The People's Marx, Abridged Popular Edition of the the Three Volumes of Capital, Borchardt 1921

Chapter 17


The Circular Course of Capital and the Time requisite for its Circulation.

(Extracted from vol. II, ch. 1, 2, 3, 4 German edition.)

We have learnt to know what constitutes the essence of money that it represents in a material and concrete shape the exchange-value of all other commodities, i. e. of all the human labour incorporated in such commodities; and we have further seen the functions of money in the simple circulation of commodities. It now remains for us to investigate the nature of money in so far the latter constitutes capital.

In doing so we must bear in mind that by capital we understand a sum of values, which yield, or ought to yield, surplus-value. Money capital is thus a capital which exists in the form of money, or in other words, a sum of money applied for the purpose of obtaining surplus-value. We have seen how surplus-value is obtained: in the production of commodities. Money capital must therefore be applied for the production of commodities; and, for this purpose, it is above all things necessary to purchase the objects required for the production of commodities, i. e. means production and labour power. The process of production can then commence. When it is completed, its results must be sold, in order to bring back the. money capital - and also the surplus-value obtained - to its previous money form.

The circular course of money capital passes therefore through the three following phases:

First Phase: The, capitalist appears on the market for commodities and the labour market as purchaser. His money is turned into commodities, and thus completes the first phase of the process of circulation: Money - Commodities (M - C).

Second Phase: The commodities thus bought are applied for the purpose of production, and consumed in the process. Commodities of increased value are the result.

Third Phase: The capitalist returns to the market as seller. His commodities are turned into money, and the second phase of the process of circulation Commodities - Money (C - M) is completed.

The circular round achieved by money capital can thus be represented by the following formula:

M - C .... P .... C - M'

in which the dots (....} indicate that the circulation is interrupted, whereas C' and M' indicate C and M increased to the extent of the surplus-value.

The second phase, i. e. that of production, has already been analysed in detail. There remain the first and third phases. We must, of course, in the first place make abstraction of all accidental, non-essential circumstances. Consequently we shall here take for granted, not only that the commodities are sold for their value, but also that this takes place under circumstances which remain the same. We will therefore make abstraction of the changes of value, which may occur during the process of circulation.

The first phase of that process (M - C) is constituted by the purchase of commodities by means of the money available as capital. But the nature of the commodities is not an optional one. Such commodities must have certain definite qualities, i. e. they must be means of production and labour power. And they must, further, be adapted to each other. The means of production must be such as can be worked-up precisely by that labour power which is purchased. If L represents the labour power, and Mp the means of production, the money capital (M) is divided into two parts, of which one buys the labour power and the other the corresponding means of production. We can represent the process by means of the following formula:

M - C<LMP

L and Mp must not only be adapted to each other in respect of quality, but also in respect of quantity. Mp must be sufficient to employ L, including such surplus-labour as may be required. For instance, if the daily value of labour power be 3 shillings and if these 3 shillings be the product of 5 hours' labour, according to the laws of capitalist production previously set forth, the 3 shillings must be considered as the wage for more than 5 hours' labour - let us say, for 10 hours' labour. If such a contract, for example, be made with 50 workmen, the latter must collectively furnish the purchaser with 500 working-hours per day, of which 250 represent exclusively surplus-labour. The capitalist who buys the 50 labour powers must therefore buy such an amount of Mp, that the latter suffice not only for 250, but for 500 working-hours. The relation in which the money capital must be divided when purchasing L and Mp, is thus a perfectly definite one. When this has been done, the capitalist not only disposes of the amount of Mp and L necessary for the production of a useful article; but he likewise disposes of the means necessary to produce articles of greater value, i e. surplus-value. His money capital has become productive capital.

We know that the purchase of labour power (M - L) is the essential feature of this process, seeing that surplus-value arises from the employment of labour power. M - Mp is only necessary in so far as it enables the labour power purchased to enter into activity. Thus although, in the process M - L, the owner of money and the owner of labour power meet each other solely in their respective capacities of buyer and seller, the capital-relation is none the less already included in this incident of circulation. As a matter of fact, the capitalist, before he can apply for the first time his money as capital, must purchase the means of production (buildings, machines, etc.) before purchasing the labour power; for as soon as the latter comes under his control, Mp must be there in order to render the utilisation of L possible. When he buys L, the capitalist is thus already the owner of Mp. The capital-relation, the class-relation between capitalist and wage-labourer thus already exists, nay, is already presumed, when the two confront each other in the process M - L; and this relation exists by reason ot the fact that the conditions under which alone labour power can enter into activity, i. e., the necessaries of life and the means of production, are entirely outside the control of the owner of labour power. The capital-relation existing during the process of production is only rendered manifest because it already exists in the process of circulation, i. e. in the various fundamental economic conditions under which buyer and seller confront each other - in other words, in their class-relation.

When the process of production is terminated, a certain amount of commodities is available (C), e. g. 10000 Ibs. of yarn, the value of which is greater than the value of the total amount of commodities available when the process of production commenced. The fact that the commodities produced constitute capital is manifest in this increase of value. Such commodities must now be sold. For as long as they are lying on the market, production is at a standstill. According to the rapidity with which capital is reconverted from the commodity form to the money form, will the same capital-value serve in a very unequal degree for the creation of new products and new value. Further, the entire amount of the commodities C must be sold, for it is essential that no part of the lot should remain unsold. Only when the capitalist has sold all the 10000 Ibs. of yarn, has he converted the entire capital-value and surplus-value into money. After the sale, at the end of the whole process of circulation, the capital-value resumes the original form in which it entered upon that process; thus it can begin the process again as money capital, and pass through its various phases.

When the sale C' - M' is finished, the original capital-value and the added surplus-value are to be found, one next to the other, in the sum of money which appears as the final result of the whole process of circulation, and can thus be separated from each other, or not, as the owner desires. This is important for the continuation of the process of production, according as to whether the surplus-value is added to the capital in its entirety or partially, or is not added to it at all.

The process of the circulation of capital can proceed normally, only as long as its various phases pass into each other without let or hindrance. On the other hand, it is in the nature of things that the process of circulation should itself determine the immobilisation of the capital in the various phases of the process, during definite time-lengths.

The process of circulation of capital manifests, in its totality, the intimate connection between production and circulation. In the first phase of its circulation, capital needs the general circulation of commodities in order to assume the form in which alone it can function in the process of production. Capital requires that general circulation just as much in the third phase, in order to cast off its commodity form, under which it would be unable to renew the process of its circulation: it needs it likewise in order to have the possibility of separating the process of its own circulation as capital, from the process of the circulation of the surplus-value added to it.

The circulation of money capital is thus the most one-sided, and hence striking and characteristic form in which industrial capital manifests itself; in that process the aim and motive power of industrial capital - expansion of value, making money, accumulation - assert themselves most emphatically in the shape of buying in order to sell dearer. The fact that the first phase is M - C, renders manifest the origin of the component parts of the productive capital as derived from the commodities market, and also renders manifest the further fact that the capitalist process of production is conditioned by circulation, i. e. trade. The circular course of money capital is not only the production of commodities; it is itself brought about solely by the process of circulation, which it presupposes.

The labour power, which the capitalist buys, must as a rule be paid for by him at the end of 1 or 2 weeks. With the means of production, the case is different. In this case the dates of purchase and payment are different. Consequently a part of the money must be used to complete the process M - C whilst another part retains its money form. The necessities of circulation thus cause a storing-up of money. Seeing that all money withdrawn from circulation takes the form of treasure, the treasuring-up of money is indispensable for the regular functioning of money capital.

The storing-up of a money treasure results also in another way. In the chapter on accumulation we saw that surplus-value is always added afresh to capital, i. e. is applied to extending the scope of production or to creating new places where capital is carried-on. For this purpose, however, it must be of a certain size. It must be sufficient to employ a given number of workmen and to procure the means of production required by them. For the proportions in which production can be extended are not arbitrary, but are determined by technical necessities. If the surplus-value derived from one circular course of capital, is not sufficient, it must be accumulated until, after many such circular courses, it has attained the requisite dimensions. Meanwhile it is immobilised in the shape of treasure, and forms in this shape potential money capital, i. e. money susceptible of serving as capital, but which does not yet serve as such.

If the commodities sold by our capitalist are not payable immediately, but only after a certain time, which may be short or long, that part of the surplus-product destined to be added to the capital is not turned into money, but into claims, or proprietary rights to some counter-value; the latter may perhaps already be in the possession of the buyer, perhaps only in his prospective possession.

As to whether the gold surplus-value shall be added once more immediately to the productive capital-value, depends on circumstances which are independent of its mere existence. If it is to serve as money capital in a second, independent business transaction, it must amount to the requisite minimum sum. Such a minimum sum is likewise necessary if it is to be applied to the increase of the original capital. The spinner, for instance, cannot augment the number of his spindles without simultaneously procuring the corresponding number of carding machines and roving frames, to say nothing of the increased expenses for cotton and wages necessitated by such an extension of business. As long as the surplus-value which has been turned into money does not attain this minimal amount, the circular course of capital must be repeated several times. Even modifications of details, e. g. in the spinning machinery, in so far as they render the latter more productive, require a greater outlay for spinning material, an increase of the carding machinery, etc. Thus the surplus-value will, in the meantime, be accumulated.

Once the process of production is completed, the capitalist throws his commodities into the stream of circulation, in order to sell them. These commodities possess greater value than those (L + Mp) bought by the capitalist before the process of production began. He thus draws, through the sale of his products, a greater value from the process of circulation in the form of money, than he originally threw into it in the same form. But he can only do this because he throws a greater value into the stream of circulation, in the form of commodities, than he withdrew from it. In so far as we consider only the "industrial" capitalist [1], the latter invariably throws a greater value in the form of commodities into circulation, than he withdraws from it. If his supply of commodity-values harmonised with his demand, his capital would obtain no increment. He must, indeed, "sell dearer than he bought". He can do this, however, only because he has meanwhile transformed in the course of the process of production, the less valuable commodities bought by him into more valuable ones. The profit yielded by his capital increases in the proportion that his supply of commodity-values exceeds his demand. He can, therefore, never aim at establishing an equilibrium between his supply and his demand; but, on the contrary, he must constantly endeavour to increase the former as much as possible beyond the latter.

Exactly the same holds good of the capitalist class in its totality. It is, of course, only question here of the demand which is requisite for production, i. e. of the demand for L and Mp.

As we have already seen, the capital advanced (Cp) is divided into the part applied for buying Mp and the part applied for buying L. If we consider its value, the demand for Mp is therefore smaller than the capital advanced, and, in consequence, much smaller than the commodity-capital which is, last of all, after the process of production is completed, thrown into circulation.

The demand for L is increasingly less than the demand for Mp. (Comp. the chapter on Accumulation, ch. XII).

In so far as the labourer converts the greater part of his wages into means of subsistence - and especially into indispensable means of subsistence - the demand of the capitalist for L is at the same time, indirectly, a demand for the articles of consumption required by the labouring class. But this demand is equal to v, and not an atom larger - at the most it is smaller, if the labourer economises on his wages (v = variable capital).

Thus the total demand for commodities, on the part of the capitalist, can never be greater than Cp = c + v. But his supply is equal to c + v + s. The greater the rate of profit, i. e. the greater the surplus-value relatively to capital, the more will the supply of commodities by the capitalist exceed his demand, and the less will be his demand relatively to his supply (c = constant capital, s = surplus-value).

We must not forget that his demand for Mp is always less than his capital, calculated day by day. Let us assume the existence of another capitalist, alongside of him, who supplies him with those Mp, and who, under otherwise identical circumstances, works with an equally large capital; in this case, the demand of the first capitalist for Mp will always be less, in respect of value, than the commodities-product of the second one. The Fact that there is not only one capitalist, but many, does not alter the matter. Let us assume, that his capital amounts to £ 50, of which the constant part (c) is £ 40. In this case, the demand made by him on the collectivity of capitalists is equal £ 40; together they furnish, on £ 50 of capital at equal profit rates, Mp for the value of £ 60. Thus his demand only covers two-thirds of their supply, whereas his own total demand is equal to but four-fifths of his own supply, considered according to the amount of the value.

Only if the capitalist were to consume the entire surplus-value, and were to continue producing with the capital in its original size, would his demand - as capitalist - be equal in value to his supply. But even then, his demand as capitalist only corresponds to four-fifths of his supply - considered according to the amount of the value; he consumes one-fifth in his capacity as non-capitalist.

But that is impossible. The capitalist must not only constitute a reserve capital in view of the variations of prices, and in order to be able to wait for the most favourable opportunities for purchase and sale; he must accumulate capital in order to extend the scope of production and to be able to utilise the latest technical progress in his undertaking.

In order to accumulate capital, he must first let a part of the surplus-value (s) in money form, which he reaped from the process of circulation, accumulate as treasure, until this treasure has attained the necessary magnitude. As long as the process of the formation of treasure lasts, the demand of the capitalist does not increase. The money is immobilised; it withdraws from the commodities market no equivalent in the shape of commodities, in return for the money which it withdrew from that market in exchange for commodities supplied.

We make abstraction here of credit. When a capitalist, for instance, deposits his money, in the measure in which it accumulates, in a bank on interest, this is also a credit operation.

The total time needed by capital for its circular course is equal to the time of its production and the time of its circulation? [2]

The time of working up is included in the time of production, but the latter is longer than the former. The process of production may render interruptions of the labour process necessary, during which the object of labour is exposed to the influence of physical processes without any further human intervention, as e. g. in the case of corn which is sown, of wine which ferments in the cellar, or of the labour material needed by numerous manufactures, such as tanneries, which is subjected to chemical processes. The capitalist must further have a stock of raw materials in hand, and it must be remembered that the implements of labour, machines etc. consume much time in the course of the process of production without producing anything.

All this is capital which is lying idle. As far as labour is possible at this stage - i. e. . in order to keep the stocks in hand in good condition - it is productive labour which creates surplus-value, seeing that a part of such labour (as is the case with all other wage-labour) is not paid for. The normal interruptions of the whole process of production produce, on the contrary, neither value nor surplus-value. Hence the efforts made to enforce night-labour.

The interruptions of labour time which the object of labour must undergo during the process of production - e. g. the drying of wood - produce neither value nor sur-plus-value.

Whatever be the reason for the time of production exceeding labour time, in none of these cases do the means of production (Mp) absorb labour, nor - in consequence - surplus-labour. Hence the tendency of capitalist production to shorten as much" as possible the prolongation of the time of production over and above the labour time.

Apart from the time of production, capital must pass through the time of circulation. During this time it produces neither commodities nor surplus-value. The longer the time of circulation lasts, therefore, the smaller, proportionately, is the surplus-value produced. Inversely, the more the capitalist succeeds in reducing the time of circulation, the greater will be the surplus-value. This phenomenon would appear to confirm the false idea that surplus-value is derived from circulation.

Notes

[1]By this we mean the capitalist who produces, whether in the domain of agriculture, or in that of industry or mining - in contradistinction to the merchant, banker, mere landed proprietor, etc., who do not produce.

[2] From here on, vol. II ch. 5 (German ed.)

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