally, the unproductive character of this expenditure is not changed. For instance, insurance companies divide the losses of individual capitalists among the capitalist class. But this does not alter the fact that these equalized losses are losses so far as the aggregate social capital is concerned.

1. General Formation of Supply.

During its existence as commodity-capital, or its stay on the market, in other words, in the interval between the process of production from which it originates and the process of consumption into which it enters, the product forms a supply of commodities. As a commodity on the market, and therefore in the form of a supply, the commodity-product figures twice in each cycle: The first time as the commodity-product of that rotating capital whose cycle is being considered; the second time as the commodity-product of another capital, which must be found ready on the market, in order to be bought and converted into productive capital. It is, indeed, possible that this last-named commodity-capital is not produced until ordered. In that case, an interruption occurs until it has been produced. But the flow of the process of production and reproduction required that a certain mass of commodities (means of production) should be always on the market, that there should be a supply of them. In the same way, productive capital comprises the purchase of labor-power and the money-form is here only that form of the value of means of existence which the laborer must find at hand on the market, for the greater part. We shall discuss this more in detail in a short while; suffice it to make this point at present.

From the standpoint of the rotating capital-value, which has been transformed into a commodity-product and must now be sold or reconverted into money, which, therefore, has for the moment the function of commodity-capital on the market, the condition in which it forms a supply is contrary to its intentions and its stay on the market is involuntary. The sooner the sale is effected, the smoother runs the process of reproduction. The delay in the phase C'—M' prevents the actual change of substance which must take place in the rotation of capital and obstructs its further function as productive capital. On the other hand, so far as M—C is concerned, the constant presence of a supply of commodities on the market is a requirement for the flow of the process of reproduction and of the investment of new or additional capital.

The demurrage of the commodity-capital as a supply on the market requires buildings, stores, storage places, warehouses, in other words, an expenditure of constant capital; furthermore the payment of labor-power for storing the commodities. Finally, the commodities spoil and are exposed to injurious elementary influences. Additional capital is required to protect them, and this capital must be invested in materialized labor as well as in labor-power. 19

We see, then, that the sojourn of commodity-capital as a supply on the market causes expenses, which belong to the expenses of circulation, since they do not fall within the sphere of production. These expenses of circulation differ from those mentioned under I, by the fact that they enter in part into the value of the commodities, in other words, that they increase the price of commodities. Under all circumstances the capital and labor-power required for the conservation and storage of the commodity-supply, are withdrawn from the direct process of production. On the other hand, the capitals thus employed, including their labor-power, must be reproduced by the social product. Their expenditure, therefore, reduces the productivity of labor-power to that extent, so that a greater amount of capital and labor is needed to obtain a certain intended effect. They are dead expenses.

Inasmuch as the expenses of circulation arising out of the formation of a supply of commodities are due merely to the time required for the transformation of existing commodity-values into money, in other words, inasmuch as they are due to the prevailing social form of production, which makes the production of commodities and their transformation into money imperative, they share the character of the expenses of circulation enumerated under I. On the other hand, the value of the commodities is here preserved or increased, because the use-value, the product itself, is placed in conditions which require an outlay of capital. The commodities are submitted to operations, which expend additional labor on the use-values. But the computation of the values of commodities, the bookkeeping incidental to this process, the transactions of sale and purchase, do not influence the use-values in which the exchange-values of the commodities are embodied. These transactions concern merely the form of the values. Although, in the present case, the expenses of keeping a supply (which is done involuntarily) arise only from a delay of the metamorphosis and from its necessity, these expenses differ from those mentioned under I, in that they are not made for the purpose of effecting a change of form, but for the purpose of preserving the value embodied in the commodity as a use-value, which cannot be preserved in any other way than by preserving the use-value, the product, itself. The use-value is neither increased nor raised in value, on the contrary, it diminishes. But its diminution is restricted and it is preserved. Neither is the advanced value contained in the commodity increased, although new materialized and subjective labor is added.

We have now to investigate furthermore, to what extent these expenses arise from the peculiar nature of the production of commodities in general and from the prevailing absolute form of this mode of production, its capitalistic form; and to what extent they are common to all social production and merely assume a peculiar form and mode of expression in capitalist production.

Adam Smith has expressed the strange opinion, that the formation of a supply is a phenomenon peculiar to capitalist production alone. 20 More recent economists, for instance Lalor, insist on the other hand, that it declines with the development of capitalist production. Sismondi even regards this as one of the drawbacks of this mode of production.

As a matter of fact, the supply exists in three forms: In the form of productive capital, in the form of a fund for individual consumption, and in the form of a commodity-supply or commodity-capital. The supply in one form decreases relatively, when it increases in another, although it may increase absolutely in all three forms simultaneously.

It is plain from the outset, that wherever production is carried on for direct consumption on the part of the producer, and only to a minor extent for exchange or sale, where the social product does not assume the character of commodities at all, or only to a small degree, there the supply in the form of commodities can be only a small and insignificant part of the social wealth. On the other hand, the supply for consumption is relatively large, especially that of the means of existence. We have but to take a look at ancient agriculture, in order to understand this. The overwhelming part of the product there constitutes directly a supply of means of production and means of existence, without becoming a supply of commodities, because it remains in the hands of its producers and owners. It does not assume the form of a supply of commodities, and for this reason Adam Smith declares that there is no supply at all in societies based on this form of production. He confounds the form of the supply with the supply itself and believes that society hitherto lived from hand to mouth or trusted to the luck of the next day. 21 This is a naive misunderstanding.

A supply in the form of productive capital exists in the shape of means of production, which are either in operation in the process of production, or at least in the hands of the producer, so that they are latent in the process of production. We have seen previously, that with the development of the productivity of labour, and therefore with the development of the capitalist mode of production, which develops the socially productive power of labor more than all previous modes of production, there is a steady increase of the mass of means of production, which are permanently embodied in the productive process as instruments of labor and perform their function in it for a longer or shorter time at repeated intervals (buildings, machinery, etc.); also, that this increase is at the same time the premise and result of the development of the productivity of social labor. It is especially capitalist production, which is characterized by relative as well as absolute growth of this sort of wealth. The material forms of existence of constant capital, the means of production, do not consist merely of such instruments of labor, but also of raw material in various stages of finish and of auxiliary substances, with the enlargement of the scale of production and the increase in the productivity of labor by co-operation, division, machinery, etc., the mass of raw materials and auxiliary substances used in the daily process of reproduction, grows likewise. These elements must be ready at hand in the shop. The volume of this form of productive capital increases absolutely. In order that the process may flow along smoothly—apart from the fact whether this supply may be renewed daily or only at fixed intervals—there must always be more raw material, etc., accumulated at the place of production than is used up, say, daily or weekly. The continuity of the process requires that the fulfillment of its conditions should neither depend on its possible interruption by daily purchases, nor on the daily or weekly sale of the product, so that the regularity of its reconversion into its elements of production may not be broken. But it is evident, that the productive capital may be latent, or form a supply, in different proportions. There is, for instance, quite a difference, whether a spinner must have on hand a supply of cotton or coal for three months or for one. Plainly this supply may decrease relatively, while it may at the same time increase absolutely.

This depends on various conditions, all of which practically amount to the requirement that there shall be a greater rapidity, regularity, and security in furnishing the necessary amount of raw material always in such a way, that there may be no interruption. To the extent that these conditions are not fulfilled, to the extent that there is no rapidity, regularity, and security of supply, the latent part of the productive capital in the hands of the producer, that is to say the supply of raw materials waiting to be used, must increase in size. These conditions are inversely proportional to the degree of development of capitalist production, and thus to the productive power of social labor. The same applies to the supply in this form.

However, that which appears as a decrease of the supply, for instance, to Lalor, is in part merely a decrease of the supply in the form of commodity-capital, or of the actual commodity-supply; it is only a change of form of the same supply. If, for instance, the mass of coal daily produced in a certain country, and therefore the scale and energy of the coal-industry, are great, the spinner does not need a large store of coal in order to insure the continuity of his production. The security of the continuous reproduction of the coal supply makes this unnecessary. In the second place, the rapidity with which the product of one process may be transferred as means of production to another process depends on the development of the means of transportation and communication. The cheapness of transportation plays a great role in this question. The continually renewed transport, for instance, of coal from the mine to the spinnery, would be more expensive than the storing up of a large supply for a long time when the price of transportation is relatively cheap. These two circumstances are due to the process of production itself. In the third place, the development of the credit-system exerts an influence on this question. The less the spinner is dependent on the immediate sale of his yarn for the renewal of his supply of cotton, coal, etc.,—and this dependence will be so much smaller, the more the credit-system is developed—the smaller can be the relative size of these supplies, in order to insure independence from the hazards of the sale of yarn for the continuous production of yarn on a given scale. In the fourth place, many raw materials, and half-finished products, etc., require long periods of time for their production, and this applies especially to all raw materials furnished by agriculture.

If no interruption of the process of production is to take place, there must be a certain amount of raw materials on hand for the entire period, in which no new products can take the places of the old. If this supply decreases in the hands of the capitalist, it proves merely that it increases in the hands of the merchant in the form of a supply of commodities. The development of transportation, for instance, makes it possible to convey the cotton stored in the import warehouses of Liverpool rapidly to Manchester, so that the manufacturer can renew his supply in small portions according to his needs. But in that case, the cotton remains in so much larger quantities as a commodity-supply in the hands of the merchants in Liverpool. It is therefore merely a question of a change of form, and Lalor and others have overlooked this. And from the standpoint of social capital, the same quantity of products still remains in the form of a supply. The quantity of the supply required for, say, a whole nation during the period of one year decreases to the extent that the means of transportation are developed. If a large number of sailing vessels trade between America and England, the opportunities of England for the renewal of its supply of cotton are increased and quantity of the cotton supply to be held in storage on an average decreases. The same effect is produced by the development of the world-market and thus the multiplication of the sources of supply of the same articles. Various quantities of this supply are carried to the market from different countries and at different intervals.

2. The Commodity-Supply in Particular.

We have already seen that the product assumes the general form of commodities on the basis of capitalist production, and to the extent that the scale and scope of this production increase, this character becomes prevalent. Even if production retains the same scale, there will still be a far greater proportion of the product in the form of commodities, compared to other modes of production. And all commodities, and therefore all commodity-capital, which is but another expression for commodities in the form of capital-value, constitute an element of the commodity-supply, unless they pass immediately from the sphere of production into productive or individual consumption, instead of remaining on the market in the interval between production and consumption. If the scale of production remains the same, the commodity-supply, that is to say, the individualization, and fixation of the commodity-form of the product, grows therefore with the development of capitalist production. We have seen, furthermore, that this is merely a change of form on the part of the supply, that is to say the supply in the form of commodities increases on one side, while on the other the supply in the form of direct means of production for consumption decreases. It is merely a question of a changed form of the social supply. The fact that it is not only the relative size of the commodity-supply compared to the aggregate social product which increases, but also its absolute size, is due to the growth of the aggregate product with the advance of capitalist production.

With the development of capitalist production, the scale of production becomes less and less dependent on the immediate demand for the product and falls more and more under the determining influence of the amount of capital available in the hands of the individual capitalist, of the instinct for the creation of more value inherent in capital, of the need for the continuity and expansion of its processes of production. This necessarily increases the mass of products required in each branch of production in the shape of commodities. The amount of capital fixed for a longer or shorter period in the form of commodity-capital grows proportionately. In short, the commodity-supply increases.

Finally, the majority of the members of human society are transformed into wage workers, into people who live from hand to mouth, who receive their wages weekly and spend them daily, who therefore must find a supply of the necessities of life ready at hand. Although the individual elements of this supply may be in continuous flow, a part of them must always suffer delay in order that the supply may be ever renewed.

All these characteristics are due to the form of capitalist production and to the metamorphoses incidental to it, which the product must undergo in the process of circulation.

Whatever may be the social form of the supply of products, its preservation requires an outlay for buildings, storage facilities, etc., which protect the product; furthermore for means of production and labor, more or less of which must be expended, according to the nature of the product, in order to preserve it against injurious influences. The more the supply is socially concentrated, the smaller are the relative expenses. These expenses always consume a part of the social labor, either in a materialized or in a subjective form; they require an outlay of capital which does not enter into the productive process itself and thus diminish the product. They constitute the cost of preserving the social wealth, and are, therefore, necessary expenses, without regard to the fact whether the existence of the social product in the form of a commodity-supply is due merely to the social form of production, to the commodity-form and its metamorphoses, or whether we regard the commodity-supply merely as a special form of the supply of products, a supply common to all societies, though not always in the form of commodity-supply, which is a form of the supply of products belonging to the process of circulation.

The question is now, to what extent these expenses enter into the value of commodities.

If the capitalist has converted the capital advanced by him for means of production and labor-power into a product, into a mass of commodities ready for sale, and these commodities remain in stock unsold, then it is not only the creation of values by means of his capital which is interrupted. The expenses required for the conservation and storage of this supply in buildings, etc., and for additional labor, signify a positive loss for him. The final buyer would laugh in his face, if he were to say to him: "My articles were unsalable for six months, and their preservation during that period did not only make so and so much of my capital unproductive, but also cost me so much extra-expenses." "So much the worse for you," would the buyer say. "Here is another seller, whose articles were completed the day before yesterday. Your articles are old and probably more or less injured by the ravages of time. Therefore you will have to sell cheaper than your rival."

It does not alter the life-processes of a commodity, whether its producer is a direct producer or a capitalist producer, who is merely a representative of the actual producer. The product must be converted into money. The expenses caused by the fixation of the product in the form of commodities are a part of the individual adventures of the seller, and the buyer does not concern himself about them. The buyer does not pay for the time of circulation of the commodities. Even if the capitalist holds his goods back intentionally, in times of an actual or expected revolution of values, it depends on the materialization of this revolution of values, on the correctness or incorrectness of the seller's speculation, whether he will recover his outlay or not. Inasmuch, therefore, as the formation of a supply involves a delay in the circulation, the expenses caused thereby do not add anything to the value of the commodities. On the other hand, there cannot be any supply without a sojourn of the commodities in circulation, without the stay of capital for a longer or shorter time in the form of commodity; hence there cannot be any supply without a delay of the circulation. It is the same with money, which cannot circulate without the formation of money-reserve. Hence there cannot be any circulation of commodities without a supply of commodities. If this necessity does not confront the capitalist in C'—M', it will do so in M—C; not so far as his own commodity-capital is concerned, but that of other capitalists, who produce means of production for him and necessities of life for his laborers.

It appears that the nature of the case is not altered, whether the formation of a supply is voluntary or involuntary, that is to say whether the producer accumulates a supply intentionally or whether his product forms a supply in consequence of the resistance offered to its sale by the conditions of the process of circulation. But it is useful for the solution of this question to know what distinguishes the voluntary from the involuntary formation of a supply. The involuntary formation of a supply arises from, or is identical with, an interruption of the circulation, which is independent of the knowledge of the producer of commodities and thwarts his will. And what characterizes the voluntary formation of a supply? The seller seeks to get rid of his commodity as much as ever. He always offers his product as a commodity. If he were to withdraw it from sale, it would be only a latent, not an effective organ of the commodity-supply. The commodity as such is still as much as ever a bearer of exchange-value and can become effective only by discarding the commodity-form and assuming the money-form.

The commodity-supply must have a certain size, in order to satisfy the demand during a given period. The continual extension of the circle of buyers is one of the factors in the calculation. For instance, in order to last to a certain day, a part of the commodities on the market must retain the form of commodities while the remainder continue in flow and are converted into money. The part which is delayed while the rest keep moving decreases continually, to the extent that the size of the entire supply decreases, until it is all sold. The delay of the commodities is thus calculated on as a necessary requirement of their sale. The size of the supply must be larger than the average sale or the average extent of the demand. Otherwise the excess over this average could not be satisfied. At the same time, the supply must be continually renewed, because it is continually dissolved. This renewal cannot come from anywhere in the last instance than from production, from a new supply of commodities. Whether this comes from abroad or not, does not alter the case. The renewal depends on the periods required by the commodities for their reproduction. The commodity-supply must last during these periods. The fact that it does not remain in the hands of the original producer, but passes through various stores from the wholesaler to the retailer, changes merely the aspect, not the nature of the thing. From the point of view of society, a part of capital still retains the form of a commodity-supply, so long as the commodities have not been consumed productively or individually. The producer tries to keep a supply corresponding to his average demand, in order to be somewhat independent of the process of production and to insure for himself a steady circle of customers. Corresponding to the periods of production, terms of sale are formed and the commodities form a supply for a longer or shorter time, until they can be replaced by new commodities of the same kind. The continuity and regularity of the process of circulation, and therefore of the process of reproduction, which includes the circulation, is safeguarded only by the formation of a supply.

It must be remembered that C'—M' may have been transacted for the producer of C, although C may still be on the market. If the producer were to keep his own commodities until they are sold to the last consumer, he would have to invest two capitals, one as a producer and one as a merchant. For the commodity itself, whether we look upon it as an individual commodity or as a part of social capital, it is immaterial whether the expenses of the formation of a supply fall on the shoulders of its producer or on those of a series of merchants from A to Z.

In so far as the commodity-supply is nothing but the commodity-form of the supply which would exist at a given scale of social production either as a productive supply or as a supply of means of consumption, if it did not have the form of a commodity-supply, the expenses required for its conservation and formation, that is to say the expenses for materialized and subjective labor, are merely converted expenses for maintaining either the social fund for production or the social fund for consumption. The increase of the value of commodities caused by them distributes these expenses simply pro rata to the different commodities, since the cost is different for different kinds of commodities. And the expenses for the formation of the supply are as much as ever deductions from the social wealth, although they are one of its requirements.

The circulation of commodities is normal only to the extent that the formation of a commodity-supply is its premise and necessarily arises by means of it, only in so far as this apparent stagnation is a part of the rotation itself, just as it is in the case of the formation of a money-reserve. But as soon as the commodities resting in the reservoirs of circulation refuse to give space to the succeeding wave of so that the reservoirs are overstocked, the commodity-supply expands just as the hoards do, if the circulation of money is clogged. It does not make any difference, whether this stop occurs in the magazines of the industrial capitalist or in the warehouses of the merchant. The supply is in that case not the premise of the uninterrupted sale, but the result of the impossibility of selling the goods. The expenses remain the same, but since they now arise entirely out of the form, that is to say, out of the necessity of selling the commodities, and out of the obstacles to this metamorphosis into money, they do not enter into the values of the commodities, but cause deductions, losses, from the value to be realized. Since the normal and abnormal form of the supply cannot be distinguished externally, and both of them are clogging the circulation, these phenomena may be confounded and may deceive the agent in production so much easier as the process of circulation of the capital of the producer may continue smoothly, while that of the commodities he has sold to merchants may be arrested. If the size of production and consumption increase, other conditions remaining the same, then the size of the commodity-supply increases likewise. It is renewed and absorbed just as fast, but its size is greater. Hence the growing size of the commodity-supply caused by a delay in the circulation may be mistaken for a symptom of the expansion of the process of reproduction, especially when the development of the credit-system makes it possible to mystify the real nature of the movement.

The expense of the formation of the supply consist (1) of quantitative losses of the mass of the product (for instance, in the case of a supply of flour); (2) in a spoiling of the quality; (3) in the materialized and individual labor required for the conversion of the supply.

III. EXPENSES OF TRANSPORTATION.

It is not necessary to enter at this place into all the details of the expenses of circulation, such as packing, sorting, etc. The general law is that all expenses of circulation, which arise only from changes of form, do not add any value to the commodities. They are merely expenses required for the realization of value, or for its conversion from one form into another. The capital invested in those expenses (including the labor employed by it) belongs to the dead expenses of capitalist production. They must be made up out of the surplus-product and are, from the point of view of the entire capitalist class, a deduction from the surplus-value or surplus product, just as the labor required for the purchase of the necessities of life is lost time for the laborer. But the expenses of transportation play a too prominent role to pass them by without a few short remarks.

Within the rotation of capital and the metamorphoses of commodities which are a part of that rotation, the mutation-processes of social labor take place. These mutation-processes may require a change of location on the part of the products, their transportation from one place to another. Still, a circulation of commodities may take place without their change from place to place, and a transportation of products without a circulation of commodities, or even without a direct exchange of products. A house which is sold by A to B does not wander from one place to another, although it circulates as a commodity. Movable commodity-values, such as cotton or iron ore, remain in the same warehouse at a time when they are passing through dozens of circulation processes, when they are bought and resold by speculators. 22 That which really changes its place here is the title of ownership, not the thing itself. On the other hand, transportation played a prominent role in the land of the Incas, although the social product did not circulate either as a commodity or by means of exchange.

Even though the transportation industry under capitalist production appears as a cause of expenses of circulation, this special form does not alter the nature of the problem.

Quantities of products are not increased by transportation, neither is the eventual alteration of their natural qualities, with a few exceptions, the result of premeditated action, but an inevitable evil. But the use-value of things has no existence except in consumption, and this may necessitate a change of place on the part of the product, in other words, it may require the additional process of production of the transportation industry. The productive capital invested in this industry adds value to the transported products, partly by transferring value from the means of transportation, partly by adding value through the labor-power used in transportation. This last-named addition of value consists, as it does in all capitalist production, of a reproduction of wages and of surplus-value.

Within each process of production, the change of place of the object of labor and the required instruments of labor and labor-power—such as cotton which passes from the carding to the spinning room, or coal which is hoisted from the shaft to the surface—play a great role. The transition of the finished product, in the role of a finished commodity, from one independent place of production to another in a different location shows the same phenomenon on a larger scale. The transport of the products from one factory to another is finally succeeded by the passage of the finished products from the sphere of production to that of consumption. The product is not ready for consumption until it has completed these movements.

We have shown previously that a general law of the production of commodities decrees: The productivity of labor and its faculty of creating value stand in opposition to one another. This is true of the transportation industry as well as of any other. The smaller the amount of materialized and subjective labor required for the transportation of the commodities over a certain distance, the greater is the productivity of labor, and vice versa. 23

The absolute magnitude of the value which the transportation of the commodities adds to them is smaller in proportion as the productivity of the transportation industry increases, and vice versa, and directly proportional to the distance traveled, other conditions remaining the same.

The relative magnitude of the value added to the prices of commodities by the cost of transportation, other conditions remaining the same, is directly proportional to their volume and weight. But there are many modifying circumstances. Transportation requires, for instance, more or less provision for protection against accidents, and therefore more or less expenditure of labor and instruments of labor, according to the relative fragility, perishable nature, explosiveness of the articles. In this department, the railroad magnates show a greater talent for inventing fantastic species than botanists and zoologists. The classification of the articles on English railroads fills volumes and rests in general on the tendency of transforming the many-sided natural qualities of commodities into so many difficulties of transportation and inevitable excuses for exploitation. "Glass, which was formerly valued at the rate of 11 pounds sterling per crate, is now valued at only 2 pounds sterling in consequence of industrial improvements and the abolition of the glass-tax, but the railway rates are as high as ever and exceed the cost of transportation by water. Formerly glass and glass ware for lead work was carried for 10 shillings per ton within a radius of 50 miles of Birmingham. Now the rates have been raised to thrice that figure on the pretext of the risk involved by the fragility of the article. But if anything is broken, the railway management does not pay for it. 24 The fact that the relative magnitude of the value added by the cost of transportation to the articles is inversely proportional to their values furnishes a special excuse for the railroads to tax the articles in direct proportion to their values. The complaints of the industrials and merchants on this score are found on every page of the testimony of witnesses given before the royal commission on railways.

The capitalist mode of production reduces the cost of transportation for the individual commodities by the development of the means of transportation and communication, by their concentration, the scale of their traffic, etc. It increases that part of the materialized and subjective social labor, which is expended in the transportation of commodities, first by converting the great majority of all products into commodities, secondly, by substituting distant for local markets.

The circulation, that is to say the actual perambulation of the commodities through space, is carried on in the form of transportation. The transportation industry forms on one hand an independent branch of production, and thus a special sphere of investment of productive capital. On the other hand, it is distinguished from other spheres of production by the fact that it represents a continuation of a process of production within the process of circulation and for its benefit.

PART II
The Turn-Over of Capital.

Part II, Chapter VII
THE PERIOD AND NUMBER OF TURN-OVERS.

We have seen that the entire time of rotation of a given capital is equal to the sum of its time of circulation plus its time of production. It is the period of time from the moment of the advance of capital-value in a definite form to the return of the rotating capital-value in the same form.

The compelling motive of capitalist production is always the creation of value by means of the advanced value, no matter whether this value is advanced in its independent money-form, or in commodities, in which case its value is only ideally independent in the price of the advanced commodities. In both cases this capital- value passes through various forms of existence during its rotation. Its identity with itself is confirmed by the books of the capitalists, or in the ideal form of calculating money.

No matter whether we consider the formula M...M' or the formula P...P, both forms imply (1) that the advanced value performs the function of capital-value and has created more value; (2) that it has returned to the form in which it began its rotation, having completed its cycle. The creation of more value by means of the advanced value M and the return of capital to this money-form is plainly visible in M...M'. But the same takes place in the second formula. For the starting point of P is the existence of the elements of production, of commodities having a given value. The formula includes the creation of value by means of the advanced value (C' and M') and the return to the original form, for in the second P the advanced value has again the form of the elements of production in which it was originally advanced.

We have seen previously: "If production be capitalistic in form, so, too, will be reproduction. Just as in the former the labor-process figures but as a means towards the self-expansion of capital, so in the latter it figures but as a means of reproducing as capital, i.e., as self-expanding value, the value advanced." (Vol. I, chap. XXIII, p. 620.)

The three formulæ (1) M...M', (II) P...P, and (III) C'...C', present the following distinctions: In formula II, P...P, the renewal of the process by the process of reproduction is expressed as a reality, while it is only implied as a probability in formula I. But both of these formulæ differ from III by the fact that in them the advanced capital-value, either in the form of money or of material elements of production, is the starting and returning point. In M...M', the return to M' means M plus m. If the process is renewed on the same scale, M is again the starting point and m does not enter into it, but shows merely that M performed the function of capital and created surplus-value m, which it threw off. In the formula P...P, capital-value P advanced in the form of means of production is likewise the starting point. This form includes the creation of more value. If simple reproduction takes place, the same capitalist renews the same process in the same form P. If accumulation takes place, then P' (equal in magnitude of value to M' and C') reopens the cycle as an expanded capital-value. But it begins with the advanced capital-value in its original form, although it is of greater value than before. In form III, on the other hand, capital-value does not begin the process as an advance, but as an expanded value, as the aggregate wealth existing in the form of commodities, of which the advanced value is but a part. This last form is important for the third part of this volume, in which the movement of the individual capitals is discussed in connection with the movements of the aggregate social capital. But it is not available for the discussion of the turn-over of capital, which always begins with the advance of capital-value in the forms of money or commodities, and which always requires the return of the rotating capital-value to the form in which it had been advanced. Of these cycles I and II, the former is serviceable in the study of the influence of the turn-over on the formation of surplus-value, the latter in the study of its influence on the formation of the product.

Economists have not distinguished the different relations of the turn-over of capital to its cycles any more than they have distinguished between these cycles. They generally consider the formula M...M, because it dominates the individual capitalist and serves for a basis of his calculations, even if money is the starting point of this cycle only in the form of calculating money. Others start out from the outlay of capital in the form of elements of production and follow the cycle to the point of return, without alluding to the form of the returns, be they commodities or money. For instance, "the economic cycle,...the whole course of production, from the time that outlays are made till returns are received. In agriculture, seed time is its commencement, and harvesting its ending." S. P. Newman, Elements of Political Economy, Andover and New York, p. 81. Others begin with C', the third form. Says Th. Chalmers, in his work on "Political Economy," 2nd Ed., London, 1832, p. 84 and following, in substance: The world of the productive traffic may be regarded as rotating in a cycle, which we will call the economic cycle. Each cycle is completed, whenever the business, after passing through its successive transactions, returns to its starting point. The beginning may be made at the point where the capitalist gets his receipts, which return his capital. From this point, the capitalist proceeds once more to hire his laborers and parcel out to them their subsistence, or rather the means to purchase it with wages. They manufacture for him the articles which are his specialty. And the capitalist then takes his articles to the market and brings the cycle of this one series of transactions to a close by selling and receiving in the price of his commodities a return for his entire investment of capital.

As soon as the entire capital-value invested by some individual capitalist in any one branch of production has completed the cycle of its movements, it finds itself once more in the form in which it started and is ready to repeat the same process. It must repeat this process, if value is to perpetuate itself as capital-value and create more value. The individual cycle is but a fragment in the life of capital, it is a period which is continually repeated. At the end of the period M...M' capital has once more the form of money-capital, which passes anew through that series of metamorphoses in which its process of reproduction, or self-expansion, is included. At the end of the period P...P, capital has resumed the form of elements of production, which are the requirement for a renewal of its cycle. The rotation of capital, considered as a periodical process, not as an individual event, constitutes its turn-over. The duration of this turn-over is determined by the sum of its time of production plus its time of circulation. This sum constitutes the time of turn-over. It measures the passing of time while the entire capital-value goes through the period of its cycle until it reaches the next one. It counts the periods in the life of capital, or, the time of the renewal, repetition, of the process of self-expansion, which is the process of production, of the same capital-value.

Apart from the individual adventures which may accelerate or retard the time of turn-over of individual capitals, this time is different according to the different spheres of investment of capitals.

Just as the working day is the natural unit for the function of labor-power, so the year is the natural unit for the periods of turn-over of rotating capital. The natural basis of this unit is found in the fact that the most important crops of the temperate zone, which is the mother country of capitalist production, are annual products.

If we designate the year as the unit of the time of turn-over by T, the time of turn-over of a given capital by t, and the number of its turn-overs by n, then n = T/t. If, for instance, the time of turn-over t is 3 months, then n is equal to 12/3, or 4: in other words, capital is turned over four times per year. If t is equal to 18 months, then n = 12/18 = 2/3, capital completes only two-thirds of its turn-over in one year. If its time of turn-over is several years, it is computed in multiples of one year.

From the point of view of the capitalist, the time of turn-over is the time for which he must advance his capital in order to create value with it and have it returned in its original form.

Before we can study the influence of the turn-over on the processes of production and self-expansion, we must take a look at two new forms which accrue to capital from the process of circulation and influence the form of its turn-over.

Part II, Chapter VIII
FIXED CAPITAL AND CIRCULATING CAPITAL.

I. Distinctions of Form.

We have seen in vol. I, chap. VIII, that a portion of the constant capital retains that form of the use-value, in which it entered into the process of production and does not share in the transfer to the products toward the creation of which it contributes. In other words, it performs for a longer or shorter period, in the ever repeated labor process, the same function. This applies, for instance, to buildings, machinery, etc., in short to all things which we comprise under the name of instruments of labor. This part of constant capital yields value to the product in proportion as it loses its own exchange-value with the dwindling of its use-value. This transfer of value from an instrument of production to the product which it helps to create is determined by a calculation of averages. It is measured by the average, duration of its function, from the moment that the instrument that it is completely spent and must be reproduced, or replaced by a new specimen of the same kind.

This, then is the peculiarity of this part of constant capital of the instruments of labor:

A certain part of capital has been advanced in the form of constant capital, of instruments of labor, which now perform their function in the labor-process so long as their own use-value lasts, which they bring with them into this process. The finished product, with the elements it absorbed from the instruments of production, is pushed out of the process of production and transferred as a commodity to the sphere of circulation. But the instruments of labor never leave the sphere of production, once that they have entered it. Their function holds them there. A certain portion of the advanced capital-value is fixed in this form by the function of the instruments of labor in the process of production. In the performance of this function, and thus by the wear and tear incidental to it, a part of the value of the instruments of labor is transferred to the product, while another remains fixed in the instruments of labor and thus in the process of production. The value thus fixed decreases constantly, until the instrument of labor is worn out, its value having been distributed during a shorter or longer period, over a mass of products which emanated from a series of currently repeated labor processes. But so long as an instrument of labor is still effective and has not been replaced by a new specimen of the same kind, a certain amount of constant capital-value remains fixed in it, while another part of the value originally fixed in it is transferred to the product and circulates as a component part of the commodity-supply. The longer an instrument lasts, the slower it wears out, the longer will its constant capital-value remain fixed in this form of use-value. But whatever may be its durability, the proportion in which it yields its value is always inverse to its entire time of service. If of two machines of equal value, one wears out in five years and the other in ten, then the first yields twice as much value in the same time as the second.

This value fixed in the instruments of labor circulates as well as any other. We have seen that all capital-value is constantly in circulation, and that in this sense all capital is circulating capital. But the circulation of the portion of capital which we are now studying is peculiar. In the first place, it does not circulate in its use-form, but it is merely its exchange-value which circulates, and this takes place gradually and piecemeal, in proportion as it is transferred to the product which circulates as a commodity. During the entire period of its service, a portion of its value always remains fixed in it, independent of the commodities which it helps to produce. It is this peculiarity which gives to this portion of capital the character of fixed capital. On the other hand, all other substantial parts of the capital advanced in the process of production form the circulating, or fluid, capital.

Some portions of the means of production do not yield their substance to the product. Such are auxiliary substances, which are consumed by the instruments of labor themselves in the performance of their function, such as coal consumed by a steam engine; or substances which merely assist in the operation, such as gas for lighting, etc. It is only their value which forms a part of the value of products. In circulating its own value, the product circulates theirs. To this extent they share the fate of the fixed capital. But they are entirely consumed in every labor-process which they enter, and must therefore be replaced by new specimens of their kind in every new labor-process. They do not preserve their own use-form while performing their function. Hence no portion of capital-value remains fixed in their natural use-value during their service. The fact that this portion of the auxiliary substances does not pass bodily into the product, but yields only its value to swell thereby the value of the product, although the function of these substance is confined to sphere of production, has misled some economists, for instance Ramsay—who also confounded fixed capital with constant capital—to class them among the fixed capital.

That part of the means of production which yields its substance to the product, in other words, the raw materials, may eventually assume forms which enable it to pass into individual consumption. The instruments of labor, properly so called, that is to say, the material bearers of the fixed capital, can be consumed only productively and cannot pass into individual consumption, because their substance does not enter into the product, into the use-value, which they help to create, but they rather retain their independent form until they are completely worn out. The means of transportation are an exception to this rule. The useful effect which they produce by their productive function during their stay in the sphere of production, that is to say, the change of location, passes simultaneously into the individual consumption, for instance into that of a traveler. He pays for its use in the same way in which he pays for the use of other articles of consumption. We have seen that sometimes the raw material and auxiliary substances pervade one another, for instance in the manufacture of chemicals. In the same way, instruments of labor, raw material and auxiliary substances may pervade one another. In agriculture, for instance, the substances employed for the improvement of the soil pass into the plants and help to form the product. On the other hand, their influence is distributed over a lengthy period, say four or five years. A portion of them, therefore, pass into the product and enhance its value, while another portion remains fixed in its old use-form and retains its value. It persists as an instrument of production and retains the form of fixed capital. An ox is fixed capital, so long as it is a beast of toil. If it is eaten, it does not perform the functions of an instrument of production, and is, therefore, not fixed capital.

That which determines whether a certain portion of the capital-value invested in means of production is fixed capital or not is exclusively the peculiar manner in which this value circulates. This peculiar manner of circulation arises from the peculiar manner in which the means of production yield their value to the product, that is to say the manner in which the means of production participate in the creation of values in the process of production. This, again, arises from the special nature of the function of these means of production in the labor-process.

We know that the same use-value, which comes as a product from one labor-process, passes as a means of production into another. It is only the function of a product as a means of production in the labor-process which stamps it as fixed capital. But to the extent that it arises itself out of such a process, it is not fixed capital. For instance, a machine, as a product, as a commodity of the machine manufacturer, belongs to his commodity-capital. It does not become fixed capital, until it is employed productively in the hands of its purchaser.

All other circumstances being equal, the degree of fixity increases with the durability of the means of production. This durability determines the magnitude of the difference between the capital-value fixed in the instruments of labor and between that part of its value which is yielded to the product in successive labor-processes. The slower this value is yielded—and some of it is given up in every repetition of the labor-process—the larger will be the fixed capital, and the greater will be the difference between the capital employed and the capital consumed in the process of production. As soon as this difference has disappeared, the instrument of labor has ceased to live and lost, with its use-value, also its exchange-value. It has ceased to be the bearer of value. Since an instrument of labor, the same as every other material bearer of constant capital, yields value only to the extent that its use-value is converted into exchange-value, it is evident that the period in which its constant capital-value remains fixed will be so much longer, the longer it lasts in the process of production, the more slowly its use-value is lost.

If any one means of production, which is not an instrument of labor, strictly speaking, such as auxiliary substances, raw material, partly finished articles, etc., yields and circulates its value in the same way as the instruments of production, then it is likewise the material bearer, the form of existence, of fixed capital. This is the case with the above-mentioned improvements of the soil, which add chemical substances to the soil, the influence of which is distributed over several periods of production, or years. In this case, a portion of the value continues to exist independently of the product, it persists in the form of fixed capital, while another portion has been transferred to the product and circulates with it. And in the latter case, it is not alone a portion of the value of the fixed capital which is transferred to the product, but also a portion of the use-value, the substance in which this portion of value is embodied.

Apart from the fundamental mistake—the confounding of the categories "fixed capital and circulating capital" with the categories "constant capital and variable capital"—the confusion of the economists in the matter of definitions is based on the following points:

They make of certain qualities, embodied in the substances of the instruments of labor, direct qualities of fixed capital, for instance, the physical immobility of a house. It is always easy in that case to prove that other instruments of labor, which are likewise fixed capital, have an opposite quality, for instance, physical mobility, such as a vessel's.

Or, they confound the definite economic form, which arises from the circulation of value, with some quality of the object itself, as though things which are not at all capital in themselves, but rather become so under given social conditions, could be of themselves and intrinsically capital in some definite forms, such as fixed or circulating capital. We have seen in volume I that the means of production in every labor-process, regardless of the social conditions in which it takes place, are divided into instruments of labor and objects of labor. But both of them do not become capital until the capitalist mode of production is introduced, and then they become "productive capital," as shown in the preceding part. Henceforth the distinction between instruments and objects of labor, based on the nature of the labor-process, is reflected in the new distinction between fixed and circulating capital. It is then only, that a thing which performs the function of an instrument of labor, becomes fixed capital. If it can serve also in other capacities, owing to its material composition, it may be fixed capital or not, according to the functions it performs. Cattle as beasts of toil are fixed capital; if they are fattened, they are raw material which finally enters into circulation as commodities, in other words, they are circulating, not fixed capital.

The mere fixation of some means of production for a certain length of time in repeated labor-processes, which are consecutively connected and form a period of production, that is to say, the entire period required to complete a certain product, demands advances from the capitalist for a longer or shorter term, just as fixed capital does, but this does not give to his capital the character of fixed capital. Seeds, for instance, are not fixed capital, but only raw material which is held for about a year in the process of production. All capital is held in the process of production, so long as it performs the function of productive capital, and so are, therefore, all elements of productive capital, whatever may be their substantial composition, their function and the mode of circulation of their value. Whether the period of fixation lasts a long or a short time, according to the manner of the process of production or the effect aimed at, it does not determine the distinction between fixed and circulating capital. 25

A portion of the instruments of labor, which determine the general conditions of labor, may be located in a fixed place, as soon as it enters on its duties in the process of production or is prepared for them, for instance, machinery. Or it is produced from the outset in its locally fixed form, such as improvements of the soil, factory buildings, kilns, canals, railroads, etc. The constant fixation of the instrument of labor in the process of production is in that case also due to its mode of material existence. On the other hand, an instrument of labor may continually be shifted bodily from place to place, may move about, and nevertheless be continually in the process of production, for instance, a locomotive, a ship, beasts of burden, etc. Neither does immobility in the one case bestow the character of fixed capital on the instrument of labor, nor does mobility in the other case deprive it of this character. But the fact that some instruments of labor are attached to the soil and remain so fixed, assigns to this portion of fixed capital a peculiar role in the economy of nations. They cannot be sent abroad, cannot circulate as commodities on the market of the world. The titles to this fixed capital may be exchanged, it may be bought and sold, and to this extent it may circulate ideally. These titles of ownership may even circulate on foreign markets, for instance in the form of stocks. But the change of the persons of the owners of this class of fixed capital does not alter the relation of the immobile, substantially fixed part of national wealth to its circulating part. 26

The peculiar circulation of fixed capital results in a peculiar turn-over. That part of value which is lost by wear and tear circulates as a part of the value of the product. The product converts itself by means of its circulation from commodities into money; hence the value of the instrument of labor circulated by the product does the same, and this value is precipitated in the form of money by the process of circulation in the same proportion in which the instrument of labor loses its value in the process of production. This value has then a double existence. One part of it remains attached to the form of its use-value in the process of production, another is detached from the instrument of labor and becomes money. In the performance of its function, that part of the value of an instrument of labor which exists in its natural form constantly decreases, while that which is transformed into money constantly increases, until at last the instrument is exhausted and its entire value, detached from its body, has assumed the form of money. Here the peculiarity in the turn-over of this element of productive capital becomes apparent. The transformation of its value into money keeps pace with the like transformation of the commodity which is its bearer. But its reconversion from the form of money into that of a use-value separates itself from the reconversion of the commodities into their other elements of production and is determined by its own period of reproduction, that is to say by the time during which the instrument of labor has worn out and must be replaced by another specimen of the same kind. If a machine lasts for, say, a period of ten years, then the period of turn-over of the value originally advanced for it amounts to ten years. It need not be replaced until this period has expired, and performs its function in this natural form until then. Its value circulates in the meantime piecemeal as a part of the value of the commodities which it turns out successively, and it is thus gradually transformed into money, until it has entirely assumed the form of money at the end of ten years and is reconverted from money into a machine, in other words, has completed its turn-over. Until this time arrives, its value is meanwhile accumulated in the form of a reserve fund of money.

The other elements of productive capital consist partly of those elements of constant capital which exist in auxiliary and raw materials, partly of variable capital which is invested in labor-power.

The analysis of the processes of labor and self-expansion (vol. I, chap. VII) showed that these different elements behave differently in their role of producers of commodities and values. The value of that part of constant capital which consists of auxiliary and raw materials—the same as of that part which consists of instruments of labor—reappears in the value of the product as transferred value, while labor-power actually adds the equivalent of its value to the product by means of the labor-process, in other words, actually reproduces its value. Furthermore, a part of the auxiliary material, fuel, gas, etc., is consumed in the process of labor without entering bodily into the product, while another part of them enters bodily into the product and forms a part of its substance. But all these differences are immaterial so far as the mode of circulation and turn-over is concerned. To the extent that auxiliary and raw materials are entirely consumed in the creation of the product, they transfer their value entirely to the product. Hence this value is entirely circulated by the product, transformed into money and from money back into the elements of production of the commodity. Its turn-over is not interrupted, as that of fixed capital is, but it rather passes uninterrupted through the entire cycle of its transformations, so that these elements of production are continually reproduced in substance.

As for the variable part of productive capital, which is invested in labor-power, it buys labor-power for a definite period of time. As soon as the capitalist has bought labor-power and embodied it in his process of production, it forms a component part of his capital, definitely speaking, the variable part of his capital. Labor-power performs its function daily during a period of time, in which it not only reproduces its own daily value, but also adds a surplus-value in excess of it to the product. We do not consider this surplus-value for the moment. After labor-power has been bought, say, for a week, and performed its function, its purchase must be continually renewed within the accustomed space of time. The equivalent of its value, which labor-power embodies in its product during its function and which is transformed into money by means of the circulation of the product, must be continually reconverted from money into labor-power, must continually pass through the complete cycle of its transformations, in other words, must be turned over, lest the continuous rotation of its production be interrupted.

That part of the value of capital, then, which has been advanced for labor-power, is entirely transferred to the product—we still leave the question of surplus-value out of consideration—passes with it through the two metamorphoses belonging to the circulation, and always remains in the process of production by means of this continual reproduction. Whatever may be the differences by which labor-power is distinguished, so far as the formation of value is concerned, from those parts of constant capital which do not represent fixed capital, it nevertheless has this manner of turn-over in common with them, as compared to the fixed capital. It is these elements of productive capital—the values invested in labor-power and in means of production which are not fixed capital—that by their common characteristics of turn-over constitute the circulating capital as opposed to the fixed capital.

We have already stated that the money which the capitalist pays to the laborer for the use of his labor-power is but the form of the general equivalent for the means of subsistence required by the laborer. To this extent, the variable capital consists in substance of means of existence. But in this case, where we are discussing the turn-over, it is a question of form. The capitalist does not buy the means of the existence of the laborer, but his labor-power. And that which forms the variable part of capital is not the subsistence of the laborer, but his active labor-power. The capitalist consumes productively in the labor-process the labor-power of the laborer, not his means of existence. It is the laborer himself who converts the money received for his labor-power into means of subsistence, in order to reproduce his labor-power, to keep alive, just as the capitalist converts a part of the surplus-value realized by the sale of commodities into means of existence for himself, and yet would not thereby justify the statement, that the purchaser of his commodities pays him with means of existence. Even if the laborer receives a part of his wages in the form of means of existence, this is still a second transaction in our days. He sells his labor-power at a certain price, with the understanding that he shall receive a part of this price in means of production. This changes merely the form of the payment, but not the fact that that which he actually sells is his labor-power. It is a second transaction, which does not take place between the parties in their capacity as laborer and capitalist, but on the part of the laborer as a buyer of commodities and on that of the capitalist as a seller of commodities; while in the first transaction, the laborer is a seller of a commodity (his labor-power) and the capitalist its buyer. It is the same with the capitalist who replaces his commodity by another, for instance when he takes iron for a machine which he sells to some iron-works. It is, therefore, not the means of subsistence of the laborer which determine the character of circulating capital as opposed to fixed capital. Nor is it his labor-power. It is rather that part of the value of productive capital which is invested in labor-power that receives this character in common with some other parts of constant capital by means of the manner of its turn-over.

The value of the circulating capital—invested in labor-power and means of production—is advanced only for the time during which the product is in process of formation, in harmony with the scale of production dependent on the volume of the fixed capital. This value enters entirely into the product, is therefore fully returned by the sale of the product in the circulation, and can be advanced anew. The labor-power and means of production carrying the circulating part of capital are withdrawn from the circulation to the extent that is required for the formation and sale of the finished product, but they must be continually replaced and reproduced by purchasing them back and reconverting them from money into elements of production. They are withdrawn from the market in smaller quantities at a time than the elements of fixed capital, but they must be withdrawn so much more frequently and the advance of capital invested in them must be repeated in shorter periods. This continual reproduction is promoted by the continuous conversion of the product which circulates the entire value of these elements. And finally, they pass through the entire cycle of metamorphoses, not only so far as their value is concerned, but also their material substance. They are continually reconverted from commodities into the elements of production of the same commodities.

Together with its value, labor-power always adds surplus-value to the product, and this surplus-value represents unpaid labor. This is just as continuously circulated by the finished product and converted into money as its other elements of value. But in this substance, where we are first concerned about the turn-over of capital-value, and not of the surplus-value turned over at the same time, we dismiss the latter for the present.

From the foregoing, the following deductions are made:

1. The definite distinctions of the forms of fixed and circulating capital arise merely from the different turnovers of the capital-value employed in the process of production, the productive capital. This difference of turn-over arises in its turn from the different manner in which the various elements of productive capital transfer their value to the product; they are not due to the different participation of these elements in the production of value, nor to their characteristic role in the process of self-expansion. The difference in the transfer of value to the product-—and therefore the different manner of circulating this value by means of the product and renewing it in its original material form by means of its metamorphoses—arises from the difference of the material forms in which the productive capital exists, one portion of it being entirely consumed during the creation of the individual product, and another being used up gradually. Hence it is only the productive capital, which can be divided into fixed and circulating capital. But this distinction does not apply to the other two modes of existence of industrial capital, that is to say commodity-capital and money-capital, nor does it express the difference of these two capitals as compared to productive capital. It applies only to productive capital and its internal processes. No matter how much money-capital and commodity-capital may perform the functions of capital and circulate, they cannot become circulating capital as distinguished from fixed capital, until they have been transformed into circulating elements of productive capital. But because these two forms of capital dwell in the circulation, the economists since the time of Adam Smith, as we shall presently see, have been misled into confounding them with the circulating parts of productive capital under the head of circulating capital. Money-capital and commodity-capital are indeed circulation capital as distinguished from productive capital, but they are not circulating capital as opposed to fixed capital.