Digitized by the Internet Archive

in 2007 with funding from

Microsoft Corporation

http://www.archive.org/details/capitalcritiqueo02marxiala

CAPITAL

A CRITIQUE OF POLITICAL ECONOMY

By KARL MARX

VOLUME II

THE PROCESS OF CIRCULATION OF CAPITAL

EDITED BY

FREDERICK ENGELS

TRANSLATED FROM THE SECOND GERMAN EDITION
BY ERNEST UNTERMANN

CHIC AG O

CHARLES H. KERR & COMPANY
1933

Copyright, 1909
BY CHARLES H. KERR & COMPANY

VTA

CONTENTS.

Page

PREFACE 7

TRANSLATOR'S1 NOTE 30

THE CIRCULATION OF CAPITAL.
PART I.

THE METAMORPHOSES OF CAPITAL AND THEIR CYCLES

CHAPTER I.— The Circulation of Money-Capital 31

Section I.— First Stage M— C 32

Section II. — Second Stage, Functions of Productive Capital 41

Section III.^-Third Stage, C— M* 46

Section IV. — The Rotation as a Whole 58

CHAPTER II.— The Rotation of Productive Capital 72

Section I. — Simple Reproduction 73

Section II. — Accumulation and Reproduction on an Enlarged Scale 89

Section III. — Accumulation of Money 93

Section IV. — Reserve Funds 96

CHAPTER III.— The Circulation of Commodity-Capital 98

CHAPTER IV.— The Three Diagrams of the Process of Circulation 114

CHAPTER V.— The Time of Circulation 138

CHAPTER VI.— The Expenses of Circulation 147

Section I. — Genuine Expenses of Circulation 147

1. The Time of Purchase and Sale 147

2. Bookkeeping 151

3. Money 153

Section II. — Expenses of Storage 154

1. General Formation of Supply 155

2. The Commodity-Supply in Particular 162

Section III. — Expenses of Transportation 169

PART II.

THE TURN-OVER OF CAPITAL

CHAPTER VII.— The Period and Number of Turn-Overs 173

CHAPTER VIIL— Fixed Capital and Circulating Capital 178

Section I. — Distinctions of Form 178

Section II. — Composition, Reproduction, Repair, and Accumulation of

Fixed Capital 192

CHAPTER IX.— The Total Turn-Over of Advanced Capital, Cycles of

Turn-Over 208

CHAPTER X. — Theories of Fixed and Circulating Capital, The Physiocrats

and Adam Smith 215

CHAPTER XL— Theories of Fixed and Circulating Capital, Ricardo 245

CHAPTER XII.— The Working Period 260

CHAPTER XIIL— The Time of Production 272

CHAPTER XIV.— The Time of Circulation 284

CHAPTER XV. — Influence of the Time of Circulation on the Magnitude

of an Advance of Capital 294

Section I. — The Working Period Equal to the Period of Circulation.... 305

Section II. — The Working Period Greater than the Period of Circulation 310

Section III. — The Working Period Smaller than the Period of Circulation 315

5

493775

6 Contents

Page

Section IV. — Conclusions 319

Section V. — The Effect of a Change of Prices 326

CHAPTER XVI.— The Turn-Over of the Variable Capital 336

Section I. — The Annual Rate of Surplus- Value 336

Section II. — The Turn-Over of the Individual Variable Capital 354

Section III. — The Turn-Over of the Variable Capital Considered from

the Point of View of Society 359

CHAPTER XVII.— The Circulation of Surplus Value 367

Section I. — Simple Reproduction 373

Section II. — Accumulation and Reproduction on an Enlarged Scale 397

PART III.
THE REPRODUCTION AND CIRCULATION OF THE AGGREGATE SOCIAL CAPITAL

CHAPTER XVIII.— Introduction 404

Section I. — The Object of the Analysis 404

Section II. — The Role of Money-Capital 407

CHAPTER XIX.— Former Discussions of the Subject 414

Section I. — The Physiocrats 414

Section II. — Adam Smith 417

1. The General Point of View of Adam Smith 417

2. Smith Resolves Exchange- Value into V-|-S 427

3. The Constant Portion of Capital 430

4. Capital and Revenue in Adam Smith 436

5. Recapitulation 444

Section III. — The Economists After Smith 450

CHAPTER XX.— Simple Reproduction 453

Section I. — The Formulation of the Question 453

Section II. — The Two Departments of Social Production 457

Section III. — The Transactions Between the Two Departments 460

Section IV. — Transactions Within Department II; Necessities of Life

and Articles of Luxury 465

Section V. — The Promotion of the Transactions by the Circulation of

Money 477

Section VI. — The Constant Capital of Department 1 489

Section VII. — Variable Capital and Surplus- Value in Both Departments 493

Section VIII. — The Constant Capital in Both Departments 498

Section IX. — A Retrospect on Adam Smith, Storch and Ramsay 504

Section X. — Capital and Revenue, Variable Capital and Wages 50S

Section XL — Reproduction of the Fixed Capital 522

1. The Reproduction of the Value of the Worn-Out Part

in the Form of Money 526

2. The Reproduction of Fixed Capital in its Natural Form 532

Section XII. — The Reproduction of the Money-Supply 547

Section XIII. — Destutt De Tracy's Theory of Reproduction 560

CHAPTER XXI. — Accumulation and Reproduction on an Enlarged Scale.. 571

Section I. — Accumulation in Department 1 574

1. The Formation of a Hoard 574

2. The Additional Constant Capital 579

3. The Additional Variable Capital 5S5

Section II. — Accumulation in Department II 586

Section III. — Diagramatic Presentation of Accumulation 591

1. First Illustration 596

2. Second Illustration 600

3. Exchange of lie under Accumulation 607

Section IV. — Concluding Remarks 610

PREFACE.

It was no easy task to prepare the second volume of "CAP-
ITAL" for the printer in such a way that it should make a
connected and complete work and represent exclusively the
ideas of its author, not of its publisher. The great number of
available manuscripts, and their fragmentary character, ad-
ded to the difficulties of this task. At best one single manu-
script (No. 4) had been revised throughout and made ready
for the printer. And while it treated its subject-matter fully,
the greater part had become obsolete through subsequent re-
vision. The bulk of the material ^as not polished as to lan-
guage, even if the subject-matter was for the greater part
fully worked out. The language was that in which Marx used
to make his outlines, that is to say his style was careless, full
of colloquial, often rough and humorous, expressions and
phrases, interspersed with English and French technical
terms, or with whole sentences or pages of English. The
thoughts were jotted down as they developed in the brain of
vhe author. Some parts of the argument would be fully
treated, others of equal importance only indicated. The
material to be used for the illustration of facts would be col-
lected, but barely arranged, much less worked out. At the
conclusion of the chapters there would be only a few inco-
herent sentences as mile-stones of the incomplete deductions,
showing the haste of the author in passing on to the next
chapter. And finally, there was the well-known handwriting
which Marx himself was sometimes unable to decipher.

I have been content to interpret these manuscripts as lit-
erally as possible, changing the style only in places where
Marx would have changed it himself and interpolating ex-
planatory sentences or connecting statements only where this
was indispensable, and where the meaning was so clear that
there could be no doubt of 'the correctness of my interpreta-

7

8 Preface.

tion. Sentences which seemed in the least ambiguous were
preferably reprinted literally. The passages which I have re-
modeled or interpolated cover barely ten pages in print, and
concern mainly matters of form.

The mere enumeration of the manuscripts left by Marx
as a basis for Volume II proves the unparalleled conscien-
tiousness and strict self-criticism which he practiced in his
endeavor to fully elaborate his great economic discoveries
before he published them. This self-criticism rarely permit-
ted him to adapt his presentation of the subject, in content
as well as in form, to his ever widening horizon, which he
enlarged by incessant study.

The material for this second volume consists of the fol-
lowing parts: First, a manuscript entitled "A Contribution
to the Critique of Political Economy," containing 1472
quarto pages in 23 divisions, written in the time from
August, 1861, to June, 1863. It is a continuation of the
work of the same title, the first volume of which appeared
in Berlin, in 1859. It treats on pages 1-220, and again
pages 1159-1472, of the subject analyzed in Volume I of
"CAPITAL," beginning with the transformation of money
into capital and continuing to the end of the volume, and
is the first draft for this subject. Pages 973-1158 deal with
capital and profit, rate of profit, merchant's capital and
money capital, that is to say with subjects which have been
farther developed in the manuscript for Volume III. The
questions belonging to Volume II and many of those which
are part of Volume III are not arranged by themselves in
this manuscript. They are merely treated in passing, espe-
cially in the section which makes up the main body of the
manuscript, viz.: pages 220-972, entitled "Theories of Sur-
plus Value." This section contains an exhaustive critical
history of the main point of political economy, the theory
of surplus value, and develops at the same time, in polemic
remarks against the position of the predecessors of Marx, most
of the points which he has later on discussed individually
and in their logical connection in Volume II and III. I re-

Preface. 9

serve for myself the privilege of publishing the critical part
of this manuscript, after the elimination of the numerous
parts covered by Volumes II and III, in the form of Volume
IV. This manuscript, valuable though it is, could not be
used in the present edition of Volume II.

The manuscript next following in the order of time is that
of Volume III. It was written for the greater part in 1864
and 1865. After this manuscript had been completed in its
essential parts, Marx undertook the elaboration of Volume
I, which was published in 1867. I am now preparing this
manuscript of Volume III for the printer.

The period after the publication of Volume I, which is
next in order, is represented by a collection of four manu-
scripts for Volume II, marked I-IV by Marx himself. Man-
uscript I (150 pages), presumably written in 1865 or 1867,
is the first independent, but more or less fragmentary, elab-
oration of the questions now contained in Volume II. This
manuscript is likewise unsuited for this edition. Manuscript
II is partly a compilation of quotations and references to the
manuscripts containing Marx's extracts and comments, most
of them relating to the first section of Volume II, partly an
elaboration of special points, particularly a critique of Adam
Smith's statements as to fixed and circulating capital and
the source of profits; furthermore, a discussion of the rela-
tion of the rate of surplus value to the rate of profit, which
belongs in Volume III. The references furnished little that
was new, while the elaborations for Volumes II and III
were rendered valueless through subsequent revisions and
had to be ruled out for the greater part. Manuscript IV is
an elaboration, ready for printing, of the first section and
the first chapters of the second section of Volume II, and
has been used in its proper place. Although it was found
that this manuscript had been written earlier than Manu-
script II, yet it was far more finished in form and could
be used with advantage for the corresponding part of this
volume. I had to add only a few supplementary parts
of Manuscript II. This last manuscript is the only fairly

10 Preface.

complete elaboration of Volume II and dates from the
year 1870. The notes for the final revision, which I shall
mention immediately, say explicitly: "The second elab-
oration must be used as a basis."

There is another interruption after 1870, due mainly to
ill health. Marx employed this time in his customary
way, that is to say he studied agronomics, agricultural
conditions in America and especially Russia, the money
market and banking institutions, and finally natural sci-
ences, such as geology and physiology. Independent
mathematical studies also form a large part of the numer-
ous manuscripts of this period. In the beginning of 1877,
Marx had recovered sufficiently to resume once more his
chosen life's work. The beginning of 1877 is marked by
references and notes from the above-named four manu-
scripts intended for a new elaboration of Volume II, the
beginning of which is represented by Manuscript V (56
pages in folio). It comprises the first four chapters and is
not very fully worked out. Essential points are treated in
foot notes. The material is rather collected than sifted, but
it is the last complete presentation of this most important
first section. A preliminary attempt to prepare this part
for the printer was made in Manuscript VI (after October,
1877, and before July, 1878), embracing 17 quarto pages,
the greater part of the first chapter. A second and last at-
tempt was made in Manuscript VII, dated July 2, 1878,
and consisting of 7 pages in folio.

About this time Marx seems to have realized that he would
never be able to complete the second and third volume in
a, manner satisfactory to himself, unless a complete revolution
in his health took place. Manuscripts V-VIII show traces
of hard struggles against depressing physical conditions far
too frequently to be ignored. The most difficult part of the
first section had been worked over in Manuscript V. The
remainder of the first, and the entire second section, with ths
exception of Chapter 17, presented no great theoretical diffi-
culties. But the third section, dealing with the reproduction

Preface. 1 \

and circulation of social capital, seemed to be very much in
need of revision. Manuscript II, it must be pointed out, had
first treated of this reproduction without regard to the circu-
lation which is instrumental in effecting it, and then taken
up the same question with regard to circulation. It was the
intention of Marx to eliminate this section and to reconstruct
it in such a way that it would conform to his wider grasp
of the subject. This gave rise to Manuscript VIII, contain-
ing only 70 pages in quarto. A comparison with section
III, as printed after deducting the paragraphs inserted out
of Manuscript II, shows the amount of matter compressed
by Marx into this space.

Manuscript VIII is likewise merely a preliminary pre-
sentation of the subject, and its main object was to ascertain
and develop the new points of view not set forth in Manu-
script II, while those points were ignored about which there
was nothing new to say. An essential part of Chapter XVII,
Section II, which is more or less relevant to Section III, was
at the same time drawn into this discussion and expanded.
The logical sequence was frequently interrupted, the treat-
ment of the subject was incomplete in various places, and
especially the conclusion was very fragmentary. But Marx
expressed as nearly as possible what he intended to say on
the subject.

This is the material for Volume II, out of which I was
supposed "to make something," as Marx said to his daughter
Eleanor shortly before his death. I have interpreted this
request in its most literal meaning. So far as this was pos-
sible, I have confined my work to a mere selection of the
various revised parts. And I always based my work on the
last revised manuscript and compared this with the preced-
ing ones. Only the first and third section offered any real
difficulties, of more than a technical nature, and these were
indeed considerable. I have endeavored to solve them ex-
clusively in the spirit of the author of this work.

For Volume III, the following manuscripts were avail-
able, apart from the corresponding sections of the above-

12 Preface.

named manuscript, entitled "A Contribution to the Crit-
ique of Political Economy," from the sections in Manu-
script III likewise mentioned above, and from a few occa-
sional notes scattered through various extracts: The folio
manuscript of 1864-65, referred to previously, which is about
as fully elaborated as Manuscript II of Volume II ; further-
more, a manuscript dated 1875 and entitled "The Relation
of the Rate of Surplus Value to the Rate of Profit," which
treats the subject in mathematical equations. The prepara-
tion of Volume III for the printer is proceeding rapidly.
So far as I am enabled to judge at present, it will present
mainly technical difficulties, with the exception of a few
very important sections.

I avail myself of this opportunity to refute a certain
charge which has been raised against Marx, first indistinctly
and at various intervals, but more recently, after the death
of Marx, as a statement of fact by the German state and
university socialists. It is claimed that Marx plagiarized
the work of Rodbertus. I have already expressed myself
on the main issue in my preface to the German edition of
Marx's "Poverty of Philosophy" (1885), but I will now
produce the most convincing testimony for the refutation
of this charge.1

To my knowledge this charge is made for the first time in
R. Meyer's "Emancipationskampf des Vierten Standes"
(Struggles for the Emancipation of the Fourth Estate),
page 43: "It can be demonstrated that Marx has gathered
the greater part of his critique from these publications" —
meaning the works of Rodbertus dating back to the last
half of the thirties of this century. I may well assume,
until such time as will produce further proof, that the
"demonstration" of this assertion rests on a statement made
by Rodbertus to Mr. Meyer. Furthermore, Rodbertus him-
self appears on the stage in 1879 and writes to J. Zeller

1 In the preface to " The Poverty of Philosophy." A Reply to Proudhon's " Philoso-
phy of Poverty," by Karl Marx. Translated Into German by E. Bernstein and K. Kauteky.
Stuttgart, 1885.

Preface. 13

(Zeitschrift fur die Gesammte Staatswissenschaft, Tubin-
gen, 1879, page 219), with reference to his work "Zur Er-
kenntniss Unserer Staatswirthschaftlichen Zustande" (A
Contribution to the Understanding of our Political and
Economic Conditions), 1842, as follows: "You will find
that this line of thought has been very nicely used ... by
Marx, without, however, giving me credit for it." The pub-
lisher of Rodbertus posthumous works, Th. Kozak, repeats
his insinuation without further ceremony. (Das Kapital
von Rodbertus. Berlin, 1884. Introduction, page XV.)
Finally in the "Brief e und Sozialpolitische Aufsatze von Dr.
Rodbertus-Jagetzow," (Letters and Essays on Political Econ-
omy by Dr. Rodbertus-Jagetzow), published by R. Meyer in
1881, Rodbertus says directly: "To-day I find that I am
robbed by Schaffle and Marx without having my name men-
tioned" (Letter No. 60, page 134). And in another place,
the claim of Rodbertus assumes a more definite form: "In
my third letter on political economy, I have shown prac-
tically in the same way as Marx, only more briefly and
clearly, the source of the surplus value of the capitalists."
(Letter No. 48, page 111.)

Marx never heard anything definite about any of these
charges of plagiarism. In his copy of the "Emancipations-
kampf" only that part had been opened with a knife which
related to the International. The remaining pages were not
opened until I cut them myself after his death. The "Zeit-
schrift" of Tubingen was never read by him. The "Let-
ters," etc., to R. Meyer likewise remained unknown to him,
and I did not learn of the passage referring to the "robbery"
of which Rodbertus was supposed to be the victim until Mr.
Meyer himself called my attention to it. However, Marx
was familiar with letter No. 48. Mr. Meyer had been kind
enough to present the original to the youngest daughter of
Marx. Some of the mysterious whispering about the secret
source of his critique and his connection with Rodbertus
having reached the ear of Marx, he showed me this letter
with the remark that he had at last discovered authentic

14 'Preface.

information as to what Rodbertus claimed for himself; if
that was all Rodbertus wanted, he Marx, had no objection,
and he could well afford to let Rodbertus enjoy the pleasure
of considering his own version the briefer and clearer one.
In fact, Marx considered the matter settled by this letter of
Rodbertus.

He could so much the more afford this, as I know posi-
tively that he was not in the least acquainted with the liter-
ary activity of Rodbertus until about 1859, when his own
critique of political economy had been completed, not only
in its fundamental outlines, but also in its more important
details. Marx began his economic studies in Paris, in 1843,
starting with the prominent Englishmen and Frenchmen.
Of German economists he knew only Rau and List, and he
did not want any more of them. Neither Marx nor I heard
a word of Rodbertus' existence, until we had to criticise, in
the "Neue Rheinische Zeitung," 1848, the speeches he made
as the representative of Berlin and as Minister of Commerce.
We were both of us so ignorant that we had to ask the Rhen-
ish representatives who this Rodbertus was that had become
a Minister so suddenly. But these representatives could not
tell us anything about the economic writings of Rodbertus.
On the other hand, Marx showed that he knew even then,
without the help of Rodbertus, whence came "the surplus
value of the capitalists," and he showed furthermore how it
was produced, as may be seen in his "Poverty of Philoso-
phy," 1847, and in his lectures on wage labor and capital,
delivered in Brussels in 1847, and published in Nos. 264-69
of the "Neue Rheinische Zeitung," 1849. Marx did not
learn that an economist Rodbertus existed, until Lassalle
called his attention to the fact in 1859, and thereupon Marx
looked up the "Third Letter on Political Economy" in the
British Museum.

This is the actual condition of things. And now let us see
what there is to the content of Rodbertus which Marx is
charged with appropriating by "robbery." Says Rodbertus :
"In my third letter on political economy, I have shown prac-

Preface. 15

tically in the same way as Marx, only more briefly and
clearly, the source of the surplus-value of the capitalists."
This, then, is the disputed point: The theory of surplus
value. And indeed, it would be difficult to say what else
there is in Rodbertus which Marx might have found worth
appropriating. Rodbertus here claims to be the real origin-
ator of the theory of surplus-value of which Marx is sup-
posed to have robbed him.

And what has this third letter on political economy to say
in regard to the origin of surplus-value ? Simply this : That
the "rent," as he terms the sum of ground rent and profit,
does not consist of an "addition to the value" of a commod-
ity, but is obtained "by means of a deduction of value from
the wages of labor, in other words, the wages represent only a
part of the value of a certain product," and provided that
labor is sufficiently productive, wages need not be "equal to
the natural exchange value of the product of labor in order
to leave enough of it for the replacing of capital and for
rent." We are not informed, however, what sort of a "nat-
ural exchange value" of a product it is that leaves nothing
for the "replacing" of capital, or in other words, I suppose,
for the replacing of raw material and the wear and tear of
tools.

I am happy to say that we are enabled to ascertain what
impression was produced on Marx by this stupendous dis-
covery of Rodbertus. In the manuscript entitled "A Contri-
bution to the Critique of Political Economy," Section X,
pages 445 and following, we find, "A deviation. Mr. Rod-
bertus. A new theory of ground rent." This is the only
point of view from which Marx there looks upon the third
letter on political economy. The Rodbertian theory of sur-
plus value is dismissed with the ironical remark : "Mr. Rod-
bertus first analyzes what happens in a country where prop-
erty in land and property in capital are not separated, and
then he arrives at the important discovery that rent — mean-
ing the entire surplus-value — is only equal to the unpaid

16 Preface.

labor or to the quantity of products in which it is em-
bodied."

Now it is a fact, that capitalist humanity has been pro-
ducing surplus-value for several hundred years, and has in
the course of this time also arrived at the point where peo-
ple began to ponder over the origin of surplus-value. The
first explanation for this phenomenon grew out of the prac-
tice of commerce and was to the effect that surplus-value
arose by raising the value of the product. This idea was cur-
rent among the mercantilists. But James Steuart already
saw that in that case the one would lose what the other
would gain. Nevertheless, this idea persists for a long time
after him, especially in the heads of the "socialists." But
it is crowded out of classical science by Adam Smith.

He says in "Wealth of Nations," Vol. I, Ch. VI: "As
soon as stock has accumulated in the hands of particular
persons, some of them will naturally employ it in setting
to work industrious people, whom they will supply with
materials and subsistence, in order to make a profit by the
sale of their work, or, by what their labor adds to the value
of the materials. . . . The value which the workmen add
to the materials, therefore, resolves itself in this case into
two parts, of which the one pays their wages, the other the
profits of their employer upon the whole stock of materials
and wages which he advanced." And a little farther on he
says: "As soon as the land of any country has all become
private property, the landlords, like all other men, love to
reap where they never sowed, and demand a rent even for
its natural produce. . . . The laborer . . . must give up
to the landlord a portion of what his labor either collects
or produces. This portion, or what comes to the same tk'ng,
the price of this portion, constitutes the rent of land."

Marx comments on this passage in the above-named man-
uscript, entitled, "A Contribution, etc.," page 253 : "Adam
Smith, then, regards surplus-value, that is to say the surplus
labor, the surplus of labor performed and embodied in its
product over and above the paid labor, over and above that

Preface. 17

labor which has received its equivalent in wages, as the gen-
eral category, and profit and ground rent merely as its ram-
ifications."

Adam Smith says, furthermore, Vol. I, Chap. VIII : "As
soon as land becomes private property, the landlord demands
a share of almost all the produce which the laborer can either
raise or collect from it. His rent makes the first deduction
from the produce of labor which is employed upon land. It
seldom happens that the person who tills the ground has
wherewithal to maintain himself till he reaps the harvest.
His maintenance is generally advanced to him from the
stock of a master, the farmer who employs him, and who
would have no interest to employ him, unless he was to share
in the produce of his labor, or unless his stock was to be re-
placed by him with a profit. This profit makes a second
deduction from the produce of the labor which is employed
upon land. The produce of almost all other labor is liable
to the like deduction of profit. In all arts and manufactures
the greater part of the workmen stand in need of a master to
advance them the materials for their work, and their wages
and maintenance till it be completed. He shares in the prod-
uce of their labor, or in the value which it adds to the
materials upon which it is bestowed; and in this share con-
sists his profit."

The comment of Marx on this passage (on page 256 of
his manuscript) is as follows: "Here Adam Smith declares
in so many words that ground rent and profit of capital are
simply deductions from the product of the laborer, or from
the value of his product, and equal to the additional labor
expended on the raw material. But this deduction, as Adam
Smith himself has previously explained, can consist only
of that part of labor which the laborer expends over and
above the quantity of work which pays for his wages and
furnishes the equivalent of wages; in other words, this
deduction consists of the surplus labor, the unpaid part of
his labor."

It is therefore evident that even Adam Smith knew "the

18 Preface.

source of the surplus-value of the capitalists," and further-
more also that of the surplus-value of the landlords. Marx
acknowledged this as early as 1861, while Rodbertus and
the swarming mass of his admirers, who grew like mush-
rooms under the warm summer showers of state socialism,
seem to have forgotten all about that.
V "Nevertheless," continues Marx, "Smith did not separate;
surplus-value proper as a separate category from the special
form which it assumes in profit and ground rent. Hence
there is much error and incompleteness in his investigation,
and still more in that of Ricardo." This statement literally
fits Rodbertus. His "rent" is simply the sum of ground rent
plus profit. He builds up an entirely erroneous theory of
ground rent, and he takes surplus-value without any critical
reservation just as his predecessors hand it over to him. On
the other hand, Marx's surplus-value represents the general
form of the sum of values appropriated without any equiva-
lent return by the owners of the means of production, and
^ this form is then seen to transform itself into profit and
ground rent by very particular laws which Marx was the
first to discover. These laws are traced in Volume III. We
shall see there how many intermediate links are required for
the passage from an understanding of surplus-value in gen-
eral to that of its transformation into profits and ground
rent; in other words, for the understanding of the laws of
the distribution of surplus-value within the capitalist class.
Ricardo goes considerably farther than Adam Smith. He
bases his conception of surplus-value on a new theory of
value which is contained in the germ in Adam Smith, but
which is generally forgotten when it comes to applying it.
This theory of value became the starting point of all subse-
quent economic science. Ricardo starts out with the deter-
mination of the value of commodities by the quantity of
labor embodied in them, and from this premise he derives
his theory of the distribution, between laborers and capital-
ists, of the quantity of value added by labor to the raw
materials, this value being divided into wages and proni

Preface. 19

(meaning surplus-value). He shows that the value of the
commodities remains the same, no matter what may be the
proportion of these two parts, and he claims that this law
has only a few exceptions. He even formulates a few funda-
mental laws relative to the mutual relations of wages and
surplus-value (the latter considered by him as profit), al-
though his statements are too general (see Marx, CAPITAL,
Vol. I, Chap. XVII, 1), and he shows that ground rent is a
quantity realized under certain conditions over and above
profit. Rodbertus did not improve on Ricardo in any of these
respects. He either remained unfamiliar with the internal
contradictions which caused the downfall of the Ricardian
theory and school, or they misled him into Utopian de-
mands instead of enabling him to solve economic problems
(see his "Zur Erkenntniss, etc.," page 130).

But the Ricardian theory of value and surplus-value did
not have to wait for Rodbertus' "Zur Erkenntniss" in order
to be utilized for socialist purposes. On page 609 of the sec-
ond edition of the German original of "CAPITAL," Vol. I,
we find the following quotation : "The possessors of surplus
produce or capital." This quotation is taken from a pamph-
let entitled "The Source and Remedy of the National Diffi-
culties. A Letter to Lord John Russell. London, 1821."
In this pamphlet, the importance of which should have been
recognized on account of the terms surplus produce or cap-
ital, and which Marx saved from being forgotten, we read
the following statements:

"Whatever may be due to the capitalist" (from the cap-
italist standpoint) "he can never appropriate more than the
surplus labor of the laborer, for the laborer must live" (page
23) . As for the way in which the laborer lives and for the
quantity of the surplus value appropriated by the capitalist,
these are very relative things. — "If capital does not de-
crease in value in proportion as it increases in volume, the
capitalist will squeeze out of the laborer the product of
every hour of labor above the minimum on which the
laborer can live. . . . the capitalist can ultimately say to

20 Preface.

the laborer: You shall not eat bread, for you can live on
beets and potatoes ; and this is what we have to come to" (page
24). "If the laborer can be reduced to living on potatoes,
instead of bread, it is undoubtedly true that more can be
gotten out of his labor; that is to say, if, in order to live on
bread, he was compelled, for his own subsistence and that
of his family, to keep for himself the labor of Monday and
Tuesday, he will, when living on potatoes, keep only half of
Monday's labor for himself; and the other half of Monday,
and all of Tuesday, are set free, either for the benefit of the
state or for the capitalist." (Page 26.) "It is admitted that
the sums of interest paid to the capitalist, either in the form
of rent, money-interest, or commercial profit, are paid from
the labor of others." (Page 23.) Here we have the same
idea of "rent" which Rodbertus has, only the writer says
"interest" instead of rent.

Marx makes the following comment (manuscript of "A
Contribution, etc.," page 852) : "The little known pamph-
let— published at a time when the 'incredible cobbler' Mac-
Culloch began to be talked about — represents an essential
advance over Ricardo. It directly designates surplus-value
or 'profit' in the language of Ricardo (sometimes surplus
produce), or interest, as the author of this pamphlet calls
it, as surplus labor, which the laborer performs gratuitously,
which he performs in excess of that quantity of labor re-
quired for the reproduction of his labor-power, the equiva-
lent of his wages. It was no more important to reduce value
down to labor than it is to reduce surplus-value, represented
by surplus-produce, to surplus-labor. This had already been
stated by Adam Smith, and forms a main factor in the analy-
sis of Ricardo. But neither of them said so anywhere clearly
and frankly in such a way that it could not be misunder-
stood." We read furthermore, on page 859 of this manu-
script: "Moreover, the author is limited by the economic
theories which he finds at hand and which he accepts. Just
as the confounding of surplus-value and profit misleads
Ricardo into irreconcilable contradictions, so this author

Preface. 21

fares by baptizing surplus-value with the name of 'interest of
capital.' It is true, he advances beyond Ricardo by reduc-
ing all surplus-value to surplus-labor. And furthermore, in
calling surplus-value 'interest of capital,' he emphasizes that
he is referring by this term to the general form of surplus-
labor as distinguished from its special forms, rent, money
interest, and commercial profit. But yet he chooses the
name of one of these special forms, interest, at the same
time for the general form. And this causes his relapse into
the economic slang."

This last passage fits Rodbertus just as if it were made
to order for him. He, too, is limited by the economic cate-
gories which he finds at hand. He, too, applies the name of
one of the minor categories to surplus-value, and he makes it
quite indefinite at 'that by calling it "rent." The result of
these two mistakes is that he relapses into the economic slang,
that he makes no attempt -to follow up his advance over
Ricardo by a critical analysis, and that he is misled into
using his imperfect theory, even before it has gotten rid of
its egg-shells, as a basis for a Utopia which is in every respect
too late. The above-named pamphlet appeared in 1821 and
anticipated completely Rodbertus "rent" of 1842.

This pamphlet is but the farthest outpost of an entire lit-
erature which the Ricardian theories of value and surplus-
value directed against capitalist production in the interest
of the proletariat, fighting the bourgeoisie with its own
weapons. The entire communism of Owen, so far as it plays
a role in economics and politics, is 'based on Ricardo. Apart
from him, there are still numerous other writers, some of
whom Marx quoted as early as 1847 in his "POVERTY OF
PHILOSOPHY" against Proudhon, such as Edmonds,
Thompson, Hodgskin, etc., etc., "and four more pages of
et cetera." I select from among this large number of writ-
ings the following by a random choice: "An Inquiry into
the Principles of the Distribution of Wealth, Most Conducive
to Human Happiness, by William Thompson; a new edi-
tion. London, 1850." This work, written in 1822, first ap-

22 Preface.

peared in 1827. It likewise regards the wealth ap-
propriated by the non-producing classes as a deduction from
the product of the laborer, and uses pretty strong terms in
referring to it. The author says that the ceaseless endeavor
of that which we call society consisted in inducing, by fraud
or persuasion, by intimidation or compulsion, the produc-
tive laborer to perform his labors in return for the minimum
of his own product. He asks why the laborer should not be
entitled to the full product of his labor. He declares that
the compensations, which the capitalists filch from the pro-
ductive laborer under the name of ground rent or profit,
are claimed in return for the use of land or other things.
According to him, all physical substances, by means of
which the propertiless productive laborer who has no other
means of existence but the capacity of producing things,
can make use of his faculties, are in the possession of others
with opposite material interests, the consent of these is re-
quired in order that the laborer may find work; under these
circumstances, he says, it depends on the good will of the
capitalists how much of the fruit of his own labor the laborer
shall receive. And he speaks of "these defalcations" and of
their relation to the unpaid product, whether this is called
taxes, profit, or theft, etc.

I must admit that I do not write these lines without a cer-
tain mortification. I will not make so much of the fact that
the anti-capitalist literature of England of the 20's and 30's
is so little known in Germany, in spite of the fact that Marx
referred to it even in his "POVERTY OF PHILOSOPHY,"
and quoted from it, as for instance that pamphlet of 1821, or
Ravenstone, Hodgskin, etc., in Volume I of "CAPITAL."
But it is a proof of the degradation into which official political
economy has fallen, that not only the vulgar economist, who
clings desperately to -the coat tails of Rodbertus and really
has not learned anything, but also the duly installed profes-
sor, who boasts of his wisdom, have forgotten their classical
economy to such an extent that they seriously charge Marx

Preface. 23

with having robbed Rodbertus of things which may be
found even in Adam Smith and Ricardo.

But what is there that is new about Marx's statements on
surplus-value? How is it that Marx's theory of surplus-
value struck home like a thunderbolt out of a clear sky, in
all modern countries, while the theories of all his socialist
predecessors, including Rodbertus, remained ineffective?

The history of chemistry offers an illustration which ex-
plains this:

Until late in the 18th century, the phlogistic theory was
accepted. It assumed that in the process of burning, a cer-
tain hypothetical substance, an absolute combustible, named
phlogiston, separated from the burning bodies. This theory
sufficed for the explanation of most of the chemical phenom-
ena then known, although it had to be considerably twisted
in some cases. But in 1774, Priestley discovered a certain
kind of air which was so pure, or so free from phlogiston,
that common air seemed adulterated in comparison to it. He
called it "dephlogistieized air." Shortly after him, Scheele
obtained the same kind of air in Sweden, and demonstrated
its existence in the atmosphere. He also found that this air
disappeared, whenever some body was burned in it or in the
open air, and therefore he called it "fire-air." "From these
facts he drew the conclusion that the combination arising
from the union of phlogiston with one of the elements of
the atmosphere" (that is to say by combustion) "was noth-
ing but fire or heat which escaped through the glass." 2

Priestley and Scheele had produced oxygen, without
knowing what they had discovered. They remained "lim-
ited by the phlogistic categories which they found at hand."
The element, which was destined to abolish all phlogistic
ideas and to revolutionize chemistry, remained barren in
their hands. But Priestley had immediately communicated
his discovery to Lavoisier in Paris, and Lavoisier, by
means of this discovery, now analyzed the entire phlogistic
chemistry and came to the conclusion that this new air was

2 Roscoe-Schorlemmer, Ausuehrlicb.es Lehrbuch der Chemie. Braunsch-
weig, 1877, I, p. 33, 18.

24 Preface.

a new chemical element, that it was not the mysterious phlo-
giston which departed from a burning body, but that this
new element combined with the burning body. Thus he
placed chemistry, which had so long stood on its head,
squarely on its feet. And although he did not obtain the
oxygen simultaneously and independently of the other two
scientists, as he claimed later on, he nevertheless is the real
discoverer of oxygen as compared to the others who had pro-
duced it without knowing what they had found.

Marx stands in the same relation to his predecessors in
the theory of surplus-value that Lavoisier maintains to
Priestley and Scheele. The existence of those parts of the
value of products, which we now call surplus-value, had been
ascertained long before Marx. It had also been stated with
more or less precision that it consisted of that part of the
laborer's product for which its appropriator does not give
any equivalent. But there the economists halted. Some
of them, for instance the classical bourgeois economists in-
vestigated, perhaps, the proportion in which the product
of labor was divided among the laborer and the owner of
the means of production. Others, the socialists, declared
that this division was unjust and looked for Utopian means
of abolishing this injustice. They remained limited by
the economic categories which they found at hand.

Now Marx appeared. And he took an entirely opposite
view from all his predecessors. What they had regarded
as a solution, he considered a problem. He saw that he had
to deal neither with dephlogisticized air, nor with fire-air,
but with oxygen. He understood that it was not simply a
matter of stating an economic fact, or of pointing out the
conflict of this fact with "eternal justice and true morals,"
but of explaining a fact which was destined to revolutionize
the entire political economy, and which offered a key for
the understanding of the entire capitalist production, pro-
vided you knew how to use it. With this fact for a start-
ing point Marx analyzed all the economic categories which
he found at hand, just as Lavoisier had analyzed the cate-

Preface. 25

gories of the phlogistic chemistry which he found at hand.
In order to understand what surplus-value is, Marx had to
find out what value is. Therefore he had above all to an-
alyze critically the Ricardian theory of value. Marx also
analyzed labor as to its capacity for producing value, and
he was the first to ascertain what kind of labor it was that
produced value, and why it did so, and by what means it
accomplished this. He found that value was nothing but
crystallized labor of this kind, and this is a point which
Rodbertus never grasped to his dying day. Marx then ana-
lyzed the relation of commodities to money and demonstrated
how, and why, thanks to the immanent character of value,
commodities and the exchange of commodities must pro-
duce the opposition of money and commodities. His the-
ory of money, founded on this basis, is the first exhaustive
treatment of this subject, and it is -tacitly accepted every-
where. He analyzed the transformation of money into
capital and demonstrated that this transformation is based
on the purchase and sale of labor-power. By substituting
labor-power, as a value-producing quality, for labor he solved
with one stroko one of the difficulties which caused the down-
fall of the Ricardian school, viz.: the impossibility of har-
monizing the mutual exchange of capital and labor with
the Ricardian law of determining value by labor. By as-
certaining the distinction between constant and variable
capital, he was enabled to trace the process of the forma-
tion of surplus-value in its details and thus to explain it,
a feat which none of his predecessors had accomplished. In
other words, he found a distinction inside of capital itself
with which neither Rodbertus nor the capitalist economists
know what to do, but which nevertheless furnished a key for
the solution of the most complicated economic problems,
as is proved by this Volume II and will be proved still
more by Volume III. He furthermore analyzed surplus-
value and found its two forms, absolute and relative sur-
plus-value. And he showed that both of them had played
a different, and each time a decisive role, in the historical

26 Preface.

development of capitalist production. On the basis of this
surplus-value he developed the first rational theory of wages
which we have, and drew for the first time an outline of
the history of capitalist accumulation and a sketch of its
historical tendencies.

And Rodbertus? After he has read all that, he regards
it as "an assault on society," and finds that he has said much
more briefly and clearly by what means surplus-value is
originated, and finally declares that all this does indeed ap-
ply to "the present form of capital," that is to say to capi-
tal as it exists historically, but not to the "conception of
capital," that is to say, not to the Utopian idea which Rod-
bertus has of capital. He is just like old Priestley, who stood
by phlogiston to the end and refused to have anything to
do with oxygen. There is only this difference: Priestley
had actually produced oxygen, while Rodbertus had merely
rediscovered a common-place in his surplus-value, or rather
his "rent;" and Marx declined to act like Lavoisier and to
claim that he was the first to discover the fact of the exist-
ence of surplus-value.

The other economic feats of Rodbertus were performed
on about the same plane. His elaboration of surplus-value
into a utopia has already been inadvertently criticized by
Marx in his "POVERTY OF PHILOSOPHY." What may
be said about this point in other respects, I have said in
my preface to the German edition of that work. Rodbertus'
explanation of commercial crises out of the underconsump-
tion of the working class has been stated before him by Sis-
mondi in his "Nouveaux Principes de l'Economie Politique,"
liv. IV, ch. IV.3 However, Sismondi always had the world-
market in mind, while the horizon of Rodbertus does not
extend beyond Prussia. His speculations as to whether
wages are derived from capital or from income belong to
the domain of scholasticism and are definitely settled by the

3 " Thus the concentration of wealth into the hands of a small number of proprietors
narrows the home market more and more, and Industry Is more and more compelled to
open up foreign markets, where still greater revolutions await it" (namely, the crisis ot
1817, which is Immediately described). Nouveaux Principes, edition of 1819 I., p. 336.

Preface. 27

third part of this second volume of "CAPITAL." His the-
ory of rent has remained his exclusive property and may
rest in peace, until the manuscript of Marx criticising it
will be published. Finally his suggestions for the eman-
cipation of the old Prussian landlords from the oppression
of Capital are entirely Utopian; for they avoid the only prac-
tical question, which has to be solved, viz.: How can the old
Prussian landlord have a yearly income of, say, 20,000
marks >and a yearly expense of, say, 30,000 marks, without
running into debt?

The Ricardian school failed about the year 1830, being
unable to solve the riddle of surplus-value. And what was
impossible for this school, remained still more insoluble for
its successor, vulgar economy. The two points which caused
its failure were these:

1. Labo:* is the measure of value. However, actual labor
in its exchange with capital has a lower value than labor
embodied in the commodities for which actual labor is ex-
changed. Wages, the value of a definite quantity 'of 'actual
labor, are always lower than the value of the commodity
produced by this same quantity of labor and in which it
is embodied. The question is indeed insoluble, if put in
this form. It has been correctly formulated by Marx and
then answered. It is not labor which has any value. As
an activity which creates values it can no more have any
special value in itself than gravity can have any special
weight, heat any special temperature, electricity any special
strength of current. It is not labor which is bought and
sold as a commodity, but labor-power. As soon as labor-
power becomes a commodity, its value is determined by the
labor embodied in this commodity as a social product. This
value is equal to the social labor required for the produc-
tion and reproduction of this commodity. Hence the pur-
chase and sale of labor-power on the basis of this value does
not contradict the economic law of value.

2. According to the Ricardian law of value, two capitals
employing the same and equally paid labor, all other con-

28 Preface.

ditions being equal, produce the same value and surp\as«
value, or profit, in the same time. But if they employ un-
equal quantities of actual labor, they cannot produce equal
surplus-values, or, as the Ricardians say, equal profits. Now
in reality, the exact opposite takes place. As a matter of
fact, equal capitals, regardless of the quantity of actual labor
employed by them, produce equal average profits in equal
times. Here we have; therefore, a clash with the law of value,
which had been noticed by Ricardo himself, but which his
school was unable to reconcile. Rodbertus likewise could
not but note this contradiction. But instead of solving it,
he made it a starting point of his Utopia (Zur Erkenntniss,
etc.). Marx had solved this contradiction even in his manu-
script for his "CRITIQUE OF POLITICAL ECOMONY."
According to the plan of "CAPITAL," this solution will be
made public in Volume III. Several months will pass before
this can be published. Hence those economists, who claim
to have discovered that Rodbertus is the secret source and
the superior predecessor of Marx, have now an 'opportunity
to demonstrate what the economics of Rodbertus can accom-
plish. If they can show in which way an equal average
rate of profit can and must come about, not only without a
violation of the law of value, but by means of it, I am
willing to discuss the matter further with them. In the mean-
time, they had better make haste. The brilliant analyses of
this Volume II and its entirely new conclusions on an al-
most untilled ground are but the initial statements prepar-
ing the way for the contents of Volume III, which develops
the final conclusions of Marx's analysis of the social process
of reproduction on a capitalist basis. When this Volume
III will appear, little mention will be made of a certain
economist called Rodbertus.

The second and third volumes of "CAPITAL" were to be
dedicated, as Marx stated repeatedly, to his wife.

FRIEDRICH ENGELS.
London, on Marx's birthday, May 5, 1885.

Preface. 29

The present second edition is, in the main, a faithful
reprint of the first. Typographical errors have been cor-
rected, a few inconsistencies 'of style eliminated, and a few
short passages containing repetitions struck out.

The third volume, which presented quite unforeseen diffi-
culties, is likewise almost ready for the printer. If my
health holds out, it will be ready for the press this fall.

FRIEDRICH ENGELS.
London, July 15, 1893.

30 Preface.

TRANSLATOR'S NOTE.

The conditions and the location of the place in which
I translated volumes II and III of this work made it im-
possible for me to get access to the original works of the
authors quoted by Marx. I was compelled, under these
circumstances, to retranslate many quotations from Eng-
lish authors from the German translation, without an op-
portunity to compare my retranslated version with the Eng-
lish original. But whatever may be the difference in the
wording of the originals and of my retranslation from the
German, it does not affect the substance of the quotations
in the least. The meaning of the originals will be found to
be the same as that of my retranslation. The interpretation
given by Marx to the various quotations from other authors,
and the conclusions drawn by him from them, are not altered
in the least by any deviation, which my translation may
show from the original texts. If any one should be inclined
to turn these statements of mine to any controversial advan-
tage, he should remember that he cannot use them against
Marx, but only against me.

Ernest Untermann.

BOOK II

The Circulation of Capital

PART I

The Metamorphoses of Capital and Their Cycles

CHAPTER I.

THE CIRCULATION OF MONEY-CAPITAL.

The circulation process1 of capital takes place in three
stages, which, according to the presentation of the matter
m Volume I, form the following series :

First stage: The capitalist appears as a buyer on the
commodity and labor market; his money is transformed
into commodities, or it goes through the circulation pro-
cess M-C.

Second stage: Productive consumption of the purchased
commodities by the capitalist. He acts in the capacity of
a capitalist producer of commodities; his capital passes
through the process of production. The result is a com-
modity of more value than that of the elements compos-
ing it.

Third stage: The capitalist returns to the market as a
seller; his commodities are exchanged for money, or they
pass through the circulation process C-M.

1 From Manuscript II.

31

32 Capital.

Hence the formula for the circulation process of money
capital is: M-C ...P ...C'-M', the dots indicating the points
where the process of circulation was interrupted, and C' and
M' designating C and M increased by surplus value.

The first and third stages were discussed in Volume I only
in so far as it was required for an understanding of the sec-
ond stage, the process of production of capital. For this
reason, the various forms which capital assumes in its dif-
ferent stages, and which it either retains or discards in the
repetition of the circulation process, were not considered.
These forms are now the first objects of our study.

In order to conceive of these forms in their purest state,
we must first of all abstract from all factors which have
nothing to do directly with the discarding or adopting of
any of these forms. It is therefore taken for granted at
this point that the commodities are sold at their value and
that this takes place under the same conditions through-
out. Abstraction is likewise made of any changes of value
which might occur during the process of circulation.
I. First Stage. M-C.2

M-C represents the exchange of a sum of money for a
sum of commodities; the purchaser exchanges his money
for commodities, the sellers exchange their commodities for
money. It is not so much the form of this act of exchange
which renders it simultaneously a part of the general circu-
lation of commodities and a definite organic section in the
independent circulation of some individual capital, as its
substance, that is to say the specific use-values of the com-
modities which are exchanged for money. These commodi-
ties represent on the one hand means of production, on the
other labor-power, and these objective and personal factors
in the production of commodities must naturally correspond
in their peculiarities to the special kind of articles to be
manufactured. If we call labor-power L, and the means
of production Pm, the sum of commodities to be purchased is
C=L+Pm, or more briefly C{£m. M-C, considered as to its
substance, is therefore represented by M-C}pm, that is to
say M-C is composed of M-L and M-Pm. The sum of

2 Beginning of Manuscript VII, started July 2, 1878.

The Circulation of Money-Capital. 33

money M is separated into two parts, one of which buys
labor -power, the other means of production. These two
series of purchases belong to entirely different markets, the
one to the commodity-market proper, the other to the labor-
market.

Aside from this qualitative division of the sum of com-
modities into which M is transformed, the formula M-C \ pm
also represents a very characteristic quantitative relation.

We know that the value, or price, of labor-power is paid
to its owner, who offers it for sale as a commodity, in the
form of wages, that is to say it is the price of a sum of labor
containing surplus-value. For instance, if the daily value of
labor-power is equal to the product of five hours' labor val-
ued at three shillings, this sum figures in the contract be-
tween the buyer and seller of labor power as the price, or
wages, for say, ten hours of labor time. If such a contract
is made, for instance, with 50 laborers, they are supposed
to work 500 hours per day for their purchaser, and one-
half of this time, or 250 hours equal to 25 days of labor
of 10 hours each, represent nothing but surplus-value. The
quantity and the volume of the commodities to be pur-
chased must be sufficient for the utilization of this labor-
power.

M-C{pm, then, does not merely express the qualitative
relation represented by the exchange of a certain sum of
money, say 422 pounds sterling, for a corresponding sum
of means of production and labor-power, but also a quanti-
tative relation between certain parts of that same money
spent for the labor-power L and the means of production Pm.
This relation is determined at the outset by the quantity
of surplus-labor to be expended by a certain number of la-
borers.

If, for instance, a certain manufacturer pays a weekly
wage of 50 pounds sterling to 50 laborers, he must spend
372 pounds sterling for means of production, if this is the
value of the means of production which a weekly labor
of 3,000 hours, 1,500 of which are surplus-labor, transforms
into factory products.

It is immaterial for the point under discussion, how much
additional value in the form of means of production is re-

84 Capital.

quired in the various lines of industry by the utilization
of surplus-labor. We merely emphasize the fact that the
amount of money M spent for means of production in the
exchange M-Pm must buy a proportional quantity of them.
The quantity of means of production must suffice for the
absorption of the amount of labor which is to transform
them into products. If the means of production were in-
sufficient, the surplus-labor available for the purchaser
would not be utilized, and he could not dispose of it. On
the other hand, if there were more means of production
than available labor, they would not be saturated with labor
and would not be transformed into products.

As soon as the process M-C{£m has been completed, the
purchaser has more than simply the means of production
and labor-power required for the manufacture of some use-
ful article. He has also at his disposal a greater supply of
labor-power, or a greater quantity of labor, than is neces-
sary for the reproduction of the value of this labor-power,
and he has at the same time the means of production re-
quired for the materialization of this quantity of labor. In
other words, he has at his disposal the elements required
for the production of articles of a greater value than these
elements, he has a mass of commodities containing sur-
plus-value. The value advanced by him in the form of
money has then assumed a natural form in which it can
be incarnated as a value generating more value. In brief,
value exists then in the form of productive capital which
has the faculty of creating value and surplus-value. Let us
call capital in this form P.

Now the value of P is equal to that of L-f Pm, it is equal
to M exchanged for L and Pm. M is the same capital-value
as P, only it has a different form of existence, it is capital
value in the form of money — money-capital.

M-C{pm, or the more general formula M-C, a sum of
purchases of commodities, a process within the general cir-
culation of commodities, is therefore at the same time,
seeing that it is <a stage in the independent circulation of
capital, a process of transforming capital-value from its
money form into its productive form. It is the transforma-
tion of money-capital into productive capital. In the diagram

The Circulation of Money-Capital. 85

of the circulation which we are here discussing, money ap-
pears as the first bearer of capital-value, and money-capital
therefore represents the form in which capital is advanced.

Money in the form of money-capital finds itself employed
in the functions of a medium of exchange, in the present
case it performs the service of a general purchasing medium
and general paying medium. The last-named service is re-
quired inasmuch as labor-power, though first bought is not
paid until it has been utilized. If the means of production are
not found ready on the market, but have to be ordered,
money in the process M-Pm likewise serves as a paying
medium. These functions are not due to the fact that
money-'capital is 'capital, but that it is money.

On the other hand, money-capital, or capital- value in the
form of money, cannot perform any other service but that
of money. This service appears as a function of capital
simply because it plays a certain role in the movements of
capital. The stage in which this function is performed is
interrelated with other stages of the circulation of money-
capital. Take, for instance, the case with which we are
here dealing. Money is here exchanged for commodities
which represent the natural form of productive capital,
and this form contains in the germ the phenomena of the
process of capitalist production.

A part of the money performing the function of money-
capital in the process M-C{pm assumes, in the course
of this circulation, a function in which it loses its capital
character but preserves its money character. The circula-
tion of money-capital M is divided into the stages M-Pm
and M-L, into the purchase of means of production and of
labor-power.

Let us consider the last-named stage by itself. M-L is the
purchase of labor-power by the capitalist. It is also the
sale of labor-power, or we may say of labor, since we have
assumed the existence of wages, by the laborer who owns
it. What is M-C, or in this case M-L, from the standpoint
of the buyer, is here, as in every other transaction of this
kind, C-M from the standpoint of the seller, L-M from the
standpoint of the laborer. It is the sale of labor-power by
the laborer. This is the first stage of circulation, or the

36 Capital.

first metamorphosis, of commodities (Vol. I, Chap. Ill,
Sect. 2a) . It is for the seller of labor-power a 'transforma-
tion of his commodity into the money-form. The laborer
spends the money so obtained gradually for a number of
commodities required for the satisfaction of his needs, for
articles of consumption. The complete circulation of his
commodity therefore appears as L-M-C, that is to say first as
L-M, or C-M, second as M-C, which is the general form of
the simple circulation of commodities, C-M-C. Money is
in this case merely a passing circulation-medium, a mere
mediator in the exchange of one commodity for another.

M-L is the typical stage of the transformation of money-
capital into productive capital. It is the essential condition
for the transformation of value advanced in the form of
money into capital, that is to say into a value producing
surplus-value. M-Pm is necessary only for the purpose of
realizing the quantity of labor bought in the process M-L.
This process was discussed from this point of view in Vol.
I, Part II, under the head of "Transformation of Money
into Capital." But at this point, we shall have to consider
it also from another side, relating especially to money-capi-
tal as a form of capital.

M-L is regarded as a general characteristic of the capital
ist mode of production. But in this case we are doing so,
not so much because the purchase of labor-power repre-
sents a contract which stipulates the delivery of a certain
quantity of labor-power for the reproduction of the price of
labor-power, or of wages, not so much for the reason that
it means the delivery of surplus-labor which is the funda-
mental condition for the capitalization of the value ad-
vanced, or for the production of surplus-value; but we do
so rather on account of its money form, because wages in
the form of money buy labor-power, and this is the charac-
teristic mark of the money system.

Nor is it the irrational feature of the money form which
we shall note as the characteristic part. We shall overlook
the irrationalities. The irrationality consists in the fact
that labor itself as a value-creating element cannot havQ
any value which could be expressed in its price, and that,
therefore, a certain quantity of labor cannot have any

The Circulation of Money-Capital. 37

equivalent in a certain quantity of money. But we know
that wages are but a disguised form in which, for instanoe,
the price of one day's labor-power is seen to be the price of
the quantity of labor materialized by this labor-power in one
day. The value produced by this labor-power in six hours
of labor is then expressed as the value of twelve hours of
its labor.

M-L is regarded as the characteristic signature of the so-
called money system, because labor there appears as the com-
modity of its owner, and money as the buyer. In other
words, it is the money relation in the sale and purchase of
human activity which is considered. It is a fact, however,
that money appears at an early stage as a buyer of so-called
services, without the transformation of M into money-
capital, and without any change in the general character of
the economic system.

It makes no difference to money into what sort of com-
modities it is transformed. It is the general equivalent of
all commodities, which show by their prices that they rep-
resent in an abstract way a certain sum of money and an-
ticipate their exchange for money. They do not assume the
form in which they may be translated into use-values for
their owners, until they change places with money. Once
that labor power has come into the market as the commod-
ity of its owner, to be sold for wages in return for labor, its
sale and purchase is no more startling than the sale and
purchase of any other commodity. The peculiar character-
istic is not that the commodity labor-power is salable, but
that labor-power appears in the shape of a commodity.

By means of M-C \ pm, that is to say by the transformation
of money-capital into productive capital, the capitalist ac-
complishes the combination of the objective and personal
factors of production so far as they consist of commodities.
If money is transformed into productive capital for the
first time, or if it performs for the first time the function
of money-capital for its owner, he must begin by buying
means of production, such as buildings, machinery, etc., be-
fore he buys any labor-power. For as soon as labor-power
passes into his control, he must have means of production
for it, in order to utilize it.

88 Capital.

This is the capitalist's point of view.

The laborer, on the other hand, looks at this question in
the following light: The productive application of his la-
bor-power is not possible, until he has sold it and brought
it into contact with means of production. Before its sale,
it exists in a state of separation from the means of produc-
tion which it requires for its materialization. So long as it
remain's in this state, it cannot be used either for the pro-
duction of use-values for its owner, or for the production of
commodities, by the sale of which he might live. But
from the moment that it is brought into touch with means
of production, it forms part of the productive capital of its
purchaser, the same as the means of production.

It is true, that in the act M-L the owner of money and
the owner of labor-power enter into the relation of buyer
and seller, of money-owner and commodity-owner. To this
extent they enter into a money relation. But at the same
time the buyer also appears in the role of an owner of
means of production, which are the material conditions for
the productive expenditure of labor-power on the part of its
owner. The means of production, then, meet the owner of
labor-power in the form of the property of another. On the
other hand, the seller of labor meets its buyer in the form of
the labor-power of another and it must pass into the buyer's
possession, it must become a part of his capital, in order that
it may become productive capital. The class relation be-
tween the capitalist and the wage laborer is therefore es-
tablished from the moment that they meet in the act M-L,
which signifies L-M from the standpoint of the laborer. It
is indeed a sale and a purchase, a money relation, but it is
a sale and a purchase in which the buyer is a capitalist and
the seller a wage-laborer. And this relation arises out of
the fact that the conditions required for the materializa-
tion of labor-power, viz. : means of subsistence and means of
production, are separated from the owner of labor-power and
are the property of another.

We are not here concerned in the origin of this separa-
tion. It is a fact, as soon as the act M-L can be performed.
The thing which interests us here is that M-L does not be-
come a function of money-capital for the sole reason that

The Circulation of Money-Capital. 39

it is a means of paying for a useful human activity or serv-
ice. The function of money as a paying medium is not
the main object of our attention. Money can be expended
in this form only because labor-power finds itself separated
from its means of production, including the means of sub-
sistence required for its reproduction ; because this separa-
tion can be overcome only by the sale of the labor-power to
the owner of the means of production; because the ma-
terialization of labor-power, which is by no means limited
to the quantity of labor required for the reproduction of
its own price, is likewise in the control of its buyer. The
capital relation during the process of production arises only
because it is inherent in the process of circulation based on
the different economic conditions, the class distinctions be-
tween the buyer and the seller of labor-power. It is not
money which by its nature creates this relation ; it is rather
the existence of this relation which permits of the trans-
formation of a mere money-function into a capital-func-
tion.

In the conception of money-capital, so far as it relates to
the special function which we are discussing, two errors run
parallel to one another or cross each other. In the first
place, the functions performed by capital-value in its ca-
pacity of money-capital, which are due to its money form,
are erroneously derived from its character as capital. But
they are due only to the money form of capital-value. In
the second and reverse case, the specific nature of the
money-function, which renders it simultaneously a capi-
tal-function, is attributed to its money nature. Money is
here confounded with capital, while the specific nature of
the money-function is conditioned on social relations such
as are indicated by the act M-L, and these conditions do
not exist in the mere circulation of commodities and money.

The sale and purchase of slaves is formally also a sale and
purchase of commodities. But money cannot perform this
function without the existence of slavery. If slavery exists,
then money can be invested in the purchase of slaves. On
the other hand, the mere possession of money cannot make
slavery possible.

In order that the sale of his labor-power by the laborer,

40 'Capital.

in the form of the sale of labor for wages, may take place as
a result of social conditions which make it the basis of the
production of commodities, in order that it may not be an
isolated instance, so that money-capital may perform, on
a social scale, the function in the process M-C{pm, definite
historical processes are required, by which the original con-
nection of the means of production with labor-power is dis-
solved. These processes must have resulted in opposing
the mass of the people, the laborers, as propertiless to the
idle owners of the means of production. It makes no dif-
ference in this case, whether the connection between the la-
bor-power and the means of production before its disso-
lution was such that the laborer belonged to the means of
production and was a part of them, or whether he was their
owner.

The fact which lies back of the process M-C { pm is dis-
tribution; not distribution in the ordinary meaning of a
distribution of articles of consumption, but the distribu-
tion of the elements of production themselves. These con-
sist of the objective things which are concentrated on one
side, and labor-power which is isolated on the other.
. The means of production, the objective things of pro-
ductive capital, must therefore stand opposed to the la-
borer as capital, before the process M-L can become a uni-
versal, social one.

We have seen on previous occasions that capitalist pro-
duction, once it is established, does not only reproduce in its
further development this separation, but extends its scope
more and more, until it becomes the prevailing social con-
dition. However, there is still another side to this ques-
tion. In order that capital may be able to arise and take
control of production, a definite stage in the development
of commerce must precede. This includes the circulation
of commodities, and therefore also the production of com-
modities; for no articles can enter circulation in the form
of commodities, unless they are manufactured for sale,
and intended for commerce. But the production of com-
modities does not become the normal mode of production,
until it finds as its basis the capitalist system of production.

The Russian landowners, who are compelled to carry on

The Circulation of Money-Capital. 41

agriculture by the help of wage-laborers instead of serfs,
since the so-called emancipation of the serfs, complain about
two things. They wail in the first place about the lack of
money-capital. They say, for instance, that large sums must
be paid to wage-laborers, before the crops can be sold, and
there is a dearth of ready cash. Capital in the form of
money must always be available for the payment of wages,
before production on a capitalist scale can be carried on.
But the landowners may take hope. In due time the in-
dustrial capitalist will have at his disposal, not alone his
own money, but also that of others.

The second complaint is more characteristic. It is to the
effect that even if money is available, there are not enough
laborers at hand at any time. The reason is that the Rus-
sian farm laborer, owing to the communal property in land,
has not been fully separated from his means of production,
and hence is not yet a "free wage-worker" in the full capi-
talist meaning of the word. But the existence of "free"
wage-workers is the indispensable condition for the reali-
zation of the act M-C, the exchange of money for commodi-
ties, the transformation of money-capital into productive
capital.

As a matter of course, the formula M-C ... P ...C -M' does
not represent the normal form of the circulation of money-
capital, until capitalist production is fully developed, be-
cause it is conditioned on the existence of a social class of
wage-laborers. We have seen that capitalist production
does not only create commodities and surplus-values, but
also gives rise to an ever growing class of wage-laborers,
either by propagation or by the transformation of independ-
ent producers into proletarians.

Since the first condition for the realization of the act
M-C ... P ... C -M' is the permanent existence of a class of
wage-workers, capital in the form of productive capital and
jhe circulation of productive capital must precede it.

II. Second Stage. Functions of Productive Capital.

The circulation of capital which we have here considered
begins with the act of circulation represented by the formula
M-C, the transformation of money into commodities, or

42 Capital.

purchase. Circulation must therefore be supplemented by
the reverse metamorphosis C-M, the transformation of com-
modities into money, or sale. But the immediate result of
M-C { pm is the interruption of the circulation of the oapital
advanced in the form of money. By the transformation of
money-capital into productive capital the value of capital
has assumed a natural form in which it cannot continue to
circulate, but must enter into consumption, more accurately
into productive consumption.

The application of labor-power, labor, can not be carried
into effect anywhere but in the labor process. The capitalist
cannot sell the laborer along with the commodities, because
the wage-worker is not a chattel slave and the capitalist does
not buy anything from the laborer but the privilege of
utilizing the labor-power purchased in the person of ■the
laborer for a certain time. On the other hand, the capitalist
cannot use this labor-power in any other way than by using
it up in transforming, by its help, means of production
into commodities. The result of the first stage of the circu-
lation of money-capital is therefore its entrance into the
second stage, that of productive capital.

This movement is represented by the formula M-C {pm,
P, in which the dots indicate the place where the circulation
of capital is interrupted, while its rotation continues, since
it passes from the sphere of the circulation of commodities
into that of production. The first stage, the transformation
of money-capital into productive capital, is therefore merely
the harbinger of the second, the productive stage of capi-
tal.

The act M \$M presupposes that the person performing
it not only has at his or her disposal values of some useful
form, but also that he or she has them in the form of
money. And the act consists precisely in giving away
money. A man can, therefore, remain the owner of money
only on the condition, that the giving away of money at
the same time implies a return of money. But money can
return only through the sale of commodities. Hence the
above formula assumes the owner of money to be a pro-
ducer of commodities.

INow let us look at the formula M-L. The wage worker

The Circulation of Money-Capital. 43

lives only by the sale of bis labor-power. The preservation
of this power, equivalent to the self-preservation of the la-
borer, requires a' daily consumption. Hence the payment
of wages must be continually repeated at short intervals, in
order that the wage laborer may be able to repeat acts
L-M or C-M-C, by means of which he is enabled to purchase
the articles required for his self-preservation. For this
reason the capitalist must stand opposed to the wage worker
in the capacity of a money-capitalist, and his capital must
be money-capital. On the other hand, if (the wage labor-
ers, the mass of direct producers, are to perform the act
L-M-C, the means of subsistence required for it must be
present in the form of purchasable commodities. This
state of affairs necessitates a high degree of development
of the circulation of products in the form of commodities,
and this again must be preceded by a corresponding exten-
sion of the production of commodities. As soon as pro-
duction by means of wage labor has become universal, the
production of commodities must be the typical form of
production. If this mode of production is general, it car-
ries in its wake an ever increasing division of labor, that
is to say an ever growing differentiation in the special nature
of the products which are manufactured in the form of
commodities by the various capitalists, an ever greater di-
vision of supplementary processes of production into inde-
pendent specialties. To the extent that M-L develops, M-Pm
also develops, that is to say the production of means of pro-
duction to that extent differentiates from the production
of commodities with those means. The means of produc-
tion then stand opposed as commodities to every producer
of commodities and he must buy those means in order to
be able to carry on his special line of commodity produc-
tion. They are derived from branches of production which
are entirely divorced from his own and enter into his own
branch as commodities which he must buy. The objective
materials of commodity production assume more and more
the character of products of other commodity manufactur-
ers which he must purchase. And to the same extent the
capitalist must become a money-capitalist, in the same

44 Capital.

ratio his capital must assume the functions of money-capi-
tal.

On the other hand, the same conditions which are the
cause of the fundamental constitution of capitalist produc-
tion, especially the existence of a class of wage laborers,
also demand the transition of all commodity production
into the capitalist mode of commodity production. In
proportion as the capitalist mode of production develops,
it has a disintegrating effect on all older forms of produc-
tion, which were mainly adjusted to the individual needs
and transformed only the surplus over and above those
needs into commodities. Capitalist production makes of
the sale of products the main incentive, without at first
apparently affecting the mode of production itself. Such
was, for instance, the first effect of capitalist world commerce
on such nations as the Chinese, Indians, Arabs, etc. But
wherever it takes root, there it destroys all forms of com-
modity production which are either based on the self-em-
ployment of the producers, or merely on the sale of the
surplus product. The production of commodities is first
made general and then transformed by degrees into the
capitalist mode of commodity production.3

Whatever may be the social form of production, laborers
and means of production always remain its main elements.
But either of these factors can become effective only when
they unite. The special manner in which this union is
accomplished distinguishes the different economic epochs
from one another. In the present case, the separation of
the so-called free laborer from his means of production is
the starting point, and we have observed the way and the
conditions in which these two elements are united in the
hands of the capitalist, as the productive mode of existence
of his capital. The actual process which combines the per-
sonal and objective materials of commodity production un-
der these conditions, the process of production, thus becomes
in its turn a function of capital, a capitalist process of pro-
duction, the nature of which has been fully analyzed in the
first volume of this work. Every process of commodity
production at the same time becomes a process of exploiting

8 End of Manuscript VII. Beginning of Manuscript VI.

The Circulation of Money-Capital. 45

labor-power. But it is not until the capitalist production
of commodities is established that this mode of exploitation
becomes universal and typical, and revolutionizes in the
course of its historical development, through the organiza-
tion of the labor process and the enormous improvement of
technique, the entire economic structure of society, in a
manner eclipsing all former epochs.

The means of production and labor-power in so far as
they are forms of existence of advanced capital values,
are distinguished by the different roles assumed by them
in the production of value, hence 'also of surplus-value, and
known under the names of constant and variable capital.
As different parts of productive capital they are further-
more distinguished by the fact that the means of production
in the possession of the capitalist remain his capital even
outside of the process of production, while labor-power exists
in the form of individual capital only within this process.
While labor-power is a 'commodity only in the hands of its
seller, the wage worker, it becomes capital only in the hands
of its buyer, the capitalist who uses it temporarily. And
the means of production do not become objective parts of
productive capital, until labor-power, the personal form of
productive 'capital, is embodied in them. Human labor-
power is originally no more capital than are the means of
production. They assume this specific social character only
under definite historically developed conditions, and the
same character is impregnated upon precious metals, and
still more upon money, by the same circumstances.

Productive capital, in performing its functions, consumes
its own component parts for the purpose of transforming
them into a mass of products of a higher value. Seeing
that laborjpower acts likewise merely as an organ of pro-
ductive capital, the surplus-value produced by its surplus-
labor over and above the value of its component elements
is also gathered by capital. The surplus-labor of labor-
power is the inexpensive labor of capital and thus forms
surplus-value for the capitalist, a value which costs him no
equivalent return. The product is, therefore, not only a
commodity, but a commodity pregnant with surplus-value.
Its value is equal to P+S, that is to say equal to the value

46 Capital.

of the productive capital consumed in its manufacture plus
the surplus-value S created by it. Assuming that this product
were represented by 10,000 pounds of yarn, let us say
that means of production valued at 372 pounds sterling
and labor-power valued at 50 pounds sterling were con-
sumed in the production of this quantity of yarn. During
the process of spinning, the spinners transferred the value
of the means of production to the amount of 372 pounds
sterling to the yarn, and at the same time they created, by
means of their labor-power, new values to the amount of
128 pounds sterling. The 10,000 pounds of yarn there-
fore represent a value of 500 pounds sterling.

III. Third Stage. C-M'.

Commodities become commodity-capital by springing
into existence as a direct result of commodity-production,
embodying in a new form the capital values already utilized.
If the production of commodities were carried on as capi-
talist production in all spheres of society, all commodities
would be elements of commodityjcapital from the outset,
whether they would be composed of crude iron, Brussels
laces, sulphuric acid, or cigars. The problem as to what
class of commodities is destined by its nature to rank as
capital and what class to serve as general commodities, is
one of the self-prepared ills of the scholastic economists.

In the form of commodities, capital has to perform the
functions of commodities. The articles of which commod-
ity capital is composed are produced for sale and must be
exchanged for money, must go through the process C-M.

The commodities of the capitalist may consist of 10,000
pounds of yarn. If 372 pounds sterling represent the value
of the means of production consumed in the spinning pro-
cess, and new values to the amount of 128 pounds sterling
have been created, the yarn has a value of 500 pounds
sterling, which is expressed in its price of the same amount.
This price is realized by the sale C-M. What is it that
makes of this simple process of all commodity circulation
at the same time a capital function? It is not any change
that takes place inside of it. Neither the use-value of the

The Circulation of Money-Capital. 47

product has been changed, for it passes into the hands of
the buyer as an object of use, nor has anything been al-
tered in its exchange-value, for this value has not ex-
perienced any change of magnitude, but only of form. It
first existed as yarn, while now it exists as money. Thus a
plain distinction is evident between the first stage C-M, and
the last stage C'-M'. There the advanced money serves
as money-capital, because it is transformed, by means of the
circulation of commodities, into articles of a specific use-
value. Here, on the other hand, the commodities can only
serve as capital, since they brought this character with them
from the process of production before their circulation be-
gan. During the spinning process, the spinners created new
values to the amount of 128 pounds sterling in the shape of
yarn. Of this sum, say 50 pounds sterling are regarded by the
capitalist merely as an equivalent for wages advanced for
labor-power, while 78 pounds sterling — representing an ex-
ploitation of 156 per cent — are his surplus-value.

The value of the 10,000 pounds of yarn therefore embodies
first the value of the 'consumed productive capital P, which
consists of a constant capital of 372 pounds sterling and a
variable capital of 50 pounds sterling, their sum being 422
pounds sterling, equal to 8,440 pounds of yarn. Now the
value of the productive capital P is equal to C, the value of
the elements constituting it which the capitalist found to
be in the hands of their sellers in the stage M-C. In the
second place, the value of the yarn embodies a surplus-value
of 78 pounds sterling, equal to 1,560 pounds of yarn. C as
an expression of the value of 10,000 pounds of yarn is there-
fore equal to C plus surplus C, or C plus an increment of C
worth 78 pounds sterling, which we shall call c, since it ex-
ists in the same commodity form as that now assumed by
the original value C. The value of the 10,000 pounds of
yarn, equal to 500 pounds sterling, is therefore represented
by the formula C+c=C\ What changes C, the value of the
10,000 pounds of yarn, into C is not its absolute value of
500 pounds sterling, for it is determined, the same as C
standing for the expression of the value of any other sum of
commodities, by the quantity of labor embodied in it. It
is rather its relative value, its value as compared to that of

48 Capital

the productive capital P consumed in its production, which
is the essential thing. This value is contained in it plus
the surplus-value created through the productive capital.
Its value exceeds that of the capital by the surplus-value c.
The 10,000 pounds of yarn are the bearers of the consumed
capital value increased by this surplus-value, and they are
so by virtue of the capitalist process of production. C' ex-
presses the relation of the value of the commodities to that
of the capital advanced in its production, in other words the
composition of the value of the commodities, of capital
value and surplus-value. The 10,000 pounds of yarn repre-
sent a commodity-capital €' only because they are an altered
form of the productive capital P, and this relation exists
originally by virtue of the circulation of this individual
capital, it applies primarily to the capitalist who produced
the yarn by the help of his capital. It is, so to say, an in-
ternal, not an external relation which makes a commodity
capital of the 10,000 pounds of yarn in their capacity of
representatives of value. They are bearing the imprint of
capital not in the absolute magnitude of their value, but in
its relative magnitude, in the proportion of their value to
that of productive capital embodied in them before they
became commodities. If, then, these 10,000 pounds of yarn
are sold at their value of 500 pounds sterling, this act of
circulation, considered by itself, is identical with C-M, a
mere transformation of the same value from the form of a
commodity into that of money. But as a special stage in
the circulation of a certain individual capital, the same act
is also a realization of the capital value, embodied in the
commodity, to the amount of 422 pounds sterling plus the
surplus-value, likewise embodied in it, of 78 pounds ster-
ling. That is to say, it also represents C'-M', the trans-
formation of the commodity-capital from its commodity
form into that of money.*

The function of C is now that of all commodities, viz.:
to transform itself into money, to be sold, to go through
the circulation stage C-M. So long as the capital utilized
so far remains in the form of commodity-capital and stays

4 End of Manuscript VI. Beginning of Manuscript V.

The Circulation of Money-Capital. 49

on the market, the process of production rests. The com-
modity-capital serves then neither as a creator of value nor
of products. In proportion to the degree of speed with
which capital throws off the commodity-form and assumes
that of money, in other words, in proportion to the rapidity
of the sale, the same capital-value will serve in widely dif-
ferent degrees as a creator of products or of values, and the
scale of reproduction will be extended or abridged. It has
been shown in Volume I that the effectiveness of any given
capital is conditioned on factors in the productive process
which are to a certain extent independent of the magnitude
of its own value. Here we see that the process of circulation
sets in motion new factors which are independent of the
value of the capital, its effectiveness, its expansion or con-
traction.

The mass of commodities C, being the embodiment of
the consumed capital, must furthermore pass in its entire
volume through the metamorphosis C'-M'. The quantity
sold is here the main determinant. The individual com-
modity figures only as an integral part of the total mass.
The 500 pounds sterling are embodied in 10,000 pounds
of yarn. If the capitalist succeeds in selling only 7,440
pounds of yarn at their value of 372 pounds sterling, he
has recovered only the value of his constant capital, the
value expended by him for means of production. If he
sells 8,440 pounds of yarn, he recovers only the value of
his total capital. He must sell more, in order to obtain some
surplus-value, and he must sell the entire 10,000 pounds
in order to get the entire surplus-value of 78 pounds ster-
ling (1,560 pounds of yarn). In 500 pounds sterling he
receives merely an equivalent for the commodity sold. His
transaction within the process of circulation is simply C-M.
If he had paid his laborers 64 pounds sterling instead of
50 pounds sterling, his surplus-value would be only 64
pounds sterling instead of 78, and the degree of exploita-
tion would have been only 100 per cent instead of 150. But
the value of the yarn would remain the same; only the
relation of its component parts would be changed. The
circulation-act C-M would still represent the sale of 10,000
pounds of yarn for 500 pounds sterling, which is their
value.

50 Capital.

C is equal to C+c (or 422 plus 78 pounds st.) . C equals the
value of P, the productive capital, and this equals the value
of M, the money advanced in the act M-C, the purchase of
the elements of production, amounting to 422 pounds ster-
ling in our example. If the mass of commodities is sold at
its value, then C equals 422 pounds sterling, and c, the value
of the surplus product of 1,560 pounds of yarn, equals
78 pounds sterling. If we call c, expressed in money, m,
then C'-M'=(C+c)-(M+m), and the cycle M-C.. .P.. .C'-M',
in its expanded form, is represented by M-C'j£m...P...(C+c)-
(M+m).

In the first stage, the capitalist takes articles of use out of
the commodity-market proper and the labor-market. And
in the third stage he throws commodities back, but only
into one market, the commodity-market proper. But the
fact that he extracts from the market, by means of his com-
modities, a greater value than he threw upon it originally, is
due only to the circumstance that he throws more commodity-
values back upon it than he first drew out of it. He threw
the value M into it and drew out of it the equivalent C;
he throws the value C+c back into it, and draws out of it
the equivalent M+m.

M was in our example equal to the value of 8,440 pounds
of yarn. But he throws 10,000 pounds of yarn into the
market, he returns a greater value than he drew out of it.
On the other hand, he threw this increased value into it
only by virtue of the fact that he obtained a surplus-value
through the exploitation of labor-power (this value being
expressed by an aliquot part of the product). The mass
of commodities becomes a commodity-capital only by virtue
of this process, it is the impersonation of the used-up capi-
tal value only through it. By the act C'-M' the advanced
capital-value is recovered as well as the surplus-value. The
realization of both coincides with that series of sales, or
with that one sale, of the entire mass of commodities, which
is expressed by C'-M'. But this same act of circulation is
different for capital-value and surplus-value, because it ex-
presses for each one of these two values a different stage of
their circulation, a different section of the series of meta-
morphoses through which each of them passes in its circu-

The Circulation of Money-Capital. 51

lation. The surplus-value c did not come into the world until
the process of production began. It appeared for the first
time on the commodity-market in the form of commodities.
This is its first form of circulation, hence the act c-m is
its first circulation act, or its first metamorphosis, which
remains to be supplemented by the reverse circulation, or
the opposite metamorphosis, m-c.e

It is different with the circulation which the capital-
value C performs in the same circulation act C'-M', and
which constitutes for it the circulation act C-M, in which
C is equal to P, the M originally advanced. It opened its
circulation in the form of M, money-capital, and returns
through the act C-M to the same form. In other words,
it has now passed through the two opposite stages of the
circulation, first M-C, second C-M, and finds itself once more
in the form in which it can begin its cycle anew. What
constitutes for surplus-value the first transformation of the
commodity-form into that of money, constitutes for capi-
tal-value its return, or retransformation, into its original
money-form.

By means of M-C |pm, money-capital is transformed into
an equivalent mass of commodities, L and Pm. These com-
modities no longer perform the function of commodities, of
articles of sale. Their value now exists in the hands of
the capitalist who bought them, they represent the value
of his productive capital P. And in the function P, pro-
ductive consumption, they are transformed into commodi-
ties substantially different from the means of production,
into yarn, in which their value is not only preserved but
increased, rising from 422 pounds sterling to 500 pounds
sterling. By means of this metamorphosis, the commodities
taken from the market in the first stage, M-C, are replaced
by commodities of a different substance and value, which
now perform the function of commodities, being exchanged
for money and sold. The process of production, therefore,
appears to us as an interruption of the process of circula-

5 This is true, no matter how we separate capital-value and surplus-
value. 10,000 lbs. of yarn contain 1,560 lbs., or 78 pounds sterling, sur-
plus-value ; but one lb., or one shilling, likewise contains 2.496 ounces, or
1,728 pence of surplus-value.

52 Capital.

tion of capital-value, since up to production it has passed
only through the phase M-C. It passes through the sec-
ond and concluding phase, C-M, after C has been altered in
substance and value. But so far as capital-value, considered
by itself, is concerned, it has merely gone through a trans-
formation of its use-form in the process of production. It
existed in the form of 422 pounds sterling's worth of L
and Pm, while now it exists in the form of 8,440 pounds of
yarn valued at 422 pounds sterling. If we consider merely
the two circulation phases of capital-value, apart from its
surplus-value, we find that it passes through the stages M-C
and C-M, in which the second C represents a different use-
value, but the same exchange-value as the first C. And the
process M-C-M is, therefore, a cycle which requires the re-
turn of the value advanced in money to its money-form,
because the commodity here changes places twice and in
the opposite direction, the first change being from the money
to the commodity-form, the second from the commodity
to the money-form. Capital-value is retransformed into
money.

The same circulation act C-M', which constituted the
second and concluding metamorphosis, a return to the mon-
ey-form, for capital-value, represents for the surplus-value
simultaneously embodied in the commodity-capital, and rea-
lized by its exchange for money, its first metamorphosis, its
transformation from the commodity to the money-form,
C-M, its first circulation phase.

We have, then, two observations to make. First, the final
return of capital-value to its original money-form is a func-
tion of commodity-capital. Second, this function includes
the first transformation of surplus-value from its original
commodity-form to that of money. The money-form, then,
plays a double role here. On the one hand, it is a return
of a value, originally advanced in money, to its old form,
a return to that form of value which opened the process.
On the other hand, it is the first metamorphosis of a value
which originally enters the circulation in the form of a com-
modity. If the commodities composing the commodity-
capital are sold at their value, as we assume, then C plus c is
transformed into M plus m, its equivalent. The sold com-

The Circulation of Money-Capital. 53

modity-capital now exists in the hands of the capitalist in
the form of M plus m (422 pounds sterling plus 78 pounds
sterling, equal to 500 pounds sterling). Capital-value and
surplus-value are now present in the form of money, the
form of the general equivalent.

At the conclusion of the process, capital-value has re-
sumed the form in which it entered, and can now open a
new cycle of the same kind, in the form of money-capital,
and go through it. Just because the opening and conclud-
ing form of this process is that of money-capital, M, we call
this form of the circulation process the circulation of money-
capital. It is not the form, but merely the magnitude of
the advanced value which is changed in the end.

M plus m is a sum of money of a definite magnitude,
in this case 500 pounds sterling. As a result of the circu-
lation of capital, of the sale of commodity-capital, this sum
of money contains the capital-value and the surplus- value.
And these values are now no longer organically connected,
as they were in the yarn, they are now arranged side by
side. Their sale has given both of them an independent
money form; 211-250th of this money represent the capi-
tal value of 422 pounds sterling, and 39-250th constitute
the surplus-value of 78 pounds sterling. This separation of
capital-value and surplus-value, which results from the sale
of the commodity-capital, has not only the formal meaning
to which we shall refer presently. It becomes important in
the process of the reproduction of capital, according to
whether m is entirely, or partially, or not at all, lumped
together with M, that is to say according to whether or not
it continues to perform the functions of capital-value. Both
m and M may also pass through widely different cycles of
circulation.

In M', capital has returned to its original form M, to its
money-form. But it then has a form, in which it is mate-
rialized capital.

There is in the first place a difference of quantity. It
was M, 422 pounds sterling. It is now M', 500 pounds sterl-
ing, and this difference is expressed by the quantitatively
different points M...M' of the cycle, the movement of which
is indicated by the dots. M' is greater than M, and M'-M

54 Capital.

is equal to the surplus-value s. But as a result of this cycle
M....M' it is only M' which exists now; it is the product
which marks the close of the process of formation of money-
capital. M' now exists independently of the movement
which it started. This movement is completed, and M' exists
in its place.

But M', being M plus m, or in this case 500 pounds ster-
ling, composed of 422 pounds sterling advanced capital plus
an increment of 78 pounds sterling, represents at the same
time a qualitative relation. It is true that this qualitative re-
lation does not exist outside of the quantitative relation of the
parts of one and the same sum. M, the advanced capital,
which is now once more present in its original form (422
pounds sterling), exists as the realization of capital. It has
not only preserved itself, but also realized its own capital-
form, distinguished from m (78 pounds sterling), to which
it stands in the relation of creator, m being its fruit, an
increment born by it. It has realized its capital-form, be-
cause it is a value which has created more value. M' exists
as a capital relation. M no longer appears as mere money,
but it is explicitly used as money-capital, as a value which
has utilized itself by creating a higher value than itself.
M acts as capital by virtue of its relation to another part of
M', which it has created. Thus M' appears as a sum of
values expressing the capital relation, being differentiated
into functionally different parts.

But this expresses only a result, without showing the in-
termediate process which caused it.

Parts of value as such are not qualitatively different from
one another, except in so far as they are values of different
articles, of concrete things, embodied in different use-values.
They are values of different commodities, and this difference
is not due to their character as exchange-values. In money,
all differences of commodities are extinguished, because it
is an equivalent form common to all of them. A sum of
money of 500 pounds sterling consists of equal elements of
one pounds sterling each. Since the intermediate links of
descent are extinguished in the simple form of this sum of
money, and all traces of the specific differences of the in-
dividual parts of capital in the productive process have dis-

The Circulation of Money-Capital. 55

appeared, there exists only the mental distinction between
the main sum of 422 pounds sterling, which was the capi-
tal advanced, and a surplus sum of 78 pounds sterling.

Or, again, let M' be equal to 110 pounds sterling, of which
100 may be equal to the main sum M and 10 equal to the
surplus-value s. There is an absolute homogeneity, an ab-
sence of distinctions, between the two constituent parts of
the sum of 110 pounds sterling. Any 10 pounds of thi.a
sum always constitute 1-llth of the sum of 110 pounds re-
gardless of the fact that they are also l-10th of the advanced
main sum of 100 pound's, or the excess of 10 pounds above
it. Main sum and surplus sum (capital and surplus-value),
may simply be expressed as fractional parts of the total sum.
In our illustration, 10-llth form the main sum, and 1-llth
the surplus sum. Materialized capital, at the end of its
cycle, therefore appears as an undifferentiated expression, the
money expression, of the capital relation.

True, this applies also to C (C plus c). But there is this
difference, that C, of which C and c are also proportional
parts of the same homogeneous mass of commodities, indi-
cates its. origin P, the immediate product of which it is, while
in M', a form derived immediately from circulation, the
direct relation to P is obliterated.

The undifferentiated distinction between the main sum
and the surplus sum, which are contained in M', so far as
this expresses the result of the movement M...M', disap-
pears as soon as it performs its active function of money-
capital and is not preserved as a fixed expression of mate-
rialized industrial capital. The circulation of money-capi-
tal can never begin with M' (although M' now performs the
function of M). It can begin only with M, that is to
say, it can never begin as an expression of the capital rela-
tion, but only as an advance of capital- value. As soon as the
500 pounds sterling are once more advanced as capital, in
order to be again utilized, they constitute a point of de-
parture, not one of conclusion. Instead of a capital of
422 pounds sterling, a capital of 500 pounds sterling is now
advanced. It is more money than before, more capital-value,
but the relation between its two constituent parts has dis-

56 Capital.

appeared. In fact, a sum of 500 pounds sterling might
have served instead of the 422 pounds sterling as the origi-
nal capital.

It is not an active function of money-capital to mate-
rialize in the form of M'; this is rather a function of C\
Even in the simple circulation of commodities, first in C-M,
then in M-O, money M does not figure actively until in
the second movement, M-C.2 Its embodiment in the form
of M is the result of the first act, by virtue of which it be-
comes a transfoimation of C.1 The capital relation con-
tained in M', the relation of its constituent parts in the
form of capital-value and surplus-value, assumes a func-
tional importance only in so far as the repeated cycle
M...M' splits M' into two circulations, one of them a cir-
culation of capital, the other of surplus-value. In this case
these two parts perform not only quantitatively, but also
qualitatively different functions, M others than m. But
considered by itself, M...M' does not include the consump-
tion of the capitalist, but emphatically only the self-utiliza-
tion and accumulation of money-capital, the latter function
expressing itself at the outset as a periodical augmentation
of ever renewed advances of money-capital.

Although M' (M plus m) is the undifferentiated form of
capital, it is at the same time a materialization of money-
capital, it is money which has generated more money. But
this is different from the role played by money-capital in
the first stage, M-C {£m. In this first stage, M circulates
as money. It assumes the functions of money-capital only
because it cannot serve as money unless it assumes the form
of money, because it cannot transform itself in any other
way into the component parts of P, L and Pm, which stand
opposed to it in the form of commodities. In this circula-
tion act it serves as money. But as this act is the first stage
in the circulation of capital-value, it is also a function of
money-capital, by virtue of the specific use-value of the com-
modities L and Pm which are bought by it. M', on the other
hand, composed of M, the capital-value, and m, the surplus-
value created by M, stands for materialized capital-value, ex-
presses the purpose and the outcome, the function of the

The Circulation of Money-Capital. 57

total process of circulation of capital. The fact that it ex-
presses this outcome in -the form of money, of materialized
money-capital, is due to the capital-character of money-capi-
tal, not to its money-character; for capital opened the proc-
ess of circulation in the form of an advance of money. Its
return to the money-form, as we have seen, is a function of
C, not of money-capital. As for the difference between M
and M', it is simply m, the money-form of c, the increment
of C. For M' is composed of M plus m only because C was
composed of C plus c. In C, this difference and the rela-
tion of capital-value to its product, surplus-value, is already
present and expressed, before both of them are transformed
into M\ And in this form, these two values appear independ-
ently side by side and may, therefore, be employed in sepa-
rate and distinct functions.

M' is the outcome of the materialization of C\ Both M'
and C are different forms of utilized capital-value, one of
them the commodity, the other the money-form. Both of
them share the quality of being utilized capital-value. Both
of them are materialized capital, because capital-value here
exists simultaneously with its product, surplus-value, al-
though it is true that this relation is expressed in the un-
differentiated form of the proportion of two parts of one
and the same sum of money or commodity-value. But as
expressions of capital, and in distinction from the surplus-
value produced by it, M' and C are the same and express
the same thing, only in different forms. In so far as they
represent utilized value, capital acting in its own role, they
express the result of the function of productive capital, the
only function in which capital-value generates more value.
What is common to both of them, is that money-capital as
well as commodity-capital are different modes of existence of
capital. Their distinctive and specific functions cannot,
therefore, be anything else but the difference between the
functions of money and of commodities. Commodity-capi-
tal, the direct product of the capitalist process of pro-
duction, indicates its capitalist origin and is, therefore, to
that extent more rational and less difficult to understand than
money-capital, in which every trace of this process has

58 Capital.

disappeared. In general, all special use-forms of commodi-
ties disappear in money.

It is only when M' itself figures as commodity-capital,
when it is the direct outcome of a productive process, in-
stead of being a transformed product of this process, that
it loses its bizarre form, that is to say, in the production of
money itself. In the production of gold, for instance, the
formula would be M-C {£m< ...P...M (M plus m), and M'
would here figure as a commodity, because P furnishes more
gold than had been advanced for the elements of production
contained in the first money-capital M. In this case, the
irrational nature of the formula M...M' (M plus m) disap-
pears. Here a part of a certain sum of money appears as
the mother of another part of the same sum of money.

IV. The Rotation as a Whole.

We have seen that the process of circulation is inter-
rupted at the end of its first phase, M-C |pm> by P, which
makes the commodities L and Pm parts of the substance and
value of productive capital and consumes them. The result
of this productive consumption is a new commodity C, which
is of different composition and value than the commodities
L and Pm. The interrupted process of circulation, C-M,
must be completed by M-C. The basis of this second and
concluding phase of circulation is C, a commodity of dif-
ferent composition and value than C. The process of cir-
culation therefore appears first as M-C,1 then as C 2-M', the
C2 in this second phase representing a greater value and a
different use-value than C1, due to the 'interruption caused
by the function of P which is the production of C from
elements of C, embodied in the productive capital P. The
first form assumed by capital (vol. I, chap. IV), viz.,
M-C-M', or extended first M-C,* second O-M', shows the same
commodity twice. It is the same commodity which is ex-
changed for money in the first phase and again exchanged
for more money in the second phase. In spite of this es-
sential difference, these two modes of circulation share the
peculiarity of transforming in their first phase money into
commodities, and in the second phase commodities into
money, so that the money spent in the first phase returns in

The Circulation of Money-Capital. 59

the second. On the one hand, both have in common this
return of money to its starting point, on the other hand the
excess of the returned money over the money first advanced.
To this extent, the formula M-C.C'-M' is apparently con-
tained in the general formula M-C-M'.

It follows furthermore that equal quantities of simultan-
eously existing values are placed in opposition to one another
and exchanged in the two metamorphoses of circulation rep-
resented by M-C anc C'-M'. The change of value is due ex-
clusively to the metamorphosis P, the process of produc-
tion, which thus appears as a natural metamorphosis of capi-
tal, as compared to the merely formal metamorphosis of cir-
culation.

Let us now consider the total movement, M-C. .P. ..C'-M',
or its more explicit form, M-C {£m..P...C (C+c) -M' (M+m).
Capital here appears as a value which goes through a series
of connected metamorphoses conditioned on one another and
representing so many phases of the total process. Two of
these phases belong to the sphere of circulation, one of them
to that of production. In each one of these phases, capi-
tal-value has a different form corresponding to a different,
special, function. Within this cycle, value does not only
maintain itself at the magnitude in which it was originally
advanced, but it increases. Finally,, in the concluding stage,
it returns to the same form which it had at the beginning
of the cycle. This total movement constitutes the process
of rotation as a whole.

The two forms assumed by capital-value are that of money-
capital and commodity-capital. In the stage of production, its
form is that of productive capital. The capital which assumes
these different forms in the course of its total process of ro-
tation, discards them one after the other, and performs a
special function in each one of them, is industrial capital.
The term industrial applies to every branch of industry run
on a capitalist basis.

Money-capital, commodity-capital, productive capital are
not, therefore, terms indicating independent classes of capital,
nor are their functions processes of independent and sepa-
rate branches of industry. They are here used only to indi-

60 Capital.

cate special functions of industrial capital, assumed by it
seriatim.

The circulation of capital proceeds normally only so long
as its various phases flow uninterruptedly one into the other.
If capital stops short in its first phase M-C, money-capital
assumes the rigid form of a hoard; if it stops in the phase
of production, the means of production remain lifeless on one
side, while labor-power remains unemployed on the other;
and if capital stops short in its last phase C'-M', masses of
unsold commodities accumulate and clog the flow of rota-
tion.

At the same time, it is a matter of course that the rota-
tion of capital includes the stopping of capital for a certain
length of time in the various sections of its cycle. In each of
these sections, industrial capital is poured into a definite
mold, being either money-capital, productive capital, or
commodity-capital. It does not assume a form in which it
may enter a new metamorphosis, until it has gone through
the function corresponding to the form preceding the new
metamorphosis. In order to make this plain, we have as-
sumed in our illustration, that the capital-value of the mass
of commodities created in the phase of production is equal
to the total sum of values originally advanced in the form
of money, or, in other words, that the entire capital-value
advanced in the form of money enters undivided from one
stage into the next. Now we have seen (vol. I, chap. IV)
that a part of the constant capital, the means of production
proper, such as machinery, always serve repeatedly, for a
greater or smaller number of times, in the same processes
of production, so that they transfer their values piece-meal
to the products. We shall see later, to what extent this cir-
cumstance modifies the process of rotation of capital. For
the present, it suffices to say this: In our illustration, the
value of the productive capital of 422 pounds sterling con-
tained only the average wear and tear of buildings, machin-
ery, etc., that is to say only that part of value which they
transferred in the transformation of 10,600 pounds of cot-
ton to 10,000 pounds of yarn, which represents the product
of one week's spinning, or of 60 hours. In the means of
production, into which the advanced constant capital of 372

The Circulation of Money-Capital. 61

pounds sterling is transformed, <the instruments of labor,
buildings, machinery, etc., figure only as would ob-
jects which were rented in the market for a weekly
rate. But this does not change the problem in any way.
We have but to multiply the quantity of yarn produced in
one week, or 10,000 pounds of yarn, with the number of
weeks contained in a certain number of years, in order to
transfer the entire value of the means of production bought
and consumed during this period. It is then plain that the
advanced money-capital must first be transformed into these
means of production, must first have gone through the phase
M-C, before it can be used as productive capital, P. And it
is likewise plain that, in our illustration, the capital value of
422 pounds sterling, embodied in the yarn during the proc-
ess of production, cannot become a part of the value of the
10,000 pounds of yarn and enter the circulation phase C'-M',
until it has been produced. The yarn cannot be sold, until
it has been spun.

In the general formula, the product of P is regarded as
a material thing different from the elements of the produc-
tive capital, as an object existing apart from the process of
production and having a different use-value than the ele-
ments of production. And if the fruit of production as-
sumes the form of such an object, it always corresponds to
this description, even if a part of it should re-enter pro-
duction as one of its elements. Grain, for instance, serves
as seed for its own reproduction, but the final product is
always grain and has a different composition than the ele-
ments used in its production, such as labor-power, imple-
ments, and fertilizer. But there are certain independent
branches of industry, in which the result of the productive
process is not a new material product, not a commodity.
Among these, only the industries representing communica-
tion, such as transportation proper for commodities and hu-
man beings, and the transmission of communications, let-
ters, telegrams, etc., are economically important.

A. Cuprov6 says on this score: "The manufacturer may
first produce articles and then look for consumers" (his

6 A. Cuprov : Zeleznodoroznoje chostjajstvo, Moskva, 1875, pg. 75
and 76.

62 Capital.

product, having been completed in the process of produc-,
tion, is transferred to the process of circulation as a separate
commodity). "Production and consumption thus appear as
two acts distinct from one another in space and time. In the
transportation industry, which does not create any new prod-
ucts, but merely transfers men and things, these two acts
coincide; its services (change. of place) must be consumed
at the same time that they are produced. For this reason the
distance, within which railroads can find customers, extends
at best 50 verst (53 kilometers or about 30 miles) on either
side of their tracks."

The result in the transportation of either men or com-
modities is a change of place. Yarn, for instance, is thus
transferred from England, where it was produced, to In-
dia.

Now transportation, as an industry, sells this change of
location. This utility is inseparably connected with the
process of transportation, which is the productive process of
transportation. Men and commodities travel by the help
of the means of transportation, and this traveling, this
change of location, constitutes the production in which these
means of transportation are consumed. The utility of trans-
portation can be consumed only in this process of produc-
tion. It does not exist as a use-value apart from this proc-
ess, it does not, like other commodities, serve as a com-
modity which circulates after its process of production.
The exchange value of this utility is determined, like
that of any other commodity, by the value of the
elements of production (labor-power and means of produc-
tion) plus the surplus-value created by the surplus-labor
of the laborers employed in transportation. This utility also
entertains the same relations to consumption that all other
commodities do. If it is consumed individually, its value is
used up in consumption ; if it is consumed productively by
entering into the process of production of the transported
commodities, its value is added to that of the commodity.
The formula for the transportation industry would, there-
fore, be M-C \p ...P-M', since it is the process of production
itself which is paid for and consumed, not a product dis-
tinct and separate from it. This formula has almost the

The Circulation of Money-Capital. 63

same form as that of the precious metals, only with the dif-
ference, that in this case M' represents the changed form of
the utility resulting during the process of production, while
in the case of the precious metals it represents the natural
form of the gold or silver obtained in this process and trans-
ferred from it to other stages.

Industrial capital is the only form of existence of capital,
in which not only the appropriation of surplus value or sur-
plus product, but also its creation is a function of capital.
Therefore it gives to production its capitalist character. Its
existence includes that of class antagonisms between capital-
ists and laborers. To the extent that it assumes control over
social production, the technique and social organization of
the labor process are revolutionized and with them the eco-
nomic and historical type of society. The other classes of
capital, which appear before industrial capital amid past or
declining conditions of social production, are not only sub-
ordinated to it and suffer changes in the mechanism of their
functions corresponding to it, but move on it as a basis, live
and die, stand and fall with this basis. Money-capital and
commodity-capital, so far as they still persist as independent
branches of industry along with industrial capital, are noth-
ing but modes of existence of different functional forms either
assumed or discarded by industrial capital in the sphere of
circulation, made independent and developed one-sidedly
by the social division of labor.

The cycle M...M' on one side intermingles with the general
circulation of commodities, proceeds from it and flows back
into it, is a part of it. On the other hand, it is for the indi-
vidual capitalist an independent movement of his capital
value, taking place partly within the general circulation of
commodities, partly outside of it, but always preserving its
independent character. For in the first place, its two phases
taking place in the sphere of circulation, M-C and C'-M',
have functionally different characters as functions of capital
circulation. In M-C, the commodity C is composed of labor-
power and means of production; in C'-M', capital value is
realized plus surplus-value. In the second place, the process
of production, P, includes productive consumption. In the

64 Capital.

third place, the return of money to its starting point makes of
the cycle M...M' a process of circulation complete in itself.

Every individual capital is therefore, on the one hand, in
its two phases M-C and C'-M', an active element in the
general circulation of commodities, with which it is con-
nected either as money or as a commodity. Thus it forms a
link in the general chain of metamorphoses in the world of
commodities. On the other hand, it goes through its own
independent circulation within the general circulation. Its
independent circulation passes through the sphere of produc-
tion and returns to its starting point in the same form in
which it left that point. Within its own circulation, which
includes its natural metamorphosis in the process of produc-
tion, it changes at the same time its value. It returns not
only as the same money-value, but as an increased money-
value.

Let us finally consider M-C ...P...C-M' as a special form of
the process of circulation of capital, apart from the other
forms which we shall analyze later. It is distinguished by
the following points:

1. It appears as the circulation of money-capital, because
industrial capital in its money form, as money-capital, forms
the starting and terminal point of its total process. The
formula itself expresses the fact that money is not expended
as money at this stage, but advanced as the money-form of
capital. It expresses furthermore that exchange-value, not
use-value, is the determining aim of this movement. Just
because the money-form of this value is its tangible and inde-
pendent form, the compelling motive of capitalist produc-
tion, the making of money, is most fittingly expressed by the
circulation formula M...M.' The process of production
appears merely as an indispensable and intermediate link,
as a necessary evil of money-making. All nations with a
capitalist mode of production are seized periodically by a
feverish attempt to make money without the mediation of
the process of production.

2. The stage of production, the function of P, represents
an interruption of the two phases of circulation M-C... C'-M',
which in their turn represent links in the simple circulation
M-C-M'. The process of production appears formally and

The Circulation of Money-Capital. 65

essentially in circulation as that which is typical of capitalist
production, that is to say as a mere means of utilizing pre-
viously advanced values. The accumulation of wealth is the
purpose of production.

3. Since the series of phases is opened by M-C, the second
link of the circulation is C'-M.' In other words, the start-
ing point is M, or the money-capital to be utilized, the ter-
minal point M', or the utilized money-capital M plus m,
in which M figures together with its offspring m. This dis-
tinguishes the circulation of M from that of the two other
cycles P and C, in two ways. On one side, its two extremes
are represented by the money-form. And money is the
tangible form of value, the value of the product in its inde-
pendent form, in which every trace of the use-value of the
commodities has been extinguished. On the other side, the
formula P...P is not necessarily transformed into P...P' (P
plus p,) and in the form C-C, no difference in value is visi-
ble between the two extremes. It is, therefore, characteristic
for the formula M-M' that capital value is its starting point,
and utilized capital value its terminal point, so that advanced
capital value appears as the means, and utilized capital value
as the end of the entire operation. And furthermore, this
relation is expressed in the form of money, in the form of
independent value, so that money-capital is money genera-
ting more money. The generation of surplus-value by value
is not only expressed as the Alpha and Omega of the process,
but more explicitly in the form of glittering money.

4. Since M', the money-capital realized as a result of
C'-M', the supplementary and concluding form of M-C, has
absolutely the same form in which it began its first circula-
tion, it can immediately begin the same circulation over
again as an increased (accumulated) money-capital, or as M'
equal to M plus m. And it is not expressed in the formula
M-M' that, in the repetition of the cycle, the circulation of m
separates from that of M. Considered in its complete form,
the circulation of money capital expresses simply the process
of utilization and accumulation. The consumption in it is pro-
ductive consumption, as shown by the formula M-C { pm<
and it is only this which is included in this circulation
of individual capital. M-L means L-M, or C-M, on the part

86 Capital. >

of the laborer. It is therefore the first phase of circulation
which promotes his individual consumption, thus: L-M-C
(means of subsistence). The second phase, M-C, no longer
falls within the circulation of individual capital, but it is ini-
tiated by individual capital and an indispensable premise
for it, since the laborer must above all live and maintain
himself by individual consumption, in order to be always on
the market for exploitation by the capitalist. But this con-
sumption is here only assumed as the indispensable condition
for the productive consumption of labor power by capital,
and it is, therefore, considered only in so far as it preserves
and reproduces his labor power by means of his individual
consumption. But the means of production Pm, the com-
modities proper which enter into the circulation of capital,
are only material feeding 'the productive consumption. The
act L-M promotes the individual consumption of the laborer,
the transformation of means of subsistence into flesh and
blood. It is true, that the capitalist must also be present,
must also live and consume in order to perform the function
of a capitalist. To this end, he has, indeed, but to consume
in the same way as the laborer, and this is all that is assumed
in this form of the circulation process. But it is not for-
mally expressed, since the term M' concludes the formula and
indicates that it may at once re-enter on its function of in-
creased money-capital.

In the formula C'-M', the sale of C is directly indicated ;
but this sale C'-M' on the part of one is M-C, or the purchase
of commodities, on the part of another, and in the last analy-
sis a commodity is bought only for its use-value, in order to
enter (leaving intermediate sales out of consideration) into
the process of consumption, and this may be either produc-
tive or individual consumption, according to the nature of
the commodity. But this consumption does not enter into
the circulation of individual capital, the product of which is
C. This product is eliminated from this circulation from
the moment that it is sold. C is explicitly produced for con-
sumption by others. For this reason we note that certain
spokesmen of the mercantile system (which is based on the
formula M-C. .P.. .C'-M') deliver lengthy sermons to the effect
that the individual capitalist should consume only in his

The Circulation of Money-Capital. 67

capacity as a worker, that capitalist nations should let other
and less intelligent nations consume their own and other
commodities, and that a capitalist nation should devote itself
for life to the productive consumption of commodities.
These sermons frequently remind us in form and content of
analogous ascetic exhortations of the fathers of the church.

The rotation process of capital is therefore a combination
of circulation and production, it includes both. In so far as
the two phases M-C and C'-M' are processes of circulation, the
rotation of capital is a part of the general circulation of com-
modities. But in so far as they are definite sections perform-
ing a peculiar function in the rotation of capital, which com-
bines the spheres of circulation and production, capital goes
through its own circulation in the general circulation of com-
modities. The general circulation of commodities serves
capital in its first stage as a means of assuming that form in
which it can perform the function of productive capital; in
its second stage, it serves to eliminate the commodity func-
tion in which capital cannot renew its circulation; at the
same time it enables capital to separate its own circulation
from that of the surplus-value created by it.

The circulation of money-capital is therefore the most one-
sided, and thus the most convincing and typical form of the
circulation of industrial capital. Its aim and compelling
motive, the utilization of value, the making and accumula-
tion of money, is thus most clearly revealed. Buying in
order to sell dearer is its slogan. The first phase M-C also
indicates the origin of the elements of productive capital in
the commodity market, or more generally, the dependence
of the capitalist mode of production on circulation, on com-
merce. The circulation of money-capital is not merely the
production of commodities ; it is itself possible only through
circulation of commodities and based on it. This is plain
from the fact that the term M belongs to circulation and
represents the first and most typical form of advanced capi-
tal-value. This is not the case in the other two forms of cir-
culation.

68 Capital.

The circulation of money-capital always remains the gen-
eral expression of industrial capital, because it always implies
the utilization of the advanced value. In P...P, the money-
character of capital is shown only in the price of the ele-
ments of production as a value expressed in money-terms
for the purpose of calculation and book-keeping.

M...M' becomes a special form of the circulation of indus-
trial capital when new capital is first advanced in the form
of money and then returned in the same form, either in pass-
ing from one branch of industry to another, or in the case
that industrial capital retires from business. This includes
the capital function of the surplus-value first advanced in
the form of money, and becomes most evident when surplus-
value performs a function in some other business than the
one in which it originated. M...M' may be the first circula-
tion of a certain capital; it may be the last; it may be re-
garded as the form of the total social capital ; it is that form
of capital which is newly invested, either as a recently accu-
mulated capital in the form of money, or as some old capi-
tal which is entirely transformed into money for the purpose
of transfer from one branch of industry to another.

Being a form always contained in all circulations, money-
capital performs this circulation precisely for that part of
capital which produces surplus-value, viz., variable capital.
The normal form of an advance in wages is payment in
money; this process must be renewed in short intervals, be-
cause the laborer lives from hand to mouth. In his relation
to the laborer, the capitalist must therefore always be a
money-capitalist, and his capital must be money-capital.
There can be no direct or indirect balancing of accounts in
this case, such as we find in the purchase of means of produc-
tion or in the sale of productive commodities, where the
greater part of the money capital really exists in the form of
commodities, while the money is mainly used for purposes
of calculation and figures in cash only in the balancing of
accounts. On the other hand, a part of the surplus-value
arising out of variable capital is spent by the capitalist for
his individual consumption, which is a part of the retail
trade, and this surplus-value is in the last analysis always

The Circulation of Money-Capital. 69

expended in the form of money. It does not matter how
large or small may be this part of surplus- value. Variable
capital always appears anew as money-capital invested in
wages (M-L) and m as surplus-value which may be expended
for the individual consumption of the capitalist. So that
M, capital advanced for wages, and m, its increment, are
necessarily held and spent in the form of money.

The formula M-C...P...C-M', with its result M' equal to M
plus m, is, in a certain sense, deceptive, owing to the exist-
ence of the advanced and surplus-value in the form of the
general equivalent, money. The emphasis in this formula
is not on the utilization of value, but on the money-form of
this process, on the fact that more money-value is finally
drawn out of 'the circulation than had originally been
advanced ; in other words, the emphasis is on the multiplica-
tion of the amount of gold and silver belonging to the capi-
talist. The so-called monetary system is merely the expres-
sion of the abstract formula M-C-M', a movement which takes
place exclusively in the circulation. And this system can-
not explain the two phases M-C and C-M' in any other way
than by declaring that C is sold above its value in the second
phase and thus draws more money out of the circulation
than was put into it in its purchase. But if M-C...P...C'-M,
becomes the exclusive form of circulation, it is the basis of a
more highly developed mercantile system, in which not
only the circulation of commodities, but also their produc-
tion, is recognized as a necessary element.

The illusive character of M-C...P...C,-M' and the resulting
illusive interpretation always appear, whenever this form is
considered as rigid, not as a flowing and ever renewed move-
ment ; in other words, they appear whenever this formula is
considered not as one section of circulation, but as the exclu-
sive form of circulation. But it itself points toward other
forms.

In the first place, this entire circulation is conditioned on
the capitalist character of the process of production, and con-
siders it and the specific social conditions created by it as the
basis. M-C is equal to M-C{£m. but M-L assumes the exist-
ence of the wage laborer, and regards the means of produc-

*70 Capital.

tion as parts of productive capital. It assumes, therefore,
that the process of labor and of utilization, the process of pro-
duction, is a function of capital.

In the second place, if M...M' is repeated, the return to the
money-form is just as transient as the money-form in the
first phase. M-C disappears and makes room for P. The re-
current advance of money-capital and its equally persistent
return in the form of money appear merely as passing
moments in the general circulation.

In the third place; the repeated formula has this form:
M-C...P...C-M'. M-C...P...C-M'. M-C...P... etc.

Beginning with the second repetition of the circulation,
the cycle P...C'-M'.M-C...P appears, before the second
circulation of M is completed, and all other cycles may be
considered under the form of P...C-M-C...P, so that the
first phase of the first circulation is merely the passing
introduction for the constantly repeated circulation of the
productive capital. And this is indeed the case for the first
time in the investment of industrial capital in the form of
money.

On the other hand, before the second circulation of P is
completed, the first circulation, that of the commodity-capi-
tal, as shown in the formula C'-M'. M-C...P...C (or abridged
C...C) has preceded. Thus the first form already con-
tains the other two, and the money-form disappears, so far as
it is a general equivalent and not merely an expression of
value used for calculation.

Finally, if we consider some newly invested capital going
for the first time through the circulation M-C. .P.. .C'-M',
then M-C is the introductory phase, the preparation for the
first process of production undertaken by this capital. This
phase M-C is not considered as existing, but is caused by the
requirements of the process of production. But this applies
only to this individual capital. The general form of the
circulation of industrial capital is the circulation of money-
capital, whenever the capitalist mode of production exists and
with it the social conditions corresponding to it. It is there-
fore the capitalist mode of production which is the first con-
dition for the circulation of money-capital, and if it is not
assumed for the first phase of a newly invested industrial

The Circulation of Money Capital. 71

capital, it is certainly assumed for all others. The continu-
ous movement of this process of production requires the per-
sistent renewal of the cycle P.. .P. Even the first stage,
M-C {pmt reveals this basic condition. For it requires on
one side the existence of the wage-working class. On the
other side, that which is M-C for the buyer of means of pro-
duction, is C'-M' for their seller. Hence C presupposes the
existence of commodity-capital, and thus of commodities as
the result of capitalist production, and this implies the func-
tion of productive capital.

72 Capital.

CHAPTER II.

THE ROTATION OF PRODUCTIVE CAPITAL.

The rotation of productive capital has the general formula
P...C'-M'-C...P. It signifies the periodical renewal of the
function of productive capital, in other words its reproduc-
tion, or its process of production as a reproductive process
generating surplus-value. It is not only production, but
a periodical reproduction of surplus-value; it is the function
of industrial capital in its productive form, and this function
is not performed merely once, but periodically so that the
terminal point of one cycle is the starting point of another.
A portion of C may re-enter directly into the same labor pro-
cess as means of production out of which it came in the
form of commodities (for instance, in various branches of
investment of industrial capital). This merely does away
with the transformation of its value into money proper, or
token-money, or else it finds an independent expression
merely in calculation. This part of value does not enter into
the circulation. Thus it is that values enter into the process
of production wThich do not enter into circulation. The
same is also true of that part of C which is consumed by the
capitalist, and which represents surplus-value in the form of
means of consumption, in their natural state. But this is
inconsiderable for capitalist production. It deserves con-
sideration, if at all, only in agriculture.

Two things are at once apparent in this form.

In the first place, while in the first form, M...M', the pro*
cess of production, a function of P, interrupts the circulation
of money-capital and acts only as a mediator between its two
phase MjC and C'-M', it is the entire circulation process of
industrial capital, its entire movement within the sphere of
circulation, which intervenes here and forms the connecting
link between productive capitals, which begin the circulation
at one extreme and close it at another, only to make this last
extreme the starting point of a new cycle. Circulation

The Rotation of Productive Capital. 73

proper appears but as an instrument promoting the periodic
renewal, and thus the continuous reproduction, of productive
capital.

In the second place, the entire circulation assumes a form
which is the reverse of that which it has in the circulation of
money-capital. While the circulation of money-capital pro-
ceeds after the formula M — C — M (M — C. C — M), making-
exception of the determination of value, it proceeds in the
case of productive capital, making the same exception, after
the formula C— M— C (C— M. M— C) . which is the form of
the simple circulation of commodities.

I. Simple Reproduction.

Let us first consider the process C'-M'-C, which takes
place between the two extremes P...P.

The starting point of this circulation is the commodity-
capital C, equal to C plus c, or equal to P plus c. The func-
tion of commodity-capital C — M' has been considered in the
first form of the circulation. It consisted in the realization
of the capital-value P, contained in it, which now exists as
a part of the commodity C, and likewise in the realization of
the surplus-value contained in it, which now exists as a part
of the same mass of commodities C and has the value of c.
But in the former case, this function formed the second
phase of the interrupted circulation and the concluding
phase of the entire cycle. In the present case, it forms the
second phase of the cycle, but the first phase of the circula-
tion. The first cycle ends with M', and since M' as well as
the original M may again open the second cycle as money-
capital, it was not necessary for the moment to analyze
whether the parts of M', viz., M and m (surplus-value) con-
tinue in their course together, or whether each one of them
pursues its own course. This would only have been neces-
sary, if we had followed up the first cycle in its renewed
course. But in studying the cycles of productive capital,
this point must be decided, because the determination of its
very first cycle depends on it, and because C — M' appears in
it as the first phase of circulation which has to be supple-

74 Capital.

mented by M — C. It depends on the outcome of this deci-
sion, whether our formula represents the simple reproduc-
tion, or reproduction on an enlarged scale. The character of
the cycle changes according to this decision.

Let us, then, take first the simple reproduction of produc-
tive capital, assuming that the conditions are the same as
those taken for a basis in the first chapter, end that the com-
modities are bought and sold at their value. Under these
conditions, the entire surplus-value enters into the individual
consumption of the capitalist. As soon as the transforma-
tion of the commodity-capital C into money has taken place,
that part of the money which represents the capital-value
continues in the cycle of industrial capital; the other part,
which represents surplus-value in the form of gold, enters
into the general circulation of commodities as a circulation
of money emanating from the capitalist but taking place
outside of the circulation of his individual capital.

In our illustration, we had a commodity-capital C of
10,000 pounds of yarn, valued at 500 pounds sterling; 422
pounds sterling of this represent the value of productive
capital and continue, as the money-form of 8,440 pounds of
yarn, the capital circulation begun by C, while the surplus-
value of 78 pounds sterling, as the money-form of 1,560
pounds of yarn, the surplus-product, leaves this circulation
and describes its own separate course within the general cir-
culation of commodities.

it) :':'?©"!

!Pm

The formula m — c represents a series of purchases by
means of money which the capitalist spends either in com-
modities proper or for personal services to his cherished self
or family. These purchases are made piece-meal at various
times. Money, therefore, exists temporarily in the form of
a supply, or hoard, of money destined for gradual consump-
tion, for money interrupted in its circulation partakes of
the nature of a hoard. Its function as a circulating medium,
including that of a temporary hoard, does not share in the

The Rotation of Productive Capital. 75

circulation of capital having the form of money M. This
money is not advanced, but spent.

We have assumed that the advanced total capital always
passed entirely from one of its phases into the other. In
this case, we, therefore, assume that the mass of commodities
produced by P represents the total value of the productive
capital P, or 422 pounds sterling plus 78 pounds sterling of
surplus-value created in the process of production. In our
illustration, which deals with an easily analyzed commodity,
the surplus-value exists in the form of 1,560 pounds of
yarn; if computed on the basis of one pound of yarn, it
would exist in the form of 2.496 ounces. But if the com-
modity were, for instance, a machine valued at 500 pounds
sterling and representing the same division of values, one
part of the value of this machine would indeed be repre-
sented by 78 pounds sterling of surplus-value, but these 78
pounds sterling would exist only in the machine as a whole.
This machine cannot be divided into capital-value and sur-
plus-value without breaking it to pieces and thus destroy-
ing, with its use-value, also its exchange-value. For this
reason the two parts of value can be represented only ideally
as portions of a mass of commodities, not as independent
elements of the commodity C, such as we are able to dis-
tinguish in each pound of yarn in the 10,000 pounds of our
illustration. In the case of the machine, the total com-
modity representing the commodity-capital must be sold
before m can enter into its independent circulation. On the
other hand, when the capitalist has sold 8,440 pounds of
yarn, the sale of the remaining 1,560 pounds of yarn would
represent an entirely separate circulation of the surplus-value
in the form of c (1,560 pounds of yarn) — m (78 pounds
sterling) equal to c (articles of consumption). But the ele-
ments of value of each individual portion of yarn in the
10,000 pounds may be individually separated and valuated
the same as the total quantity of yarn. Just as the entire
10,000 pounds of yarn may be divided into the value of the
constant capital c (7,440 pounds of yarn worth 372 pounds
sterling), variable capital v (1,000 pounds of yarn worth
50 pounds sterling, and surplus- value s (1,560 pounds of
yarn worth 78 pounds sterling), so every pound of yarn

76 Capital.

may be divided into c (11.904 ounces of yarn worth 8.929
d.)', v (1.640 ounces of yarn worth 1.200 d.), and s (2.496
ounces of yarn worth 1.872 d.). The 'capitalist might also
sell various portions of the 10,000 pounds of yarn succes-
sively and consume the different portions of surplus-value
contained in them in the same way, thus realizing gradu-
ally the sum of c plus v. But this operation likewise re-
quires the final sale of the entire lot, so that the value of
c plus v would be made good by the sale of 8,440 pounds
of yarn (vol. I, chap IX, 2).

However that may be, by the movement C — M', both the
capital-value and surplus-value contained in C secure a
separate existence in separate sums of money. In both cases,
M and m are actually transformed values, which had orig-
inally only an ideal existence in C as prices of commodities.

The formula c — m — c represents the simple circulation of
commodities, the first phase of which, c — m, is included in
the circulation of the commodity-capital C — M', in short,
included in the cycle of capital; while its supplementary
phase m — c falls outside of this cycle and is a separate proc-
ess in the general circulation of commodities. The circula-
tion of 'C and c, of capital-value and surplus-value, is dif-
ferentiated after the transformation of C into M'. Hence
it follows:

First, by the realization on the commodity-capital in the
process C — M', or C — (M+m), the courses of capital-value
and surplus-value, which are united so long as they are both
embodied in the same mass of commodities in C — M', are
separated, for both of them henceforth appear in two inde-
pendent sums of money.

Second, after this separation has taken place, m being
spent as the income of the capitalist, while M continues its
way as a functional form of capital-value in a course deter-
mined by this cycle, the movement C — M' in connection
with the subsequent movements M — C and m — c, may be
represented in the form of two different circulations, viz.:
C__M — C and c — m — c, and both of these, so far as their
general form is concerned, belong to the general circulation
of commodities.

The Rotation of Productive Capital. 77

By the way, in the case of commodities which cannot be
cut up into their constituent parts, it is a matter of practice
to isolate their different portions of value and surplus-value
ideally. In the building-business of London, for instance,
which is carried on mainly on credit, the contractor re-
ceives advances in proportion to the different stages in which
the construction of a house proceeds. None of these stages
is a house, but only an actually existing fraction of the
growing house; in spite of its actuality, each stage is but
an ideal portion of the entire house, but it is real enough
to serve as security for an additional advance. (See on this
point chapter XII, vol. II.)

Third, if the movement of capital-value and surplus-value,
which proceeds unitedly so long as they are in the form of
C and M, is separated only in part (so that a portion of the
surplus-value is not spent as income), or is not separated
at all, a change takes place in the capital-value itself within
its own cycle, before it is completed. In our illustration
the value of the productive capital was equal to 422 pounds
sterling. If it continues its cycle M-C, for instance as 480
pounds sterling or 500 pounds sterling, then it goes through
the further stages of its cycle with an increase of 58 pounds
sterling or 78 pounds sterling over its original value. This
change may also go hand in hand with a change in the
proportion of its component parts.

C — M', the second stage of the circulation and the final
stage of cycle I (M...M'), is the second stage in our cycle
and the first in the circulation of commodities. So far as
the circulation is concerned, this stage must be supplemented
by M' — C\ But C — M' has not only passed the process of
utilization (in this case the function of P, the first stage),
but has also realized as its result the commodity C\ The
process of utilization of capital, and the realization on the
commodities which are its product, are therefore completed
in C'—W.

"We have started out with simple reproduction and assumed
that m — e separates entirely from M — C. Since both cir-
culations, c — m — c as well as C — M — C, belong to the cir-
culation of commodities, so far as their general form is con-
cerned (and do not show, for this reason, any difference

78 Capital.

in the value of their extremes), it is easy to conceive of
the process of capitalist production, after the manner of
vulgar economy, as a mere production of commodities, of
use-value destined for consumption of some sort, which the
capitalist produces for no other purpose than that of get-
ting in their place commodities with different use-values, or
exchanging them, as vulgar economy erroneously states.

C appears from the very outset as commodity-capital, and
the purpose of the entire process, the accumulation of wealth,
does not exclude an increasing consumption on the part of
the capitalist in proportion as his surplus- value (and thus
his capital) increases; on the contrary, it promotes such an
increasing consumption.

Indeed, in the circulation of the income of the capitalist,
the produced commodity c, or the ideal fraction of the com-
modity C corresponding to it, serves merely for its transfor-
mation, first into money, and from money into a number of
other commodities required for individual consumption. But
we must not, at this point, overlook the trifling circumstance
that c is that part of the commodity-value which did not
cost the capitalist anything, since it is the embodiment of
surplus-labor and steps originally on the stage as a part of
the commodity-capital C. This c is, by the varying nature
of its existence, bound to the cycle of circulating capital-
value, and if this cycle is clogged, or otherwise disturbed,
not only the consumption of c is restricted or entirely ar-
rested, but also the disposal of that series of commodities
which are to take the place of c. The same is true in the
case that the movement C — M' is a failure, or that only a
part of C is sold.

We have seen that c — m — c, as representing the circula-
tion of the revenue of the capitalist, enters into the circula-
tion of capital only so long as c is a part of the value of C,
of the commodity-capital ; but that, as soon as it materializes
in the form of m — c, that is to say, as soon as it completes the
entire cycle c — m — c, it does not enter into the movements
of the capital advanced by the capitalist, although this ad-
vance is its cause. It is connected with the movements of
capital only in so far as the existence of capital presupposes

The Rotation of Productive Capital. 79

the existence of the capitalist, and this is conditioned on the
consumption of surplus-value by the capitalist. ■

Within the general circulation, C, for instance yarn,
passes only as a commodity; but as an element in the cir-
culation of capital it performs the function of commodity-
capital, and capital-value alternately assumes and discards
this form. After the sale of the yarn to a merchant, it has
passed out of the circulation of the capital which produced
it, but nevertheless, as a commodity, it moves always in the
cycle of the general circulation. The circulation of one and
the same mass of commodities continues, although it may
have ceased to be an element in the independent cycle of
the capital of the manufacturer. Hence the actual and final
metamorphosis of the mass of commodities thrown into cir-
culation by the capitalist by means of C — M, their final
elimination in consumption, may be separated in space and
time from that metamorphosis in which this same mass
of commodities performs the function of commodity-capi-
tal. The same metamorphosis which has been completed in
the circulation of capital still remains to be accomplished in
the sphere of the general circulation.

This state of things is not changed by the transfer of this
yarn to the cycle of some other industrial capital. The
general circulation comprises as much the interrelations of
the various independent fractions of social capital, in other
words, the totality of the individual capitals, as the circu-
lation of those values which are not thrown on the market
as capital, but enter into individual consumption.

The different relations in the cycle of capital, according
to whether it is a part of the general circulation, or forms
certain links in the independent cycles of capital, may be
further understood when we consider the circulation of M',
or of M plus m. M as money-capital, continues the cycle
of capital. On the other hand m, spent as revenue in the
act m — c, enters into the general circulation, but is elimi-
nated from the cycle of capital. Only that part enters the
capital cycle which performs the .function of additional
money-capital. In c — m — c, money serves only as coin,
and the purpose of this circulation is the individual con-
sumption of the capitalist. It is significant for the idiocy of

80 i Capital.

vulgar economy that it pretends to regard this circulation,
which does not enter into the circulation of capital but is
merely the circulation of that part of the surplus-product
which is consumed as revenue, as the characteristic cycle of
capital.

In its second phase, M — C, the capital-value M (which is
equal to P, the value of the productive capital that at this
point re-opens the cycle of industrial capital) is again pres-
ent, delivered of its surplus-value. Therefore it has once
more the same magnitude which it had in the first stage of
the cycle of money-capital, M — C. In spite of the different
place at which we now find it, the function of money-capi-
tal, into which form the commodity-capital has now been
transformed, is the same: Transformation into Pm and
L, into means of production and labor-power.

Simultaneously with c — m, capital-value in the function
of commodity-capital (C — M') has also gone through the
phase C — M, and enters now into the supplementary phase
M — C|pm. Its complete circulation is, therefore, C — M — C
Pm.

First: Money-capital M appeared in cycle I (M...M') as
the original form in which capital-value is advanced; it
appears at the very outset as a part of that sum of money
into which commodity-capital transformed itself in the first
phase of circulation, C — M'. It is from the beginning the
transformation of P by means of the sale of commodities
into the money-form. Money-capital exists here as that form
of capital-value which is neither its original nor its final
one, since the phase M — C, which supplements the phase
C — M, can only be completed by again discarding the mon-
ey-form. Therefore, that part of M — C which is at the same
time M — L appears now no longer as a mere advance of
money in the purchase of labor-power, but also as an advance
by means of which the same 1,000 pounds of yarn, valued
at 50 pounds, which form a part of the commodity-value
created by labor-power, are given to the laborer in the form
of money. The money thus advanced to the laborer is
merely a transformed equivalent of a fraction of the value
of the commodities produced by himself. And for this very
reason, the act M — C, so far as it means M — L, is by no

The Rotation of Productive Capital. 81

means simply a replacement of a commodity in the form
of money by a commodity in the form of a use-value, but
it includes other elements which are in a way independent
of the general circulation of commodities.

M' appears as a changed form of C, which is itself a prod-
uct of a previous function of P, of the process of production.
The entire sum of money M is therefore a money-expression
of past labor. In our illustration, 10,000 pounds of yarn
(worth 500 pounds sterling), are the product of the spinning
process. Of this quantity, 7,440 pounds represent the ad-
vanced constant capital c (worth 372 pounds sterling) ; 1,000
pounds represent the advanced variable capital v (worth 50
pounds sterling) ; and 1,560 pounds represent the surplus-
value s (worth 78 pounds sterling). If in M', only the
original capital of 422 pounds sterling is again advanced,
other conditions remaining the same, then the laborer re-
ceives next week, in M — L, only a part of the 10,000 pounds
of yarn produced in this week (the money-value of 1,000
pounds of yarn). As a result of C — M, money is always
the expression of past labor. If the supplementary act M — C
takes place at once on the commodity-market and M is
given in return for commodities existing in this market,
then this act is again a transformation of past labor from
the money-form into the commodity-form. But M — C dif-
fers in the matter of time from C — M. True, these two acts
may exceptionally take place at the same time, for instance
when the capitalist who performs the act M — C and the
other capitalist for whom this act signifies C — M mutually
ship their commodities at the same time and M is used only
to square the balance. The difference in time between
the performance of C — M and M — C may be considerable or
insignificant. Although M, as the result of C — M, repre-
sents past labor, it may, in the act M — C, represent the
changed form of commodities which are not as yet on the
market, but will be thrown upon it in the future, since
M — C need not take place until C has been produced anew
M may also stand for commodities which are produced sim-
ultaneously with the C whose money-expression M is; for
instance, in the movement M — C (purchase of means of pro-
duction), coal may be bought before it has been mined.

82 Capital.

In so far as m represents an accumulation of money which
is not spent as revenue, it may stand for cotton which will
not be produced until next year. The same holds good of
the revenue of the capitalist represented by m — c. It also
applies to wages, in this case to L equal to 50 pounds ster-
ling; this money is not only the money-form of the past
labor of the laborers, but at the same time a draft on simul-
taneously performed labor or on future labor. The laborer
may buy for his wages a coat which will not be made until
next week. This applies especially to the vast number of
necessary means of subsistence which must be consumed al-
most as soon as they have been produced, to prevent their
being spoiled. Thus the laborer receives in the money which
represents his wages the changed form of his own future labor
or that of others. By means of a part of the laborer's past
labor, the capitalist gives him a draft on his own future
labor. It is the laborer's simultaneous or future labor which
represents the not yet existing supply that will pay for his
past labor. In this case, the idea of the formation of a sup*
ply disappears altogether.

Second : In the circulation C — M — C \ pm the same money
changes places twice; the capitalist first receives it as a
seller and gives it away as a buyer; the transformation of
commodities into the money-form serves only for the purpose
of retransforming it from money into commodities; the
money-form of capital, its existence as money-capital, is
therefore only a passing factor in this movement; or, so
far as the movement proceeds, money-capital appears only as
a circulating medium when it serves to buy things; on the
other hand, money-capital performs the function of a pay-
ing medium when capitalists buy mutually from one an-
other and square only the balance of their accounts.

Third: The function of money-capital, whether it is a
mere circulating medium or a paying medium, mediates
only the renewal of C by L and Pm, that is to say, the
renewal of the commodities produced by productive capital,
such as yarn (after deducting the surplus-value used as
revenue), out of its constituent elements, in other words,
the retransformation of capital-value from its commodity -
form into the elements constituting this commodity. In the

The Rotation of Productive Capital. 83

last analysis, the function of money-capital mediates only
the retransformation of commodity-capital into productive
capital.

In order that the cycle may be completed normally, C
must be sold at its value and completely. Furthermore, C —
M — C does not signify merely the replacing of one com-
modity by another, but also the replacing of the same rela-
tive values. We assume that this takes place here. As a
matter of fact, however, the values of the means of produc-
tion vary; it is precisely capitalist production which has for
its characteristic a continuous change of value-relations, and
this is conditioned on the ever changing productivity of
labor, which is another characteristic of capitalist produc-
tion. This change in the value of the factors of produc-
tion will be discussed later on, and we merely refer to it
here. The transformation of the elements of production
into commodity-products, of P into C, takes place in the
sphere of production, while their retransformation from C
into P takes place in the sphere of circulation; it is ac-
complished by way of the simple metamorphosis of com-
modities, but its content is a phase in the process of repro-
duction, regarded as a whole. C — M — C, considered as a
form of the circulation of capital, includes a change of sub-
stance due to this function. The process C — M — C requires
that C should be identical with the elements of production of
the quantity of commodities C, and that these elements
maintain their relative proportions toward one another. It
is, therefore, understood that the commodities are not only
bought at their value, but also that they do not undergo any
change of value during their circulation. Otherwise this
process cannot run normally.

In M...M', the factor M represents the original form of
capital-value, which is discarded only to be resumed. In
P...C — M' — C...P, the factor M represents a form which is
only assumed in this process and which is discarded before
this process is over with. The money-form appears here only
as a passing independent form of capital-value. Capital is
just as anxious to assume this form in C as it is to discard
it in M' after barely assuming it, in order to again transform
itself into productive capital. So long as it remains in the

84 Capital.

money-form, it does not perform the function of capital and
does not, therefore, generate new values; it then lies fal-
low. M serves here as a circulating medium, but as a circu-
lating medium of capital. The semblance of independence,
which the money-form of capital-value possesses in the first
form of the circulation of money-capital, disappears in this
second form, which, therefore, is the negation of the first
form and reduces it to a concrete form. If the second meta-
morphosis M — C meets with any obstacles — for instance, if
there are no means of production in the market — the unin-
terrupted flow of the process of reproduction is arrested, quite
as much as it is when capital in the form of commodity-
capital is held fast. But there is this difference-. It can re-
main longer in the money-form than in that of commodi-
ties. It does not cease to be money, if it does not perform
the functions of money-capital; but it does cease to be a
commodity, or even a use-value, if it is interrupted too long
in its functions of commodity-capital. Furthermore, it is
capable in its money-form, of assuming another form in-
stead of its original one of productive capital, while it does
not change places at all if held in the form of C\

C — M' — C includes processes of circulation only for C,
and they are phases in its reproduction, but the actual repro-
duction of C, into which C is transformed, is necessary for
the completion of C — M' — C. This, however, is conditioned
on a process of reproduction which lies outside of the process
of reproduction of the individual capital represented by C\

In the first form, M — C Pm prepares only the first trans-
formation of money-capital into productive capital; in the
second form, it prepares the retransformation of commodity-
capital into productive capital; that is to say, so far as the
investment of industrial capital remains the same, the com-
modity-capital is retransformed into the same elements of
production out of which it originated. Here as well as in
the first form, the process of production is in a preparatory
stage, but it is a return to it and its renewal, it is for the pur-
pose of repeating the process of self-utilization.

It must be noted, once more, that M — L is not merely the
exchange of commodities, but the purchase of a commodity
L, which is to serve for the production of surplus-value, just

The Rotation of Productive Capital. 85

as M — Pm is a process which is indispensable for the same
end.

When M — C |pm has been completed, M has been retrans-
formed into productive capital P, and the cycle begins anew.

The elaborated form of P...C— M'— C...P is

c

M

+

+

c

m

The transformation of money-capital into productive
capital is the purchase of commodities for the purpose of
producing commodities. Consumption falls within the cycle
of capital only in so far as it is productive consumption ; its
premise is that surplus-value is produced by means of the
commodities so consumed. And this is quite different from
a production, even though it be a production of commodi-
ties, which has for its end the existence of the producer. A
replacing of one commodity by another for the purpose of
producing surplus-value is a different matter than the ex-
change of products which is perfected merely by means of
money. But some economists use this sort of exchange as a
proof that there can be no overproduction.

Apart from the productive consumption of M, which is
transformed into L and Pm, this cycle contains the first
phase M — L, which signifies, from the standpoint of the
laborer L — M, or C — M. In the laborer's circulation,
L — M — C, which includes his individual consumption, only
the first factor falls within the cycle of capital by means of
L — M. The second act, M — C, does not fall within the
circulation of individual capital, although it is conditioned
on it. But the continuous existence of the laboring class is
necessary for the capitalist class, and this requires the indi-
vidual consumption of the laborer, made possible by M — C.

The act C — M' requires only that C be transformed into
money, that it be sold, in order that capital-value may con-
tinue its cycles and surplus-value be consumed by the capi-
talist. Of course, C is bought only because the article is a
use-value and serviceable for individual or productive con-
sumption. But if C continues to circulate, for instance, in
the hand of the merchant who has bought the yarn, this

86 Capital.

does not interfere with the continuation of the cycle of indi-
vidual capital which produced the yarn and sold it to the
merchant. The entire process proceeds uninterruptedly and
simultaneously with the individual consumption of the capi-
talist and the laborer. This point is important in a discus-
sion of commercial crises.

As soon as C has been sold for money, it may re-enter into
the material elements of the labor process, and thus of the
reproductive process. Whether C is bought by the final
consumer or by a merchant, does not alter the case. The
quantity of commodities produced by capitalist production
depends on the scale of production and on the continual
necessity for expansion following from this production. It
does not depend on a predestined circle of supply and de-
mand, nor on certain wants to be supplied. Production on a
large scale can have no other buyer, apart from other indus-
trial capitalists, than the wholesale merchant. Within
certain limits, the process of reproduction may take place
on the same or on an increased scale, although the commodi-
ties taken out of it may not have gone into individual or
productive consumption. The consumption of commodities
is not included in the cycle of the capital which produced
them. For instance, as soon as the yarn has been sold, the
cycle of the capital-value contained in the yarn may begin
anew, regardless of what may become of the sold yarn. So
long as the product is sold, everything is going its regular
course from the standpoint of the capitalist producer. The
cycle of his capital-value is not interrupted. And if this
process is expanded — including an increased productive con-
sumption of the means of production — this reproduction of
capital may be accompanied by an increased individual con-
sumption (demand) on the part of the laborers, since this
individual consumption is initiated and mediated by produc-
tive consumption. Thus the production of surplus- value,
and with it the individual consumption of the capitalist, may
increase, the entire process of reproduction may be in a flour-
ishing condition, and yet a large part of the commodities
may have entered into consumption only apparently, while
in reality they may still remain unsold in the hands of deal-

The Rotation of Productive Capital. 87

ers, in other words, they may still be actually in the market.
Now one stream of commodities follows another, and finally
it becomes obvious that the previous stream had been only
apparently absorbed by consumption. The commodity-cap-
itals compete with one another for a place on the market.
The succeeding ones, in order to be able to sell, do so below
price. The former streams have not yet been utilized, when
the payment for them is due. Their owners must declare
their insolvency, or they sell at any price in order to fulfill
their obligations. This sale has nothing whatever to do
with the actual condition of the demand. It is merely a
question of a demand for payment, of the pressing necessity
of transforming commodities into money. Then a crisis
comes. It becomes noticeable, not in the direct decrease of
consumptive demand, not in the demand for individual con-
sumption, but in the decrease of exchanges of capital for cap-
ital, of the reproductive process of capital.

If the ■commodities Pm and L, into which M is trans-
formed in the performance of its function of money-capital,
in its capacity as capital-value destined for retransformation
into productive capital, if, I say, those commodities are to be
bought or paid at different dates, so that M — C represents a
series of successive purchases or payments, then a part of M
performs the act M — C, while another part persists in the
form of money, and does not serve in the performance of
simultaneous or successive acts M — 0, until the conditions of
this process itself demand it. This part of M is temporarily
withheld from circulation, in order to perform its function at
the proper moment. This storing of M for a certain time is
a function conditioned on its circulation and intended for
circulation. Its existence as a fund for purchase and pay-
ment, the suspension of its movement, the condition of its
interrupted circulation, are conditions in which money per-
forms one of its functions as money-capital. I say money-
capital ; for in this case the money remaining temporarily at
rest is itself a part of money-capital M (of M' — m equal to
M), of that part of commodity-capital which is equal to P, of
that value of productive capital from which the cycle pro-
ceeds. On the other hand, all money withdrawn from cir-
culation has the form of a hoard. In the form of a hoard,

88 Capital.

money is thus likewise a function of money-capital, just as
the function of money in M — C as a medium of purchase or
payment becomes a function of money-capital. For capital-
value here exists in the form of money, the money-form is
a condition of industrial capital in one of its stages, pre-
scribed by the interrelations of processes within the cycle.
At the same time it is here once more obvious, that money-
capital performs no other functions than those of money
within the cycle of industrial capital, and that these func-
tions assume the significance of capital functions only by
virtue of their interrelations with the other stages of this
cycle.

The representation of M' as a relation of m to M, as a
capital relation, is not so much a function of money-capital,
as of commodity-capital C, which in its turn, as a relation
of c to C, expresses but the result of the process of production,
of the self-utilization of capital which took place in it.

If the movement of the process of circulation meets with
obstacles, so that M must suspend its function M — C on
account of external conditions, such as the condition of the
market, etc., and if it therefore remains for a shorter or
longer time in its money-form, then we have once more
money in the form of a hoard which it may also assume in
the simple circulation of commodities, as soon as the transi-
tion from C — M to M — C is interrupted by external condi-
tions. It is an involuntary formation of a hoard. In the
present case, money has the form of fallow, latent, money-
capital. But we will not discuss this point any further for
the present.

In both cases, the suspension of money-capital in the form
of money is the result of an interruption of its movements,
no matter whether this is advantageous or harmful, volun-
tary or involuntary, in accord with its functions or contrary
to them.

The Rotation of Productive Capital. 89

II. Accumulation and Reproduction On An Enlarged
Scale.

Since the proportions of the expansion of the productive
process are not arbitrary, but determined by technical condi-
tions, the produced surplus-value, though intended for capi-
talization, frequently does not attain a size sufficient for its
function as additional capital, for its entrance into the cycle
of circulating capital-value, until several cycles have been
repeated so that it must be accumulated until that time.
, Surplus-value thus assures the rigid form of a hoard and is,
then, latent capital. It is latent, because it cannot function
as capital so long as it persists in the money-form. 6a The
formation of a hoard thus appears as a phenomenon included
in the process of capitalist accumulation, accompanying it,
but nevertheless essentially different from it. For the proc-
ess of reproduction is not expanded by latent capital. On
the contrary, latent money-capital is here formed, because
the capitalist producer cannot at once expand the scale of his
production. If he sells his surplus-product to a producer
of gold or silver, or, what amounts to the same thing, to a
merchant who imports additional gold or silver from foreign
countries for a part of the national surplus-product, then his
latent money-capital forms an increment of the national
gold or silver hoard. In all other cases, the surplus-value,
for instance the 78 pounds sterling, which were a circulating
medium in the hand of the purchaser, have only assumed
the form of a hoard in the hands of the capitalist. In other
words, a different repartition of the national gold or silver
hoard has taken place, that is all.

If the money serves in the transactions of our capitalist as
a means of payment, in such a way that the commodities are
to be paid for by the buyer on long or short terms, then the
surplus-product intended for capitalization is not trans-
formed into money, but into creditor's claims, into titles of

6a The term "latent" is borrowed from the idea of latent heat in
physics, which has now been almost replaced by the theory of the trans-
formation of energy Marx therefore uses in the third part, which is of
later date, another term borrowed from the idea of potential energy,
viz. : "potential," or, analogous to the virtual velocities of D'Alembert,
"virtual capital." — F. E.

90 Capital.

ownership of a certain equivalent, which the buyer may
either have in his possession, or which he may expect to pos-
sess. It does not enter into the reproductive process of the
cycle any more than money which is invested in interest^
bearing papers, although it may enter into the cycles of other
individual industrial capitals.

The entire character of capitalist production is determined
by the utilization of the advanced capital-value, that is to say,
in the first instance by the production of as much surplus-
value as possible; in the second place, by the production of
capital, in other words, by the transformation of surplus-
value into capital (see vol. I, chap. XXIV). But, as we
have seen in volume I, the further development makes it a
necessity for every individual capitalist to accumulate, or to
produce on an enlarged scale, in order to produce more and
more surplus-value, and this appears as a personal motive of
the capitalist for his own enrichment. The preservation of
his capital is conditioned on its continuous enlargement.
But we do not revert any further to our previous analysis.

We considered first simple reproduction, and we assumed
that the entire surplus-value was spent as revenue. But in
reality and under normal conditions, only a part of the sur-
plus-value can be spent as revenue, and another part must be
capitalized. And it is quite immaterial, whether a certain
surplus-value, produced within a certain period, is entirely
consumed or entirely capitalized. In the average movement
— and the general formula cannot represent any other —
both cases occur. But in order not to complicate the form-
ula, it is better to assume that the entire surplus-value is
accumulated. The formula P...C — M' — C {£m...P stands
for productive capital, which is reproduced on an enlarged
scale and with enlarged values, and which begins its second
cycle as enlarged productive capital, or, what amounts to the
same, which renews its first cycle. As soon as this second
cycle is begun, we have once more P as a starting point ; only
P is a larger productive capital than the first P was. Hence,
if the second cycle begins with M' in the formula M — M',
this M' functions as M, as an advanced capital of a definite
size. It is a larger money-capital than the one with which the
first cycle was opened ; but all relations to its growth by the

The Rotation of Productive Capital. 91

capitalization of surplus-value have disappeared, as soon as it
appears in the function of advanced money-capital. This
origin is extinguished in its form of money-capital which
begins its cycle. This also applies to P', as soon as it
becomes the starting point of a new cycle.

If we compare P...P' with M...M', or with the first
cycle, we find that they have not the same significance.
M...M', taken by itself as an individual cycle, expresses
only that M, money-capital, or industrial capital in its cycle
as money-capital, is money generating more money, value
generating more value, in other words, producing surplus-
value. But in the cycle of P, the process of utilization is
completed as soon as the first stage, the process of produc-
tion, is over with, and after going through the second stage
(the first stage of the circulation), C — M', the capital-value
plus surplus-value exists already as materialized money-cap-
ital, as M', which appeared as the last extreme in the first
cycle. The fact that surplus-value has been produced is
registered in the first considered formula P...P by c — m — c
(see expanded formula previously given). This, in its sec-
ond stage, falls outside of the circulation of capital and
represents the circulation of surplus-value as revenue. In
this form, where the entire movement is represented by
P...P and where there is no difference in value between the
two extremes, the utilization of the advanced value, or the
production of surplus-value, is represented in the same way
as in M...M', only the act C — M', which appears as the last
stage in M — M', and as the second stage of the cycle, appears
as the first stage of the circulation P. ..P.

In P...P', the term F does not express the fact that sur-
plus-value has been produced, but that the produced surplus-
value has been capitalized, that capital has been accumulated,
and that P as distinguished from P consists of the original
capital-value plus the value of capital accumulated by its
movements.

M[, as the closing link of M...M', and C, as it appears
within all these cycles, do not express the movement, but its
result, if taken by themselves: they represent the result, in
the form of money or commodities of the utilization of capi-
tal-value, and capital-value therefore appears as M plus m, or

92 Capital.

C plus c, as a relation of capital-value to its surplus-value,
its offspring. But whether this result appears in the form of
JVP or C, it is not a function of either money-capital or com-
modity-capital. As special and different forms correspond-
ing to special functions of industrial capital, money-capital
can perform only money functions, and commodity-capital
only commodity functions. Their difference is merely that
of money and commodity. Industrial capital, in its capac-
ity of productive capital, can likewise consist only of the
same elements as those of any other process of labor which
creates products: on one side objective means of production,
on the other labor-power as the productive element. Just
as industrial capital can exist within the process of produc-
tion only in a composition which corresponds to the require-
ments of all production, even if it is not capitalist production
so it can exist in the sphere of circulation only in the two
forms corresponding to it, viz., that of a commodity or of
money. Now the sum of the elements of production reveals
its character of productive capital at the outside by the fact
that the labor-power belongs to another from whom the cap-
italist purchases it, just as he purchases his means of pro-
duction from others who own them, so that the process of
production itself appears as a productive function of indus-
trial capital. In the same way money and commodities
appear as forms of circulation of the same industrial capital,
hence their functions as those of the circulation of this capi-
tal, which either introduce the function of productive capital
or originate from it. The money function and the commod-
ity function become at the same time functions of money-cap-
ital and commodity-capital for no other reason than that they
enter into relationship with the functional forms through
which industrial capital passes in the different stages of its
process of circulation. It is, therefore, a mistake to attempt
to derive the specific characters of money and commodities,
and their specific functions as such, from their capital-char-
acter, and it is likewise a mistake to derive the qualities of
productive capital from its existence in means of production.
As soon as M' or C have become fixed in the relation of
M plus m, or C plus c, in other words, as soon as they become
parts of the relation between capital-value and its offspring

The Rotation of Productive Capital. 93

surplus-value, they give expression to this relation either in
the form of money or of commodities, without changing the
nature of the relation itself. This relation is not due to any
qualities or functions of either money or commodities as
such. In both cases the characteristic quality of capital,
that of being a value generating more value, is expressed
only as a result. C is always the product of the function of
P, and M' is always merely a form of C changed in the cycle
of industrial capital. As soon as the realized money-capi-
tal begins its special function as money-capital anew, it ceases
to express the capital-relation conveyed by the formula M'
equal to M plus m. After M...M' has been completed and
M' begins the cycle anew, it no longer figures as M' but as M,
even if the entire capital-value contained in M' is capitalized.
The second cycle begins in our case with a money-capital of
500 pounds sterling, instead of 422 pounds in the first cycle.
The money-capital, which opens the cycle, is larger by 78
pounds sterling than before ; this difference exists in the com-
parison of one cycle with another, but it does not exist within
each cycle. The 500 pounds sterling advanced as money-
capital, 78 pounds of which formerly existed as surplus-
value, do not play any different role than some other 500
pounds sterling by which another capitalist opens his first
cycle. The increased P' opens a new cycle as P, just as P
did in the simple reproduction P.. .P.

In the stage M' — C |pm> the increased magnitude is indi-
cated only by C, but not by L' and Pm\ Since C is the
sum of L and Pm, the term C indicates sufficiently that the
sum of the L and Pm contained in it is greater than the orig-
inal P. In the second place, the terms L' and Pm' would be
incorrect, because we know that the growth of capital implies
a change in the relative proportions of the values composing
it, and that, with the progressive changing of this proportion,
the value of Pm increases, while that of L always decreases
relatively, if not absolutely.

III. Accumulation of Money

Whether or not m, the surplus-value transformed into
gold, is immediately combined with the circulating capital-
value and is thus enabled to enter into the cycle together

94 Capital.

with the capital M in the magnitude of M', depends on cir-
cumstances which are independent of the mere existence of
m. If m is to serve as money-capital in a second independ-
ent business, to be run by the side of the first, it is evident that
it cannot be used for this purpose, unless it is of the mini-
mum size required for it. And if it is intended to use it for
the extension of the original business, the condition of the
substances composing P and their relative values likewise
demand a minimum magnitude for m. All the means of
production employed in this business have not only a quali-
tative, but also a definite quantitative relation toward one
another. These proportions of the substances and of their
values entering into the productive capital determine the
minimum magnitude required for m, in order to be capable
of transformation into additional means of production and
labor-power, or only into means of production as an addi-
tion to the productive capital. For instance, the owner of a
spinning loom cannot increase the number of his spindles
without at the same time purchasing a corresponding num-
ber of carders and preparatory looms, apart from the
increased expense for cotton and wages, which such an ex-
tension of his business demands. In order to carry this out,
the surplus-value must have reached a considerable figure
(one pound sterling per spindle is generally assumed for new
installations) . So long as m does not reach this figure, the
cycle of the original capital must be repeated several times,
until the sum of the successively produced surplus-values m
can take part in the functions of M, in the process M' — C
|pm. Even mere changes of detail, for instance, in the spin-
ning machinery, made for the purpose of making it more
productive, require greater expenditures for spinning mate-
rial, preparatory looms, etc. In the meantime, m is accumu-
lated, and its accumulation is not its own function, but the
result of repeated cycles of P. ..P. Its own function consists
in persisting in the form of money, until it has received suffi-
cient additions from the outside by means of successive cycles
of utilization of capital to have acquired the minimum mag-
nitude necessary for its active function. Only when it has
reached this magnitude, can it actually serve as money-capi-
tal and eventually take part in the functions of the active

The Rotation of Productive Capital. 95

money-capital M as its accumulated part. But until that
time it is accumulated and exists only in the form of a hoard
in a process of gradual growth. The accumulation of
money, the formation of a hoard, appears here as a process
which accompanies temporarily the accumulation by which
industrial capital expands the scale of its productive action.
This is a temporary phenomenon, for so long as the hoard
remains in this condition, it does not perform the function of
capital, does not take part in the process of utilization, and
remains a sum of money which grows only by virtue of the
fact that other money, existing without the initiative of the
hoard, is thrown into the same safe.

The form of a hoard is simply the form of money not
in circulation. It is money interrupted in its circulation
and stored up in the form of money. As for the process of
forming a hoard, it is found in all systems of commodity-
production, and it plays a role as an end in itself only in
the undeveloped, precapitalist forms of this production. In
the present case, the hoard assumes the form of money-capi-
tal, and goes through the process of forming a hoard as a
temporary corollary of the accumulation of capital, merely
because the money here figures as latent money-capital, and
because the formation of a hoard as well as the surplus-value
hoarded in the form of money represent a functionally pre-
scribed and preliminary stage required for the transforma-
tion of surplus-value into capital actually performing its
functions. It is this end which gives it the character of
latent money-capital. Hence the volume, which it must
have acquired before it can take part in the process of capi-
tal, is determined in each case by the values of which the
productive capital is composed. But so long as it remains
in the condition of a hoard, it does not perform the func-
tions of money-capital, but is merely sterile money-capital;
its functions have not been interrupted, as in a previous case,
but it is as yet incapable of performing them.

"We are here discussing the accumulation of money in its
original and real form of an actual hoard of money. But
it may also exist in the form of mere outstanding money, of
credits granted by a capitalist who has sold C\ As concerns

96 Capital.

ite other forms, where this latent money-capital exists in the
meantime in the shape of money breeding more money,
such as interest-bearing deposits in a bank, in drafts, or in
bonds of some sort, these do not fall within the discussion
at this point. Surplus-value realized in the form of money
then performs special capital-functions outside of that cycle
of industrial capital which originated it. In the first place,
these functions have nothing to do with that cycle of indus-
trial capital as such, in the second place they represent capi-
tal-functions which are to be distinguished from the func-
tions of industrial capital and which are not yet developed
at this stage.

IV. Reserve Funds.

In the case which we have just discussed, surplus-value
in the form of a hoard represents accumulated funds, a
money-form temporarily assumed by the accumulation of
capital and to that extent a condition of this accumulation.
However, such accumulated funds may also perform special
services of a subordinate nature, that is to say they may enter
into the circulation-process of capital, even if this process,
has not assumed the form of P — P', in other words, with-
out an expansion of capitalist reproduction.

If the process C — M' is prolonged beyond its normal size,
so that commodity-capital meets with abnormal obstacles dur-
ing 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 disturb-
ances 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-capi-
tal 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 func-
tions successively at different times. In the continuous

The Rotation of Productive Capital. 97

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 cir-
culating 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 in-
stance, 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-capi-
tal, or the transformation of money into money-capital.

The following is the general formula for the cycle of pro-
ductive capital, combining simple reproduction and repro-
duction on an enlarged scale:

P...C— M\ M— C^m...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.

88 Capital.

CHAPTER III.

THE CIRCULATION OF COMMODITY-CAPITAL.

The general formula for the cycle of commodity-capital
in

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 capi-
tal that which C — M' includes for the other, at least in so
far as a part of the means of production represents the com-
modity-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. Fur-
thermore, 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 repro-
duction, 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 op-
posite 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

The Circulation of Commodity-Capital. 99

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 capi-
tal 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 in-
creased accumulation of capital-value, which includes a pro-
portionate increase of newly produced surplus-value. In
every case, C always opens the cycle as a commodity-capi-
tal which is equal to capital-value plus surplus-value.

C as C does not appear in the circulation of some individu-
al industrial capital as a form of this capital, but as a form of
some other industrial capital, so far as the means of pro-
duction 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{£m the factors L and Pm
have identical relations, in so far as they are commodities

100 Capital.

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 prod-
uct. And from the point of view of exchange-value, com-
modity-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 sepa-
rated, as soon as C is transformed into M\

If the entire commodity-product is separable into inde-
pendent 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 sepa-
rated from the surplus-value. If the capitalist sells first

The Circulation of Commodity-Capital. 101

8,440 lbs. at 422 pounds sterling, then these 8,440 lbs. of yarn
represent C, or the capital-value, in the form of commodi-
ties. The surplus-product of 1,560 lbs. of yarn, likewise con-
tained in C, and valued at 78 pounds sterling, does not cir-
culate until later. The capitalist may accomplish C — M — C-
|£m 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 condi-
tions of the cycle permit it, the capitalist, instead of separat-
ing 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. of yarn, valued at 372 pounds ster-
ling, 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 capi-
tal-value, into its aliquot parts 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 to-
gether 844 lbs. of yarn at 42.2 pounds sterling, for replac-
ing the capital-value contained in 1,000 lbs. of yarn; finally,
156 lbs. of yarn at 7.8 pounds sterling, representing the

102 Capital.

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 suc-
ceeds 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 ster-
ling, replaces the variable capital-value; or a total of 1,316-
.640 lbs. of yarn, valued at 65.832 pounds sterling, for re-
placing 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.

The Circulation of Commodity-Capital. 103

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 ana-
lyzes during the negotiations the different values of which
this lot is composed, he does so simply with the malignant in-
tention 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 require-
ments. 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 spend-
ing of surplus-value or for the accumulation of capital, exist
only in the cycle of that capital, which exists as a com-
modity 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 that 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

104 Capital.

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, trans-
ferred 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 circula-
tion 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 suc-
ceeding circulation process is conditioned. The concluding
P, on the other hand, does not stand for the productive
process; it is only the return of the industrial capital to its
form of productive capital. And it has that form by virtue
of the last phase of circulation, in which the transforma-
tion 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 produc-
tion and to pretend that production itself is the purpose of
this process; just as though it were only a question of pro-
ducing as much as possible, as cheaply as possible, and of

The Circulation of Commodity-Capital. 105

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 over-
looked, 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 commod-
ity 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. Ac-
cumulation, 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 re-
turn 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 com-
modity-capital, the cycle is re-opened by the circulation-
phase C — M\ Both forms of the cycle are incomplete, be-
cause 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 influ-
ence 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

106 Capital.

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 com-
modity-product is assumed as the condition of the normal
course of the cycles of capital itself. The individual con-
sumption 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 con-
sumption, 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 it-
self. 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 capi-
talist.

In forms I and II, the aggregate movement appears as a
movement of advanced capital-value. In form III, the util-
ized 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 sep-
arate into movements of capital and revenue. The dis-
tribution 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

The Circulation of Commodity-Capital. 107

of production have become dearer. The same is true of
C...C'.

In C...C' capital in the form of commodities is the prem-
ise 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 an-
other 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 con-
cluding 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 accom-
plished in I and II by a simple transaction in the circula-
tion of commodities, .by a formal change of position of com-
modity and money ; in III, C is a changed form of the pro-
ductive 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 prod-
uct of an individual cycle of industrial capital, presupposes
only that form P of the industrial capital which does not

108 Capital.

belong to .the circulation, M', since the terminal point of J
representing the changed form of C (C — M'), presuppose!
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 pro-
ductive 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,

C'l ...M'j

( c ( m . . . .c

C is presupposed twice outside of the cycle. The first time,
it is assumed to exist in the cycle C — M' — C\^m. 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 produc-
tion ; and even if it is not, it appears as a commodity-capital
in the hands of the merchant. The second time it is as-
sumed 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 com-
modity-capital or not, L and Pm are commodities as well as
C and maintain towards one another the relation of com-
modities. 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 sec-
ond 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

The Circulation of Commodity-Capital. 109

have it before. Or they would have to be commodities,
such as imported articles, which replace some original com-
modity-capital by bestowing upon it another form of ex-
istence.

The commodity-elements L and Pm, of which the pro-
ductive 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 func-
tions 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 per-
forms the functions of capital-value, whether increased by
surplus-value or not) into those commodities which are
its elements of production. And this transformation com-
prises the entire process of circulation, C — M — C (equal to
L plus Pm), and is its result. C here stands at both ex-
tremes, 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 stages 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 circula-
tion. In these instances, it is only M' and P which are sup-
posed to exist at the end in the hands of another. So far
as the process* of circulation takes place between the ex-
tremes, 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 trans-
formed into productive capital, and as a result of the func-
tions of this capital, C once more appears at the end of the
cycle.

110 Capital.

But just because the cycle C ...C presupposes for its real-
ization 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 aggre-
gate 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 annual-
ly produced in a certain country, and analyze the move-
ments 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 indi-
cating the movements of social capital as well as of the sur-
plus-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 capi-
tals, does not militate against the possibility that this move-
ment, 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 i»-

The Circulation of Commodity-Capital. Ill

dustrial 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 accumula-
tion. 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 further-
more included for the reason, that the starting point C, com-
modity, exists in the form of some article of use ; but every
article produced by capitalist methods is a commodity-capi-
tal, no matter whether its use-form destines it for productive
or for individual consumption, or for both. M...M' indi-
cates only the quality of value, the utilization of the ad-
vanced 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 capi-
tal of the same or of increased value (accumulation) ; C...C,
while it indicates at the outset that it is a part of the capi-
talist production of commodities, comprises productive and
individual consumption from the start, and productive con-
sumption 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 proc-
ess of production, it follows as a matter of course, that the dif-
ferent elements of value of C expressed by parts of the prod-
uct 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 capital-
ist 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 capi-
tal, on the other links in the general circulation of commodi-

112 Capital.

ties. 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 there-
fore base our studies mainly on the two first formulas.

The cycle C...C' appears as the movement of an indi-
vidual 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 move-
ment 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 con-
tinuous premise of the processes of production and repro-
duction. If this formula is regarded as fixed, all elements of
the process of production seem to originate in the circula-
tion 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 com-
modity-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 re-
maining otherwise the same, can take place only when the
part of the surplus-product to be capitalized already con-
tains the material elements of the additional productive capi-
tal; 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 reproduc-
tion in the same year. Increase 1 productivity can increase
only the subs' mce of capital, but not its value ; of course, it

The Circulation of Commodity-Capital. 113

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).

114 Capital.

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— U...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 it-
self. 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 circula-
tion, 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 — 0 means C — M from the point of view of
the seller, the circulation of capital presents only the fea-
tures of the ordinary metamorphosis of commodities, subject
to the laws relative to the amount of money in circulation,
as analyzed in volume I, chap. Ill, 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, then the
mere change of form between money and commodities does
not explain matters.

In a continuously revolving circle, every point is simul-
taneously a point of departure and point of return. If

Diagrams of the Process of Circulation. 115

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 indus-
trial capitals are passing, their differences have but an in-
dividual 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 in-
stance, 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 commodi-
ty-capital. The cycle C.-.C is thus continuously rotating,
and so are the two other forms. The reproduction of capi-
tal 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 final-
ly 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

116 Capital.

other hand its entire process of production is interrupted,
as soon as it performs any functions in one of its two cir-
culation 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 circula-
tion 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 cir-
culation 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 circu-
lation 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 causes the next, but also excludes
it.

But continuity is the characteristic mark of capitalist pro-
duction, conditioned on its technical basis, although not
absolutely attainable. Let us see, then, what passes in real-
ity. While the 10,000 lbs. of yarn appear on the market as
commodity-capital and are transformed into money (re-
gardless 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 pre-

Diagrams of the Process of Circulation. IVi

ceding 10,000 lbs. are going through the second stage of
circulation and are reconverted from money into the ele-
ments of productive capital. All parts of capital pass suc-
cessively through the process of rotation and are simultane-
ously in its different stages. The industrial capital thus
exists simultaneously in all the successive stages of its rota-
tion 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 produc-
tion 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 cycles 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 capi-
tal has a definite volume which does not merely depend on
the means of the capitalist and which has a minimum mag-
nitude 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 per-
form their functions simultaneously with the process of pro-
duction. The simultaneous functions, which enable the pro-
duction to proceed continuously, are only due to the rota-

118 Capital.

tion of the various parts of capital which pass successively
through their different stages. The simultaneousness is mere-
ly 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 ele-
ments 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 capi-
tal into a new phase is conditioned on its departure from
another. Every special cycle has therefore one of the func-
tional 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 rota-
tion 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 re-
quirement 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 ele-
ments. 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 capi-
tal are continuously presented by each form. One part of"
capital, continually changing, continually reproduced, exists
as a commodity-capital which is converted into money; an-
other 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

Diagrams of the Process of Circulation. 119

bi ought 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 continu-
ously and successively from one phase and functional form
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 succes-
sive 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 inter-
rupted 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 por-
tions may be differently distributed, according to the charac-
ter 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 agricul-
ture, 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 proc-
ess of rotation.

Capital, as a value creating more value, is not merely con-
ditioned on 'dass-relaitions, on a definite social system rest-
ing on the existence of labor in the form of wage-labor. It
is also a movement, a rotation through various stages, com-
prising three different cycles. Therefore it can be understood

120 Capital.

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 realiza-
tion 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 ro-
tation. 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 hap-
pen, 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 revo-
lutions 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 com-
pared 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 ex-
ploitation of labor-power, this rise of independence on the

Diagrams of the Process of Circulation. 121

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 com-
modities, because such only admit of being exchanged with
each other." This criticism is directed against the compari-
son 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
values 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 puri-
ty, it is not sufficient to assume that the commodities are
sold at their value, but that this takes place under con-
ditions 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 depreci-
ated; 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

122 Capital

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 proc-
ess balance one another. But to the extent that these dis-
turbances 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 mini-
mum size of the capital to be advanced increase in the proc-
ess of capitalist production, we have here another circum-
stance 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 asso-
ciations.

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 ap-
pears, if a change in the value of the elements of produc-
tion occurs.

In the cycle M...M', the formula of newly invested capital,
which for the first time appears in the role of money-capi-
tal, 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 busi-
ness of a definite size, because the scale of the process of pro-
duction 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 com-
modities is increased, which are required as elements of a

Diagrams of the Process of Circulation. 123

certain productive capital, then more money-capital is re-
quired for 'the establishment of a business of definite pro-
portions. 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 pro-
duction. 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{pm>
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 ac-
cumulation (production on an enlarged scale) , or the trans-
formation 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 ac-
cumulation, 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 ad-

124 Capital.

ditional 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 de-
preciated 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 capi-
tal in the form of commodity-capital, for instance in cot-
ton 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|pm. 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|pm; 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 cir-
culation. 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{p-m, at a
period of developed and prevailing capitalist modes of pro-
duction, 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.

Diagrams of the Process of Circulation. 125

In the opposite case, in those sections of its process of rota-
tion, where industrial capital performs either the functions
of money or of commodities, the cycle of industrial capi-
tal, 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 commodi-
ties 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 circula-
tion 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 em-
bodied 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

126 Capital.

production as much as possible into a production of com-
modities. The mainspring, by which this is accomplished,
is the implication of other modes of production into the cir-
culation process of capitalist production. And developed
commodity-production is capitalist production. The inter-
vention of industrial capital promotes this transformation
everywhere, and simultaneously with it also the transforma-
tion of all direct producers into wage laborers.

Second. The commodities entering into the process of cir-
culation (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 con-
sumer. Of course, so far as a consumer is himself a produc-
tive consumer, an industrial capitalist, whose industrial capi-
tal 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 capi-
tal is the premise of capitalist production and develops more
and more in the course of development of this mode of pro-
duction. Therefore we use it occasionally for the illustra-
tion of various aspects of the process of capitalist circula-
tion; 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 some-
what 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 de-

Diagrams of the Process of Circulation. 127

scribed. 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 manu-
facture of cloth, was always the same; and when it was ex-
changed for the income of the consumer, it was merely
divided into two parts; 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 of 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 circula-
tion 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 ad-
vanced for wages and the purchase price paid by the last con-
sumer 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 produc-
tion ; for having consumption for its object, production can-
not be regarded as completed, until the product is placed into
the reach of the consumer (Ibidem, page 157)."

128 Capital.

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 hark 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 pay-
ing 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 circula-
tion of commodities. The same mass of money, for instance
500 pounds sterling, starts successively so many more indus-
trial capitals or eventually individual capitals in the form
of commodity-capitals) in circulation, the greater the velo-
city 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 cap-
ital-value therefore requires so much less money for its cir-
culation, 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 pay-
ing 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 commodi-
ties (price multiplied by the volume of commodities), or,

Diagrams of the Process of Circulation. 129

if tne 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 circula-
tion ; 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 :

(C- (M-Cj£m..P(P')
II) P..C j — M'j

(_ c ( m — c

(C (M-C^m..P..C

III)CV— M'l

( c ( m — c

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 circula-
tion 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 repre-
sent an intermingling of the metamorphoses of different

130 Capital.

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 trans-
formed 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 metamor-
phoses 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 capi-
talist. It is always a question of M — C on one side, and
C — M on the other, but not always of intermingling meta-
morphoses 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 trans-
formed commodity-capital; it may be the money-equivalent
of labor-power (wages), or of the product of some independ-
ent 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 \ pm
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 com-
ponent parts of the aggregate social capital, of which individ-
ual capitals are merely components performing independent

Diagrams of the Process of Circulation. 131

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 meta-
morphoses in the circulation of commodities. Such inter-
mingling 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 gen-
eral phrases have been employed by economists for his pur-
pose, and if we test those phrases, they contain nothing but
indefinite ideas borrowed from the intermingling of meta-
morphoses common to all circulations of commodities.

One of the most obvious peculiarities of the process of rota-
tion of industrial capital, and therefore of capitalist produc-
tion, is the fact that on the one side, the component elements
of productive capital are derived from the commodity-mar-
ket, are continually renewed out of it, and are sold as com-
modities; 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. Com-
pare, for instance, a modern tenant of Lower Scotland with
an old-fashioned small farmer on the continent. The form-
er 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 produc-
tion 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 pro-
ducers 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 corre-

132 Capital

spond only to different stages in the development of capital-
ist 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 sys-
tems.

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 classifica-
tions.

.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 produc-
tion. The characteristic mark of capitalist production
would then be only the extent to which the product is manu-
factured for purposes of trade, as a commodity, and the
extent to which its own elements of formation enter as com-
modities 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 be-
comes 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 \U
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 agricul-
tural laborer becomes a wage-laborer. In the relation of cap-
italist 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 char-
acter of the circulation rather depends on that of production.

Diagrams of the Process of Circulation. 133

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.7

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 per-
sonification 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 func-
tions 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 con-
tains 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 cap-
italist 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.

7 End of Manuscript V. What follows to the end of the chapter is a
note found in a Manuscript of 1877 or 1S78 amid extracts from other
works.

134 Capital.

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 pro-
duction 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 deter-
mined by the proportion of his variable capital to his total
capital, as expressed by Vh-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 consump-
tion 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 sup-
ply 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

Diagrams of the Process of Circulation. 135

means of production. It does not alter the case, if many-
capitalists instead of one furnish him with means of produc-
tion. 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 buy-
ing 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 CH-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 invest-
ment, so far as this enters into the annual commodity-pro-
duct, so that they are included in that one tenth of sinking
fund. If the repairs cost less than the average he is so much

136 Capital.

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 con-
cerned.

We now come to the question of reproduction. Take it
that the capitalist consumes the entire surplus-value com-
posed 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 the value of his supply. He consumes
one-fifth as a non-capitalist; he consumes it, not in the per-
formance of his function as capitalist, but for his private re-
quirements 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 enjoy-
ment 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 pro-
tection 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 ob-
tained 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

Diagrams of the Process of Circulation. 137

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 run-
ning account.

138 Capital.

CHAPTER V.

THE TIME OF CIRCULATION.8

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 produc-
tion, 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 la-
bor-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 longeT
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 production9 and its time of function.
The time of production of the means of production in gen-
eral comprises, therefore, first the time during which they
serve as means of production by taking part in the produc-
tive process; second, the stops during which a certain pro-
cess of production, and thus the function of the means of

8 Beginning of Manuscript IV.

9 Time of production of the means of production does not mean, in this
case, the time required for their production, but the time during which
they take part in the process of production *f a certain commodity. — F. E.

The Time of Circulation. 139

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 interrup-
tions 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 in-
terrupted. This applies, for instance, to the grain, after it
has been sowed, the wine fermenting in the cellar, the la-
bor-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 capi-
tal. 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

140 Capital.

the cost of the raw material, etc., but they are productive
labor and produce surplus-value, because a part of this la-
bor, like all wage-labor, is not paid. The normal inter-
ruptions of the entire process of production, the pauses in
which the productive capital does not perform any func-
tions, create neither value nor surplus-value. Hence the
tendency to keep the work going at night (Volume I, Chap-
ter 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 ad-
vance 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 prod-
uct is brought to this stage by labor itself, and the em-
ployment 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 instru-
ments of labor whose function is interrupted only by the
regular pauses of the productive process (irregular inter-
ruptions 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 produc-
tive 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 con-
sumes them to good effect as means of production. And
it does not change the case, whether labor has to be exerted

The Time of Circulation. 141

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 un-
dergo 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 pre-
liminary to the actual productive process, or that their func-
tion 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 in-
crease 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 productiv-
ity and increment of a given productive capital in a given
time are so much greater, the more nearly the time of pro-
duction and labor-time are equal. Hence we have the ten-
dency 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, al-
though it includes time in which it is either latent or pro-
duces without creating surplus-values.

Within the sphere of circulation, capital abides as com-
modity-capital and money-capital. Its two processes of cir-
culation 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 pro-
cesses as transactions in circulation, of processes in the
simple metamorphosis of commodities, that this transfor-
mation of commodities into money is at the same time a re-

142 Capital.

alization 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 cap-
ital-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 prompt-
ly or slowly, according to the length of the time of circula-
tion. 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 continu-
ally 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 contrac-
tion 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 produc-
tive 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 pay-
ment 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 lim-
its 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 in-
crease 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

The Time of Circulation. 148

time of circulation on the creation of surplus-values in gen-
eral. It takes this negative effect for a positive one, because
its results are positive. It clings so much the more to this
semblance, as this seems to prove that capital has a mystic
source 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 sci-
entific political economy has been deceived by this appear-
ance of things. Various phenomena contribute to this de-
ception: 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 circula-
tion 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 circu-
lation. 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 con-
version 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. Ill), 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 form of continual readiness. How-
ever, in the process of circulation of capital, its phase C — M

144 Capital.

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, circu-
lation 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 representa-
tives for both of them, either in the person of the capital-
ist 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 produc-
tive 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 businesses, 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 con-
sumer. The consumers can pay only inasmuch as they are
themselves instrumental in producing an equivalent in com-
modities 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 a 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 pro-
duction. Intrinsicallv. C — M as well as M — G is merely a

The Time of Circulation. 145

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 perish-
able. 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 sur-
plus-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 pro-

146 Capital.

duction is restricted, the sphere of its circulation is nar-
rowed, 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 im-
provement 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.

The Expenses of Circulation. 14*J

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 consti-
tutes 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.

9a 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 commodi-
ties 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 con-
verted values remains the same; the plus on one side is off-
set 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

9a From here to 10 are statements taken from a note at the end of
Manuscript VIII.

148 Capital.

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 ap-
propriate 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 ob-
ject of contention. It is with this labor, which is a neces-
sary part of the totality of the capitalist process of produc-
tion, 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 wdth 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 trans-
actions 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 accom-
plished by unloading this work of "combustion" from the
shoulders of the industrial capitalists to those of paid em-
ployees 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.10

10 See explanation 9a.

The Expenses of Circulation. 149

For the capitalist who has others working for him, selling
and buying become primary functions. Seeing that he ap-
propriates 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 cre-
ated by the function of merchant's capital. But without en-
tering at this point into a detailed discussion of this fact, we
can plainly see this much : If a function, which is unproduc-
tive in itself, although a necessary link in reproduction, is
transformed by a division of labor from an incidental occu-
pation of many into an exclusive occupation of a few, the
character of this function is not changed thereby. One mer-
chant, as an agent promoting the transformation of com-
modities by assuming the role of a mere buyer and seller,
may abbreviate by his operations the time of sale and pur-
chase for many producers. To that extent he may be re-
garded as a machine which reduces a useless expenditure of
energy or helps to set free some time of production."

In order to simplify the matter, seeing that we shall not
discuss the merchant as a capitalist and his capital as mer-
chant'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 per-
forms a necessary function, because the process of reproduc-
tion itself includes an unproductive function. He works as
well as any other man, but intrinsically his labor creates

11 "The expenses of commerce, although necessary, must be regarded
as a burden." (Quesnay, Analyse du Tableau Economique, in Daire.
Physiocrates, part I, Paris, 1846, page 71.) According to Quesnay, the
"profit," which the competition between merchants produces, and which
he sees in the fact that competition compels them "to figure a discount

on their loss or gain is really nothing but a prevention of loss

for the seller at first hand or for the consuming buyer. Now, a pre-
vention of loss on the expenses of commerce is not a real product or
an increase of wealth through commerce, considering it simply as an
exchange, whether with or without the cost of transportation." (Pages
145 and 146.) "The expenses of commerce are always paid by those who
sell the products and who would enjoy the full prices paid for them
by the buyers, if there were no incidental expenses." (Page 163, Ibidem.)
The "proprietaires" and "producteurs" are "salariants," the merchants are

"salaries." (Page 164, Quesnay, Problemes Economiques, in Daire,

Physiocrates, Part I, Paris, 1S46.)

150 Capital.

neither products nor values. He belongs himself to the un-
productive expenses of production. His services do not trans-
form 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 as-
sume 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 work-
ing hours, when he performs his functions for ten hours.
But his two hours of surplus-labor do not produce any sur-
plus-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 circula-
tion. 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 re-
duces the expenses of circulation of his capital, which rep-
resent a deduction from his income. For the capitalist this
is a positive gain, because the negative limit for the utiliza-
tion of his capital is thereby reduced. So long as small inde-
pendent 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

The Expenses of Circulation. 151

order to convert them from commodities into money. Inas-
much 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 circula-
tion. And if the expansion of his business compels or en-
ables him to hire his own wage-laborers as agents of circu-
lation, 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 addi-
tional expenditure of capital. A part of the variable capi-
tal 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 mate-
rialized 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 espe-
cially the capitalist producer of commodities. This move-
ment 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, espe-

152 Capital.

cially of the productian 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 ac-
count only in his head (for instance a farmer; a bookkeep-
ing tenant is not known until capitalist production intro-
duces him), or incidentally, outside of his time of produc-
tion, makes a note of his expenses, receipts, instalment days,
etc., just so long does it appear intelligible that this func-
tion, and the materials consumed by it, such as paper, etc.,
require an additional expenditure of labor-time and mate-
rials, 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.12
The nature of the function itself is not changed. The vol-
ume 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 capi-
talist 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 inci-
dentally, nor by its modification into an independent func-
tion 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,

12 In. the middle ages, we find bookkeeping for agriculture only in
the convents. But we have seen in Vol. I, that a bookkeeper was in-
stalled tor agriculture as early as the primitive Indian, communes. Book-
keeping is then made an independent function of a communal officer.
This division of labor saves time, pains, and expenses, but production
and bookkeeping for production remain as much two different things as
a cargo of a ship and the way-bill. In the person of the bookkeeper,
a part of the labor-power of the commune is withdrawn from production,
and the cost of his function is not reproduced by his own labor, but by
a deduotion from the communal product. What is true of the book-
keeper of an Indian commune, is true under changed circumstances of the
bookkeeper of the capitalists. (From Manuscript II.)

The Expenses of Circulation. 153

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 with-
drawn from production and belongs to the expenses of cir-
culation, deductions from the total product (including the
labor-power itself, which is expended wholly for this func-
tion).

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 sellingand 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. Bookkeep-
ing, for the control and ideal survey of the process, becomes
necessary to the extent that the process assumes a social scak
and loses its purely individual character. It is, therefore,
more necessary in capitalist production than in scattered
handicraft and agricultural production, and still more nec-
essary 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 im-
perceptible and incidental accompaniments of individual pro-
duction, 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 busi-
nesses. 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 pro-
ductively or individually consumed. If it is a commodity,

154 Capital.

its value is ideally expressed in its price, which does not
change its actual use-value. But the fact that certain com-
modities, 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 pro-
duction gives to all its products the general form of com-
modities, 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 more 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-commodi-
ties 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 develop-
ment of this production, especially when capitalized. They
represent a part of the social wealth, which must be sacrificed
in the process of circulation."

II. EXPENSES OF STORAGE.

Expenses of circulation, which are due to a mere change

13 "The money circulating in a country is a certain portion of the
capital of the country, absolutely withdrawn from productive purposes,
in order to facilitate or increase the productiveness of the remainder ;
a certain amount of wealth is, therefore, as necessary in order to adopt
gold as a circulating medium, as it is to make a machine, in order to
facilitate any other production." (Economist, Vol. V, Page 519.)

The Expenses of Circulation. 155

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 ex-
penses 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 mate-
rialized labor, while 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 indi-
vidual capitalists in the same sphere of production. When
added to the prices of commodities, they are divided in pro-
portion as they fall upon the shoulders of the various in-
dividual 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 ex-
penses 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 unpro-
ductive 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 proc-
ess of production from which it originates and the process

156 Capital.

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-prod-
uct figures twice in each cycle: The first time as the com-
modity-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 capi-
tal. It is, indeed, possible that this last-named commodity-
capital is not produced until ordered. In that case, an in-
terruption occurs until it has been produced. But the flow
of the process of production and reproduction requires 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 in-
voluntary. 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 func-
tion 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, ware-
houses, in other words, an expenditure of constant capital;
furthermore the payment of labor-power for storing the com-

The Expenses of Circulation. 157

modities. 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."

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 circum-
stances the capital and labor-power required for the con-
servation and storage of the commodity-supply, are with-
drawn 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 ex-
penditure, 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 com-
modity-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 transforma-
tion 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 in-
creased, because the use-value, the product itself, is placed in
conditions which require an outlay of capital. The com-

14 Corbet calculates, in 1841, that the cost of storing wheat for a season
of nine months amounts to a loss of lx/<> per cent in quantity, 3 per cent
for interest on the price of wheat, 2 per cent for warehouse rental, 1
per cent for sifting and drayage, % per cent for delivery, together 7
per cent, or 3 sh. 6 d. on a price of 50 sh. per quarter. (Th. Corbet,
An Inquiry Into the Causes and Modes of the Wealth of Individuals,
etc., London, 1841.) According to the testimony of Liverpool merchants
before the railroad commission, the net expenses of grain storage in 1865
amounted to 2 d. per month per quarter, or 9 to 10 d. per ton. (Royal
Commission on Railways, 1867. Evidence, page 19; Nr. 331.)

158 Capital.

modities are -submitted to operations, which expend addi-
tional 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 influ-
ence the use-values in which the exchange-values of the com-
modities 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 can-
not be preserved in any other way than by preserving the
use-value, the product, itself. The use-value is neither in-
creased 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 produc-
tion of commodities in general and from the prevailing abso-
lute 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 capital-
ist production alone.15 More recent economists, for instance
Lalor, insist on the other hand, that it declines with the
development of capitalist production. Sismondi even re-
gards this as one of the drawbacks of this mode of produc-
tion.

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 de-

15 Wealth of Nations, Book II, Introduction.

The Expenses of Circulation. 159

creases 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 pro-
ducer, 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 sup-
ply 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 re-
mains 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.16 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 produc-

16 Instead of a supply arising from the conversion of the product into a
commodity, and of the supply of articles of consumption into commodi-
ties, as Adam Smith thinks, this transformation, on the contrary, causes
violent crises in the economy of the producer during the transition from
production for use to production for sale. In India, for instance, the
custom of storing up large quantities of grain in years of superfluity,
when little could be gotten for it, was observed until very recent times.
(Return. Bengal and Orissa Famine. H. of C, 1807, I, page 230, Nr.
74.) The sudden increase in the demand for cotton, jute, etc., led in
many parts of India to a restriction of rice culture, a rise in the price
of rice, and a sale of old supplies of the producers. Then followed the
unexampled export of rice to Australia, Madagascar, etc., in 1864-66.
This accounts for the acute character of the famine of 1866, which
cost the lives of more than a million inhabitants in the district of Orissa
alone (1. c. 174, 175, 213, 214, and III. Papers relating to the Famine
in Behar, pages 32, 33, where the "drain of the old stork" is emphasized
as one of the causes of the famine). — From Manuscript II.

160 Capital.

tion. We have seen previously, that with the develt pment
of the productivity of labor, and therefore with the d evelop-
ment of the capitalist mode of production, which develops
the socially productive power of labor more than all previ-
ous modes of production, there is a steady increase of the
mass of means of production, which are permanently em-
bodied in the productive process as instruments oi 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 instru-
ments 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 re-
quires 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 regu-
larity 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 propor-
tions. 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.

The Expenses of Circulation. 161

This depends on various conditions, all of which practi-
cally amount to the requirement that there shall be a great-
er rapidity, regularity, and security in furnishing the neces-
sary 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 rapid-
ity, 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 propor-
tional 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 wnich 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 produc-
tion. 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 spin-
nery, would be more expensive than the storing up of a
large supply for a long time when the price of transporta-
tion 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 immedi-
ate 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 inde-

162 Capital.

pendence from the hazards of the sale of yarn for the con-
tinuous 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 agricul-
ture.

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 in-
stance, 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 por-
tions 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 re-
quired for, say, a whole nation during the period of one
year decreases to the extent that the means of transporta-
tion 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 in-
creased and the quantity of the cotton supply to be held in
storage on an average decreases. The same effect is pro-
duced by the development of the world-market and thus of
the multiplication of the sources of supply of the same arti-
cles. 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 gen-
eral form of commodities on the basis of capitalist produc-
tion, and to the extent that the scale and scope of this pro-

The Expenses of Circulation. 163

duction 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 commodi-
ties, compared to other modes of production. And all com-
modities, 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 remain-
ing 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 com-
pared 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 im-
mediate 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 prod-
ucts 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 pro-
portionately. 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

164 Capital.

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 t"he metamorphoses incidental to it,
which the product must undergo in the process of circula-
tion.

Whatever may be the social form of the supply of prod-
ucts, its preservation requires an outlay for buildings, stor-
age 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 rela-
tive 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 re-
gard to the fact whether the existence of the social product
in the form of a commodity-supply is due merely to the so-
cial form of production, to the commodity-form and its
metamorphoses, or whether we regard the commodity-sup-
ply merely as a special form of the supply of products, a
supply common to all societies, though not always in the
form of a commodity-supply, which is a form of the sup-
ply of products belonging to the process of circulation.

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

If the capitalist has converted the capital advanced by
him for means of production and labor-power into a prod-
uct, 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 inter-
rupted. 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

The Expenses of Circulation. 165

were unsalable for six months, and their preservation dur-
ing that period did not only make so and so much of my
capital unproductive, but also cost me so much extra-ex-
penses." "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 proba-
bly 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, wheth-
er 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 com-
modities 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 com-
modities. Even if the capitalist holds his goods back inten-
tionally, 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. In-
asmuch, 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 capi-
tal for a longer or shorter time in the form of a commod-
ity; 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 a 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
a3 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 involun-
tary, that is to say whether the producer accumulates a sup-

166 Capital.

ply intentionally or whether his product forms a supply in '
consequence of the resistance offered to its sale by the con-
ditions 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 independ-
ent 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 com-
modity-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 contin-
ual 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 de-
layed 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 calcu-
lated 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 contin-
ually dissolved. This renewal cannot come from anywhere
in the last instance than from production, from a new sup-
ply 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 whole-

The Expenses of Circulation. 167

saler to the retailer, changes merely the aspect, not the na-
ture 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 produc-
tively or individually. The producer tries to keep a supply
corresponding to his average demand, in order to be some-
what 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. Tne continuity and regularity of the process of cir-
culation, and therefore of the process of reproduction, which
includes the circulation, is safeguarded only by the forma-
tion of a supply.

It must be remembered that C — M' may have been trans-
acted 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 in-
dividual commodity or as a part of social capital, it is im-
material 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 ex-
penses 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.

168 Capital

The circulation of commodities is normal only to the ex-
tent that the formation of a commodity-supply is its prem-
ise 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 cir-
culation refuse to give space to the succeeding wave of so
that the reservoirs are overstocked, the commodity-sup-
ply 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 capital-
ist 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 metamor-
phosis 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 com-
modities he has sold to merchants may be arrested. If the
size of production and consumption increase, other condi-
tions 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 expenses of the formation of the supply consist (1)
of quantitative losses of the mass of the product (for in-
stance, 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 conservation of the supply.

The Expenses of Circulation. 169

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 (in-
cluding the labor employed by it) belongs to the dead ex-
penses 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 labor-
er. 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 prod-
ucts, 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 prod-
ucts without a circulation of commodities, or even with-
out a direct exchange of products. A house which is sold
by A to B does not wander from one place to another, al-
though it circulates as a commodity. Movable commodity-
values, such as cotton or iron ore, remain in the same ware-
house at a lime when they are passing through dozens of
circulation processes, when they are bought and resold by
speculators." 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 capital-
ist production appears as a cause of expenses of circula-

17 Storch calls this circulation factice.

170 Capital.

tion, this special form does not alter the nature of the prob-
lem.

Quantities of products are not increased by transporta-
tion, neither is the eventual alteration of their natural quali-
ties, 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 card-
ing 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 consump-
tion. 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 mate-
rialized and subjective labor required for the transportation
of the commodities over a certain distance, the greater is
the productivity of labor, and vice versa.18

18 Ricardo quotes Say, who considers it one of the blessings of com-
merce that it increases the price, or the value, of the products by trans-
portation. "Commerce," writes Say, "enables us to obtain a commodity

The Expenses of Circulation. 171

The absolute magnitude of the value which the trans-
portation 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 condi-
tions remaining the same, is directly proportional to their
volume and weight. But there are many modifying cir-
cumstances. 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, explo-
siveness of the articles. In this department, the railroad mag-
nates show a greater talent for inventing fantastic species
than botanists and zoologists. The classification of the arti-
cles on English railroads fills volumes and rests in general on
the tendency of transforming the many-sided natural quali-
ties 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 with-
in 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 any-
thing is broken, the railway management does not pay for

at its original place of production and to transport it to another place
for consumption ; it enables us, therefore, to increase the value of com-
modities by .the entire difference between their price at the first and that
at the second place." Ricardo remarks with reference to this : "True,
but how is the additional value given to it? By adding to the cost of pro-
duction, first, the expenses of conveyance, secondly, the profit on the
advances of capital made by the merchant. The commodity is only more
valuable, for the same reason that every other commodity may become
more valuable, because more labor is expended on its production and
conveyance before it is purchased by the consumer. This must not be
mentioned as one of the advantages of commerce." (Ricardo, Principles
of Political Economy, 3rd ed., London, 1821, pp. 309 310.)

172 Capital.

it."19 The fact that the relative magnitude of the value added
by the cost of transportation to the articles is inversely pro-
portional 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 de-
velopment of the means of transportation and communica-
tion, 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 commodi-
ties, 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.

19 Royal Commission of Railways, p. 31, No.

630.

The Period and Number of Turn-Overs. 173

PART II
The Turn-Over of Capital.

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 mo-
ment 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 com-
modities. 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 re-
turn of capital to this money-form is plainly visible in
M...M'. But the same takes place in the second formula.
For the startiiig 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 ad-

174 Capital.

vanced 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 formulas (I) 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 reproduc-
tion is expressed as a reality, while it is only implied as a
probability in formula I. But both of these formulas dif-
fer 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 per-
formed 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 capital-
ist renews the same process in the same form P. If accumu-
lation 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 connec-
tion with the movements of the aggregate social capital. But
it is not available for the discussion of the turn-over of capi-

The Period and Number of Turn-Overs. 1 * o

tal, 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 prod-
uct.

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 con-
sider 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 commence-
ment, 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 pro-
ductive 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 re-
ceipts, which return his capital. From this point, the capi-
talist 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.

170 Capital.

As soon as the entire capital-value invested by some in-
dividual 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 metamor-
phoses in which its process of reproduction, or self -expan-
sion, 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 indi-
vidual event, constitutes its turn-over. The duration of this
turn-over is determined by the sum of its time of produc-
tion 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 ac-
celerate or retard the time of turn-over of individual capi-
tals, this time is different according to the different spheres
of investment of capitals.

Just as the working day is the natural unit for the func-
tion 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 = ? If»
for instance, the time of turn-over t is 3 months, then n
is equal to g2, or 4: in other words, capital is turned over

The Period and Number of Turn- Overs. 177

four times per year. If it is equal to 18 months then n =
\% = |, capital completes only two-thirds of its turn-over in
one year. If its time of turn-over is several years, it is com-
puted 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 orig-
inal 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.

178 Capital.

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, machin-
ery, 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 cal*
culation of averages. It is measured by the average dura-
tion of its function, from the moment that the instrument
of labor transfers its parts to the product to the moment
that it is completely spent and must be reproduced, or re-
placed 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 per-
form 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

Fixed Capital and Circulating Capital. 179

it. Their function holds them there. A certain portion of
the advanced capital-value is fixed in this form by the func-
tion of the instruments of labor in the process of produc-
tion. In the performance of this function, and thus by
*he wear and tear incidental to it, a part of the value of
tfie instruments of labor is transferred to the product, while
•mother remains fixed in the instruments of labor and thus
\n 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 trans-
ferred 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 ma-
chines 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 ihat 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 re-
mains 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

180 Capital.

other hand, all other substantial parts of the capital ad-
vanced 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 functions, 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 cir-
culating 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 speci-
mens of their kind in every new labor-process. They do not
preserve their own use-form while performing their func-
tion. 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
substances is confined to the sphere of production, has mis-
led some economists, for instance Ramsay — who also con-
founded 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, prop-
erly 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 trans-
portation 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 con-

Fixed Capital and Circulating Capital. 181

sumption, 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 some-
times 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 aux-
iliary 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 re-
tains its value. It persists as an instrument of production
and retains the form of fixed capital. An ox is fixed capi-
tal, 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 capi-
tal 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 produc-
tion yield their value to the product, that is to say the man-
ner 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 prod-
uct 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 ma-
chine, as a product, as a commodity of the machine manu-
facturer, belongs to his commodity-capital. It does not be-
come fixed capital, until it is employed productively in the
hands of its purchaser.

All other circumstances being equal, the degree of fixity

182 Capital.

increases with the durability of the means of production.
This durability determines the magnitude of the difference be-
tween the capital-value fixed in the instruments of labor and
between that part of its value which is yielded to the prod-
uct 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 em-
ployed and the capital consumed in the process of produc-
tion. As soon "as this difference has disappeared, the instru-
ment 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 instru-
ment of labor, strictly speaking, such as auxiliary substances,
raw material, partly finished articles, etc., yields and circu-
lates its value in the same way as the instruments of produc-
tion, 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 an-
other portion has been transferred to the product and cir-
culates 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 sub-
stance 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 :

Fixed Capital and Circulating Capital. 183

They make of certain qualities, embodied in the sub-
stances 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 cap-
ital 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 capi-
tal until the capitalist mode of production is introduced,
and then they become "productive capital," as shown in the
preceding part. Henceforth the distinction between instru-
ments 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 ma-
terial 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 cer-
tain 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 cer-
tain 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 ma-
terial which is held for about a year in the process of pro-
duction. All capital is held in the process of production,

184 Capital.

so long as it performs the functions of productive capital,
and so are, therefore, all elements of productive capital,
whatever may be their substantial composition, their func-
tion 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 cir-
culating capital.20

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 pro-
duction 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 instru-
ment 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 neverthe-
less be continually in the process of production, for instance,
a locomotive, a ship, beasts of burden, etc. Neither does im-
mobility in the one case bestow the character of fixed capi-
tal 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.21

The peculiar circulation of fixed capital results in a pecu-
liar turn-over. That part of value which is lost by wear

"On account of the difficulty of determining what constitutes the dis-
tinguishing mark of fixed and circulating capital, Mr. Lorenz Stein
thinks that this distinction is suitable only for lighter study.

21End of Manuscript IV, beginning of Manuscript II.

Fixed Capital and Circulating Capital. 185

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 pro-
duction, 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 ex-
ists 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.

186 Capital.

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 in-
vested in labor-power.

The analysis of the processes of labor and self-expansion
(vol. I, chap. VII) showed that these different elements be-
have 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 prod-
uct 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 imma-
terial so far as the mode of circulation and turn-over is con-
cerned. 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 pro-
duction 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 sub-
stance.

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 func-
tion daily during a period of time, in which it not only re-
produces its own daily value, but also adds a surplus-value
in excess of it to the product. We do not consider this sur-
plus-value for the moment. After labor-power has been
bought, say, for a week, and performed its function, its

Fixed Capital and Circulating Capital. 187

purchase must be continually renewed within the accus-
tomed 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 circula-
tion 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 prod-
uct— we still leave the question of surplus-value out of con-
sideration— passes with it through the two metamorphoses
belonging to the circulation, and always remains in the
process of production by means of this continual reproduc-
tion. 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 val-
ues invested in labor-power and in means of production
which are not fixed capital — that by their common charac-
teristics of turn-over constitute the circulating capital as
opposed to the fixed capital.

We have already stated that the money which the capital-
ist pays to the laborer for the use of his labor-power is but
the form of the general equivalent for the means of subsist-
ence 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 ques-
tion 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 subsist-
ence of the laborer, but his active labor-power. The capital-
ist 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

188 Capital.

his labor-power, to keep alive, just as the capitalist converts
a part of the surplus-value realized by the sale of commodi-
ties 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 under-
standing that he shall receive a part of this price in means
of production. This changes merely the form of the pay-
ment, 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 com-
modities and on that of the capitalist as a seller of commod-
ities ; 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 commodi-
ty 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 capi-
tal. 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 circulat-
ing 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

Fixed Capital and Circulating Capital. 189

from money into elements of production. They are with-
drawn 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 invest-
ed in them must be repeated in shorter periods. This con-
tinual reproduction is promoted by the continuous conver-
sion 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 con-
cerned, 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 sur-
plus-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 instance, 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 turn-
overs of the capital-value employed in the process of produc-
tion, 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 participa-
tion of these elements in the production of value, nor to their
characteristic role in the process of self-expansion. The dif-
ference in the transfer of value to the product — and there-
fore 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 ex-
ists, 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.

190 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 cir-
culating 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 circulat-
ing parts of productive capital under the head of circulating
capital. Money-capital and commodity-capital are indeed
circulation capital as distinguished from productive capi-
tal, but they are not circulating capital as opposed to fixed
capital.

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

3. The value invested in the fixed part of productive
capital is advanced in a lump-sum for the entire period of
employment of that part of the instrument of labor which
constitutes the fixed capital. Hence this value is thrown
into the circulation by the capitalist all at one time. But
it is withdrawn from the circulation only in portions cor-

Fixed Capital and Circulating Capital. 191

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

4. The elements of circulating capital are as continually
engaged in the process of production — provided it is to be
uninterrupted — as the elements of fixed capital. But the
elements of circulating capital held in this condition are
continually reproduced in their natural form (the instru-
ments of production by other specimens of the same kind,
and labor-power by renewed purchases) while in the case
of the elements of fixed capital, neither the substance has
to be renewed during their employment, nor the purchases.
There are always raw and auxiliary materials in the proc-
ess of production, but always new specimens of the same
kind, whenever the old elements have been consumed in
the creation of the finished product. Labor-power is like-
wise always in the process of production, but only by means

192 Capital. .

of ever new purchases, and frequently with changed indi-
viduals. But the same identical buildings, machinery, etc.,
continue their function during repeated turn-overs of the
circulating capital in the same repeated processes of produc-
tion.

77. Composition, Reproduction, Repair, and Accu-
mulation of Fixed Capital.

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

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

Fixed Capital and Circulating Capital. 193

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

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

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

Tubular bridges in their present form will not be renewed,
writes W. P. Adams in his "Roads and Rails," London,
1862. Ordinary repairs of them, removal and replacing of
single parts, are not practicable. (There are now better
forms for such bridges.) The instruments of labor are
largely modified by the constant progress of industry.
Hence they are not replaced in their original, but in their
modified form. On the one hand, the quantity of the fixed
capital invested in a certain natural form and endowed
with a certain average vitality in that form constitutes one

22The quotations marked R. C. are from the work: Royal Commis-
sion of Railways. Minutes of Evidence taken before the commissioners.
Presented to both houses of Parliament, London, 1867. The questions
and answers are numbered, as indicated above.

194 Capital.

reason for the gradual pace of the introduction of new
machinery, etc., and therefore an obstacle to the rapid gen-
eral introduction of improved instruments of labor. On
the other hand, competition enforces the introduction of
new machinery before the old is worn out, especially in the
case of important modifications. Such a premature repro-
duction of the instruments of labor on a large social scale is
generally enforced by catastrophes or crises.

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

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

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

The fixed capital consists in part of homogeneous ele-
ments, which do not, however, last the same length of time,
but are renewed from time to time and piecemeal. This is
true, for instance, of the rails in railway stations, which must
be replaced more frequently than those of the remainder of
the track. It also applies to the ties, which for instance on
the Belgian railroads in the fifties had to be renewed at the
rate of 8 per cent, according to Lardner, so that all the ties
were renewed in the course of 12 years. Hence we have
here the following proposition : A certain sum is advanced
for a certain kind of fixed capital for, say, ten years. This
expenditure is made at one time. But a certain part of this
fixed capital, the value of which has been transferred to the

Fixed Capital and Circulating Capital. 195

value of the product and converted with it into money, is
bodily renewed every year, while the remainder persists in
its original natural form. It is this advance in one sum
and the reproduction in natural form by small degrees,
which distinguishes this capital in the role of fixed from
circulating capital.

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

With regard to the gradual extension of the business in the
course of the partial renewal, we make the following re-
marks: Although we have seen that the fixed capital con-
tinues to perform its functions in the process of production
in its natural state, a certain part of its value, proportion-
ate to the average wear and tear, has circulated with the prod-
uct, has been converted into money, and forms an element
in the money reserve fund intended for the renewal of the
capital pending its reproduction in the natural form. This
part of the value of fixed capital transformed into money
may serve to extend the business or to make improvements
in machinery with a view to increasing the efficiency of
the latter. Thus reproduction takes place in larger or
smaller periods of time, and this is, from the standpoint of
society, reproduction on an enlarged scale. It is extensive
expansion, if the field of production is extended ; it is inten-
sive expansion, if the efficiency of the instruments of produc-
tion is increased. This reproduction on an enlarged scale
does not result from accumulation — not from the transform-
ation of surplus-value into capital — but from the reconver-
sion of the value which has detached itself in the form of
money from the body of the fixed capital and has resumed
the form of additional, or at least of more efficient, fixed
capital of the same kind. Of course, it depends partly on
the specific nature of the business, to what extent and in
what proportion it is capable of such expansion, and to what

196 Capital.

amount, therefore, a reserve-fund must be collected, in order
to be invested for this purpose ; also, what period of time is
required, before this can be done. To what extent, further-
more, improvements in the details of existing machinery
can be made, depends, of course, on the nature of these im-
provements and the construction of the machine itself. That
this is well considered from the very outset in the construc-
tion of railroads, is apparent from a statement of Adams
to the effect that the entire construction should follow the
principle of a beehive, that is to say, it should have a faculty
for unlimited expansion. All oversolid and preconceived
symmetrical structures are impracticable, because they must
be torn down in the case of an extension. (Page 123 of
the above-named work.)

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

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

The fixed capital requires special expenditures for its
conservation. A part of this conservation is provided by
the labor-process itself ; the fixed capital spoils, if it is not
employed in production. (See vol. I, chap. VIII; and chap.
XV, on wear and tear of machinery when not in use.) The
English law therefore explicitly regards , it as a waste, if
rented land is not used according to the custom of the coun-
try. (W. A. Holdsworth, barrister at law. "The Law of

Fixed Capital and Circulating Capital. 197

Landlord and Tenant." London, 1857, p. 96.) The con-
servation due to use in the labor-process is a natural
and free gift of living labor. And the conservating
power of labor is of a twofold character. On the one hand,
it preserves the value of the materials of labor, by transfer-
ing it to the product, on the other hand it preserves the
value of the instruments of labor, provided it does not trans-
fer this value in part to the product, by preserving their use-
value by means of their activity in the process of production.

The fixed capital requires also a positive expenditure of
labor for its conservation. The machinery must be cleaned
from time to time. This is additional labor, without which
the machinery would become useless ; it is labor required to
ward off the injurious influences of the elements, which are
inseparable from the process of production ; it is expended
for the purpose of keeping the machinery in perfect' work-
ing order. The normal life-time of fixed capital is, of course,
so calculated that all the conditions are fulfilled under which
it can perform its functions normally during that time, just
as we assume in placing a man's average life at 30 years that
he will wash himself. Nor is it here a question of reproduc-
ing the labor contained in the machine, but of labor which
must be constantly added in order to keep it in working
order. It is not a question of the labor performed by the
machine itself, but of labor spent on it in its capacity of raw
material, not of an instrument of production. The capital
expended for this labor belongs to the circulating capital,
although it does not enter into the actual labor-process to
which the product owes its existence. This labor must be
continually expended in production, hence its value must
be continually replaced by that of the product. The capital
invested in it belongs to that part of circulating capital,
which has to cover the general expenses and is distributed
over the produced values according to an annual average.
We have seen that in industry, properly so-called, this labor
of cleaning is performed gratis by the working men during
pauses, and thus frequently during the process of production
itself, and many accidents are due to this custom. This
labor is not counted in the price of the product. The con-

198 Capital.

sumer receives it free of charge to this extent. On the othei
hand, the capitalist thus receives the conservation of his
machinery for nothing. The laborer pays this expense in
his own person, and this is one of the mysteries of the self-
preservation of capital, which constitute in point of fact a
legal claim of the laborer on the machinery, on the strength
of which he is a part-owner of the machine even from the
legal standpoint of the bourgeoisie. However, in various
branches of production, in which the machinery must be
taken out of the process of production for the purpose of
cleaning, and where this labor of cleaning cannot be per-
formed between pauses, for instance in the case of locomo-
tives, this labor of conservation counts with the running ex-
penses and is therefore an element of circulating capital. A
locomotive must be taken to the shop after a maximum of
three days' work in order to be cleaned; the boiler must cool
off before it can be washed out without injury. (R. C,
No. 17,823.)

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

The injuries to which individual parts of the machinery
are exposed are naturally accidental, and so are therefore the
necessary repairs. Nevertheless two kinds of repairs are to
be distinguished in the general mass, which have a more oi

Fixed Capital and Circulating Capital. 199

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

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

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

On the other hand it is also evident that the value added
by this extra expenditure of capital and labor cannot be
transferred to the price of the products simultaneously as it
is made. For instance, a manufacturer of yarn cannot sell
his yarn dearer this week than last, merely because one of
his machines broke a wheel or tore a belt this week. The
general expenses of the spinning industry have not been

200 Capital.

changed by this accident in some individual factory. Here
as in all determinations of value, the average decides. Ex-
perience teaches the average extent of such accidents and of
the necessary labors of conservation and repair during the
average life-time of the fixed capital invested in a given
branch of industry. This average expense is distributed
over the average life-time. It is added to the price of the
product in corresponding aliquot parts and hence also repro-
duced by means of its sale.

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

The manner of bookkeeping does not, of course, change
in any way the actual condition of the things of which an
account is kept. But it is important to note that it is the
custom of many businesses to class the expenses of repairing
with the actual wear and tear of the fixed capital, in the fol-
lowing manner: Take it that the advanced fixed capital is
10,000 pounds sterling, its life-time 15 years; the annual
wear and tear 666 and 2/3 pounds sterling. But the wear
and tear is calculated at only ten years, in other words, 1,000
pounds sterling are added annually for wear and tear of the
fixed capital to the prices of the produced commodities,

Fixed Capital and Circulating Capital. 201

instead of 60G and 2/3 pounds sterling. Thus 333 and 1/3
pounds sterling are reserved for repairs, etc. (The figures
10 and 15 are chosen at random.) This amount is spent on
an average for repairs, in order that the fixed capital may
last 15 years. This calculation does not alter the fact that
the fixed capital and the additional capital invested in repairs
belong to different categories. On the strength of this mode
of calculation it was, for instance, assumed that the lowest
estimate for the consefvation and reproduction of steamships
was 15 per cent, the time of reproduction therefore equal
to 6 2/3 years. In the sixties, the English government in-
demnified the Peninsular and Oriental Co. for it at the rate
of 16 per cent, making the time of reproduction equal to
G 1/3 years. On railroads, the average life-time of a locomo-
tive is 10 years, but the wear and tear including repairs is
assumed to be 12 1/2 per cent, reducing the life-time down
to 8 years. In the case of passenger and freight cars, 9 per
cent are estimated, or a life-time of 11 1/9 years.

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

202 Capital

terial by new, or to make up for the inevitable deprecia*
tion incidental to the lapse of time and normal usage.

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

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

In the determination of the wear and tear and of the cost
of repairing, according to the social average, there are nec-
essarily great discrepancies, even for investments of capi-
tal of equal size and in equal conditions, in the same branch
of production. In practice, a machine lasts in the case of
one capitalist longer than its average time, while in the
case of another it does not last so long. The expenses of
the one for repairs are above, of the other below the average,
etc. But the addition to the price of the commodities result-
ing from wear and tear and from repairs is the same and is
determined by the average. The one therefore gets more
out of this additional price than he really spent, the other
less. This as well as other circumstances which produce dif-

Fixed Capital and Circulating Capital. 203

ferent gains for different capitalists in the same branch of
industry with the same degree of the exploitation of labor-
power renders an understanding of the true nature of sur-
plus-value difficult.

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

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

204 Capital.

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

"To repair means to renew ; for me there is no such word
as 'replacement' ; . . . once that a railway company has
bought a car or a locomotive, they ought to keep them in
such repair that they will run for all eternity (17,784). We
calculate 8 1/2 d. per English freight mile for locomotive ex-
penses. Out of this 8 1/2 d. we maintain the locomotives for-
ever. We renew our machines. If you want to buy a ma-
chine new, you spend more money than is necessary. . . .
You can always find a few wheels, an axle, or some other
part of an old machine in condition to be used, and that
helps to construct cheaply a machine which is just as good
as an entirely new one (17,790). I now produce every week
one new locomotive, that is to say, one that is as good as
new, for its boiler, cylinder, and frame are new." (17,843.)
Archibald Sturrock, locomotive superintendent of Great
Northern Railway, in R. C, 1867.

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

Fixed Capital and Circulating Capital. 205

production ; that which must be done at one time for the
track, takes place for the rolling stock gradually, from year
to year. Its existence is perennial, it is in process of contin-
uous rejuvenation.

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

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

London & North Western £370

Midland £225

London & South Western £257

Great Northern £360

Lancashire & Yorkshire £377

South Eastern £263

Brighton £266

Manchester & Sheffield £200

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

In certain cases, the wear and tear, and therefore its re-
placement, is practically infinitesimal so that nothing but
expenses for repairs have to be charged. The statements of
Lardner relative to works of art, which are given in sub-
stance below, also apply in general to all solid works, docks,
canals, iron and stone bridges, etc. According to him, pages

206 Capital.

38 and 39 of his work, the wear and tear which is the re-
sult of the influence of long periods of time on solid works,
is almost imperceptible in short spaces of time; after the
lapse of a long period, for instance of centuries, such influ-
ences will nevertheless require the partial or total renewal
of even the most solid structures. This imperceptible wear
and tear, compared to the more perceptible in other parts
of the railroad, may be likened to the secular and periodical
inequalities in the motions of world-bodies. The influence
of time on the more massive structures of a railroad, such
as bridges, tunnels, viaducts, etc., furnishes illustrations of
that which might be called secular wear and tear. The more
rapid and perceptible depreciation, which is compensated by
repairs in shorter periods, is analogous to the periodical in-
equalities. The compensation of the accidental damages,
such as the outer surface of even the most solid structures
will suffer from time to time, is likewise included in the
annual expenses for repairs; but apart from these repairs,
age does not pass by such structures without leaving its
marks, and the time must inevitably come, when their con-
dition will require a new structure. From a financial and
economic point of view, this time may indeed be too far off
to be taken into practical consideration.

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

Although, as we have seen, a greater part of the money
returning for the compensation of the wear and tear of the
fixed capital is annually, or even in shorter periods, recon-
verted into its natural form, nevertheless every capitalist re-
quires a sinking fund for that part of his fixed capital, which
becomes mature for complete reproduction only after the
lapse of years and must then be entirely replaced. A con-
siderable part of the fixed capital precludes gradual repro-
duction by its composition. Besides, in cases where the re-
production takes place piecemeal in such a way that every
now and then new pieces are added in compensation for

Fixed Capital and Circulating Capital. 20?

worn-out ones, a previous accumulation of money is neces-
sary to a greater or smaller degree, according to the specific
character of the branch of production, before replacement
can proceed. It is not any arbitrary sum of money which
suffices for this purpose ; a sum of a definite size is required
for it.

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

208 Capital.

CHAPTER IX.

THE TOTAL TURN-OVER OF ADVANCED CAPITAL.
CYCLES OF TURN-OVER.

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

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

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

The circulating capital entering into the process of pro-
duction transfers its entire value to the product and must,
therefore, be continually reproduced in its natural form by
the sale of the product, if the process of production is to
proceed without interruption. The fixed capital entering
into the process of production transfers only a part of its
value (the wear and tear) to the product and continues de-
spite this wear and tear, to perform its function in the proc-
ess of production. Therefore it need not be reproduced until
after the lapse of intervals of various duration, at any rate
not as frequently as the circulating capital. This necessity of
reproduction, this term of reproduction, is not only quantita-
tively different for the various constituent parts of fixed capi-
tal, but, as we have seen, a part of the perennial fixed capi-

Total Turn-Over of Advanced Capital. 209

tal may be replaced annually or at shorter intervals and
added in natural form to the old fixed capital. In the case
of fixed capital of a different composition, the reproduction
can take place only all at once at the end of its life-time.

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

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

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

210 Capital.

Take it that the fixed capital is 80,000 pounds sterling,
its period of reproduction 10 years, so that 8,000 pounds of
this capital annually return to their money-form, or com-
plete one-tenth of its turn-over. Let the circulating capital
be 20,000 pounds sterling, and its period of turn-over be five
times per year. The total capital would then be 100,000
pounds sterling. The turned over fixed capital is 8,000
pounds, the turned-over circulating capital five times 20,-
000, or 100,000 pounds sterling. Then the capital turned
over during one year is 108,000 pounds sterling, or 8,000
pounds more than the advanced capital. 1 + 2-25 of the
capital have turned over.

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

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

Total Turn-Over of Advanced Capital. 211

tiiis cycle is determined by the life-time, in other words
by the period of reproduction, or turn-over of the invested
fixed capital.

To the same extent that the volume of the value and the
duration of the fixed capital develop with the evolution of
the capitalist mode of production, does the life of industry
and of industrial capital develop in each particular invest-
ment into one of many years, say of ten years on an average.
If the development of fixed capital extends the length of this
life on one side, it is on the other side shortened by the con-
tinuous revolution of the instruments of production, which
likewise increases incessantly with the development of capi-
talist production. This implies a change in the instru-
ments of production and the necessity of continuous replace-
ment on account of virtual wear and tear, long before they
are worn out physically. One may assume that this life-
cycle, in the essential branches of great industry, now
averages ten years. However, it is not a question of any
one definite number here. So much at least is evident that
this cycle comprising a number of years, through which
capital is compelled to pass by its fixed part, furnishes a
material basis for the periodical commercial crises in which
business goes through successive periods of lassitude, average
activity, overspeeding, and crisis. It is true that the periods
in which capital is invested are different in time and place.
But a crisis is always the starting point of a large amount
of new investments. Therefore it also constitutes, from the
point of view of society, more or less of a new material basis
for the next cycle of turn-over. 22a

5. On the mode of calculation of the turn-overs, Scrope,
an American economist, says in substance the following in
his work on political economy (published by Alonzo Pot-
ter, New York, 1841, pages 141 and 142) : In some lines
of business the entire capital advanced is turned over, or
circulated, several times inside of a year. In some others,
one portion is turned over more than once a year, another

22a "Municipal production is bound to a cycle of days, agricultural
production to one of years." (Adam G. Mueller, Die Elemente der
Staatskunst. Berlin, 1809, II, page, 178.) This is the naive conception
tt industry and agriculture held by the romantic school.

212 Capital.

portion not so often. It is the average period required by
the entire capital for the purpose of passing through the
hands of the capitalist, or in order to turn over once, which
must furnish the basis on which the capitalist figures his
profits. Take it, that a certain individual engaged in a cer^
tain business has invested half of his capital for buildings
and machinery, which are replaced once in every ten years ;
one-quarter for tools, etc., which are replaced in two years;
and the last quarter, invested in wages and raw materials,
which quarter is turned over twice per year. Let his entire
capital be $50,000. Then his annual expenditure will be:

50,000-2, or $25,000 in 10 years, or $2,500 in one year.
50,000-4, or $12,500 in 2 years, or $6,250 in one year.
50,000-4, or $12,500 in y2 year, or $25,000 in one year.

$33,750 in one year.

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

12,500-10 1,250

12,500 12,500

25,000X2 50,000

Turned over in one year 63,750

6. Real and apparent differences in the turn-over of the
various component parts of capital. Scrope also says in the
same place that the capital invested by a manufacturer,
landlord, or merchant in wages circulates most rapidly, as
it is probably turned over once a week, if he pays his labor-
ers weekly, by the weekly receipts from his sales or from
paid bills. The capital invested in raw materials and fin-
ished supplies does not circulate so fast; it may be turned
over two or four times per year, according to the time pass-
ing between the purchase of the one and the sale of the other,
provided that the capitalist buys and sells on equal terms

Total Turn-Over of Advanced Capital. 213

of credit. The capital invested in tools and machinery
circulates still more slowly, as it is turned over, that is to
say consumed and circulated, probably on an average of
once in five or ten years ; many tools, however, are used up
in one single series of manipulations. The capital invested
in buildings, for instance, in factories, stores, storerooms,
barns, streets, irrigation works, etc., circulates almost imper-
ceptibly. But of course these structures are likewise worn
out just the same as the others, so long as they serve in
production, and must be replaced, in order that the pro-
ducer may be able to continue his operations. They are
merely consumed and reproduced more slowly than the
others. The capital invested in them is probably turned
over in twenty or fifty years. So far Scrope. —

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

In the second place, it is not only the entire new value
added to the product by means of one week's labor which
enters completely into the weekly product, but also the value
of the raw and auxiliary materials consumed by the weekly
product. These values circulate with the product contain-
ing them. They assume the form of money by the sale of the
product and must be reconverted into the same elements of
production. This applies as well to the labor-power as to
the raw and auxiliary materials. But we have already
seen (chapter IV, 2, A) that the continuity of the produc-

214 Capital.

tion requires a supply of means of production, different for
various branches of industry, and different within one and
the same branch for the various component parts of the cir-
culating capital, for instance, for coal and cotton. Hence,
although these materials must be continually replaced in
their natural form, they need not be bought continually.
How often new purchases of them must be made, depends
on the magnitude of the available supply, on the times it
takes to use it up. In the case of the labor-power, there is
no such storing of a supply. The reconversion into money
of the capital invested in labor-power goes hand in hand
with that of the capital invested in raw and auxiliary mate-
rials. But the reconversion of the money, on one side into
labor-power, on the other into raw materials, proceeds sep-
arately on account of the special terms of purchase and pay-
ment of these two constituents of productive capital, one of
them being bought as a productive supply for long terms,
the other, labor-power, for shorter terms, for instance, for
terms of one week. On the other hand, the capitalist must
keep a supply of finished commodities besides a supply of
materials for production. Apart from the difficulties of sell-
ing, etc., a certain quantity must be produced, say for in-
stance, on order. While the last portion of this quantity
is being produced, the finished product is waiting in storage
until the order can be completely filled. Other differences
in the turn-over of circulation capital arise as soon as some
of its individual elements must stay in some preliminary
stage of the process of production, such as the drying of
wood, etc., longer than others.

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

Theories of Fixed and Circulating Capital. 215

CHAPTER X.

THEORIES OF FIXED AND CIRCULATING CAPITAL.
THE PHYSIOCRATS AND ADAM SMITH.

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

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

216 Capital.

entirely replaced annually, that of the other only partially
and in longer intervals.23

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

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

As a matter of fact, the ways in which value may be em-
ployed so as to perform the functions of capital and yield

23 Compare with regard to Quesnay the Analyse du Tableau Econom-
ique in Physiocrates, edition of Daire, part I, Paris, 1846. There we
read, for instance, -that the annual advances consist of the expenses in-
curred annually for the work of cultivation ; these advances must be
distinguished from the primitive ones, which form the funds for the es-
tablishment of the farming business." (Page 59.) In the works of the
later physiocrats, these advances are sometimes termed capital, for in-
stance by Dupont de Nemours in his Oriyine et Progres <Tune Science
Nouvelle, 1767, Daire edition, I, page 291, where he speaks of "capital
or advances," furthermore by Le Trosne : "As a result of the longer or
shorter duration of the employment of manual labor, a nation possesses
a considerable fund of wealth independent of its annual reproduction,
and this fund is a capital accumulated in long periods and originally
paid by productive acts, which are always continued and increased."
(Daire, II, page 928.) Turgot employs the term capital more regularly
for advances, and identifies the advances of the manufacturers still more
with those of the tenants of land. (Tufgat, Reflexions \sur la Formation
et la Distribution des Richesses, 1766.)

Theories of Fixed and Circulating Capital. 217

surplus-value to its owner are as different and varied as the
spheres of investment of capital. It is a question of the dif-
ferent spheres of production in which capital may be in-
vested. If put in this way, the question implies still more.
It includes the other question of the way in which value,
even if it is not employed as productive capital, may per-
form the functions of capital for its owner, for instance, as
interest-bearing capital, merchants' capital, etc. At this
point we are already far away from the real object of the an
alysis, that is to say from the question: How does the di-
vision of productive capital into its various elements affect
their periods of turn-over, leaving out of consideration their
different spheres of investment?

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

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

Or does he mean to say that capital employed in the pro-
duction of commodities and their sale at a profit must again

218 Capital.

be sold after its transformation into commodities and must
pass in the first place from the possession of the seller into
that of the buyer, and in the second place from its com-
modity-form into the money-form, so that it is of no use to
its owner so long as it retains the same form in his hands?
In that case, the problem amounts to this : The same capi-
tal-value, which formerly performed the functions of pro-
ductive capital in a form typical of the process of produc-
tion, now performs those of commodity-capital and money-
capital in forms typical of the process of circulation, where it
is no longer either fixed or circulating capital. And this ap-
plies equally to those elements of value which are added by
means of raw and auxiliary material, in other words to cir-
culating capital, and to those which are added by the con-
sumption of instruments of production, or to fixed capital.
We do not get any nearer to the distinction between fixed
and circulating capital in this way.

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

That which Adam Smith here calls circulating capital,
is a thing which I shall call capital of circulation, that is
to say, capital in a form characteristic of the process of cir-
culation, changes of form due to exchange (a change of
substance and of hands), in other words, commodity-capital
and money-capital, as distinguished from the form of pro-
ductive capital, which is characteristic of the process of pro-
duction. These are not special divisions made by the indus-
trial capitalist of his capital, but different forms assumed
and discarded by the advanced capital-value during its
course of life, in ever renewed cycles. The great backward
step of Adam Smith as compared with the physiocrats is
that he does not discriminate between these forms and
those which arise in the circulation of capital-value through
its successive metamorphoses while it exists in the form of

Theories of Fixed and Circulating Capital. 219

productive capital, and which are due to different ways in
which the various elements of productive capital take part
in the formation of values and transfer their own value to
the products. We shall see the consequences of confounding
these fundamentals, productive capital and capital in the
sphere of circulation (commodity-capital and money-capital)
on one side, and fixed and circulating capital on the other.
The capital-value advanced in fixed capital is as much cir-
culated by the product as that which has been advanced
in the circulating capital, and both are equally transformed
into money-capital by the circulation of commodity-capital.
The difference arises only from the fact that the value of
fixed capital circulates piece-meal and is, therefore, repro-
duced in the same way in shorter or longer intervals in its
natural form.

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

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

But it is quite incomprehensible how profit should arise
by the transformation of money and commodities, by the
mere exchange of one of these forms for the other. And an
explanation becomes impossible for Adam Smith, because
he starts out with merchants' capital which moves only in

220 Capital

the sphere of circulation. We shall return to this later.
Let us first hear what he has to say about fixed capital.

"Secondly, it (capital) may be employed in the improve-
ment of land, in the purchase of useful machines and in-
struments of trade, or in such like things as yield a revenue
or profit without changing masters, or circulating any
further. Such capitals, therefore, may very properly be
called fixed capitals. Different occupations require very dif-
ferent proportions between the fixed and circulating capi-
tals employed in them Some part of the capital

of every master artificer or manufacturer must be fixed in
the instruments of his trade. This part, however, is very

small in some, and very great in others The far

greater part of the capital of all such master artificers (such
as tailors, shoemakers, weavers) however, is circulated, either
in the wages of their workmen, or in the price of their mate-
rials, and to be repaid with a profit by the price of the
work."

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

Theories of Fixed and Circulating Capital. 221

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

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

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

222 Capital.

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

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

On the other hand, let us look at some other industry,
which utilizes raw materials that form the substance of its
product, and auxiliary materials that enter bodily into the
product, instead of only so far as their value is concerned,
as in the case of coal for fuel. Simultaneously with the
product, for instance with the yarn, the raw material com-
posing it, the cotton, likewise changes masters, and passes
from the process of production to that of consumption. But

Theories of Fixed and Circulating Capital. 225

so long as the cotton performs the function of an element
of productive capital, its owner does not sell it, but manip-
ulates it for the purpose of making it into yarn. He does
not take his hand from it. Or, to use Smith's crudely er-
roneous and trivial terms, he does not make any profit by
parting with it, by its changing masters, or by circulating
it. He does not permit his materials to circulate any more
than his machines. They are fixed in the process of produc-
tion, the same as the spinning machines and the factory-
buildings. Indeed, a part of the productive capital in the
form of coal, cotton, etc., must be just as continually fixed
as that in the form of instruments of labor. The difference
is only that the cotton, coal, etc., required for the process
of production, say, for one week, is always entirely con-
sumed in the manufacture of the weekly product, so that new
specimens of cotton, coal, etc., must be supplied; in other
words, these elements of productive capital consist contin-
ually of new specimens of the same species, identical only
so far as the species is concerned, while the same individual
spinning machine, the same individual factory-building,
continue their participation in a whole series of weekly pro-
ductions without being replaced by new specimens of their
kind. All the elements of productive capital constituting
its parts must be continually fixed in the process of produc-
tion, for it cannot proceed without them. And all the ele-
ments of productive capital, whether fixed or circulating,
are equally distinguished as productive capital from capital
of circulation, that is to say, commodity-capital and money-
capital.

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

224 Capital.

Smith confounds different definitions, when he says of
circulating capital as compared to fixed: "The capital em-
ployed in this manner yields no revenue or profit to its em-
ployer, while it either remains in his possession or continues
in the same shape." He places the merely formal metamor-
phosis of the commodity, which the product in the form of
commodity-capital, undergoes in the sphere of circulation
and which brings about the change of masters of the com-
modities, on the same level with the bodily metamorphosis,
which the different elements of productive capital undergo
during the process of production. He unceremoniously
jumbles together the transformation of commodities into
money, of money into commodities, or purchase and sale,
with the transformation of elements of production into
products. His illustration for circulating capital is mer-
chants' capital which is transformed from commodities into
money and from money into commodities — the metamor-
phosis C — M — C belonging to the circulation of commodi-
ties. But this metamorphosis within the circulation signi-
fies for the industrial capital in action that the commodi-
ties into which the money is retransformed are elements of
production (means of production and labor power), in other
words, that it renders the function of industrial capital con-
tinuous, that it makes of the process of production a contin-
uous one, a process of production. This entire metamorphosis
takes place in circulation. It is the process of circulation
which brings about the bodily transition of the commodi-
ties from one master to another. On the other hand, the
metamorphoses experienced by productive capital within
the process of production take place in the labor-process and
are necessary for the purpose of transforming the elements
of production into the desired product. Adam Smith clings
to the fact that a part of the means of production (the in-
struments of labor, strictly speaking) serve in the labor-
process (yield a profit to their master, as he erroneously ex-
presses it) without changing their natural form and wear
out only by degrees; while another part, the materials,
change their form and fulfill their duty as means of produc-
tion by virtue of this very fact. This difference in the be-
havior of the elements of productive capital in the labor-

Theories of Fixed and Circulating Capital. 225

process, however, serves only as the point of departure for the
difference between fixed capital and capital which is not fixed,
but it is not this difference itself. This is evident from the
mere fact that this different behavior is common to all
modes of production, whether they are capitalist or not.
But on the other hand, this different behavior of the sub-
stances is accompanied by a different yield of value to the
product, and this in its turn corresponds to a different re-
production of value by the sale of the product. And this is
what constitutes the difference in question. Hence capital
is not fixed capital, because it is fixed in the means of pro-
duction, but because a part of the value invested in means
of production remains fixed in them, while another part cir-
culates as a part of the value of the product.

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

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

226 Capital.

final analysis, the difference is not attributed to the process
of production or self-expansion, not to the function of
productive capital itself, but it is supposed to apply only sub-
jectively to the individual capitalist, whom one part of capi-
tal serves a useful purpose in one way, while another does
in a different way.

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

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

In mentioning the circulating capital as distinguished
from the fixed, he does not emphasize the fact, that this dis-
tinction rests on the circumstance that circulating capital
is that part of productive capital which must be fully repro-
duced by the value of the product and must therefore fully

Theories of Fixed and Circulating Capital. 227

share in its metamorphoses, while this is not so in the case
of the fixed capital. On the contrary, he jumbles it together
with those forms which capital assumes in its transition
from the sphere of production to that of circulation, that is
to say,, commodity-capital and money-capital. But both
forms, commodity-capital as well as money-capital, are bear-
ers of the value of the fixed and the circulating parts of
productive capital. Both of them are capitals of circulation,
as distinguished from productive capital, but they do not
represent circulating capital as distinguished from fixed
capital.

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

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

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

Adam Smith then gives the following illustration : "That
part of the capital of the farmer which is employed in the
implements of agriculture is a fixed, that which is employed

228 Capital.

in the wages and maintenance of his laboring servants is »
circulating capital." (Here the difference of fixed and cir-
culating capital is correctly applied as referring to the
different circulation, the turn-over of different constitu-
ent parts of productive capital.) "He makes a profit
of the one by keeping it in his own possession, and of the
other by parting with it. The price or value of his la-
boring cattle is a fixed capital" (here he is again correct
in that it is the value, not the material substance, which
determines the difference), "in the same manner as that
of the instruments of husbandry; their maintenance" (mean-
ing that of the laboring cattle) "is a circulating capital, in
the same way as that of the laboring servants. The farmer
makes his profit by keeping the laboring cattle and part-
ing with their maintenance." (The farmer keeps the fodder
of the cattle, he does not sell it. He uses it to feed the cat-
tle, while he exploits the cattle themselves as instruments of
labor. The difference is only this: The feed used for the
maintenance of the cattle is wholly consumed and must be
continually reproduced by new feed, either by means of the
products of agriculture or by their sale; while the cattle
themselves are reproduced only to the extent that each speci-
men becomes worn out.) "Both the price and the mainte-
nance of the cattle which are bought in and fattened, not
for labor, but for sale, are a circulating capital. The farmer
makes his profit by parting with them." (Every producer
of commodities, hence the capitalist producer likewise, sells
his product, the result of his process of production, but this
is not a means of constituting this product a part of either
the fixed or the circulating part of his productive capital.
The product has now rather that form, in which it is re-
leased from the process of production and compelled to per-
form the function of commodity-capital. The fattened stock
serve in the process of production as raw material, not as
instruments of labor like the laboring cattle. Hence the fat-
tened cattle enter bodily into the product, and their whole
value enters into it, just as that of the auxiliary material,
the feed, does. The fattened cattle are, therefore, a circu-
lating part of the productive capital, but they are not so,
because the sold product, these same cattle, have the same

Theories of Fixed and Circulating Capital. 229

natural form as the raw material, that is to say these cattle
when not yet fattened. This is a mere coincidence. At
the same time Adam Smith might have seen by this illus-
tration that it is not the material form of the elements of
production, but their function within the process of produc-
tion, which determines the value contained in them as a
fixed or circulating one.) "The whole value of the seed, too,
is a fixed capital Though it goes backwards and for-
wards between the ground and the granery, it never changes
masters, and therefore it does not properly circulate. The
farmer makes his profit not by its sale, but by its increase."

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

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

According to Adam Smith, raw and auxiliary materials
lose their independent form, which they carried as use-

2'SO Capital.

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

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

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

Theories of Fixed and Circulating Capital. 231

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

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

It was one of the errors following from the conception of
Smith that the capacity of fixed and circulating capital was
regarded as vested in the things themselves. The mere an-
alysis of the labor-process on his part, in book I, chapter
V, shows that the capacity of instruments of labor, materials
of labor, and products changes according to the different

232 Capital.

role played by one and the same thing in the process. The
determination of what is fixed or circulating capital, in its
turn, is based on the definite roles played by these elements
in the labor-process, and therefore also in the process of the
formation of value.

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

"... The third and last of the three portions into
which the general stock of society naturally divides itself, is
the circulating capital, of which the characteristic is, that
it affords a revenue only by circulating or changing masters.
This is composed likewise of four parts : first, of the money
. . ." (but money is never a form of productive capi-
tal, of capital performing its function in the productive pro-
cess; it is always merely one of the forms assumed by cap-
ital within its process of circulation.) . . . "secondly,
of the stock of provisions which are in the possession of the
butcher, the grazier, the farmer . . . and from the
sale of which they expect to derive a profit

Theories of Fixed and Circulating Capital. 233

Fourthly and lastly, of the work which is made up and com-
pleted, but which is still in the hands of the merchant and
manufacturer. And, thirdly, of the materials, whether
altogether rude or more or less manufactured, of clothes,
furniture, and buildings, which are not yet made up into
any of those three shapes but which remain in the hands of
the growers, the manufacturers, the mercers and drapers,
the timber-merchants, the carpenters and joiners, the brick-
makers, etc."

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

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

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

234 Capital.

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

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

On the other hand, the utility-form of a certain product
may be such that it is incapacitated for service as an element
of productive capital, either as raw material or an instru-
ment of labor. This is the case, for instance, with articles of
food. Nevertheless it is a commodity-capital for its pro-
ducer, in which the value of his fixed as well as his circulate

Theories of Fixed and Circulating Capital. 235

ing capital is incorporated; and it is the representative of
the value of either the one or the other of these two forms
according to whether the capital employed in its production
has to be reproduced in full or partially, in other words, ac-
cording to whether this capital transfers its full or its par-
tial value to the product.

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

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

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

We have just seen that, apart from money-capital, circu-
lating capital is only another name for commodity-capital.
But to the extent that labor-power circulates on the market,
it is not capital, not a form of commodity-capital. It is not
capital at all; the laborer is not a capitalist, although he
brings his commodity to market, namely his own skin. Not
until labor-power has been sold and incorporated in the pro-
cess of production, in other words, until it has ceased to cir-
culate as a commodity, does it became an element of produc-

236 Capital.

. tive capital, variable capital and the source of surplus-value,
a circulating part of productive capital so far as the turn-
over of the capital-value invested in it is concerned. Since
Smith here confounds the circulating capital with commod-
ity-capital, he cannot place labor-power under his category
of circulating capital. Hence the commodity-capital here
appears in the form of commodities which the laborer buys
with his wages, that is to say, means of subsistence. In
this form, the capital-value invested in wages is supposed to
belong to the circulating capital. That which is incorpo-
rated in the process of production is labor-power, the laborer
himself, not the means of subsistence by which the laborer
maintains himself. True, we have seen in volume I, chap-
ter XXIII, that, from the point of view of society, the repro-
duction of the laborer himself by means of his individual
consumption belongs to the process of reproduction of social
capital. But this does not apply to the individual and iso-
lated process of production which we are studying here.
The "acquired and useful abilities" which Smith mentions
under the head of fixed capital, are on the contrary ele-
ments of circulating capital, when they are abilities of the
wage-worker and have been sold by him with his labor.

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

Theories of Fixed and Circulating Capital. 237

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

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

With the exception of that part of the product which is
immediately consumed as means of production, the follow-
ing general rule applies to capitalist production : All prod-
ucts are taken to market as commodities and, therefore, cir-
culate as capital in the form of commodities, as the commo-
dity-capital of the capitalist, regardless of whether these
products must or may serve in their natural form, as use-
values, in the performance of their function as elements of
productive capital in the process of production, in other

238 Capital.

words, as means of production and, therefore, as fixed or
circulating parts of productive capital, or whether they can
serve only as means of individual, not of productive, con-
sumption. All products are thrown upon the market as
commodities; all means of production or consumption, all
elements of productive and individual consumption, must
therefore be released from the market by purchasing them as
commodities.

Of course, this truism is correct. It applies for this rea-
son to the fixed as well as the circulating elements of pro-
ductive capital, for instruments of labor as well as raw
material in all its forms. (This, moreover, is leaving aside
the fact that there are certain elements of productive cap-
ital which are furnished ready by nature and are not prod-
ucts.) A machine is bought on the market as well as cot-
ton. But this implies by no means that every fixed capital
comes originally from some circulating capital; it is only
through the confusion, on the part of Smith, of capital of
circulation with circulating capital, with capital that is not
fixed, that this erroneous conclusion is reached. And to
cap the climax, Smith refutes himself. According to him,
machines, as commodities, form a part of No. 4, the circu-
lating capital. To say that they come from the circulating
capital means that they were performing the function
of commodity-capital before they performed the func-
tion of machines, but that substantially they are derived
from themselves; so is cotton, as the circulating element of
some spinner's capital, derived from the cotton on the mar-
ket. But as for deriving fixed capital from circulating capi-
tal for the reason that labor and raw material are required
for the making of machines, as Adam Smith is doing in his
further arguments, we say that in the first place, fixed capi-
tal is also required for the making of machines, and in the
second place, fixed capital, such as machinery, is likewise
required for the making of raw materials, since the produc-
tive capital always includes instruments of labor, but not
always raw materials. He says himself immediately after-
wards : "Lands, mines, and fisheries, require all both a fixed
and circulating capital to cultivate them;" — thus he admits
that not only circulating, but also fixed capital is required

Theories of Fixed and Circulating Capital. 239

for the production of raw materials — "and" — renewed con-
fusion at this point — "their produce replaces with a profit,
not only those capitals, but all the others in society." (Page
188.) This is entirely wrong. Their produce furnishes
the raw materials, auxiliary substances, etc., for all other
branches of industry. But their value does not reproduce
the value of all other social capitals ; it reproduces merely the
value of their own capital (plus the surplus-value) . Adam
Smith is here stampeded by his recollection of the physio-
crats.

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

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

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

But products which are localized by being imbedded in
the soil, and therefore can be consumed only locally, such
as factory buildings, railroads, bridges, tunnels, wharves, etc.,
improvements of the soil, etc., cannot be bodily exported.
They are not movable. They are either useless, or they
must serve as fixed capital, in the country that produced
them, as soon as they have been sold. From the point of
view of their capitalist producer, who builds factories or
improves land for speculation and sale, these things are
forms of his commodity-capital, or, according to Adam
Smith, a form of circulating capital. But from the

240 Capital.

point of view of society, these things must finally
serve in the same country as fixed capital in some process of
production fixed by their own locality, unless they are to be
useless. This does not imply by any means that immovable
things are fixed capital of themselves. They may belong to
the fund for consumption, for instance residence houses,
and in that case they do not belong to the social capital at
all, although they are an element of the social wealth, of
which capital is only a part. The producer of these things,
to use the language of Smith, makes a profit by their sale.
In other words, circulating capital! Their user, their final
purchaser, can use them only by utilizing them in the pro-
cess of production. Therefore, fixed capital!

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

However, it does not follow that fixed capital necessarily
consists of immovable things, because the locally fixed in-
struments of labor, which cannot be detached from the soil,
must to all intents and purposes serve at some time as fixed
capital in the same country, even though they may serve as
commodity-capital for their producer and do not consti-
tute any elements of his fixed capital, which is made up of
the instruments of labor required by him for the building of
factories, railroads, etc. A ship and a locomotive produce
their effects only by motion; yet they serve as fixed capital
for the owner who uses them, although not for him who
produced them. On the other hand, some things which
are very decidedly fixed in the process of production, which
live and die in it and never leave it any more after they
have entered it, are circulating parts of the productive capi-
tal. Such are, for instance, the coal consumed by the ma-
chine in the process of production, the gas used for light-

Theories of Fixed and Circulating Capital. 241

ing the factory, etc. They are circulating capital not
because they bodily leave the process of production together
with the product and circulate as commodities, but because
their entire value is transferred to that of the product in
whose production they assisted, so that their value must be
entirely reproduced by the sale of the product.

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

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

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

1. Because he confounds circulating capital as distinguished
from fixed with forms of capital belonging to the sphere
of circulation, with capital of circulation; this mistake per-
sisted after him without being criticized. He therefore con-

242 Capital.

founds the commodity-capital with the circulating part of
the productive capital, and in that case it is a matter of
course that, whenever the social product assumes the form of
commodities, the maintenance of the laborers as well as
that of the non-laborers, the materials as well as the instru-
ments of labor, must be taken out of the commodity-capital.

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

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

Theories of Fixed and Circulating Capital. 243

Adam Smith calls them), while another part of these be-
longs in the category of fixed capital.

The fact that the capital invested in wages belongs to the
circulating part of productive capital and shares this circu-
lating quality, as distinguished from the fixed character of
productive capital, with a part of the material objects, the
raw materials, etc., instrumental in creating the product,
has nothing whatever to do with the role played by this
variable part of capital in the process of self-expansion,
as distinguished from the constant part of capital. It refers
merely to the manner in which this part of the invested
capital-value is reproduced out of the value of the product
by way of the circulation. The purchase and repeated pur-
chase of labor-power belongs in the process of circulation.
But it is only within the process of production that the
value invested in labor-power (not for the benefit of the
laborer, but that of the capitalist) is converted from a defi-
nite constant into a variable magnitude, and only thus
the advanced value is converted into capital-value, into self-
expanding value. But by classing the value advanced for
articles of consumption among the circulating elements of
productive capital, as Smith does, instead of the value in-
vested in labor-power, the understanding of the difference
between variable and constant capital, and thus the under-
standing of the capitalist process of production in general,
is rendered impossible. The mission of this part of capital
of being variable as distinguished from the constant capital
invested in material objects instrumental in production, is
hidden under the mission of the capital invested in labor-
power of serving in the turn-over as a circulating part of
productive capital. And the obscurity is made complete
by enumerating the laborer's maintenance among the ele-
ments of productive capital, instead of his labor-power. It
is immaterial, whether the value of labor-power is advanced
in money or immediately in articles of consumption. How-
ever, under capitalist production, the last-named eventuality
can be but an exception.24

24 To what extent Adam Smith has blocked his own way to an under-
standing of the role of labor-power in the process of self-expansion is
proven by the following sentence, which places the labor of human labor-
ers on the same level with that of laboring cattle, after the manner of
the physiocrats. "Not only his (the farmer's) laboring servants, but his
laboring cattle are productive laborers." (Book II, chap. V, p. 243.)

244 Capital.

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

Theories of Fixed and Circulating Capital. 245

CHAPTER XI.

THEORIES OF FIXED AND CIRCULATING CAPITAL. RICARDO.

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

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

And if we ask him which two sorts of capital he is refer-
ring to, we are told: "The proportions, too, in which the
capital that is to support labor, and the capital that is in-
vested in tools, machinery, and buildings, may be variously
combined." (1. c.) In other words, fixed capital consists
of instruments of labor, and circulating capital is such as
is invested in labor. "Capital that is to support labor" is
a senseless term culled from Adam Smith. On one hand,
the circulating capital is here confounded with the variable
capital, that is to say, with that part of productive capital
which is invested in labor. On the other hand, twice con-
founded conceptions arise for the reason that the distinction
is not between variable and constant capital and derived
from the process of self -expansion, but from the process
of circulation repeating the old confusion of Smith.

1. The difference in the degree of durability of fixed
cppital and the difference in the proportion in which con-
stant and variable capital may be combined, are conceived
as being of equal significance. But the last-named differ-
ence determines the difference in the production of surplus-
value; the first-named, on the other hand, refers merely to
the manner in which a given value is transferred from a
mean? of production to the product, in so far as the process

246 Capital.

of self -expansion is concerned ; and as for the process of cir-
culation, this difference refers only to the period of the re-
production of the advanced capital, or, from 9 pother point
of view, the time for which it has been advanced. Of course,
if one looks upon the capitalist process of production in the
light of a completed phenomenon, instead of seeing through
its internal machinery, then these differences coincidp In
the distribution of the social surplus-value among the vari-
ous capitals invested in different lines of production, the
proportions of the different periods of time for which capi-
tal has been advanced (for instance, the different durability
of fixed capital) and the different organic composition of
capital (and therefore also the different circulation of
constant and variable capital) contribute equally toward »a
equalization of the general rate of profit and the conversion
of values into prices of production.

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

K /

Theories of Fixed and Circulating Capital. 247

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

It is to be noted at this point that the capitalist, to use
the language of political economy, advances the capital in-
vested in wages for different periods, according to whether
he pays these wages weekly, monthly, or quarterly. But in
reality, the reverse takes place. The laborer advances his
labor to the capitalist for one week, one month, or three
months, according to whether he is paid by the week, by the
month, or every three months. If the capitalist really were
to buy labor-power, instead of only paying for it, in other
words, if he were to pay the laborer in advance for a day,
a week, a month, or three months, then he would be justi-
fied in claiming that he advanced wages for those periods.
But since he does not pay until labor has lasted for days,
weeks, or months, instead of buying it and paying for the
time which it is intended to last, we have here a confusion
of terms on the part of the capitalist, who performs the
trick of converting an advance of labor made to the capital-
ist by the laborer into an advance of money made to the la-
borer by the capitalist. It does not alter the case that the
capitalist may not get any returns from his product by way
of the circulation in the shape of a reproduction of his
product or of its value (increased by the surplus value em-
bodied in it) until after a certain length of time, according
to the different periods required for its manufacture, or
for its circulation. It does not concern the seller of a com-
modity what its buyer is going to do with it. The capital-
ist does not get a machine cheaper, because he must ad-

248 Capital.

vance its entire value at one time, while this value returns
to him only gradually and piecemeal by way of the circu-
lation ; nor does he pay more for cotton, because its value is
assimilated fully by the product into which it is made over,
and is therefore fully recovered at one time by the sale of
the product.

Let us return to Ricardo.

1. The characteristic mark of variable capital is that
a certain given, and to that extent constant, part of capital
representing a given sum of values (supposed to be equal to
the value of labor-power, although it is immaterial for this
discussion whether wages are equal to the value of labor-power
or higher or lower than it) is exchanged for a self-expand-
ing power which creates value, namely, labor-power, which
not only reproduces the value paid for it by the capitalist,
but produces a surplus-value, a value not previously ex-
isting and not paid for by any equivalent. This character-
istic mark of the capital-value advanced for wages, which
distinguishes it as a variable capital from constant capital,
disappears whenever the capital-value advanced for wages is
considered solely from the point of view of the circulation,
for then it appears as a, circulating capital as distinguished
from the fixed capital invested in instruments of labor. This
is apparent from the simple fact that it is then classed under
one head, namely, under that of circulating capital, to-
gether with a part of the constant capital, namely, that
which is invested in raw materials, and thus distinguished
from another part of constant capital, namely, that invested
in instruments of labor. The surplus-value, the very fact
which converts the advanced sum of values into capital, is
entirely ignored under these circumstances. Furthermore,
the fact is ignored that the value added to the product by
the capital invested in wages is newly produced (and there-
fore actually reproduced), while the value transferred from
the raw material to the product is not newly produced, not
actually reproduced, but only preserved in the value of the
product and merely reappears as a part of the value of the
product. The distinction, as seen from the point of vie*;

Theories of Fixed and Circulating Capital. 249

of the contrast between fixed and circulating capital, con-
sists now simply in this: The value of the instruments
of labor used for the production of a certain commodity
is transferred only partially to the value of the commodi-
ty and is therefore only partially recovered by its sale,
is only partially and gradually returned. On the other
hand, the value of the labor-power and materials of labor
(raw materials, etc.) used in the production of a cer-
tain commodity is entirely assimilated by it, and is
therefore entirely recovered by its sale. From this stand-
point, and with reference to the process of circulation,
one part of capital appears as fixed, the other as cir-
culating. In both cases it is a matter of a transfer of
definite advanced values to the product and of their recov-
ery by the sale of the product. The only difference which
is essential at this point is whether the transfer of values,
and consequently their recovery, proceeds gradually or in
one bulk. By this means the really decisive difference be-
tween the variable and constant capital is blotted out, the
whole secret of the production of surplus-value and of capi-
talist production, namely, the circumstances which trans-
form certain values and the things in which they are con-
tained into capital, are obliterated. All constituent parts
of capital are then distinguished merely by their mode of
circulation (and, of course, circulation concerns itself solely
with already existing values of definite size). And the
capital invested in wages then shares a peculiar mode of cir-
culation with a part of capital invested in raw materials,
partly finished articles, auxiliary substances, as distinguished
from another part of capital invested in instruments of
labor.

It is, therefore, easy to understand why the bourgeois
political economy instinctively clung to Adam Smith's con-
fusion of the categories of "constant and variable capital"
with the categories "fixed and circulating capital," and re-
peated it parrotlike from generation to generation for a
century. The capital invested in wages is not in the least
distinguished by bourgeois political economy from capital
invested in raw materials, and differs only formally from
constant capital to the extent that it is partially or in bulk

250 Capital.

circulated by the product. In this way the fiwf retirement
for an understanding of the actual movement of capitalist
production, and thus of capitalist exploitation, is buried pt
one stroke. It is henceforth but a question of the reap-
pearance of advanced values.

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

Among the physiocrats this confusion is not found. The
distinction between avarices annuelles and avances primi-
tives refers only to the different periods of reproduction of
the various parts of capital, especially of agricultural capi-
tal; while their ideas concerning the production of surplus-
value form a part of their theory, apart from these dis-
tinctions, being upheld by them as the salient point 0/ this
theory. The formation of surplus-value is not explained
out of capital as such, but only attributed to one special
sphere of production of capital, namely, agriculture.

2. The essential point in the determination of variable
capital — and therefore for the conversion of any sum of
values into capital — is that the capitalist exchanges a defi-
nite given, and to that extent constant, magnitude of values
for a power which creates values, a magnitude of values for
a production, a self-expansion, of values. It does not alter
this essential fact that the capitalist may pay the laborer
either in money or in means of subsistence. This alters
merely the mode of existence of the value advanced by the
capitalist, seeing that in one case it has the form of money
for which the laborer himself buys his means of subsistence
on the market, in the other case that of means of subsistence
which he consumes directly. A developed capitalist produc-
tion rests indeed on the assumption that the laborer is paid in
money and more generally on the assumption that the proc-
ess of production is promoted by the process of circulation, in
other words, by the monetary system. But the production of

Theories of Fixed and Circulating Capital. 251

surplus-value — and consequently the capitalization of the ad-
vanced sum of values — has its source neither in the money-
form, nor in the natural form, of wages, or of the capital
invested in the purchase of labor power. It arises out of
the exchange of value for a power creating value, the con-
version of a constant into a variable magnitude.

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

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

Although it is not the durability of the material of which
it is made that gives to an instrument of labor the charac-
ter of fixed capital, nevertheless its role as such an instru-

252 Capital.

ment requires that it should be composed of relatively dura-
ble material. The durability of its material is, therefore,
a condition of its function as an instrument of labor, and
consequently the material basis of the mode of circulation
which renders it a fixed capital. Other circumstances being
equal, the greater or lesser durability of its material endows
it in a higher or lower degree with the quality of fixedness,
in other words, its durability is closely interwoven with its
quality of being a fixed capital.

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

The real substance of the capital invested in wages is
labor itself, active, value creating, living labor, which the
capitalist trades for dead, materialized labor and embodies in
his capital, by which means alone the value in his hands
is transformed into a self-expanding value. But this self-
expanding power is not sold by the capitalist. It is always
solely a constituent part of his productive capital, the same
as his instruments of labor; it is never a part of his com-
modity-capital, as, for instance, the finished product which
he sells. Within the process of production, as parts of his
productive capital, the instruments of labor are not distin-
guished from labor-power as fixed capital any more than the
raw materials and auxiliary substances are identified with
it as circulating capital. Labor confronts both of them as
a personal factor, while they are objective things — speaking
from the point of view of the process of production. Both
of them stand opposed to labor-power, to variable capital,
as constant capital — speaking from the point of view of the
process of self -expansion. Or, if mention is to be made

Theories of Fixed and Circulating Capital. 253

here of a difference in substance, so far as it affects the
process of circulation, it is only this: It follows from the
nature of value which is nothing but materialized labor, and
from the nature of active labor-power which is nothing but
labor in process of materialization, that labor-power continu-
ally creates value and surplus-value during the process of
its function; that the thing which on the part of labor-
power appears as motion and a creation of value, appears
on the part of its product as rest and as a created value. If
the labor-power has performed its function, then capital no
longer consists of labor-power on one side, and means of
production on the other. The capital value invested in
labor is then value added with a surplus-value to the prod-
uct. In order to repeat the process, the product must be
sold, and new labor-power must be bought with the money
so obtained, in order to be once more embodied in the pro-
ductive capital. It is this which then gives to the capital
invested in labor-power, and to that invested in raw mate-
rials, etc., the character of circulating capital as distin-
guished from the capital remaining fixed in instruments
of labor.

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

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

254 Capital.

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

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

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

He remarks in addition thereto: "A division not essen-
tial, and in which the line of demarcation cannot be ac-
curately drawn."

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

As soon as the capital-value invested in labor-power dif-
fers from that invested in instruments of labor only by its
period of reproduction and term of circulation, as soon as
one part of capital consists of means of subsistence, an-
other of instruments of labor, so that these differ from those
only by the degree of their durability, which durability is
further different for the various kinds of each class, it fol-
lows as a matter of course that all specific difference be-

Theories oj Fixed and Circulating Capital. 255

tween the capital invested in labor-power and that invested
in means of production is obliterated.

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

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

256 Capital.

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

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

Theories of Fixed and Circulating Capital. 257

ipitalist process of production into a complete mystery is
• happily accomplished and the origin of the surplus-value
incorporated in the product is entirely concealed.

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

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

If means of subsistence are of themselves capital circulat-

258 Capital.

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

Ricardo as well as Bartonss everywhere confound the re-
lation between variable and constant capital with that be-
tween circulating and fixed capital. We shall see later, to
what extent this vitiates Ricardo's analyses concerning the
rate of profit.

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

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

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

1. The distinction between fixed and circulating capital

25 Observations on the Circumstances Which Influence the Condi
tion of the Labouring Classes of Society, London, 1817.

Theories of Fixed and Circulating Capital. 259

is confounded with that between productive capital and
commodity-capital. For instance, a machine is said to be
circulating capital when on the market as a commodity, and
fixed capital when incorporated in the process of produc-
tion. Under these circumstances, it is impossible to ascer-
tain why one kind of capital should be more fixed or circu-
lating than another.

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

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

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

260 Capital.

CHAPTER XII.

THE WORKING PERIOD.

Take two branches of production, with equal working
days, for instance of ten hours each, one of them a cotton
spinnery, the other a locomotive factory. In one of these
branches, a definite quantity of finished product, cotton
yarn, is completed daily, or weekly; in the other, the pro-
ductive process may have to be repeated for three months
in order that the finished product, a locomotive, may be
ready. In one case, the product is made up of separate lots,
and the same labor is repeated daily or weekly. In the
other case, the labor process is continuous and extends over
a prolonged number of daily labor-processes which, in their
continuity, result in the finished product. Although the
duration of the working day is the same in both cases, there
is a marked difference in the duration of the productive act,
that is to say, in the duration of the repeated labor-processes,
which are required in order to complete the finished prod-
uct, to get it ready for its role as a commodity on the mar-
ket, in other words, to convert it from a productive into a
commodity-capital. The difference between fixed and cir-
culating capital has notning to do with this. The differ-
ence just indicated would exist, even if the very same pro-
portions of fixed and circulating capital were employed in
both branches of production.

These differences in the duration of the productive acts
are found not alone in two different spheres of production,
but also within one and the same sphere of production, ac-
cording to the volume of the intended product. An ordi-
nary residence house is built in less time than a large factory
and therefore requires a smaller number of consecutive
labor-processes. While the building of a locomotive re-
quires three months, that of an ironclad requires one year
or more. The production of grain extends over nearly a
year, that of horned cattle over several years, and the pro-
duction of timber may require from twelve to one hundred

The Working Period. 261

years. A country road may be completed in a few months,
while a railroad requires years. An ordinary carpet is
made in about a week, while Gobelins requires years, etc.
The differences in the duration of the productive act are,
therefore, infinitely manifold.

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

It is, however, an immaterial condition that the capitals
advanced weekly should be equal. Whatever may be the

262 Capital

quantity of the invested capital, it is advanced for one week
in one case, and for twelve weeks in the other, before the
same operation can be repeated with it, or another inau-
gurated.

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

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

Interruptions, disturbances of the process of social pro-
duction, for instance, by crises, therefore have very different
effects on labor products of a discontinuous nature and those
that require for their completion a prolonged and connected
working period. In one case, today's production of a cer-
tain mass of yarn, coal, etc., is not followed by tomorrow's
production of yarn, coal, etc. Not so in the case of ships,
buildings, railroads, etc. It is not only the work which is
interrupted, but also a connected working period. If the

The Working Period- 263

work is not continued, the means of production and labor
so far expended in its manufacture are wasted. Even if
work is resumed, a deterioration has taken place in the
meantime.

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

It is different with the circulating portions of the invest-
ed capital. The labor-power bought for this week is con-
sumed in the course of the same week and transferred to the
product. It must be paid for at the end of this week. And
this investment of capital in labor-power is repeated every
week for three months without enabling the capitalist to
use the investment of this part of capital in this week's labor-
power for the purchase of next week's. Every week, addi-
tional capital must be invested for the payment of labor-
power, and, leaving aside the question of credit, the capital-
ist must be able to advance wages for three months, even if
he pays them only in weekly instalments. It is the same
with the other portion of circulating capital, the raw and
auxiliary materials. One shift of labor after another is
transferred to the product. It is not alone the value of the

264 Capital.

expended labor-power which is continually transferred to
the product during the labor-process, but also surplus-value.
This product, however, is unfinished, it has not yet the form
of a finished commodity, it cannot yet circulate. This ap-
plies likewise to the capital-value transferred to the product
by the raw and auxiliary materials.

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

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

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

We have assumed that equal capitals are invested in the
spinnery and the machine factory, that these capitals con-
tain equal proportions of constant and variable, fixed and
circulating capital, that the working days are equal, in

The Working Period. 265

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

In undeveloped stages of capitalist production, enter-
prises requiring a long working period, and hence a large
investment of capital for a long time, such as the building
of streets, canals, etc., especially when they can be carried
out only on a large scale, are either not managed on a capi-
talist basis at all, but rather at the expense of the munici-
pality or state (in older times generally by means of forced

266 Capital.

labor, so far as labor-power was concerned) ; or, such prod-
ucts as require a long working period are manufactured
only for the smaller part by the help of the private re-
sources of the capitalist himself. For instance, in the build-
ing of a house, the private person for whose account the
house is built advances money in instalments to the con-
tractor. The owner thus pays for his house in instalments
to the extent that his productive process proceeds. But in
the developed capitalist era, when on the one hand masses
of capital are concentrated in the hands of single individ-
uals, while on the other hand associations of capitalists
(stock companies) appear by the side of individual capital-
ists and the credit system is simultaneously developed, a
capitalist contractor builds only in exceptional cases for the
order of private individuals. He makes it his business to
build rows of houses and sections of cities for the market,
just as individual capitalists make it their business to build
railroads as contractors.

To what extent capitalist production has revolutionized
the building of houses in London, is shown by the testi-
mony of a contractor before the banking committee of 1857.
When he was young, he said, houses were generally built
to order and the payments made in instalments to the
contractor when certain stages of the building were com-
pleted. Very little was built on speculation. Contractors
used to consent to this mainly to give their hands regular
employment and thus keep them together. In the last forty
years, all this has changed. Very little is now built for
order. If a man wants a house, he selects one from among
those built on speculation or still in process of building.
The contractor no longer works for his customers, but for
the market. Like every other industrial capitalist, he is
compelled to have finished articles on the market. While
fomerly a contractor had perhaps three or four houses
at a time building for speculation, he must now buy a large
piece of real estate (which, in continental language means
rent it for ninety-nine years, as a rule), build from 100 to
200 houses on it, and thus engage in an enterprise which
exceeds from twenty to fifty times his resources. The funds
are secured by taking up mortgages, and money is placed

The Working Period. 267

at the disposal of the contractor to the extent that the build-
ing of the individual houses is progressing. Then, if a
crisis comes along and interrupts the payment of the ad-
vance instalments, the entire enterprise generally collapses.
In the best case, the houses remain unfinished until the
coming of better times, in the worst case they are sold at
auction at half-price. Without building on speculation,
and that on a large scale, no contractor can get along now-
adays. The profit from building itself is extremely small.
The main profit of the contractor comes from raising the
ground rent, by a careful selection and utilization of the
building lots. By this method of speculation anticipating
the demand for houses nearly the whole of Belgravia and
Tyburnia, and the countless thousands of villas in the vi-
cinity of London have been built. (Abbreviated from the
Report of the Select Committee on Bank Acts. Part I,
1857, Evidence, Questions 5413-18; 5535-36.)

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

The circumstances which augment the product of the
individual working day, such as co-operation, division of la-
bor, employment of machinery, shorten at the same time the
working period of connected acts of production. Thus
machinery shortens the building time of houses, bridges,
etc.; a mowing and threshing machine, etc., shorten the
working period required to transform the ripe grain into a
finished product. Improved shipbuilding reduces by in-
creased speed the time of turn-over of capital invested in
navigation. Such improvements as shorten the working
period and thereby the time for which circulating capital
must be advanced are, however, generally accompanied by
an increased outlay for fixed capital. On the other hand,

268 Capital.

the working period in certain branches of production may
be shortened by the mere extension of co-operation. The
completion of a railroad is hastened by the employment of
huge armies of laborers and the carrying on of the work
in many places at once. The time of turn-over is in that
case hastened by an increase of the advanced capital. More
means of production and more labor-power must be com-
bined under the command of the capitalist.

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

In branches of production in which the working period
is continually, or occasionally, determined by definite natural
conditions, no shortening of the working period can take
place by the above mentioned means. Says Walter Good,
in his "Political, Agricultural, and Commercial Fallacies,"
(London, 1866, page 325) : "The expression, 'more rapid
turn-over5 cannot be applied to grain crops, as only one
turn-over per year is possible. As for cattle, we will sim-
ply ask : How is the turn-over of bi- or tri-ennial sheep, and
of quardrennial and quinquennial oxen to be hastened?"

The necessity of securing ready money (for instance, for
the payment of fixed tithes, such as taxes, groundrent, etc.)
solves this question by selling or killing cattle before they
have reached the normal economic age, to the great detri-
ment of agriculture. This also causes finally a rise in the price
of meat. We read on pages 12 and 13 of the above named
work that the people who formerly were mainly engaged in
the raising of cattle for the purpose of supplying the pastures
of the midland counties in summer, and the stables of the

The Working Period. 269

eastern counties in winter, have been so reduced by the fluc-
tuations and sinking of the corn prices that they are glad to
avail themselves of the high prices of butter and cheese ; they
carry the former every week to the market, in order to cover
their running expenses, while they take advance payments
on the cheese from some middleman who calls for it as soon
as it can be transported and who, of course, makes his own
prices. As a result of this, agriculture being ruled by the
laws of political economy, the calves, which were formerly
taken south from the dairy districts to be raised, are now
sacrificed in masses, frequently when they are only eight or
ten days old, in the stock yards of Birmingham, Manchester,
Liverpool, and other neighboring cities. But if the malt
were untaxed, the farmers would not only have made more
profits and been able to keep their young cattle until they
would have been older and heavier, but the malt would also
have served instead of milk for the raising of calves by
those who keep no cows: and the present appalling want of
young cattle would have been avoided to a large extent. If
the raising of calves is now recommended to those small
farmers, they reply : "We know very well that it would pay
to raise them on milk, but in the first place we should have
to lay out money, and we cannot do that, and in the second
place we should have to wait long for the return of our
money, while in dairying we get returns immediately."

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

To the extent that the working period lasts, and thus the
period required for the completion of the commodity ready
for circulation, the value successively yielded by the fixed
capital accumulates and the reproduction of this value is
retarded. But this retardation does not cause a renewed out-
lay of fixed capital. The machine continues its function in
the process of production, no matter whether the reproduc-
tion of its wear and tear in the form of money takes place
slowly or rapidly. It is different with the circulating capi-
tal. Not only must capital be tied up for a longer time in
proportion as the working period extends, but new capital

270 Capital.

must also be continually advanced in the form of wages,
raw and auxiliary materials. A retardation of the reproduc-
tion has therefore a different effect on either capital. No
matter whether reproduction proceeds rapidly or slowly, the
fixed capital continues its functions. But the circulating
capital becomes unable to perform its functions, if the re-
production is retarded, if it is tied up in the form of unsold,
or unfinished and as yet unsalable, products, and if no ad-
ditional capital is at hand for its reproduction in natural
form.

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

Of course, it is impossible to deliver a quinquennial ani-
mal before the lapse of five years. But a thing that is pos-
sible is the gettiug ready of the animals for their destina-
tion by changed modes of treatment. This was accomplished
particularly by Bakewell. Formerly, English sheep, like
the French as late as 1855, were not ready for slaughter-
ing until after four or five years. By the Bakewell system,
even a one year old sheep may be fattened, and in every case
it is completely grown before the end of the second year.
By means of careful sexual selection, Bakewell, a farmer of
Dishley Grange, reduced the skeleton of sheep to the mini-
mum required foi their existence. His sheep are called the
New Leicesters. "The breeder can now supply three sheep
for the market in the same time that he formerly required
for one, and at that with a broader, rounder, and larger
development of the parts giving the most meat. Nearly their

The Working Period. 271

entire weight is pure meat." (Lavergne, The Rural Econo-
my of England, etc., 1855, page 22.)

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

272 Capital.

CHAPTER XIII.

THE TIME OP PRODUCTION.

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

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

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

In all these cases, additional labor is contributed only
occasionally during a large portion of the time of produc-

The Time of Production. 273

tion. The condition described in the previous chapter, where
additional capital and labor must be contributed to the capi-
tal already tied up in the process of production, is found
here only in longer or shorter intervals.

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

274 Capital.

methods introduced since then. The time of production
has been enormously abbreviated, but the investment of
fixed capital has increased accordingly.

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

The difference between the time of production and the
working time becomes especially apparent in agriculture.
In our moderate climates, the land bears grain once a year.
The abbreviation or prolongation of the period of produc-
tion (for winter grain an average of nine months) is itself
dependent on the change of good or bad seasons, and for
this reason it cannot be as accurately determined before-
hand and controlled as in industry properly so called. Only
such by-products as milk, cheese, etc., are successively pro-
ducible and saleable in short periods. On the other hand, the
working time meets with the following conditions: "The
number of working days in the various regions of Germany,
with regard to the climatic and other determining condi-
tions, will permit the assumption of the three following
main working periods: For the spring period, from the
middle of March or beginning of April to the middle of
May, about 50 to 60 working days; for the summer period,
from the beginning of June to the end of August, 65 to

The Time of Production. 275

80 ; and for the fall period, from the beginning of September
to the end of October, or the middle or end of November,
55 to 75 working days. For the winter, only the chores
customary for that time, such as the hauling of manure,
wood, market goods, and building materials, are to be noted."
(F. Kirchhoff, Handbuch der landwirthschaftlichen Be-
triebslehre. Dresden, 1852, page 160.)

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

276 Capital.

While in most branches of industry proper, of mining,
transportation, etc., the work proceeds uniformly, the work-
ing time being the same from year to year, and the out-
lay for the capital passing daily into circulation being uni-
formly distributed, making exception of such abnormal in-
terruptions as fluctuations of prices, business depressions, etc. ;
while furthermore also the recovery of the circulating capi-
tal, or its reproduction, is uniformly distributed through-
out the year, provided the conditions of the market remain
the same — there is, on the other hand, the greatest inequality
in the outlay of circulating capital in such investments of
capital, in which the working time constitutes only a part
of the time of production, while the recovery of the capital
takes place in bulk at a time determined by natural condi-
tions. If such a business is managed on the same scale as
one with a continuous working period, that is to say, if the
amount of the circulating capital to be advanced is the same,
it must be advanced in larger doses at a time and for longer
periods. The durability of the fixed capital differs here
considerably from the time in which it actually performs a
productive function. Together with the difference between
working time and time of production, the time of invest-
ment of the employed fixed capital is, of course, likewise
continually interrupted for a longer or shorter time, for
instance, in agriculture in the case of laboring cattle, im-
plements and machines. In so far as this fixed capital con-
sists of laboring cattle, it requires continually the same, or
nearly the same, amount of expenditure for feed, etc., as
it does during its working time. In the case of inanimate
instruments of labor, disuse also implies a certain amount
of depreciation. Hence there is an appreciation of the prod-
uct in general, seeing that the transfer of value is not cal-
culated by the time in which the fixed capital performs its
function, but by the time in which it depreciates in value.
In such branches of production as these, the disuse of the
fixed capital, whether combined with current expenses or
not, forms as much a condition of its normal employment
as, for instance, the waste of a certain quantity of cotton in
spinning; and in the same way the labor-power unproduc-

The Time of Production. 277

tively consumed in any labor-process under normal condi-
tions, and inevitably so, counts as much as its productive
consumption. Every improvement which reduces the un-
productive expenditure of instruments of labor, raw mate-
rial, and labor-power, also reduces the value of the product.

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

All methods by which partly the expenditures for wages
and instruments of labor in agriculture are distributed more
equally over the entire year, partly the turn-over is shortened
by the raising of various products making different harvests
possible during the course of the year, require an increase
of the circulating capital invested in wages, fertilizers, seeds,
etc., and advanced for purposes of production. This is the
case, for instance, in the transition from the three plat sys-
tem with fallow land to the system of crop rotation without
fallow. It applies furthermore to the cultures derobees of
Flanders. "The root crops are planted in culture derobee;
the same field yields in succession first grain, flax, rape, for

278 Capital.

the wants of man, and after their harvest root crops are
sown for the subsistence of cattle. This system, which per-
mits the keeping of horned cattle in the stables without in-
terruption, yields a considerable amount of manure and
thus becomes the fulcrum of crop rotation. More than a
third of the cultivated area in sandy districts is taken up
with cultures derobees; it is as though the cultivated area
had been increased by one third." Apart from root crops,
clover and other leguminous crops are likewise used for this
purpose. "Agriculture, being thus carried to a point where
it merges into horticulture, naturally requires a relatively
considerable investment of capital. In England, a first in-
vestment of 250 francs per hectare is assumed. In Flanders,
our farmers will probably consider a first investment of 500
francs far too low." (Emile de Laveleye, Essais sur L'Econo-
mie Rurale de la Belgique, Paris, 1863, pages 59, 60, 63.)
Take finally timber growing. "The production of timber
differs from most of the other branches of production essen-
tially by the fact that in it the force of nature is acting in-
dependently and does not require the power of man and
capital in its natural propagation. Even in places where
forests are artificially propagated the expenditure of human
and capital power is inconsiderable compared to the action
of natural forces. Besides, a forest will still thrive in soils
and locations where grain does no longer give any yield or
where its production does not pay. Forestry furthermore
requires for its regular economy a larger area than grain
culture, because small plats do not permit a system of fell-
ing trees in plats, prevents the utilization of by-products,
complicates the production of the trees, etc. Finally, the
productive process extends over such long periods that it
exceeds the aims of private management and even surpasses
the age limit of human life in certain cases. The capital
invested in the purchase of the real estate" (in the case of
communal production there is no capital needed for this,
the question being simply how much land the community
can spare from its cultivated and pasturing area for forestry)
"will not yield returns until after a long period and is turned
over gradually, but completely, with forests of certain

The Time of Production. 279

kinds of wood, only after as much as 150 years. Besides, a
consistent production of timber demands itself a supply of
living wood which exceeds the annual requirements from ten
to forty times. Unless a man has, therefore, still other
sources of income and owns vast tracts of forest, he can-
not engage in regular forestry." (Kirchhof, page 58.)

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

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

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

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

A similar influence on the turn-over is exerted by an-
other kind of supply, which is productive capital only po-

280 Capital.

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

It has been previously stated, when discussing the ques-
tion of the formation of a supply, that a definite, more or

The Time of Production. 281

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

282 Capital.

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

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

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

In agriculture, such a cycle of turn-over arises out of the
system of crop rotation. "The duration of the lease must
certainly not be figured less than the time of rotation of
the adopted system of crop succession. For this reason, one
always calculates with 3, 6, 9, in the three plat system.
In the three plat system with complete fallow, a field is cul-
tivated only four times in six years, being planted with both
winter and summer grain in the years of cultivation, and,
if the condition of the soil permits it, wheat and rye, barley

The Time of Production. 283

and oats, are likewise introduced into the rotation. Every
species of grain, however, differs in its yields from others
on the same soil, every one of them has a different value and
is sold at a different price. For this reason, the yield of
the same field is different in every year in which it is culti-
vated, and different in the first half of the rotation (the
first three years ) from that of the second. Even the average
yield of one period of rotation is not equal to that of another,
for its fertility does not depend merely on the good condition
of the soil, but also on the weather of the various seasons,
just as prices depend on a multitude of circumstances. Now,
if one calculates the income from one field on the average
of the crops for the entire rotation of six years and the average
prices of those years, one finds the total income of one year
in either period of rotation. But this is not so, if the in-
come is calculated only for half of the period of rotation
that is to say, for three years, for then the total yields would
be unequal. It follows from the foregoing that the duration
of a lease in a system of three fields must be chosen for at
least six years. It would be still more desirable for tenants
and owners that the duration of the lease should be a multi-
ple of the duration of the lease ( !), in other words, that it
should be 12, 18, or more years instead of 6 years, in a sys-
tem of three fields, and 14, 28 years instead of 7 in a system
of seven fields." (Kirchhof, pages 117, 118.)

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

284 Capital.

CHAPTER XIV.

THE TIME OF CIRCULATION.

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

One of the sections of the time of circulation — relatively
the most decisive — consists of the time of selling, the period
during which capital has the form of commodity-capital. Ac-
cording to the relative length of this time, the time of circu-
lation, and to that extent the period of turn-over, are
lengthened or shortened. An additional outlay of capital
may become necessary <as a result of expenses of storage. It
is evident from the outset that the time required for the sale
of finished products may differ considerably for the indi-
vidual capitalists in one and the same branch of industry;
and this does not refer merely to the grand totals of capital
invested in the various departments of industry, but also
to the different individual capitals, which are in fact in-
dividual parts of the aggregate capital invested in the same
department of production. Other circumstances remaining
equal, the period of selling for the same individual capital

The Time of Circulation. 285

will vary with the general fluctuations of the market condi-
tions, or with their fluctuations in that particular business
department. We do not tarry over this point any longer.
We merely state the simple fact that all circumstances which
produce differences in the periods of turn-over of the capitals
invested in different business departments, also carry in
their train differences in the turn-over of the various indi-
vidual capitals existing in the same departments, provided
these circumstances have any individual effects (for instance,
if one capitalist has an opportunity to sell more rapidly than
his competitor, if one employs more methods shortening the
working periods than the other, etc. ) .

One cause which acts continuously in differentiating the
times of selling, and thus the periods of turn-over in gen-
eral, is the distance of the market, in which a commodity is
finally sold from its regular place of sale. During the entire
time of its trip to the market, capital finds itself fettered in
the form of commodity-capital. If goods are made to order,
this condition lasts up to the time of delivery; if they are
not made to order, the time of the trip to the market is fur-
ther increased by the time during which the goods are on
the market waiting to be sold. The improvement of the
means of communication and transportation abbreviates the
wandering period of the commodities absolutely, but does
not abolish the relative difference in the time of circulation
of different commodity-capitals arising from their wander-
ings, nor that of different portions of the same commodity-
capital which wander to different markets. The improved
sailing vessels and steamships, for instance, which shorten
the wanderings of commodities, do so equally for near and
for distant ports. But the relative differences may be altered
by the development of the means of transportation and com-
munication in a way that does not correspond to the nat-
ural distances. For instance, a railroad, which leads from a
place of production to an inland center of population, may
relatively or absolutely prolong the distance to a nearer point
inland not connected with a railroad, compared to the one
which is naturally more distant. In the same way, the same
circumstances may alter the relative distance of places of
production from the larger markets, which explains the

286 Capital.

running down of old and the rise of new places of production
through changes in the means of communication and trans-
portation. (In addition to these circumstances, there is the
greater relative cheapness of 'transportation for long than
for short distances.) Moreover, it is not alone the velocity
of the movement through space, and the consequent reduc-
tion of distance in space, but also in time, which is brought
about by the development of the means of transportation.
It is not only the quantity of means of communication
which is developed, so that, for instance, many vessels sail
simultaneously for the same port, or several trains travel
simultaneously on different railways between the same two
points, but freight vessels may, for instance, clear on different
successive days of the week from Liverpool for New York, or
freight trains may start at different times of the day from
Manchester to London. It is true, that the absolute velocity,
or this part of the time of circulation, is not modified by this
latter circumstance, a certain definite capacity of the means
of transportation being given. But successive quantities of
commodities can start on their passage in shorter succession
of time and thus reach the market one after another with-
out accumulating as potential commodity-capital in large
quantities before shipping. Hence the return movement
likewise is distributed over shorter successions of time, so that
a part is continually transformed into money-capital, while
another circulates as commodity-capital. By means of this
distribution of the return movement over several successive
periods the total time of circulation is abbreviated and there-
by also the turn-over. On one hand, the greater or lesser
frequency of the function of means of transportation, for in-
stance the number of railroad trains, develops first to the ex-
tent that a place of production produces more and becomes
a greater center <of production, and this development tends
in the direction of the existing market, that is to say, toward
the great centers of production and population, export places,
etc. But on the other hand this special facilitation of traffic
and the consequent acceleration of the turn-over of capital
(to the extent that it is conditioned on the time of circula-
tion) give rise to a hastened concentration of the center of
production and of its market. Along with this hastened

The Time of Circulation. 287

concentration of masses of men and capital, the concentra-
tion of these masses of capital in a few hands likewise pro-
gresses. Simultaneously there is a movement, which shifts
and displaces the center of commercial gravity as a result of
changes in the relative location of centers of production and
markets caused by transformations in the means of com-
munication. A place of production which once had a special
advantage by its favored location on some highway or canal
then finds itself set aside on a single side-track, which runs
trains only at relatively long intervals, while another place,
which formerly lay removed from the main roads of traffic,
then finds itself located at the crossing point of several rail-
roads. This second point is built up, the former goes down.
A transformation in the means of transportation thus causes
a local difference in the time of circulation of commodities,
the opportunity to buy, to sell, etc., or an already existing
local differentiation is distributed differently. The signifi-
cance of this circumstance for the turn-over of capital is
shown in the disputes of the commercial and industrial rep-
resentatives of the various places with the railroad man-
agers. (See, for instance, the above quoted bluebook of the
Railway Committee.)

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

While on one hand, the development of the means of
transportation and communication by the progress of capi-
talist production reduces the time of circulation for a given
quantity of commodities, the same progress, on the other
hand, coupled to the growing possibility of reaching more
distant markets to the extent that the means of transpor-
tation and communication are improved, leads to the neces-
sity of producing for ever more remote markets, in one word,
for the world market. The mass of commodities in transit
for distant places grows enormously, and with it also grows
absolutely and relatively that part of social capital which

288 Capital.

remains constantly for longer periods in the stage of com-
modity-capital, within the time of circulation. Simultan-
eously that portion of social wealth increases, which, instead
of serving as direct means of production, is invested in the
fixed and circulating capital required for operating the
means of transportation and communication.

The mere relative length of the transit of the commodi-
ties from their place of production to their market causes
a difference, not only in the first part of the time of circu-
lation, the selling time, but also in its second part, the
reconversion of money into the elements of 'productive capi-
tal, the buying time. For instance, some commodities are
shipped to India. This requires, say, four months. Let us
assume that the selling time is equal to zero, that is to say, the
commodities are made to order and are paid for on delivery
to the agent of the producer. The return of the money (no
matter what may be its form) requires again four months.
Thus it takes eight months, before the same capital can
again serve as productive capital and renew the same op-
erations. The differences in the turn-over thus caused are
one of the material bases of the various terms of credit.
Trans-oceanic commerce in general, for instance in Venice
and Genoa, is one of the sources of the credit system — strictly
so called. The London Economist of July 16, 1866, wrote
that the crisis of 1847 enabled the banking and trading busi-
ness of that time to reduce the Indian and Chinese usage (for
the running time of checks between those countries and
Europe) from ten months after sight to six months, and the
lapse of twenty years with its acceleration of the trip and
the institution of telegraphs renders necessary a further re-
duction from six months after sight to four months after
date as a preliminary step toward four months after sight.
The trip of a sailing vessel from Calcutta around the cape
to London lasts on an average less than 90 days. A usage
of four months after sight would be equivalent to a run-
ning time of 150 days, approximately. The present usage of
six months after sight is equivalent to a running time of 210
days. On the other hand, we read in the issue of June 30,
1866, of the same paper, that the Brazilian usage is still
fixed at two and three months after sight, checks of Antwerp

The Time of Circulation. 289

on London are drawn for three months after date, and even
Manchester and Bradford draw on London for three months
and longer dates. By a tacit understanding, the merchant
is thus given sufficient opportunity to realize on his goods
by the time the checks are due, if not before. For this
reason, the usage of Indian checks is not excessive. Indian
products, which are sold in London generally on three
months' time, cannot be realized upon in much less than
five months, if some time for the sale is allowed, while
another five months pass on an average between the
purchase in India and the delivery to an English ware-
house. Here we have a period of ten months, while the
checks drawn against the goods do not run above seven
months. And again, on July 7, 1866, we read that, on
July 2, 1866, five great London banks, dealing especially
with India and China, and the Paris Comptoir d'Escompte,
gave notice that, beginning with January 1, 1867, their
branch banks and agencies in the Orient would buy and
sell only such checks as were not drawn for more than four
months after sight. However, this reduction miscarried
and had to be revoked. (Since then the Suez canal has
revolutionized all this.)

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

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

Other differences in the period of turn-over arise from
the size of contracts for the delivery of goods, and their size
grows with the extent and scale of capitalist production.
Such a contract, being a transaction between buyer and
seller, is an operation belonging to the market, the sphere
of circulation. The differences in the time of turn -over
arising from it have their source for this reason in the sphere

290 Capital.

of circulation, but react immediately on the sphere of pro-
duction, apart from all dates of payment and conditions of
credit including cash payment. For instance, coal, cotton,
yarn, etc., are discontinuous products. Every day supplies
its quantity of finished product. But if the spinner or the
mine owner accepts contracts for the delivery of large quan-
tities, which require, say, a period of four or six weeks of
successive working days, then this is the same, so far as the
time of investment of advanced capital is concerned, as
though a continuous working period of four or six weeks
had been introduced in this labor-process. It is of course
assumed in this case that the entire quantity ordered is to be
delivered in one bulk, or at least is only paid after all of it
has been delivered. Individually considered, every day
had furnished its definite quantity of finished product. But
this finished product is only a part of the quantity con-
tracted for. Although the portion finished so far is no
longer in the process of production, it is still in the ware-
house as a potential capital.

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

We have already seen that the prolongation of time
caused by the distance of the market, by which capital is
fettered in the form of commodity-capital, directly retards

The Time of Circulation. 291

the return movement of the money and, consequently, the
transformation of capital from its money into its productive
form.

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

A similar effect is produced in various businesses by the
longer or shorter periods, in which large quantities of raw
material are thrown on the market. In London, for in-
stance, great auction sales of wool take place every three
months, and the wool market is controlled by them. The
cotton market, on the other hand, is on the whole restocked
continuously, if not uniformly, from harvest to harvest.
Such periods determine the principal dates of buying for
these raw materials and affect especially the speculative
purchases requiring longer or shorter advances of these ele-
ments of production, just as the nature of the produced
commodities exerts an influence on the premeditated specu-
lative retention of the product for a longer or shorter term
in the form of potential commodity-capital. "The farmer
must also be to a certain extent a speculator, and, therefore,
hold back the sale of his products according to prevailing
conditions. ..." Here follow a few general rules. "...
However, in the sale of the products, success depends mainly
on the personality, the product itself, and the locality. A
man with sufficient business capital, won by ability and
good luck (!), will not be blamed, if he keeps his grain
crop stored for a year when prices happen to be unusually
low. On the other hand, a man who lacks business capital,
or enterprise in general ( ! ) , will try to get the average
prices and be compelled to sell as soon and as often as oppor-
tunity presents itself. It will almost always bring losses to
keep wool stored longer than a year, while grain and rape

292 Capital.

seed may be stored for several years without injury to their
condition and quality. Such products as are generally sub-
ject to a large rise and fall in short intervals, for instance,
rape seed, hops, teasel, etc., may be to good advantage stored
during the years in which the market price is far below the
price of production. It is least permissible to postpone the
sale of such articles as require daily expenses for their
preservation, such as fatted cattle, or which spoil easily,
such as fruit, potatoes, etc. In some localities, a certain
product has its lowest average price at a certain season, its
highest at another. For instance, the average price of
grain in some localities is lower about August than in the
time between Christmas and Easter. Furthermore, some
products sell well in certain localities only at certain periods,
as is the case, for instance, with wool in the wool markets
of those localities, where the wool trade is dull at other
times, etc." (Kirchhof, page 302.)

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

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

The Time of Circulation. 293

Therefore it exists in the form of money-capital, although
the volume which it has as such changes.

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

294 Capital.

CHAPTER XV.

INFLUENCE OF THE TIME OF CIRCULATION ON THE MAGNITUDE OF
AN ADVANCE OF CAPITAL.

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

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

Influence of the Time of Circulation. 295

the terms of payment for the sold goods. Production
would be at a standstill for three weeks every three months,
or four times three, or twelve weeks, in a year, which means
three months or one quarter of the annual period of turn-
over. Hence, if production is to be continuous and to be
carried along on the same scale week after week, there are
only two possibilities.

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

In case of an obstruction of production, an overstocking
of the markets, an increase in the price of raw materials,
etc., there is a reduction of the normal outlay of circulating
capital, compared to a given scale of fixed capital, by the re-
duction of the working time, work being carried on, say,
for only half a day. On the other hand, in times of pros-
perity, the fixed capital, remaining the same, there is an ab-
normal expansion of the circulating capital, partly by the

296 Capital.

prolongation of the working time, partly by its intensifi-
cation. In businesses which are adjusted from the outset
to such fluctuations, recourse is either taken to the above-
named measures, or a greater number of laborers are simul-
taneously employed, combined with an investment of re-
serve capital, such as reserve locomotives of railroads, etc.
However, such abnormal fluctuations are not considered
here, where we assume normal conditions.

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

If, on the other hand, we assume that the nature of the
business excludes the idea of a reduction of the scale of pro-
duction and thus of the circulating capital to be invested
weekly, then the continuity of production can be secured
only by additional circulating capital, in the above-named

Influence of the Time of Circulation. 297

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

Now, the following must be noted in this connection:

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

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

Let us give this matter a tangible form.

First period of turn-over of 12 weeks: First working
period of 9 weeks ; the turn-over of the capital advanced for
this is completed at the beginning of the 13th week. Dur-
ing the last 3 weeks, the additional capital of 300 pounds

298 Capital.

sterling performs its service, opening up the second work-
ing period of 9 weeks.

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

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

Influence of the Time of Circulation. 299

and thus the 37th running week begins simultaneously the
fourth period of turn-over and the fifth working period.

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

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

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

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

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

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

etc.

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

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

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

2. Working period: 7 — 12th week. During the 7 — 9th
week 300 pounds sterling of additional capital is advanced.

300 Capital.

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

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

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

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

Secondly: The capital which served during the working
period, lies fallow during the time *£ ^.xculation. In the

Influence of the Time of Circulation. 301

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

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

302 Capital.

production. In such an eventuality, capital lies fallow, un-
less it is employed otherwise in the meantime.

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

The additional capital is subdivided exactly like the orig-
inal. But it is distinguished from capital I by the fact that
(apart from conditions of credit), in order to be available
for its own period of labor, it must be advanced during the
entire duration of the first working period of capital I, in
which it does not take part. During this time, it may be
converted into constant circulating capital, at least in part,
being advanced for the entire period of turn-over. To
what extent it will assume this form, or persist in the form
of additional money-capital, up to the time where this con-
version becomes necessary will depend partly on the special
conditions of production of definite lines of business, partly

Influence of the Time of Circulation. 303

on the fluctuations in the prices of raw material, etc. Look-
ing at it from the point of view of the aggregate social capi-
tal, there will always be a more or less considerable part of
this additional capital for a rather long time in the form
of money-capital. But as for that portion of capital II
which is to be advanced for wages, it is always gradually
converted into labor-power to the extent that small working
periods are closed and paid for. This portion of capital II,
then, is available in the form of money-capital for the en-
tire working period, until it is converted into labor-power
and thus takes part in the function of productive capital.

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

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

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

Let us look at the second illustration. The capital con-
tinuously employed in the process of production amounts
to 500 pounds sterling. The working period being 5 weeks, it
works ten times during a working year of 50 weeks. Hence

304 Capital.

its product, apart from surplus-value, is 10 times 500 or
5,000 pounds sterling. From the point of view of a direct-
ly and uninterruptedly working capital in the process of
production, a capital-value of 500 pounds sterling, the time
of circulation seems entirely eliminated. The period of
turn-over coincides with the working period, the time of
circulation being assumed as equal to zero.

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

In our illustration, the reserve capital of 500 pounds ster-
ling comes to the rescue during those five periods of circula-
tion, and the turn-over is thus expanded from 2,500 to
5,000 pounds. But now the advanced capital is 1,000 in-
stead of 500 pounds sterling. Hence there are only five
turn -overs instead of ten. This is indeed the way in which
people count. But when it is said that the capital of 1,000
pounds has been turned over five times in the year, the
recollection of the time of circulation disappears in the hol-
low skulls of the capitalists, and a confused idea is formed
that this capital has served continuously in the process of
production during the successive five turn-overs. As a mat-
ter of fact, if we say that the capital of 1,000 pounds has
been turned over five times in a year, we include both the
time of circulation and the time of production. For, in-

Influence of the Time of Circulation. 305

deed, if 1,000 pounds sterling had actually been continuous-
ly active in the process of production, the product would
have to be 10,000 pounds sterling instead of 5,000, accord-
ing to our assumptions. But in order to have 1,000 pounds
sterling continuously in the process of production, 2,000
pounds would have to be advanced. The economists, who
as a general rule have nothing clear to say in reference to
the mechanism of the turn-over, always overlook this main
point, to-wit, that only a part of the industrial capital can
actually be engaged in the process of production, if produc-
tion is to proceed uninterruptedly. While one part is busy
in the process of production, another must always be en-
gaged in the process of circulation. Or in other words,
one part can perform the functions of productive capital
only on condition that another part is withdrawn from
production in the form of commodity or money-capital. In
overlooking this, the significance and role of money-capital
is entirely ignored.

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

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

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

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

The two capitals (capital I advanced for the first working
period, and reserve capital II advanced during the time of
circulation of capital I) relieve one another in their move-
ments without crossing. With the exception of the first
period, either of the two capitals is therefore advanced only

306

Capital.

for its own period of turn-over. Let the period of turn-
over be 9 weeks, as indicated in the two following illustra-
tions, so that the working period and the time of circulation
are each of them 4% weeks. Then we have the following
annual diagram:

Periods of
Turn-Over.
I. 1 — 9. week
II. 10—18.

III. 19—27.

IV. 28—36.
V. 37-45.

VI. 46- (54)

Table I.
CAPITAL I.

Working Periods. Advance.

1 — 4. 5. week
10—13. 5. "
19—22. 5. "
28-31. 5. "
37—40. 5. "
46-49. 5. "

450 p. st.
450 " "
450 " "
450 " "
450 " "
450 '• "

Periods of
Circulation.
4. 5 — 9. week
13. 5—18.
22. 5-27.
81. 5-36.
40. 5-45.
49. 5- (54)

I.

II. 13. 5—22. 5.

III. 22. 5—31. 5.

IV. 31. 5—40. 5.
V. 40. 5—49. 5.

VI. 49. 5- (58. 5.)

CAPITAL II.

Periods of Periods of

Turn-Over. Working Period. Advance. Circulation.

4. 5—13. 5. week 4. 5— 9. week 450 p. st. 10—13. 5. week

13. 5-18. " 450 " " 19—22. 5. "

22. 5-27. " 450 " " 28—31. 5. "

31. 5-36. " 450 " " 37—40. 5. "

40. 5-45. " 450 " " 46—49. 5. "

49. 5-(54.) " 450 " " (54—58. 5.) "

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

28 The weeks falling within the second year of turn-over are placed
in parentheses.

Influence of the Time of Circulation. 30%

2,325 pounds sterling; actual aggregate turn-over 4,875
pounds sterling.

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

Capital I has completed five full turn-overs and two-thirds
of its sixth period of turn-over. At the end of the year it
has the form of commodity-capital, which lacks three weeks
of its normal realization. During this time, it cannot take
part in the process of production. It performs the function
of commodity-capital, it circulates. It has completed only
two-thirds of its last period of turn-over. This is expressed
in the words: It has been turned over only two-thirds,
only two-thirds of its total value have completed their turn-
over. We say that 450 pounds sterling complete their turn-
over in 9 weeks, hence 300 do in 6 weeks. But in this ex-
pression, the organic conditions of the two specifically dif-
ferent portions of the period of turn-over are neglected. The
exact meaning of the expression, that the advanced capital
of 450 pounds sterling has made 5 2-3 turn-overs, is merely
that it has completed five turn-overs fully and of the sixth
only two-thirds. On the other hand, the expression that
the turned-over capital is equal to 5 2-3 of the advanced
capital, or, in the above case, 5 2-3 times 450 pounds ster-
ling, making 2,550, is correct only in so far as it means that
unless this capital of 450 pounds sterling were supple-
mented by another capital of 450 pounds sterling, one por-
tion of it would have to be in the process of circulation
while another is in the process of production. If the period
of turn-over is to be expressed in the quantity of the turned-
over capital, it can be expressed only in a quantity of exist-
ing values (embodied in the finished product). The fact
that the advanced capital is not in a condition in which it
may reopen the process of production is due to the cir-
cumstance that only a part of it is in a condition suitable
for production, or that, in order to be in a condition suitable

308 Capital.

for continuous production, it would have to be divided into
a portion which would be continually in the period of pro-
duction and into another which would be continually in the
period of circulation, according to the mutual relation of
these periods. It is the same law which determines the
quantity of the continually serving productive capital by
the proportion of the time of circulation to the period of
turn-over.

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

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

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

Hence the advanced capital of 900 pounds sterling has

Influence of the Time of Circulation. 309

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

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

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

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

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

It must be further noted that just as the capitals I and
II in the same private business have, strictly speaking, dif-
ferent years of turn-over (the cycle of turn-over of capital II
beginning 4 1-2 weeks later than that of capital I, so that the
year of capital I closes 4 1-2 weeks earlier than that of capi-
tal II), just so the various private capitals in the same sphere
of production begin their activities at totally different sec-
tions of time and, therefore, conclude their years of turn-
over at different times of the year. The same calculation of

310 Capital.

averages, which we employed above for capitals I and II,
suffices also for the reduction of the years of turn-over of the
various independent portions of the social capital to one
uniform year of turn-over.

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

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

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

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

Table II.

CAPITAL I, 600 POUNDS STERLING.

Periods of

Periods of

Turn-Over.

Working Periods. Advance.

Circulation.

I.

1 — 9. week

1— 6.

week 600 p. st.

7. — 9. week

II.

10-18. "

10-15.

600 " "

16.-18. "

III.

19—27. «'

19-24.

600 " "

25.-27. "

IV.

28—36. "

28-33.

" 600 " "

34.-36. "

V.

37-45. "

37-42.

600 " "

43.-45. "

VI.

46- (54) "

46-51.

600 " «

(52.-541 "

Influence of the Time of Circulation. 311

ADDITIONAL CAPITAL II, 300 POUNDS STERLING.

Periods of

Periods of

Turn-Over. Working Periods.

Advance.

Circulation.

I. 7—15. week 7— 9. week.

300 p. st.

10 — 15. week,

II. 16—24. " 16—18. "

300 " "

19—24. "

III. 25—33. " 25—27. "

300 «• "

28—33. "

IV. 34-^2. " 34—36. "

300 " "

37—42. "

V. 43-51. •' 42-45. "

300 " "

46—51. «'

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

Capital I, 2 2-3 times 600 or 3,400 p. st.

Capital II, 5 times 300 or 1,500 p. st.

Total capital 5 4-9 times 900, or 4,900 p. st.

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

Now, in reality, capital II has no working and circulating
periods separate and distinct from capital I. The working
period is 6 weeks, the circulation period 3 weeks. Since
capital II amounts to only 300 pounds sterling, it can fill
out only a part of the working period. This is indeed the
case. At the close of the 6th week, a product valued at 600
pounds sterling passes into circulation and flows back in
money at the close of the 9th week. Then capital II begins
its activity at the opening of the 7th week and responds to
the requirements of the next working period for the 7th to
9th week. But according to our assumption, the working
period is only half completed at the end of the 9th week.
Hence, in the beginning of the 10th week, capital I of 600
pounds sterling, having just returned, comes once more into
activity and advances 300 pounds sterling for the require-
ments of the 10th to 12th week. This completes the second

312 Capital.

working period. Products valued at 600 pounds, .sterling
are once again in circulation and will return in money at
the close of the 15th week. Furthermore, 300 pounds ster-
ling are set free, equal to the original amount of capital II,
and are enabled to serve in the first half of the following
working period, that is to say, in the 13th to 15th week.
After the lapse of these, the 600 pounds sterling flow back ;
300 of them suffice for the remainder of the working period,
300 are set free -for the following working period.
The course of events is, therefore, as follows :

I. Period of turn-over 1 — 9. week.

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

1. Period of circulation: 7 — 9. week. After the lapse of

the 9th week, 600 p. st. flow back in money.

II. Period of turn-over: 7 — 15 week.

2. Working period: 7 — 12. week.

First half: 7—9. week. Capital II, of 300 p. st.,
performs its function. After <the lapse of the 9th
week, 600 p. st. (capital I) flow back in money.
Second half: 10—12. week. 300 p. st. of capital I
perform their function. The other 300 p. st. of
capital I remain free.

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

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

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

3. Working period: 13 — 18. week.

First half: 13-15. week. The free 300 p. st. perform

their function. After the close of the 15th week, 600

p. st. flow back in money.

Second half: 16—18. week, 300 of the returned 600

perform their function, the other 300 again remain

free.

Influence of the Time of Circulation. 313

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

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

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

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

I. Period of turn-over: 1 — 9. week.

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

1. Circulation period: 6 — 9. week. After the close of the

9th week, 500 p. st. flow back in money.

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

2. Working period: 6 — 10. week.

314 Capital.

First section : 6 — 9. week. Capital II, of 400 p. st.,
performs its function. After the close of the 9th
week, capital I, of 500 p. st., flows back in money.
Second section: 10. week. 100 of the returned 500
p. st. perform their function. The remaining 400
p. st. are set free for the following working period.

2. Circulation period: 11 — 14. week.

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

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

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

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

The second period of turn-over, from the 8th to the 16th
week, contains the second working period of the 8th to
14th week. The requirements of the 8th and 9th week of
this period are covered by capital II. After the close of the
9th week, the above 700 p. st. flow back. Up to the close of
this working period (10—14.), 500 p. st. of this sum are
used up. 200 p. st. remain free for the next working period.
The second circulation period lasts from the 15th to the
16th week. After the close of the 16th week, 700 p. st. flow
back once more. From now on, the same phenomenon is

Influence of the Time of Circulation.

315

repeated in every working period. The demand in capital
of the first two weeks is covered by the 200 p. st. set free
at the close of the preceding working period; after the
close of the second week, 700 p. st. flow back in money;
but the working period lasts only 5 weeks longer, so that
only 500 p. st. can be consumed ; therefore, 200 p. st. always
remain free for the next working period.

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

HI. The Working Period Smaller Than The Circulation

Period.

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

Table III.

CAPITAL I.
Periods of Turn-Over. Working Periods. Periods of Circulation.

I. 1 — 9. week.

1 — 3. week.

4 — 9. week

II. 10—18. "

10—12. "

13—18. "

III. 19—27. "

19—21. "

22—27. "

IV. 28—36. "

28—30. "

31—36. "

V. 37-45. "

37—39. "

40—45. "

VI. 46- (54.) "

46—48. "

49- (54.) "

316

Capital.

Table III.
CAPITAL II.
Periods of Turn-Over. Working Periods. Periods of Circulation.

I. 4—12. week.
II. 13—21.

III. 22—30.

IV. 31—39.
V. 40—48.

VI. 49-(57.)

I. 7—15. week.
II. 16—24. "

III. 25—33. "

IV. 34—42. "
V. 43—51. "

4 — 6. week.
13—15. "
22—24. "
31—33. "
40—42. "
49—51. "

CAPITAL III.

7— 9. week.
16—18. "
25—27. "
34—36. "
43—45. "

7—12. week.
12—21. "
16—30. "
25—39. "

24—48.
(52—57.) "

10 — 15. week.
19—24. "
28—33. "
37-42. "
46—51. "

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

The total turn-over is calculated as follows:

Capital I, 300 times 5 2-3, or 1,700 p. st.
Capital II, 300 times 51-2, or 1,600 p. st.
Capital III, 300 times 5 , or 1,500 p. st.

Total capital 900 times 5 1-3, or 4,800 p. st.

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

Influence of the Time of Circulation.

817

Table IV.

CAPITAL I.

Periods of Turn-Over.

Working Periods.

Periods of Circulation-

I. 1 — 9. week.

1 — 4. week.

5 — 9. week.

II. 9—17. "

9. 10—12. "

13—17. "

III. 17—25. "

17. 18— 20. "
CAPITAL II.

21—25. "

I. 5—13. week.

5 — 8. week.

9—13. week.

II. 13—21. "

13. 14—16. "

17—21. "

III. 21—29. "

21. 22—29. "
CAPITAL III.

25—29.

I. 9—17. week.

9. week.

10—17. week.

II. 17—25. "

17. "

17—21. "

III. 25—33. "

25. "

26—33. "

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

In all cases investigated by us it was assumed that both
the working period and the circulation period remain the
same throughout the year in any of the businesses selected.
This assumption was necessary, if we wished to ascertain the

318 Capital.

influence of the time of circulation on the turn-over and
advance of capital. It does not alter the matter, that this
assumption is not borne out unconditionally in reality, and
that it frequently does not apply at all.

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

Influence of the Time of Circulation. 319

for the first working period. This is the source of the in-
fluence exerted by the duration of the working period of
the circulating capital over the scale of the process of pro-
duction and the division of the advanced capital, or event-
ually the advance of new portions of capital. It is precisely
this which we had to examine in this section.

IV. Conclusions.

From the preceding analyses, it follows that,

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

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

C. It follows that for the aggregate social capital, so far
as its circulating capital is concerned, the setting free of

320 Capital.

capital must be the rule, while the mere relieving of portions
of capital following successively in the process of produc-
tion must be the exception. For the equality of the period
of work and circulation, or the equality of the period of cir-
culation with a simple multiple of the working period, in
other words, a similar proportion of the two portions of the
period of turn-over has nothing to do with the nature of the
case, and for this reason it cannot be found in general, but
only in rare instances.

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

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

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

D. The total capital, for instance 900 p. st., must be di*
vided into two portions, for instance, 600 p. st. for the work-
ing period and 300 p. st. for the period of circulation. That
portion, which is really invested in the labor-process, is thus
reduced by one third, or from 900 to 600 p. st. The scale
of production is thus reduced by one third. On the other
hand, the 300 p. st. perform their function only to make

Influence of the Time of Circulation. 321

the working period continuous, in order that 100 p. st. may
be invested every week of the year in the labor-process.

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

Now, if we take a closer look at the released, or rather
suspended, capital, we find that a considerable part of it
must always be in the form of money-capital. Let us ad-
here to our illustration: Working period 6 weeks, period
of circulation 3 weeks, expenditure per week 100 p. st. In
the middle of the second working period, after the
close of the 9th week, 600 p. st. flow back, and 300 of them
must be invested for the remainder of the working period.
After the close of the second working period, 300 p. st. are
then released. In what condition are these 300 p. st.? We
will assume that 1-3 is invested for wages, 2-3 for raw ma-
terials and auxiliary substances. Then 200 of the returned
600 p. st. exist in the form of money for wages, and 400
p. st. in the form of a productive supply, in the form of
elements of the constant circulating productive capital. But
since only one half of this productive supply is required for
the second half of the second working period, the other half
is for 3 weeks in the form of a surplus, that is to say, of a
productive supply exceeding the requirements of one work-
ing period. The capitalist, on the other hand, knows that
he needs only one-half (200 p. st.) of this portion (400 p.
st.) of the returned capital for the current working period.

322 Capital.

It will, therefore, depend on market conditions, whether he
will immediately reconvert these 200 p. st. entirely or par-
tially into a surplus productive supply, or reserve them
entirely or partially in the form of money in the expectation
that the conditions of the market will improve. It goes
without saying, that the portion of capital to be used for the
payment of wages (200 p. st.) is reserved in the form of
money. The capitalist cannot store labor-power in ware-
houses after he has bought it, as he may do with the raw
material. He must incorporate it in the process of production
and he pays for it at the end of the week. At least these
100 p. st. of the released capital of 300 p. st. will, therefore,
have the form of money not required for the working
period. The capital released in the form of money-capital
must therefore be at least equal to the variable portion of
capital invested in wages. At a maximum, it may com-
prise the entire released capital. In reality it fluctuates
continually between this minimum and maximum.

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

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

Influence of the Time of Circulation. 323

money-market, whereby it is relieved as much as it is by an
increased supply. Or, finally, the sums made superfluous
by the mechanism are thrown definitely on the money-
market.

In consequence of the contraction of the period of turn-
over from 3 weeks to 2, and thus of the period of turn-over
from 9 weeks to 8, one ninth of the advanced total capital
becomes superfluous. The working period of 6 weeks can
now be kept going as continuously with 8G0 p. st. as former-
ly with 900. One portion of the value of the commodity-
capital, equal to 100 p. st., therefore persists in the form of
money-capital without performing any more functions as
a part of the capital advanced for the process of production.
While production is continued on the same scale and with
other conditions, such as prices, etc., remaining equal, the
value of the advanced capital is reduced from 900 to 800
p. st. The remainder of the originally advanced value, to
the amount of 100 p. st., is released in the form of money-
capital. As such it passes over into the money-market and
forms an additional portion of the capitals serving in that
capacity.

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

Let us assume, on the other hand, that the period of cir-
culation is prolonged from 3 weeks to 5. In that case, the
reflux of the advanced capital takes place 2 weeks too late
at the very next turn-over. The last part of the process

324 Capital.

of production of this working period cannot be carried on,
the mechanism of the turn-over of the advanced capital
itself interfering. In case of a longer duration of this con-
dition, a contraction of the process of production, a reduc-
tion of its volume, might take place, just as an extension
did in the previous case. But in order to continue the proc-
ess on the same scale, the advanced capital would have to
be increased by 2-9, or 200 p. st., for the entire duration of
the prolongation of the circulation period. This additional
capital can be obtained only from the money-market. If,
then, the prolongation of the period of circulation applies
to one or more great lines of business, it may cause a pres-
sure on the money-market, unless this effect is compensated
by some counter-effect from some other direction. In this case
likewise it is evident and obvious that such a pressure is
not in the least due to a change in the prices of the com-
modities nor to the quantity of the existing means of cir-
culation.

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

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

Influence of the Time of Circulation. 325

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

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

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

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

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

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

The essential point in the above analysis is the demon-
stration that, on one hand, a considerable portion of the
industrial capital must always be available in the form of
money, and, on the other hand, a still more considerable

826 Capital.

portion must temporarily assume the form of money. This
proof is, if anything, still more emphasized by these addi-
tional remarks of mine. — F. E.)

V. The Effect of a Change of Prices

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

In the second place, one half of the originally advanced

Influence of the Time of Circulation. 327

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

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

But, in the third place, given a certain scale of production,
the velocity of the turn-over and the prices for the circu-
lating elements of productive capital remaining the same,
the price of the product of the business of X may rise or
fall. If the price of the commodities supplied by the busi-
ness of X falls, the price of his commodity-capital of 600
p. st., which it threw continually into circulation, sinks, for
instance, to 500 p. st. In that case, one sixth of the value
of the advanced capital does not flow back from the process
of circulation, (the surplus-value contained in the commod-

328 Capital.

ity-capital is not considered here), and it is lost in circula-
tion. But since the value, or price, of the elements of pro-
duction remains the same, this reflux of 500 p. st. suffices
only to replace 5-6 of the capital of 600 p. st. engaged in the
process of production. It requires therefore an addition of
100 p. st. of money-capital to continue production on the
same scale.

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

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

But the following points fall under this analysis:

I. Case. — A Change in the Period of Circulation, and
thus of Turn-Over, while the Scale of Produc-
tion, and the Prices of the Elements of Produc-
tion and of Products Remain the Same.

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

The business of X supplies the same as ever a six weeks'
product of the same value of 600 p. st., and as work con-
tinues without interruption during the entire year, the same
quantity of products, valued at 5,100 p. st., is supplied in
51 weeks. There is, then, no change so far as the quan-
tity and price of the product thrown into circulation by
this business are concerned, nor in the terms of time in
which it throws its product on the market. But 100 p. st.

Influence of the Time of Circulation. 329

are released, because the requirements of the productive
process are satisfied with 800 instead of 900 p. st., after the
contraction of the period of circulation. The released 100
p. st. of capital exist in the form of money-capital. But
they do not by any means represent that portion of the
advanced capital, which would have to serve continually in
the form of money-capital. Let us assume that 4-5, or
480 p. st. of the advanced circulating capital are continually
invested in material elements of production, and 1-5, or
120 p. st., in labor-power. Then the weekly investment
in materials of production would be 80 p. st., and in labor-
power 20 p. st. Of course, capital II, of 300 p. st., must
also be divided into 4-5, or 240 p. st., for materials of pro-
duction, and 1-5, or 60 p. st., for wages. The capital in-
vested in wages must always be advanced in the form of
money. As soon as the commodity-product to the amount
of 600 p. st. has been reconverted into money, 480 p. st.
of it may be transformed into materials of production (pro-
ductive supply), but 120 p. st. retain their money-form, in
order to serve in the payment of wages for six weeks. These
120 p. st. are the minimum of the returning capital of 600
p. st., which must always be renewed in the form of money-
capital and so replaced, and therefore this minimum must
always be kept on hand as that portion of the advanced
capital which serves in its money-form.

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

If the contraction of the period of circulation has become
a fact, then only 400 p. st. of the above 600, instead of 480,

330 Capital.

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

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

Tt has been assumed here, that the capital belongs to him
who invests it. But if he had borrowed it, nothing would
be altered in these conditions. With the contraction of the

Influence of the Time of Circulation. 331

period of circulation, he would need only 800 p. st. of bor-
rowed money instead of 900. This sum of 100 p. st., if re-
turned to the lender, forms nevertheless 100 p. st. of new
money-capital, only in the hands of Y instead of X. If
the capitalist X receives his materials of production to the
amount of 480 p. st. on credit, so that he has only to ad-
vance 120 p. st. for wages out of his own pocket, then he
would now have to purchase 80 p. st.'s worth of goods less
on credit, so that this sum would constitute an excess of
commodity-capital for the capitalist giving it on credit,
while the capitalist X would have released 20 p. st. of his
money.

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

January 1, 300 bales, remaining in storage 900 bales.

April 1, 300 bales, remaining in storage 600 bales.

July 1, 300 bales, remaining in storage 300 bales.

October 1, 300 bales, remaining in storage 0 bales.

But in the second case, the situation would be:

January 1, sold 200, remaining in storage 1,000 bales.
Murch 1, sold 200, remaining in storage 800 bales.

May 1, sold 200, remaining in storage 600 bales.

July 1, sold 200, remaining in storage 400 bales.

September 1, sold 200, remaining in storage 200 bales.
November 1, sold 200, remaining in storage 0 bales.

In other words, the money invested in cotton flows back
completely one month later, in November instead of Octo-

332 Capital.

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

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

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

Influence of the Time of Circulation. 333

purchase of the weekly supply, and likewise the 20 p. st.
for wages, because the turned-over capital of 600 p. st.
returns one week earlier.

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

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

II. CASE. — A Change in the Price of Materials of Pro-
duction, All Other Circumstances
Remaining the Same.

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

334 Capital.

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

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

III. CASE. — A Change in the Market Price of the
Products Themselves.

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

Influence of the Time of Circulation. 335

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

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

636 Capital.

CHAPTER XVI.

THE TURN-OVER OF THE VARIABLE CAPITAL.

I. The Annual Rate of Surplus- Value.

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

Let the period of turn-over be 5 weeks; the working pe-
riod 4 weeks, the period of circulation 1 week. Then capital
I is 2000 p. st., consisting of 1600 p. st. of constant capital
and 400 p. st. of variable capital; capital II is 500 p. st.,
400 of which are constant and 100 variable. In every
working week, a capital of 500 p. st. is invested. In a year
of 50 weeks an annual product of 50 times 500, or 25,000
p. st., is manufactured. The capital I, continuously invested
in one working period and amounting to 2000 p. st., is
turned over 12 y2 times. 12 V2 times 2000 make 25,000 p.
st. Of this sum of 25,000 p. st., four-fifths, or 20,000 p.
st., are constant capital invested in materials of production,
and one-fifth, or 5000 p. st., is variable capital invested in
wages. The total capital of 2500 p. st. is turned over 10
times, which is 25,000 divided by 2500.

The variable circulating capital expended in production
can serve afresh in the process of circulation only to the
extent that the product in which its value is reproduced is
sold, converted from a commodity-capital into a money-
capital, in order to be once more expended in the payment
of labor-power. But the same is true of the constant circu-
lating capital invested in production for materials, the value
of which reappears as a portion of the value of the product.
That which is common to these two portions of the circula-
ting capital, the variable and constant capital, and which dis-
tinguishes them from the fixed capital, is not that the value
transferred from them to the product is circulated by the
commodity-capital, circulated as a commodity through the

The Turn-Over of the Variable Capital. 337

circulation of the product. For one portion of the value
of the product, and thus of the product circulating as a
commodity, the commodity-capital, always consists of the
wear of the fixed capital, that is to say, of that portion of the
value of the fixed capital which is transferred to the product
during the process of production. The difference is rather
this: The fixed capital continues to serve in the process of
production in its old natural form for a longer or shorter
cycle of periods of turn-over of the circulating capital (which
consists of constant circulating plus variable circulating
capital), while every single turn-over is conditioned on the
reproduction of the entire circulating capital passing from
the sphere of production in the form of commodity-capital
into the sphere of circulation. The constant and variable cir-
culating capital both have in common the first phase of the
circulation, C — M\ But in the second phase they separate.
The money, into which the commodity is reconverted, is in
part transformed into a productive supply (constant cir-
culating capital). According to the different terms of pur-
chase of this material, a portion may be sooner, another
later, converted from money into materials of production,
but finally it is wholly consumed that way. Another por-
tion of the money realized by the sale of the commodity is
held in the form of a money-supply, in order to be gradual-
ly expanded in the payment of labor-power incorporated in
the process of production. This portion constitutes the
variable circulating capital. Nevertheless the entire repro-
duction of either portion is due to the turn-over of the cap-
ital, to their conversion into a product, from a product into
a commodity, from a- commodity into money. This is the
reason why, in the preceding chapter, the turn-over of the
circulating constant and variable capital was discussed sep-
arately and simultaneously without any regard to the fixed
capital.

For the purposes of the question which we have to dis-
cuss now, we must go u step farther and proceed with the
variable portion of the circulating capital as though it con-
stituted the circulating capital by itself. In other words,

338 Capital.

we leave out of consideration the constant circulating capital
which is turned over together with it.

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

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

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

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

If 500 p. st. of variable capital produce a surplus-value of
500 p. st., then 5000 p. st. produce ten times 500, or 5000
p. st. of surplus-value. The proportion of the total quanti-
ty of surplus-value produced during one year to the val-
ue of 'the advanced variable capital is what we call the an-
nual rate of surplus-value. In the present case, this is as
5000 to 500, or 1000%. If we analyze this rate more
closely, we find that it is equal to the rate of surplus-value

The Turn-Over of the Variable Capital. 339

produced by the advanced variable capital during one peri-
od of turn-over, multiplied by the number of turn-overs
of the variable capital (which coincides with the number
of turn-overs of the entire circulating capital).

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

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

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

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

340 Capital.

100%, the quantity of surplus-value produced in 5 weeks
likewise 500 p. st. The quantity of labor-power, which is
here exploited, and the intensity of its exploitation, are as-
sumed to be the same as those of capital A.

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

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

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

The strangeness of this phenomenon disappears at once,

The Turn-Over of the Variable Capital. 341

when we piace capital A and B in exactly the same con-
ditions, not peemingly, but actually. These equal circum-
stances are present only when the variable capital B is ex-
pended in the payment of labor-power in its entire volume
and in the same period of time as capital A.

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

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

The labor-process itself is determined by the time. If the
length of the working period is given (as it is here, where
we assume all circumstances relating to A and B to be equal,
in order to elucidate the difference in the annual rate of
surplus-value), the working week consists of a certain num-
ber of working days. Or, we may consider any working
period, for instance this working period of 5 weeks, as one
single working day of 300 hours, if the working day has
10 hours and the working week 6 days. We must further
multiply this number with the number of laborers who
are employed every day simultaneously in the same labor-

342 Capital.

process. If there were 10 laborers, there would be 60 times
10, or 600 working hours in one week, and a working period
of 5 weeks would have 600 times 5, or 3000 working hours.
Variable capitals of equal magnitude are, therefore, em-
ployed, the rate of surplus-value and the working days being
the same if equal quantities of labor-power are set in motion
in the same time (a labor-power of the same price multiplied
with the same number).

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

The circumstances which differentiate the relations of the
advanced to the employed capital, influence the production
of surplus-value — the rate of surplus-value being given —
only to the extent that they differentiate the quantity of

The Turn-Over cf the Variable Capital. 343

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

Let us consider the first productive section of 5 weeks of
capital B. At the end of the fifth week, 500 p. st. have
been employed and consumed. The value of the product
is 100 p. st., hence the rate as 500 s to 500 v or 1100%,
the same as in the case of capital A. The fact that, in
the case of capital A, the surplus-value is realized together
with the advanced capital, while in the case of B it is not,
does not concern us here, where it is merely a question of
the production of surplus-value and of its proportion to the
variable capital advanced during its production. But if
we calculate the proportion of surplus-value in B, not as
compared to that portion of the advanced capital of 5000
p. st. which has been employed and consumed in its produc-

344 Capital.

tion, but to this total advanced capital itself, we find that it is
as 500 s to 5000 v, or as 1 to 10, or 10%. In other words, it is
10% for capital B and 100% for capital A, ten times more.
If any one were to say that this difference in the rate of
surplus-value for equal capitals, setting in motion equal
quantities of labor which is equally divided into paid and
unpaid labor, is contrary to the laws of the production of
surplus-value, then the answer would be simple and prompt-
ed by the mere inspection of the actual conditions: In the
case of A, the actual rate of surplus-value is expressed, that
is to say, the proportion of a surplus-value of 500 p. st.,
to a variable capital of 500 p. st., which produced it in 5
weeks. In the case of B, on the other hand, we are dealing
with a calculation which has nothing to do either with the
production of surplus-value, or with the determination of
its corresponding rate of surplus-value. For the 500 p. st.
of surplus-value produced by a variable capital of 500 p.
st. are not calculated with reference to the 500 p. rt. of vari-
able capital advanced in their production, but with reference
to a capital of 5000 p. st., nine-tenths of which, -or 4500
p. st., have nothing whatever to do with the production of
this surplus-value of 500 p. st., but are rather intended for
gradual service in the following 45 weeks, so that they do
not exist at all so far as the production of the first 5 weeks
is concerned, which is alone significant in this instance. Un-
der these circumstances, the difference in the rate of surplus-
value of A and B is no problem at all.

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

Rate of Surplus- Value of Capital B 10%

Rate of Surplus- Value of Capital A 100%

Now we have

Annual Rate of Surplus- Value of Capital B 100%

Annual Rate of Surplus- Value of Capital A 1000%

The Turn-Over of the Variable Capital. 345

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

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

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

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

First. The Capital advanced in the case of A is only
five times larger than that portion of capital which is con-

346 Capital.

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

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

The variable capital turned over during one year — and
hence that portion of the annual product, or of the annual
expenditure, which is equal to that portion — is the variable

The Turn-Over of the Variable Capital. 347

capital employed and productively consumed during the
year. It follows that, assuming the variable capital A turned
over annually and the variable capital B turned over an-
nually to be equal, and to be employed under equal con-
ditions of investment, so that the rate of surplus-value is the
same for both of them, the quantity of surplus-value pro-
duced annually must likewise be the same for both of them.
Hence the annual rate of surplus-value must also be the
same for them so far as it is expressed by the formula

Quantity of Surplus- Value Produced Annually

Variable Capital Turned-Over Annually.

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

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

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

Capital Turned-Over Annually

Capital Advanced

taking into account, as we have said before, only the vari-
able capital. The division shows the number of turn-overs
made by the capital advanced in one year.
In the case of capital A, we have :

5000 p. st. of Capital Turned-Over Annually

500 p. st. of Capital Advanced

In the case of capital B, we have:

5000 p. st. of Capital Turned Over Annually

5000 p. st. of Capital Advanced

348 Capital.

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

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

The ratio of the variable capital turned over annually
to the variable capital advanced indicates (1) the ratio of
the capital intended for investment to the variable capital
employed during a definite working period. If the number
of turn-overs is 10, as in the case of A, and the year is as-
sumed to have 50 working weeks, then the period of turn-
over is 5 weeks. For these 5 weeks, variable capital must
be advanced, and the capital advanced for 5 weeks must
be 5 times as large as the variable capital employed during
one week. That is to say, only one-fifth of the advanced
capital (in this case of 500 p. st.) can be employed in the
course of one week. On the other hand, in the case of
capital B, where the number of turn-overs is 1-1, the time of
turn-over is 1 year of 50 weeks. The ratio of the advanced
capital to the capital employed weekly is, therefore, as 50
to 1. If matters were the same for B as they are for A,
then B would have to invest 1000 p. st. per week instead of
100. (2). It follows, that B has employed ten times as
much capital (5000 p. st.) as A, in order to set in motion
the same quantity of variable capital and, the rate of sur-
plus-value being the same, of labor (paid and unpaid),
and thus to produce the same quantity of surplus-value
during one year. The current rate of surplus-value ex-

The Turn-Over of the Variable Capital. 349

presses nothing but the ratio of the variable capital em-
ployed during a certain period to the surplus-value produced
in the same time; or, the quantity of unpaid labor set in
motion by the variable capital employed during this time.
It has absolutely nothing to do with that portion of the
variable capital which is advanced for a time in which it is
not employed. Hence it has nothing to do, in the case of
different capitals, with the ratio, determined and differ-
entiated by the period of turn-over, of that portion of capi-
tal which is advanced for a definite time and that portion
which is employed in the same time.

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

(A) The annual rate of surplus-value is equal to

the Quantity of Surplus- Value Produced during the Year
Variable Capital Advanced

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

(B) The annual rate of surplus-value is equal to the

350 Capital.

Cur. Rate of Surpl.Val. mltpl.b. the Var.Cap. Adv. mltpl. b n

Var. Cap. Adv.

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

100 times 5000 times 1

, or 100%.

5000

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

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

s'vn

S' is equal to , or s'n.

v

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

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

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

Finally, S' is smaller than s', when n is smaller than
1, that is to say, when the capital turned over during one

The Turn-Over of the Variable Capital. 351

year is only a part of the advanced capital, so that the
period of turn-over is longer than* one year.

Let us linger a moment over this last case.

We retain all the premises of our former illustration,
only the period of turn-over is to be 55 weeks instead of
50 weeks. The labor-process requires a variable capital of
100 p. st. per week, so that 5500 p. st. are needed for the
period of turn-over, and every week 100 s is produced, s'
is, therefore, smaller than 100%. Indeed, if the annual rate

turn-overs, n, is then_ or , because the time of turn-

55 11

over is 1 plus 1-10 year (of 50 weeks), or 11-10 year.
S' is equal to

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

annual rate of surplus- value is s , or 10-11, or 90

10-11%. 5500 v

The annual rate of surplus-value, or the comparison be-
tween the surplus-value produced during one year and the
variable capital advanced (as distinguished from the vari-
able capital turned over during one year), is therefore not
merely a subjective matter, but the actual movement of cap-
ital causes this juxtaposition. So far as the owner of capital
A is concerned, his advanced variable capital of 500 has re-
turned to him at the end of the year, and it has produced
5000 p. st. of surplus-value in addition. It is not the quan-
tity of capital employed by him during the year, but the
quantity returning to him periodically, that expresses the
magnitude of his advanced capital. It is immaterial for
the present question, whether the capital exists at the end
of the year partly in the form of a productive supply, or
partly in that of money or commodity-capital, and what
may be the proportions of these different parts. On the

352 Capital.

other hand, so far as the owner of capital B is concerned,
his advanced capital of 5000 p. st. has returned to him.
with an additional surplus-value of 5000 p. st. And as foi
the owner of capital C (the last mentioned 5500 p. st.),
surplus-value to the amount of 5000 p. st. has been produced
for him (advanced 5000 p. st., rate of surplus-value 100%),
but his advanced capital has not yet returned to him nor has
he pocketed his surplus-value.

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

Quantity of S.-V. produced in one Period of T.-O.

Var. Cap, employed in one Period of T.-O.

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

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

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

Capital A, which is turned over ten times in one year, is

The Turn-Over of the Variable Capital. 353

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

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

s'vn

S' equal to , or s'n.

v

As the current rate of surplus-value, a', is equal to ', equal
to the quantity of surplus-value divided by the variable
capital which produced it, we may substitute the value of
s' in s'n, that is to say %, in our formula, thus making it
S' equal to 8°.
But by its tenfold turn-over, and thus the tenfold re-

354 Capital.

newal of its advance, the capital of 500 p. st. performs the
function of a ten times larger capital, of a capital of 5000
p. st., just as 500 dollar coins, which circulate ten times per
year, perform the same function as 1000 dollar coins which
circulate once a year.

II. The Turn-Over of the Individual Variable Capital.

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

In the case of capital A, we have 10 periods of turn-over
of 5 weeks each. In the first period of turn-over, 500 p.
st. of variable capital are advanced, that is to say, 100 p. st.
are converted into labor-power every week, so that 500
p. st., have been converted into labor power at the end
of the first period of turn-over. These 500 p. st., originally
a part of the total capital advanced, have then ceased to be
capital. They are paid out in wages. The laborers in their
turn pay them out in the purchase of means of subsistence,
consuming subsistence to the amount of 500 p. st. A quant-
ity of commodities of that value is therefore annihilated
(what the laborer may save up in money, etc., is not capi-
tal). This quantity of commodities has been consumed un-
productively from the standpoint of the laborer, except in so
far as it preserves his labor-power, an indispensable instru-
ment of the capitalist. In the second place, these 500 p.
st. have been converted, from the standpoint of the capital-
ist, into labor-power of the same value (or price). Labor-
power is consumed by him productively in the labor-process.
At the end of 5 weeks, a product valued at 1,000 p. st. has
been created. Half of this, or 500 p. st., is the reproduced
value of the variable capital paid out for wages. The other

The Turn-Over of the Variable Capital. 855

half, or 500 p. st., is newly produced surplus-value. But
5 weeks of labor-power, by the consumption of which a
portion of a capital was transformed into variable capital,
is likewise expended, consumed, although productively. The
labor which was active yesterday is not the one which is
active today. Its value, together with that of the surplus-
value created by it, exists now as the value of a thing sep-
arate from labor-power, to wit, a product. But by converting
the product into money, that portion of it, which is equal
to the value of the variable capital advanced, may once
more be transformed into labor-power and thus perform
again the functions of variable capital. It is immaterial
that the same laborers, that is to say, the same bearers of the
labor-power may be employed not only with the reproduced,
but also with the reconverted capital-value in the form of
money. It might be possible that the capitalist might hire
different laborers for the second period of turn-over.

It is, therefore, a fact that a capital of 5,000, and not of
500 p. st., is paid out for labor-power in the ten periods of
turn-over of 5 weeks each. The capital of 5,000 p. st. so
advanced is consumed. It does not exist any more. On the
other hand, labor-power to the value of 5,000, not of 500,
p. st. is incorporated successively in the productive process
and reproduces not only its own value of 5,000 p. st., but also
a surplus value of 5,000 p. st. over and above its value. The
variable capital of 500 p. st., which is advanced for the sec-
ond period of turn-over, is not the identical capital of 500
p. st., which had been advanced for the first period of turn-
over. This has been consumed, expended in labor-power.
But it is replaced by new variable capital of 500 p. st., which
was produced in the first period of turn-over in the form of
commodities and reconverted into money. This new money-
capital is, therefore, the money-form of the quantity of com-
modities newly produced in the first period of turn-over.
The fact that an identical sum of 500 p. st. is again in the
hands of the capitalist, apart from the surplus-value, a sum
equal to the one which he had originally advanced, dis-
guises the circumstance that he now operates with a newly
produced capital. (As for the other constituents of value

356 Capital.

of the commodity-capital, which replace the constant parts
of capital, their value is not newly produced, but only the
form is changed in which this value exists.) Let us take
the third period of turn-over. Here it is evident that the
capital of 500 p. st., advanced for a third time, is not an
old, but a newly produced capital, for it is the money-form
of the quantity of commodities produced in the second, not
in the first, period of turn-over that is to say, of that portion
of this quantity of commodities, whose value is equal to that
of the advanced variable capital. The quantity of commodi-
ties produced in the first period of turn-over is sold. Its
value, to the extent that it was equal to the variable portion
of the value of the advanced capital, was transformed into
the new labor-power of the second period of turn-over and
produced a new quantity of commodities, which were sold
in their turn and a portion of whose value constitutes the
capital of 500 p. st. advanced for the third period of turn-
over.

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

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

At the end of the first period of 5 weeks, a variable capi-
tal of 500 p. st. has been advanced and expended by both
capitalists A and B. Both B and A have transformed its

The Turn-Over of the Variable Capital. 357

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

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

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

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

Both A and B consume new labor-power in the second
period of 5 weeks and expend a new capital of 500 p. st. for
the payment of this labor-power. The means of subsistence of
the laborer paid with the first 500 p. st. are gone, their value
has in every case disappeared from the hands of the capi-
talist. With the second 500 p. st., new labor-power is bought,

358 Capital

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

The difference is due to the difference of the periods of
turnover, that is to say, to the period in which the substi-
tute for the value of a certain variable capital employed for
a certain time can renew its function of capital, can serve as
a new capital. In the case of both B and A, the same repro-
duction of value of the variable capital employed during the
same periods take place. There is also the same increment
of surplus-value during the same periods. But in the case
of B, while there is every 5 weeks a reproduction of the
value of 500 p. st. and a surplus-value of 500 p. st., these

The Turn-Over of the Variable Capital. 359

values do not yet make a new capital, because they are not
in the form of money. In the case of A, on the other hand,
the value of the old capital is not only reproduced by a
new value, but it is rehabilitated in its money-form, so that
it may at once assume the functions of a new capital.

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

III. The Turn-Over of the Variable Capital, Consid-
ered From the Point op View op Society.

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

360 Capital.

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

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

Given the scale of production, the absolute magnitude of
the advanced variable capital (and of the circulating capi-
tal in general) decreases in proportion as the period of turn-
over is shortened, and so does the annual rate of surplus-
value increase. Given the magnitude of the advanced cap-
ital, and the rate of surplus-value, the scale of production
and the absolute quantity of surplus-value created in one
period of turnover increases simultaneously with the rise

The Turn-Over of the Variable Capital. 361

in the annual rate of surplus-value due to the contraction
of the periods of reproduction. It follows in general from
the preceding analysis that, according to the different length
of the periods of turn-over, money-capital of considerably
different quantity must be advanced, in order to set in motion
the same quantity of productive circulating capital and
the same quantity of labor-power with the same intensity
of exploitation.

Second. It is due to the first difference, that the laborers
of B and A pay for the means of subsistence which they buy
with the variable capital that has been transformed into
a medium of circulation in their hands. For instance, they
do not only withdraw wheat from the market, but also
leave in its place an equivalent in money. But since the
money, with which the laborer of B pays for his means of
subsistence and draws them from the market is not the
money-form of the value of a product which he has thrown
on the market during the year, as it is in the case of the
laborer of A, he supplies the seller of his means of sub-
sistence only with money, but not with products — be they
materials of production or means of subsistence — which
this seller might buy with the money received from
the laborer, as he may in the case of the laborer
of A. The market is therefore stripped of labor-power,
means of subsistence for this labor-power, fixed capital, in
the form of instruments of production used by B, and ma-
terials of production, and an equivalent in money is thrown
on the market in their place, but no product is thrown on
the market during the year by which the material elements
of productive capital withdrawn from it might be replaced.
If we assumed that society were not capitalistic, but com-
munistic, then the money-capital would be entirely elim-
inated, and with it the disguises which it carries into the
transactions. The question is then simply reduced to the
problem that society must calculate beforehand how much
labor, means of production, and means of subsistence it can
utilize without injury for such lines of activity as, for in-
stance, the building of railroads, which do not furnish any
means of production or subsistence, or any useful thing, for

362 Capital.

a long time, a year or more, while they require labor, and
means of production and subsistence out of the annual so-
cial production. But in capitalist society, where social in-
telligence does not act until after the fact, great disturbances
will and must occur under these circumstances. On one
hand there is a pressure on the money-market, while on the
other an easy money-market creates just such enterprises
in mass, that bring about the very circumstances by which
a pressure is later on exerted on the market. A pressure is
exerted on the money-market, since an advance of money-
capital for long terms is always required on a large scale.
And this is so quite apart from the fact that industrials and
merchants invest the money-capital needed for the carrying
on of their business in railroad speculation, etc., and re-
imburse themselves by borrowing in the money-market.
On the other hand, there is a pressure on the available
productive capital of society. Since elements of productive
capital are continually withdrawn from the market and only
an equivalent in money is thrown on the market in their
place, the demand of cash payers for products increases with-
out supplying any elements for purchase. Hence a rise in
prices, of means of production and of subsistence. To make
matters worse, swindling operations are always carried on
at this time, involving a transfer of great capitals. A band
of speculators, contractors, engineers, lawyers, etc., enrich
themselves. They create a strong demand for consumption
on the market, wages rising at the same time. So far as
means of subsistence are concerned, it is true that agriculture
is thus stimulated. But as these means of subsistence can-
not be suddenly increased within the year, their importa-
tion increases, as does the importation of exotic food stuffs,
such as coffee, sugar, wine, and articles of luxury. Hence
we then have a surplus importation and speculation in this
line of imports. Furthermore, in those lines of business in
which production may be rapidly increased, such as manu-
facture proper, mining, etc., the rise in prices causes a sud-
den expansion, which is soon followed by a collapse. The
same effect is produced on the labor-market, where large
numbers of the latent relative over-population, and even of
the employed laborers, are attracted toward the new lines

The Turn-Over of the Variable Capital. 3(58

of business. In general, such enterprises on a large scale
as railroad building withdraw a certain quantity of labor-
powers from the labor-market, which can come only from
such lines of business as agriculture, etc., where strong men
are needed. This still continues even after the new enter-
prises have become established lines of business and the
wandering class of laborers needed for them has already
been formed. A case in point is the temporary increase in
the scale of business of railroads beyond the normal. A
portion of the reserve army of laborers who kept wages down
is absorbed. Wages rise everywhere, even in the hitherto
engaged parts of the labor-market. This lasts until the in-
evitable crash throws the reserve army of labor out of work,
and wages are once more depressed to their minimum or be-
low it. 27

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

Furthermore, to the extent that the length of the working
period is conditioned on the size of the orders (the quanti-
tative volume in which the product is generally thrown upon
the market), this point depends on conventions. But con-

27 In the manuscript, the following note is here inserted for future
elaboration: "Contradiction in the capitalist mode of production; the
laborers as buyers of commodities are important for the market. But
as sellers of their own commodity — labor-power — capitalist society tends
to depress them to the lowest price. Further contradiction : The epochs
in which capitalist production exerts all its forces are always periods of
overproduction, because the forces of production can never be utilized
to such a degree that more value is not only produced but also realized ;
but the sale of commodities, the realization on the commodity-capital,
and thus on surplus-value, is limited, not by the consumptive demand
of society in general, but by the consumptive demand of a society in
which the majority are poor and must always remain poor. However,
this belongs into the next part."

864 Capital.

vention itself depends for its material basis on the scale of
production, and it is accidental only when considered in-
dividually.

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

For instance, English cotton goods or yarn are sold to
India. The export merchant may pay the English cotton
manufacturer. (The export merchant does so willingly only
when the money-market stands well. If the manufacturer
replaces his money-capital by operating credit on his own
part, matters are already in a bad state) . The exporter sells
his cotton goods later in the Indian market, whence his
advanced capital is returned to him. Until the time of this
return the case is identical with the one in which the
length of the working period necessitates the advance of new
money-capital, in order to maintain the process of produc-
tion on a certain scale. The money-capital with which the
manufacturer pays his laborers and renews the other ele-
ments of his circulating capital, is not the money-form of
the yarn produced by him. This cannot be the case until
the value of this yarn has returned to England in the form
of money or products. It is additional capital as before.
The difference is only that it is advanced by the merchant
instead of the manufacturer, and that it reaches the
merchant oy means of manipulations of credit. Further-
more, before this money is thrown on the market, or simul-
taneously with it, no additional product has been thrown
on the English market, to be bought with this money and

The Turn-Over of the Variable Capital. 365

to be consumed productively or individually. If this con-
dition occurs for a long period on a large scale, it must cause
the same effects as a prolongation of the working period,
previously mentioned.

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

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

Third. So far as the employed circulating capital (con-
stant and variable) is concerned, the length of the period

366 Capital.

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

The Circulation of Surplus-Value. 367

CHAPTER XVII.

THE CIRCULATION OF SURPLUS-VALUE.

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

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

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

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

In the case of A, this portion of capital — in full or for
the greater part — is not advanced at the beginning of pro-
duction. It need not be available, or even in existence. It
comes out of the business itself by a direct transformation
of surplus-value into capital by its direct employment as
capital. One portion of the surplus-value which is not only
periodically produced but also realized may cover the ex-
penditures required for repairs, etc. A portion of the capi-
tal needed for carrying on the business on its original scale

368 Capital.

is thus produced in the course of business by the business
itself by means of capitalization of a portion of surplus-
value. This is impossible for the capitalist B. This portion
of capital must in his case form a part of the capital origin-
ally advanced. In both cases this portion will figure in
the books of the capitalists as an advanced capital, which
it really is, since according to our assumption it is a part
of the productive capital required for maintaining the busi-
ness on a certain scale. But it makes a great difference
out of which funds it is advanced. In the case of B, it is
actually a part of the capital to be originally advanced
or held available. On the other hand, in the case of A, it
is a part of the surplus-value, if used as capital. This last
case shows that not only the accumulated capital, but also
a portion of the orginally advanced capital, may be capital-
ized surplus-value.

As soon as the development of credit interferes, the rela-
tion between originally advanced capital and capitalized
surplus-value is still more complicated. For instance, A bor-
rows a portion of the productive capital, with which he starts
his business and continues it during the year, from banker

C, not having sufficient capital of his own for this purpose.
Banker C lends him the required sum, which consists only
of surplus-value deposited with the banker by capitalists

D, E, F, etc. From the standpoint of A, there is as yet no
question of any accumulated surplus- value. But from the
point of view of D, E, F, etc., A is merely their agent capi-
talizing surplus-value appropriated by them.

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

The expansion of the scale of production may proceed
in small portions, a part of the surplus-value being used
for improvements which either increase simply the pro-
ductive power of the labor employed, or permit at the same
time of its more intensive exploitation. Or, in places where

The Circulation of Surplus-Value. 369

the working day is not legally restricted, an additional ex-
penditure of circulating capital (in materials of production
and wages) suffices to expand production without an ex-
tension of the fixed capital, whose daily time of employment
is thus merely lengthened, while its period of turn-over is
correspondingly abbreviated. Or, capitalized surplus-value
may, under favorable market combinations, permit of spec-
ulation in raw materials, an operation for which the capital
originally advanced would not have been sufficient, etc.

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

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

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

370 Capital.

form of capital, thrown upon the money-market and with-
drawn from it for the purpose of expanding production.

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

"The mass of the actually accumulated wealth, con-
sidered as to magnitude, ... is absolutely insignificant com-
pared to the productive forces of society to which it belongs,
whatever may be its stage of civilization; or even compared
to the actual consumption of this same society in the course
of but a few years ; so insignificant, that the attention of the
legislators and political economists should be mainly di-
rected to the forces of production and their free develop-
ment in the future, not, as heretofore, to the mere accumu-
lated wealth which strikes the eye. By far the greater part
of the so-called accumulated wealth is only nominal and
does not consist of actual objects, such as ships, houses,
cotton goods, real estate improvements, but of mere legal
titles, claims on the future annual productive forces of so-
ciety titles generated and perpetuated by the devices or in-
stitutions of insecurity . . . The use of such articles (accumu-
lations of physical things, or actual wealth) as a mere means
of appropriating for their owners a wealth which the future
productive forces of society are as yet to create, this use
would be gradually withdrawn from them without any force

The Circulation of Surplus-Value. 371

by the natural laws of distribution; with the assistance of
co-operative labor, it would be withdrawn from them within
a few years." (William Thompson, Inquiry into the Prin-
ciples of the Distribution of Wealth, London, 1850, page
453. This book appeared for the first time in 1827.)

"It is little understood, nor even suspected by most people,
what an utterly insignificant portion, whether it be in
quantity or effectiveness, the actual accumulations of society
constitute of the human productive forces, yea, even of the
ordinary consumption of a single generation of men during
a few years. The reason for this is obvious, but the effect
is very injurious. The wealth which is consumed annually,
disappears as it is being used; it stands before the eye only
for a moment, and makes an impression only while it is en-
joyed or consumed. But the slowly consumable portion of
wealth, furniture, machines, buildings, from our childhood
to our age they are standing before our eyes, lasting monu-
ments of human exertion. By virtue of the ownership of
this fixed, lasting, slowly consumed portion of public wealth
— of the soil and the raw materials on which, the instruments
with which, work is done, the houses which give shelter
while the work is being done — by virtue of this ownership
the owners of these objects control for their own advantage
the annual productive forces of all really productive laborers
of society, insignificant as those objects may be in propor-
tion to the ever recurring products of this labor. The popula-
tion of Great Britain and Ireland is 20 millions ; the average
consumption of every man, woman, and child is about 20
p. st., making a total wealth of 400 million p. st., the
product of labor annually consumed. The total amount of
the accumulated capital of those countries does not exceed,
according to estimates, 1,200 million p. st., or thrice the an-
nual product of labor; if equally divided, 60 p. st. of capi-
tal per capita. We have here to deal more with the propor-
tion than with the more or less inaccurate absolute amounts
of these estimated sums. The interest on this total capital
would suffice to maintain the total population in its present
•style of living for about two months of one year, and the en-
tire accumulated capital (if buyers could be found for it)

372 Capital.

would maintain them without labor for a whole three years !
At the end of which time, without houses, clothing, and
food, they would have to starve, or become the slaves of those
who have maintained them during these three years. As
three years are to the life time of one healthy generation,
say to 40 years, so the magnitude and importance of the ac-
tual wealth, the accumulated capital of even the richest
country, is to its productive forces, to the productive forces
of a single human generation ; not to what they might really
produce under intelligent institutions of equal security, and
especially with co-operative labor, but to what they are ac-
tually producing under the imperfect and discouraging
makeshifts of insecurity .... And in order to maintain
this apparently tremendous mass of existing capital, or
rather the control and monopoly of the annual product of
labor in its present condition of compulsory division this
entire machinery the vices, the crimes, the sufferings of in-
security, are to be perpetuated. Nothing can be accumulated,
unless the necessary wants are first satisfied, and the great
current of human desires flows after enjoyment; hence the
comparatively insignificant amount of actual wealth of so-
ciety at any given moment. It is an eternal circulation of
production and consumption. In this immense mass of an-
nual production and consumption, the handful of actual
accumulation would hardly be missed, and yet attention has
been mainly directed, not to that mass of productive forces,
but to this handful of accumulation. But this handful has
been appropriated by a few, and transformed into an instru-
ment for the appropriation of the ever recurring annual
products of the labor of the great masses. Hence the vital
importance of such an instrument for these few .... About
one-third of the annual national product is now taken from
the producers under the name of public taxes, and un-
productively consumed by people that do not give any
equivalent for it, that is to say, none that is accepted as
such by the producer .... The eye of the crowd looks with
astonishment upon the accumulated masses, especially when
they are concentrated in the hands of a few. But the an-
nually produced masses, like the eternal and innumerable

The Circulation of Surplus-Value. 373

waves af a mighty stream, roll by and are lost in the for-
gotten ocean of consumption. And yet this eternal con-
sumption determines not alone all enjoyments, but the very
existence of the human race. The quantity and distribution
of this annual product should above all be made the object
of study. The actual accumulation is of secondary im-
portance, and receives even this importance almost exclu-
sively by its influence on the distribution of the annual
product . . . The actual accumulation and distribution is here
(in Thompson's work) always considered in reference and
subordination to the productive forces. In almost all other
systems, the productive forces have been considered with
reference and in subordination to accumulation and to the
perpetuation of existing mode of distribution. Compared with
the conservation of this existing mode of distribution, the ever
recurring suffering or welfare of the entire human race is
not considered worthy of a glance. To perpetuate the re-
sults of force, of fraud, and of accident, this has been called
security, and for conservation of this lying security, all
the forces of production of the human race have been merci-
lessly sacrificed." C Ibidem, pages, 440-443.)

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

There is either reproduction on a simple scale.

Or, there is a capitalization of a surplus-value, accumu-
lation.

I. Simple Reproduction.

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

The fact that the value of the product consists in part
of surplus-value, in part of that portion of value which is
formed by the variable capital reproduced through it plus
the constant capital consumed by it, does not alter anything,

374 Capital.

either in the quantity, or in the value of the total product,
which continually passes into circulation and is just as
continually withdrawn from it, in order to pass into produc-
tive or individual consumption, that is to say, to serve as
means of production or consumption. Making exception of
the constant capital, only the distribution of the annual
product between the laborers and the capitalists is thereby
affected.

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

According to the laws of the simple circulation of com-
modities (developed in volume I, chapter III), the mass
of the metal coin existing in a country must not only be
sufficient for the circulation of the commodities, but must
also suffice for the fluctuations of the circulation of money,
which arise partly from fluctuations in the velocity of the
circulation, partly from a change in the prices of commodi-
ties, partly from the various and varying proportions in
which the money serves as a medium of payment or as the
typical medium of circulation. The proportion in which the
existing quantity of money is divided into a hoard and
money in circulation, varies continually, but the quantity
of money is always equal to the sum of the money hoarded
and the money circulating. This quantity of money (quant-
ity of precious metal) is a gradually accumulated hoard of
society. To the extent that a portion of this hoard is con-
sumed by wear, it must be replaced annually, the same as
any other product. This takes place in reality by a direct
or indirect exchange of a part of the annual product of a
country for the product of countries producing gold and
silver. However, this international character of the trans-

The Circulation of Surplus-Value. 375

action disguises its simple course. In order to reduce the
problem to its simplest and most transparent expression,
it must be assumed that the production of gold and silver
takes place in the same country in which the other products
are created, so that the production of gold and silver con-
stitutes a part of the total social production within every
country.

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

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

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

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

376 Capital.

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

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

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

The Circulation of Surplus- Value. 377

circulation in the form of money, but by additional, newly
produced money.

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

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

Let us look at the variable portion of this circulating
capital, and assume that it is, as before, 100 p. st. Then
these 100 p. st. would be sufficient in the ordinary produc-
tion of commodities, with 10 turn-overs, to pay continually
for the required labor-power. Here, in the production of
money, the same amount is likewise sufficient. But the 100
p. st. of the reflux, with which the labor-power is paid every 5

378 Capital.

weeks are not a converted form of its product, but a portion
of this ever renewed product itself. The producer of gold
pays his laborers directly with a portion of the gold pro-
duced by them. Thus the 1,000 p. st. invested annually in
labor-power and thrown by the laborers into the circulation
do not return by the way of this circulation to their start-
ing point.

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

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

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

According to the law of the circulation of commodities,
the quantity of money must be equal to the amount of money
required for circulation plus a certain amount held in the
form of a hoard, which increases or decreases according to
the contraction or expansion of circulation and serves es-

The Circulation of Surplus-Value. 379

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

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

380 Capital.

assumption, there must be surplus- value as a matter of
course.

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

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

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

But the commodity-capital must be monetized before its

The Circulation of Surplus-Value. 381

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

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

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

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

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

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

382 Capital.

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

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

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

It might also be answered that that portion of the
circulating variable capital, which A continually advances
to his laborers, flows back to him continually from the
circulation, and only an alternating part stays continu-
ally tied up for the payment of wages. But a certain time
elapses between the expenditure and the reflux, and mean-
while the money paid out for wages might, among other
uses, serve for the monetization of surplus-value. But we
know, in the first place, that, the greater the time, the great-
er must be the supply of money which the capitalist A must
keep continually in reserve. In the second place, the laborer
spends the money, buys commodities for it, and thus mone-
tizes to that extent the surplus-value contained in them.
Without penetrating any further into the question at this
point, it is sufficient to say that the consumption of the

The Circulation of Surplus-Value. 383

entire capitalist class, and of the unproductive persons de-
pendent upon it, keeps step with that of the laboring class;
so that, simultaneously with the money thrown into cir-
culation by the laboring class, the capitalists must throw
money into it, in order to spend their surplus-value as rev-
enue. Hence money must be withdrawn from circulation
for it. This explanation would merely reduce the quantity
of money required, but not do away with it.

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

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

However, from the point of view of capitalist production,

384 Capital.

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

The capitalist class, then, remains the sole point of de-
parture of the circulation of money. If they need 400 p. st.
for the payment of means of production, and 100 p. st. for
the payment of labor-power, they throw 500 p. st. into
circulation. But the surplus-value incorporated in the pro-
duct, with a rate of surplus-value of 100%, is equal to the

The Circulation of Surplus-Value. 385

value of 100 p. st. How can they continually draw 600
p. st. out of circulation, when they continually throw only
500 p. st. into it? From nothing comes nothing. The
capitalist class as a whole cannot draw out of circulation
what was not previously in it.

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

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

Take some individual capitalist, who opens his business,
for instance, a capitalist farmer. During the first year, he
advances a money-capital of, say, 5,000 p. st., paying 4,000
p. st. for means of production, and 1,000 p. st. for labor-
power. Let the rate of surplus-value be 100%, the amount
of surplus-value appropriated by him 1,000 p. st. The above
5,000 p. st. comprise all the money advanced by him. But
the man must also live, and he does not get any receipts
until the end of the year. Take it that his consumption
amounts to 1,000 p. st. These he must have in his possession.
He may say to himself that he has to advance these 1,000
p. st. during the first year. But this advance has only a

386 Capital.

subjective meaning, for it signifies that he must pay for his
individual consumption during the first year out of his own
pocket, instead of getting the money for it out of the unpaid
labor of his employes. He does not advance this money as
capital. He spends it, pays it out as an equivalent for
means of subsistence which he consumes. This value is
spent by him as money, thrown as such into circulation
and withdrawn from it as commodities. He has consumed
commodities of that amount. He has thus ceased to be in
any way related to their value. The money with which
he paid for this value is now an element of the circulating
money. But he has withdrawn the value of this money
from circulation in the form of products, and this value
is destroyed with the commodities in which it was incorpor-
ated. It has disappeared. But at the end of the year he
throws commodities worth '6,000 p. st. into circulation and
sells them. By this means he recovers: (1) His advanced
money-capital of 5,000 p. st. ; (2) the monetized surplus-
value of 1,000 p. st. He had thrown 5,000 p. st. into circu-
lation when he advanced capital, and he withdraws from it
6,000 p. st., 5,000 p. st. of which cover his capital, and 1,000
p. st., his surplus-value. The last 1,000 p. st. are monetized
with the money which he had himself thrown into circula
tion, not as a capitalist, but as a consumer, not advanced,
but spent. They now flow back to him as the money-form
of the surplus-value produced by him. And henceforth
this operation is repeated every year. But beginning with
the second year, the 1,000 p. st. which he spends are contin-
ually the converted form, the money-form of surplus-value
produced by him. He spends it annually and it flows back
annually.

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

This money is not thrown into circulation by the capi-
talist as money. It is rather inherent in the character of a

Thi Circulation of Surplus-Value. 387

capitalist to be able to live on means in his possession until
some surplus-value flows back to him.

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

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

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

Although a part of this product of 500 p. st. in gold is
surplus-value of the gold-producers, still the entire sum is

388 Capital.

intended only to replace the money worn out in the circula-
tion of commodities. It is immaterial for this purpose, how
much of this gold monetizes the surplus-value incorporated
in the commodities, and how much of their other constitu-
ents.

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

The Circulation of Surplus-Value.

originally the surplus-value of the capitalists producing gold,
but, as we have said, by the proportion in which the above
product of 500 p. st. is generally distributed between capi-'
talists and laborers, and in which the commodity-supply to
be circulated consists of surplus-value and other constitu-
ents of value.

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

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

Now, two things are to be noted here.

In the first place, it follows that the surplus-value spent
by the capitalists as money, as well as the variable and other
productive capital advanced by them in money is actually
a product of the laborers, namely of those engaged in the pro-
duction of gold. They produce anew not only that portion
of gold which is "advanced" to them as wages, but also that
portion of gold in which the surplus-value of the capitalist
gold producers is directly embodied. As for that portion of
the gold product, which replaces only the constant capital-
value advanced for its production, it re-appears in the form
of money (or a product in general) only through the annu-

390 Capital.

al labor of the working men. In the beginning of the busi-
ness, it was originally expended in money by the capitalists,
and this money was not newly produced, but formed a part
of the circulating mass of social money. But to the extent
that it is replaced by a new product, by additional money,
it is the annual product of the laborer. The advance on the
part of the capitalist appears here likewise merely as a form,
which owes its existence to the fact that the laborer is neither
the owner of his own means of production, nor able to
command, during his production, the means of subsistence
produced by other laborers.

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

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

If we furthermore assume other circumstances as equal —
the length, intensity, and productivity of the working day
also remaining unchanged — but a different division of the
value of the product, between wages and surplus-value, so
that either the former rise and the latter fall, or vice versa,
the mass of the circulating money is not touched thereby.
This change can take place without any expansion or con-
traction of the mass of money in circulation. Let us con-
sider particularly the case in which there would be a general
rise in wages, so that, under the given assumptions, there
would be a general fall in the rate of surplus-value, while
there would not be any change, also according to our assump-

The Circulation of Surplus-Value. 391

tion, in the mass of circulating commodities. In this case,
there should be indeed ar increase of the money-capital
which must be advanced as variable capital in the quantity
of money which serves for this purpose. But to the exact
extent that the amount of money required for the function
of variable capital grows, does the surplus-value decrease,
and thus the amount of money required for its realization.
The amount of money required for the realization of the
values of the commodities is not affected thereby, any more
than this value itself. The cost price of the commodity
rises for the individual capitalist, but its social price of pro-
duction remains unchanged. That which is changed is the
proportion, in which, apart from the constant portion of
its value, the price of production stands to wages and profits

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

Reply to the first argument: In consequence of a rise in
wages, especially the demand of the laborers for the neces-
sities of life will rise. In a lesser degree their demand for
articles of luxury will increase, or the demand will be de-
veloped for things which did not generally belong to the
scope of their consumption. The sudden and increased
demand for the necessities of life will doubtless raise their
prices momentarily. As a result, a greater portion of the
social capital will be invested in the production of the neces-
sities of life, and a smaller portion in the production of
articles of luxury, since these fall in price on account of
the decrease in surplus-value and the consequent decrease in
the demand of the capitalists for these articles. And to the
extent that the laborers themselver buy articles of luxury,

392 Capital.

the rise in their wages — to this degree — does not promote
an increase in the prices of necessities of life, but simply
fills the place of the buyers of luxuries. More luxuries than
before are consumed by laborers, and relatively fewer by
capitalists. That is all. After some fluctuations, the value
of the circulating commodities is the same as before. As
for the momentary fluctuations, they will not have any other
effect than to throw unemployed money-capital into the in-
land circulation, capital which so far had sought employ-
ment in speculative enterprises at the stock exchange or in
foreign countries.

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

The claim that the capitalists can raise the prices of ar-
ticles of luxury, because the demand for them decreases (in
consequence of the reduced demand of the capitalists whose
spending money has decreased) would be a very unique
application of the law of supply and demand. The prices
of articles of luxury fall in consequence of reduced demand
to the extent that capitalist buyers are not replaced by la-
boring buyers, and so far as this replacement takes effect,
the demand of the laborers does not result in a rise of the
prices of necessities, for the laborers cannot spend that por-
tion of their increased wages for necessities which they spend
for luxuries. Consequently capital is withdrawn from the
production of luxuries, until their supply in the market is
reduced to the measure which corresponds to their altered
role in the process of social production. With their pro-
duction thus reduced, they rise in price, provided their value
is otherwise unchanged, to their normal level. So long as
this contraction, or this process of compensation, takes place,

The Circulation of Surplus-Value. 393

there is just as constantly, with rising prices of necessities,
a migration of capital into the production of these to the
degree that it is withdrawn from the other line of business,
until the demand is satisfied. Then the balance is restored,
and the end of the whole process is that the social capital,
including the money-capital, is divided in a different propor-
tion between the production of necessary means of subsis-
tence and that of luxuries.

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

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

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

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

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

We found in our study of the simple circulation of com-
modities (volume I, chapter III, 2), that, even though the

394 Capital

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

Aside from this, the rotation of money — that is to say,
the return of money to its point of departure — so far as it
is an element in the turn-over of capital, is a phenomenon
entirely different from, or even the reverse of, the circulation
of money, 28 which expresses its removal from the point of
departure through a number of hands. (Vol. I. page 129.)
Nevertheless an accelerated turn-over implies naturally an
acceleration of the circulation.

As for the variable capital, if a certain money-capital,
say 500 p. st., is turned over ten times in a year, in the form
of a variable capital, it is evident that this aliquot part of the

28 Although the physiocrats still intermingle these two phenomena in-
discriminately, they are nevertheless the first who emphasize the reflux
of money to its starting point as the essential form of circulation of
capital, as that form of circulation which promotes reproduction. "Throw
a glance at the Tableau Economique, and you will see that the pro-
ductive class gives the money with which the other classes buy products
from it, and that they return this money to it when they come back
next year to make the same purchases. . . . You see, then, that there
is in this instance no other cycle but that of expenditure followed by
reproduction, and of reproduction followed by expenditure. And this
cycle is described by the circulation of money, which is the measure of
expenditure and reproduction." — Quesnay, Problemes Economiques, Daire
edition, Physiocrats, I, pages 208, 209.) "It is this continual advance
and return of capitals which must be called the circulation of money,
this useful and fertile circulation, which gives life to all the labors of
society, which maintains the activity and life of the social body, and
which is with good justification compared to the circulation of blood in
the animal body." (Turgot, Reflexions, etc., Daire '•edition, I, page 45.)

The Circulation of Surplus-Value. 395

quantity of money in circulation circulates ten times its
value, or 5,000 p. st. It circulates ten times per year be-
tween the capitalist and the laborer. The laborer is paid,
and pays, ten times per year with the same aliquot amount
of money. If the same variable capital were turned over
only once a year, the scale of production remaining the
same, there would be only one turn-over of capital per year.

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

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

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

A more rapid circulation of money takes place whenever
a larger number of transactions are carried on with the same
amount of money. This may take place also with the same
periods of reproduction of capital, as a result of changes in
the technical appliances of the circulation of money. Fur-
thermore, there may be an increase in the number of trans-
actions in which money circulates without expressing actual
exchanges, of commodities (marginal business at the stock-

396 Capital.

exchange, etc.). On the other hand, some circulations of
money may be entirely dispensed with. For instance, where
the farmer is himself a real estate owner, there is no circu-
lation of money between the capitalist farmer and the real es-
tate owner; where the industrial capitalist is himself the
owner of the capital, there is no circulation of money be-
tween him and the creditor.

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

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

The additional commodities which are to be converted
into money find the necessary amount of money at hand,
because on the other side additional gold (and silver) in-
tended for conversion into commodities is thrown into cir-
culation, not by means of exchange, but by production it-
self. .

The Circulation of Surplus-Value. 397

II. Accumulation and Reproduction on an Enlarged

Scale.

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

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

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

The general reply is again the same. The sum total of
the prices of the commodities has been increased, not be-
cause the prices of a given quantity of commodities have
risen, but because the mass of the commodities now cir-
culating is greater than that of the previously circulating
commodities, and because this increase has not been offset
by a fall in prices. The additional money required for the
circulation of this greater quantity of commodities of great-
er value must be secured, either by greater economy in the
circulating quantity of money — whether by means of bal-
ancing payments, etc., or by some measure which accelerates
the circulation of the same coins — or, by the transformation

398 Capital.

of money from the form of a hoard into that of a circu-
lating medium. This does not merely imply that barren
money-capital becomes active as a means of purchase or
payment, or that money-capital which is already actually
circulating for the benefit of the society while representing
a reserve fund for its owner is thus performing a double
service (such as deposits in banks which are continually
balanced) . It also implies that the stagnating reserve funds
of money are economized.

"In order that money should flow continuously as coin,
coin must constantly coagulate as money. The continuous
flow of coin depends on its constant accumulation in the
form of reserve funds of coin which spring up throughout
the sphere of circulation and form sources of supply; the
formation, distribution, disappearance, and reformation of
these reserve funds is constantly changing, their existence
constantly disappears, their disappearance constantly exists.
Adam Smith expressed this never-ceasing transformation of
coin into money and of money into coin by saying that
every owner of commodities must always keep in supply,
aside from the particular commodity which he sells, a certain
quantity of the universal commodity with which he buys.
We saw, that in the process C — M — C the second member
M — C splits up into a series of purchases which do not take
place at once, but at intervals of time, so that one part of
M circulates as coin while the other rests as money. Money
is in that case only suspended coin and the separate parts of
the circulating mass of coins appear now in one form, now
in another, constantly changing. This first transformation
of the medium of circulation into money represents, there-
fore, but a technical aspect of money-circulation." (Karl
Marx, "A Contribution to the Critique of Political Economy,7'
1859, page 167-168.) — ("Coin" as distinguished from money
is here employed to indicate the function of money as a
mere medium of circulation as compared to its other func-
tions.)

When all these measures do not suffice, an additional
production of gold must take place, or, what amounts to the
same, one portion of the additional product is directly or

The Circulation of Surplus-Value. 399

indirectly exchanged for gold — the product of countries in
which precious metals are mined.

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

This disposes also of the absurd question, whether capital-
ist production in its present volume would be possible with-
out the credit system (even if analyzed only from this point
of view), that is to say, if it were possible with the circula-
tion of metallic coin alone. Evidently this is not the case.
It would have found the barriers of the limited production
of precious metals in its way. On the other hand, one must
not entertain any myths as to the productive power of the
credit system, so far as it supplies or releases money-capital.
The further analysis of this question is out of place here.

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

To the extent that money so accumulating is additional
money, the matter needs no explanation. It can only be a
portion of the surplus-gold imported from gold producing

400 • Capital.

countries. In this connection it must be remembered that
the national product, in exchange for which this gold is
imported, is no longer in this country. It has been exported
to foreign countries in exchange for gold.

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

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

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

But the difficulty arises when we assume, not a partial,

The Circulation of Surplus-Value. 401

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

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

They would all have to sell a portion of their product
without buying anything in return. It is not at all mys-
terious that they should all have a certain fund of money
which they throw into circulation for their consumption,

402 Capital.

and a certain portion of which flows back to each one of
them. But this fund of money, as a fund for circulation,
arises precisely through the monetization of surplus-value
and is not by any means latent money-capital.

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

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

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

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

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

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

Hence, while a portion of the money realized in surplus-
value is on the one hand always withdrawn from circu-
lation and accumulated as a hoard, another part of the
surplus-value is at the same time continually converted into

The Circulation of Surplus- Value. 403

productive capital. With the exception of the distribution
of additional precious metals among the members of the
capitalist class, accumulation in the form of money never
takes place simultaneously at all points.

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

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

404 Capital.

PART III.

The Reproduction and Circulation of the Aggregate
Social Capital.

CHAPTER XVIII »

INTRODUCTION.

I. The Object of the Analysis.

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

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

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

29 From manuscript II.

Introduction. 405

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

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

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

The rotation of individual capitals, then, in their ag-
gregation as social capital, but in their totality, comprises
not only the circulation of capital, but also the general cir-
culation of commodities. The last named can originally
consist of only two parts: (1) The rotation of the capi-
tal itself, and (2) the rotation of the commodities which
pass into individual consumption, the commodities for
which the laborer expends his wages and the capitalist
his surplus-value (or a part of it). True, the rotation of
capital comprises also the circulation of surplus-value, so
far as it is a part of the commodities, and likewise the con-

406 Capital.

version of the variable capital into labor-power, the payment
of wages. But the expenditure of this surplus-value and
wage for commodities does not form a link in the circula-
tion of capital, although at least the expenditure of wages
is a requirement for this circulation.

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

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

In the second part of this volume, the rotation of capital
was studied as a periodical process, as a turn-over. It was
shown on one side, in what manner the various constituent
parts of capital (fixed and circulating) accomplish the ro-
tation of forms in different periods of time and different
ways; and, on the other side, the circumstances were ana-
lyzed on which the different duration of the working
period and the period of circulation is conditioned. We
observed the influence of the period of turn-over and of the
different proportions of its component parts upon the volume
of the process of production and upon the annual rate of
surplus-value. Indeed, while it was the successive forms
continually assumed and discarded by capital in its rotation
which were studied in part I of volume II, it was shown
in part II of this volume, how a capital of a given magnitude
is simultaneously divided, within this flow and succession,
into the different forms of productive capital, money-capi-

Introduction. 407

tal, and commodity-capital, in varying proportions, so that
they do not only relieve one another, but that different por-
tions of the total capital-value are continually side by side
and serve in these different forms. Especially money-capi-
tal was revealed in its peculiarities, which had not been
shown in volume I. Certain laws were found, according
to which certain portions of different size of a given capital
must be continually advanced and renewed in the form of
money-capital, according to the conditions of the turn-over,
in order to maintain in service a productive capital of a
certain volume.

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

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

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

II. The Role of Money-Capital.
(Although the following belongs in a later part of this
section, we shall analyze it immediately, namely, the money-

408 Capital.

capital considered as a constituent part of the aggregate
social capital.)

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

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

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

In regard to the first point, we have seen that the pro-
duction of commodities implies the circulation of commodi-
ties, and the circulation of commodities implies the ma-
terialization of commodities in money, the circulation of
money; the duplication of commodities in commodities and
money is a law of the transformation of products into com-
modities. The capitalist production of commodities likewise
implies — whether considered socially or individually — that
capital in the form of money, or money-capital, is the prime
motor of every new business and its continual motor. Es-
pecially the circulating capital implies the continuous re-
appearance of money-capital in short intervals as a motor.
The entire advanced capital-value, that is to say, all the ele-
ments of capital composed of commodities, labor-power, in-
struments and materials of production, must be continually

Introduction. 409

bought with money and again bought with money. What
is true of the individual capital, is also true of the social
capital which functions only in the form of many individual
capitals. But, as we showed in volume I, this does not im-
ply that the field of activity of capital, the scale of produc-
tion, even on a capitalist basis, depends absolutely for its
extension on the amount of the money-capital in service.

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

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

The same instruments of labor, and thus the same fixed
capital, may be more effectively used by a prolongation of
their daily use and by greater intensity of employment, with-
out an additional investment of money for fixed capital.
There is, in that case, only a more rapid turn-over of the
fixed capital, but the elements of its reproduction are also
supplied more rapidly.

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

410 Capital.

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

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

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

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

But evidently all this has nothing to do with the real

Introduction. 411

question of money capital. It shows only that the advanced
capital, a given sum of values consisting in its free form,
in its value-form, of a certain sum of money after its conver-
sion into productive capital, includes productive potentiali-
ties whose limits are confined within those of its values, but
which may exert themselves extensively or intensively with-
in a certain playroom. If the prices of the elements of
production — the materials of production and labor-power —
are given, the magnitude of the money-capital required for
the purchase of a definite quantity of these elements of
production in the form of commodities is determined. Or,
the magnitude of the value of the capital to be advanced
is determined. But the extent to which this capital acts as
a creator of values and products is elastic and variable.

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

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

So far as the period of turn-over is determined by the dura-
tion of the working period, it is determined, other con-
ditions remaining equal, by the material nature of the pro-

412 Capital.

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

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

We see, then, that, so far as the need of money-capital is
due to the length of the working period, it is determined
by two things : First, that money is the general form in which
every individual capital (apart from credit) must make its
entry in order to transform itself into productive capital;
this follows from the nature of capitalist production, or of

Introduction. 41 3

commodity-production in general. Second: The magnitude
of the required money advance is due to the fact that labor-
power and means of production must continually be with-
drawn from society for a long time without any return of
products convertible into money. The first requirement,
namely that capital must be advanced in the form of money,
is not suspended by the form of this money itself, regard-
less of whether it is metal-money, credit-money, token-money,
etc. The second circumstance is in no way affected by the
money-medium or the form of production by means of
which labor, means of subsistence, and means of production
are withdrawn, without the return of some equivalent into
the circulation.

414 Capital.

CHAPTER XIX. 30

FORMER DISCUSSIONS OP THE SUBJECT.

I. The Physiocrats.

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

30 Beginning of manuscript VIII.

Former Discussions of the Subject. 415

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

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

The retrogression of Adam Smith31 in the analysis of the

process of reproduction is so much more remarkable, as he

manipulates other correct analyses of Quesnay, for instance,

by generalizing the "avances primitives" and "avances an-

nuelles" into "fixed" and "circulating" capital,32 and even

31 "Capital," volume I, page 647, footnote.

82 Some physiocrats had paved the way for him even here, especially
Turgot. This author uses more frequently than Quesnay and the other
physiocrats the term capital instead of avances and identifies still more
the avances or capital of the manufacturers with those of the capitalist
farmers. For instance: "Like these (the manufacturing entrepreneurs),
the capitalist farmers must secure, over and above the return of their
capitals, etc." (Turgot, Oeuvres, Daire edition, Paris, 1844, vol. I, page
40.)

416 Capital.

relapses entirely into physiocratic errors in some places. For
instance, in order to demonstrate that the capitalist farmer
produces more value than any other class of capitalists, he
says : "No other capital sets a greater quantity of productive
labor in motion than that of the capitalist farmer. Not
only his laboring servants, but also his laboring cattle, con-
sist of productive laborers." (Fine compliment for the la-
boring servants!) "In agriculture, nature works as well
as human beings; and although its labor does not require
any expense, its product nevertheless has a value, the same
as that of the most expensive laborer. The most important
operations of agriculture seem to aim, not so much to in-
crease the fertility of nature — although they do that, too —
as to direct it toward the production of the plants most use-
ful to mankind. A field grown up in thorns and weeds
often enough furnishes as large a quantity of plant growth
as the best tilled vineyard or corn field. Planting and
cultivation serve frequently more to regulate than to stim-
ulate the active fertility of nature; and after those have
exhausted all their labors, there still remains a great deal
of work to do for the latter. The laborer and the laboring
cattle ( ! ) employed in agriculture, therefore, do not only
effect, like the laborers in the manufactures, the reproduc-
tion of a value which is equal to their own consumption and
the capital employing them together with the profit of the
capitalist, but that of a far greater value. Over and above
the capital of the farmer and all his profits they effect regu-
larly the reproduction of the rent of the land owner. The
rent may be regarded as the product of the forces of nature,
Ihe use of which the land owner lends to the farmer. It
is larger or smaller according to the estimated degree of these
forces, in other words, according to the estimated natural
or artificially insured fertility of the soil. It is the work
of nature which remains after deducting or replacing all
that which may be regarded as the work of man. It is rare-
ly less than one quarter and frequently more than one
third of the total product. No other equal quantity of labor,
employed in manufacture, can ever effect so large a repro-
duction. In manufacture nature does nothing, man every-

Former Discussions of the Subject. 417

thing; and reproduction must always be proportional to the
strength of the agencies that carry it on. Therefore the capi-
tal invested in agriculture does not only set in motion a
greater quantity of productive labor than any equal capital
employed in manufacture ; but it also adds, in proportion to
the quantity of productive labor employed by it, a far great-
er value to the annual product of the soil and to the labor
of a certain country, to the actual wealth and income of its
inhabitants." (Book II, chapter 5, page 242.)

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

II. Adam Smith.

(1.) The General Point of View of Adam Smith

Adam Smith says in Book I, Chapter 6, page 42: "In
every society the price of every commodity finally dissolve?

418 Capital.

into one or the other of these three parts (wages, profit,
ground rent), or into all three of them; and in every ad-
vanced society all three of them pass more or less as com-
ponent parts into the price of by far the greater part of
the commodities."33 Or, as he continues, page 63 : "Wages,
profit, and ground rent are the three final sources of all in-
come as well as of all exchange value." We shall discuss
further along this doctrine of Smith concerning the "com-
ponent parts of the prices of commodities," or of "all ex-
change value."

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

After Adam Smith has thus dissolved the price of all com-
modities individually as well as "the total price or exchange-
value .... of the annual product of the soil and the labor
of every country" into three sources of revenue for wage-
workers, capitalists, and real estate owners, he must needs
smuggle a fourth element into the problem by a circuitous
route, namely the element of capital. This is accomplished
by the distinction between a gross and a net income. "The
gross income of all inhabitants of a large country comprises
the entire annual product of their soil and their labor; the
net income that portion which remains at their disposal
after deducting the cost of maintenance, first of fixed, and
second, of their circulating capital; or that portion which

33 In order that the reader may not be in doubt as to the meaning of
the phrase "the price of by far the greater part of the commodities,"
the following lines may show how Adam Smith himself explains it.
For instance, no rent passes into the price of sea fish, only wages and
profit ; only wages pass into the price of Scotch pebbles. He says : "In
some parts of Scotland poor people make it their business to gather on
the sea shore the varicolored pebbles, known as Scotch pebbles. The
price which the stone cutters pay for them consists only of their wages,
as neither ground rent nor profit constitute any part of it."

Former Discussions of the Subject. 419

they can place in their supply for consumption, or expend
for their maintenance, comfort, and pleasure, without
touching their capital. Their actual wealth likewise is pro-
portional, not to their gross, but to their net income."
(Ibidem, page 190.)

We make the following comment:

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

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

Adam Smith says furthermore : "The lowest ordinary rate
of profits must always amount to a little more than is suffici-

420 Capital.

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

Adam Smith then tells us that he excludes from the net
revenue, that is to say, from the revenue in its specific mean-
ing, the entire fixed capital, furthermore that entire por-
tion of the circulating capital which is required for the main-
tenance and repair of the fixed capital, and for its renewal ;
as a matter of fact, all capital not in the natural form in-
tended for the fund for consumption.

"The entire expenditure for the maintenance of the fixed
capital must evidently be excluded from the net revenue
of society. Neither the raw materials by means of which
the machines and tools of industry must be kept in condi-
tion nor the product of the labor required for the transforms-

Former Discussions of the Subject. 421

tion of these raw materials into their intended form can ever
constitute a portion of this revenue. The price of this labor
may indeed form a portion of that revenue, as the labor-
ers so employed may invest the entire value of their wages
in their immediate fund for consumption. But in other
kinds of labor the price" (that is to say, the wages paid
for this labor) "as well as the product" (in which this la-
bor is incorporated) "enter into the fund for consumption ;
the price into that of the laborers, the product into that
of other people, whose subsistence, comfort, and pleasure
are increased by the labor of these workmen." (Book II,
chapter 2, page 190, 191.)

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

422 Capital.

means of production serving within the sphere of produc-
tion— the means of production which produce means of
production — a portion of value equal to the value of the
constant capital employed in this sphere and excluded from
the portions of value forming a revenue, not only by the
natural form in which it exists, but also by its function
as capital.

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

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

"While the entire expense for maintaining the fixed capi-
tal is thus necessarily excluded from the net revenue of
society, the same is not the case with the expense of main-
taining the circulating capital. Of the four parts which go
to make up this last named capital, money, means of sub-
sistence, raw materials, and finished products, the last three,
as we have said, are regularly taken out of it and trans-
ferred either to the fixed capital of society, or to the fund
intended for immediate consumption. That portion of the
consumable articles which is not employed for the main-
tenance of the former" (the fixed capital) "passes wholly
into the latter" (the fund for immediate consumption)
"and forms a part of the net revenue of society. Hence the
maintenance of these three parts of the circulating capital

Former Discussions of the Subject. 423

does not diminish the net revenue of society by any other
portion of the annual product than that required for main-
taining the fixed capital." (Book II, chapter 2, page 192.)

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

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

We learn, then, the following facts from him:

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

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

424 Capital.

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

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

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

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

Former Discussions of the Subject. 425

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

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

If Adam Smith had continued his analysis to this point,
then he would have lacked but little for the complete so-
lution of the problem. He was almost on the point of solv-
ing it, for he had already observed, that certain values of
one kind (means of production) of the commodity-capitals

426 Capital.

constituting the total product of society yield indeed a
revenue for the laborers and capitalists engaged in produc-
tion, but do not contribute anything toward the revenue
of society; while another part of value of another kind
(means of consumption), although it is capital for its in-
dividual owners, that is to say, for the capitalists engaged in
this sphere, is only a part of the social revenue.

So much is evident from the foregoing:

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

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

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

Former Discussions of the Subject. 427

II. Smith Resolves Exchange- Value Into V Plus S.

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

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

Adam Smith says explicitly in the chapter just quoted:
"The entire annual product of the soil and the labor of
each country .... naturally resolves itself into two parts.
One of them, and frequently the greater, is intended pri-
marily to replace capital and to reproduce the means of
subsistence, raw materials and finished products obtained
from some capital; the other is intended to form a revenue
either for the owner of this capital, as a profit on his capital,

428 Capital.

or for some one else, as a rent of his real estate." (Page 222.)
Only a portion of the capital, so Adam Smith informed us
just awhile ago, also forms a revenue for some one, namely
that which is invested in the purchase of productive labor.
This portion — the variable capital — performs first "the func-
tion of capital" for its employer and in his hands, and then
it "forms a revenue" for the productive laborer himself.
The capitalist transforms a portion of the value of his capi-
tal into labor-power and thereby into variable capital; it
is only due to this transformation that not alone this portion
of capital, but his entire capital, serve as industrial capital.
The laborer — the seller of his own labor-power — receives
its value in the form of wages. In his hands, labor-power
is but a saleable commodity, a commodity whose sale keeps
him alive, which is the sole source of his revenue; labor-
power serves as a variable capital only in the hands of its
buyer, the capitalist, and the capitalist advances its purchase
price only apparently, since its value has been previously
supplied to him by the laborer.

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

Former Discussions of the Subject. 429

thus, with Adam Smith, the price of all commodities re-
solves itself into v plus s.

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

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

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

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

430 Capital.

(2). Here the ridiculous mistake of Adam Smith reaches
its climax. After having taken his departure from a cor-
rect determination of the component parts of the value of
commodities and the sum of values of the product incor-
porated in them, and having demonstrated that these com-
ponent parts form so many different sources of revenue;31
after having in this way deducted the revenues from the
value, he proceeds in the opposite way — and this remains
the ruling conception with him — and makes of the revenues
''primary sources of all exchange-value" instead of "com-
ponent parts," thereby throwing the doors wide open to
vulgar economy. (See, for instance, our Roscher.)

III. The Constant Portion of Capital.

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

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

"Another portion pays the wages and subsistence of the
laborers" (and of the laboring cattle, as he adds) "employed
in its production, and the third portion pays the profit of
the capitalist farmer. These three portions seem" (they
seem indeed) "to constitute either directly, or in the last in-
stance, the entire price of corn."35 This entire price, that

34 1 reproduce this sentence verbatim from the manuscript, although
it seems to contradict, in its present connection, both the preceding and
the following statements. This apparent contradiction is solved farther
along in (4). Capital and Revenue in Adam Smith. — F. E.

35 We do not make anything of the fact that Adam Smith was here
particularly unlucky in the choice of his example. The value of the
corn resolves itself into wages, profit, and rent only, because the fpod
consumed by the laboring cattle is regarded as wages, and the laboring
cattle as laborers, so that, on the other hand, the wage laborer also
appears in the role of the laboring cattle. (Note added from manu-
script II.)

Former Discussions of the Subject. 431

is to say, the determination of its magnitude, is absolutely
independent of its distribution among three kinds of people.
"A fourth portion may seem necessary in order to reproduce
the capital of the farmer, or the wear of his laboring cattle
and of his other implements. But it must be considered
that the price of any agricultural implement, for instance
of a laboring horse, is in its turn composed of the above
three parts: the rent of the land on which it is bred, the
labor of breeding, and the profit of the farmer who ad-
vances both the rent of this land and the wages of this
labor. Hence, although the price of the corn may reproduce
the price as well as the cost of maintenance of the horse, the
entire price still resolves itself, directly or in the last in-
stance, into the same three parts: ground rent, labor," (he
means wages) "and profit." (Book I, chapter 6, page 42.)
This is verbatim all that Adam Smith has to say in sup-
port of his surprising doctrine. His proof consists simply
in the repetition of the same contention. He admits, for
instance, that the price of corn does not only consist of v
plus s, but contains also the price of the means of produc-
tion consumed in the production of corn, in other words,
the value of a capital not invested in labor-power by the
farmer. But, says he, the prices of all these means of pro-
duction likewise resolve themselves into v plus s, the same
as the price of corn. He forgets, however, to add in this
case, that they also contain the prices of the means of pro-
duction consumed in their production. He refers us from
one line of production to another, and from that to a third.
The contention that the entire price of commodities resolves
itself "immediately" or "ultimately" into v plus s would not
be a specious subterfuge in the sole case that he could dem-
onstrate that the product in commodities, the price of which
resolves itself immediately into c (price of consumed means
of production) plus v plus s, is ultimately compensated
by products which reproduce those "consumed means of
production" completely and which are themselves produced
by the investment of mere variable capital, by a mere in-
vestment of capital in labor-power. The price of these last
products would then be v plus s. And in that case the price

432 Capital.

of the first products, represented by c plus v plus s, where
c stands for the constant portion of capital, could be ulti-
mately resolved into v plus s. Adam Smith himself did not
believe that he had furnished such a proof by his example
of the collectors of Scotch pebbles, who, according to him,
do not produce any surplus-value, but produce only their
own wages, and who, in the second place, do not employ
any means of production (they do, however, employ them,
such as baskets, sacks, and other means of carrying the
stones) .

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

Former Discussions of the Subject. 433

quantity of annual labor resolves itself into labor required
for the reproduction of the value of the capital invested in
labor-power, and labor required for the creation of surplus-
value, where would the labor required for the production of
the value of a capital not invested in labor-power come from ?

The situation is as follows:

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

434 Capital.

equal to the excess of the value created in the manufacture
of the product over that portion which is an equivalent
for the wages.

(2). That which is true of a commodity produced in
some individual industrial establishment by any individual
laborer is true of the annual product of all lines of busi-
ness together. That which is true of the day's work of
some individual productive laborer is true of the entire
year's work realized by the entire class of productive labor,
ers. It "fixes" (expression of Adam Smith) in the anf/jal
product a total value determined by the quantity cf che
annual labor expended, and this total value resolves itself
into one portion determined by that part of the annual
labor which reproduces the equivalent of its annual
wages, or these wages themselves; and into another
portion determined by the additional labor by which
the laboring class creates surplus- value for the capi-
talist class. The value contained in the annual
product then consists of but two elements, namely
the equivalent of the wages received by the laboring class,
and the surplus-value annually created for the capitalist
class. Now, the annual wages are the revenue of the work-
ing class, and the annual quantity of surplus-value the reve-
nue of the capitalist class; both of them represent the rela-
tive shares in the annual fund for consumption (this view
is correct when simple reproduction is the premise) and are
realized in it. There is, then, no room left anywhere for
the value of the constant capital, for the reproduction of*
the capital serving in the form of means of production. And
Adam Smith states explicitly in the introduction of his work
that all portions of the value of commodities which serve
as revenue coincide with the annual product of labor in-
tended for a social fund for consumption: "In what the
revenue of the people consisted generally, or what was the
nature of the fund, which . . . supplied their annual con-
sumption, to explain this is the purpose of these first four
books." (Page 12.) And in the very first sentence of the
introduction we read : "The annual labor of every nation is
the fund, which supplies them originally with all the sub-

Former Discussions of the Subject. 435

sistence which they consume in the course of the year, and
which always consist either of the immediate product of
this labor, or in articles bought with this product from other
nations." (Page 11.)

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

Hence, if Adam Smith says in the just cited passage : "The
annual labor of every nation is the fund, which supplies
them originally with all the subsistence which they con-
sume in the course of the year, etc.," he places himself one-
sidedly upon the standpoint of mere useful labor, which
has indeed given all these means of subsistence their con-

436 Capital.

sumable form. But he forgets that this was impossible
without the assistance of instruments and materials of labor
supplied by former years, and that, therefore, the "annual
labor," so far as it has created any values, did not create all
the value of the products finished by it; that the product
in values is smaller than the value of the products.

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

IV. Capital and Revenue in Adam Smith.

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

Former Discussions of the Subject. 437

lion of the value in its natural form, that of his own product,
the capitalist pays him in money. The capitalist then
holds the variable portion of his advanced capital in the
form of commodities, while the laborer has received the
equivalent for his sold labor-power in the form of money.

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

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

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

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

438 Capital.

labor-power) and receives its value (realizes its price) in
money; the buyer gives away his money and receives in
turn the commodity itself — in this case labor-power.

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

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

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

Since the value of the labor-power — that is to say, the ade-
quate selling price of this commodity — is determined by the
quantity of labor required for its reproduction, and this

Former Discussions of the Subject. 439

quantity of labor itself is here determined by that required
for the necessary subsistence of the laborer, the wages be-
come a revenue on which the laborer has to live.

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

440 Capital.

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

The continuous purchase and sale of labor-power, then,
perpetuates on one hand labor-power as an element of capi-
tal, by the the grace of which it appears as the creator of
commodities, use-values having an exchange-value, by means
of which, furthermore, that portion of capital which buys
labor-power is continually reproduced by its own product,
so that the laborer himself creates the fund of capital out
of which he is paid. On the other hand, the sale of labor-
power becomes the ever renewed source for the maintenance
of the laborer and makes of his labor-power that faculty
through which he secures his revenue, by which he lives.
Revenue in this case signifies nothing else but an appropri-
ation of values by means of ever repeated sales of i* com-
modity (labor-power), these values serving merely for the
continual reproduction of the commodity to be sold. And
to this extent Smith is right when he says that that portion
of the value of the laborer's product, for which the capi-
talist pays him an equivalent in the form of wages, becomes
a source of revenue for the laborer. But this does not alter
the nature or magnitude of this portion of value of the
commodity any more than the value of the means of pro-
duction is changed by the fact that they serve as capital-
values, or the nature and magnitude of a straight line are
changed by the fact that it serves as a basis for some tri-
angle or as a diameter of some ellipse. The value of labor-
power remains quite as independent as that of those means
of production. This portion of the value of a commodity
neither consists of a revenue as one of its independent con-
stituent factors, nor does it resolve itself into revenue. Be-
cause this value, ever renewed by the laborer, constitutes a
source of revenue for him, that is no reason why his revenue,
on the other hand, should be an element of the new values
produced by him. The magnitude of his share in the new
value created by him determines the volume of the value

Former Discussions of the Subject. 441

of his revenue, not vice versa. The fact that this portion
of the new value forms a revenue for him indicates merely
what becomes of it, shows the character of its employment,
and has no more to do with its formation than with that
of any other value. The fact that my receipts are ten dol-
lars a week changes nothing in the nature of the value of
the ten dollars nor in the magnitude of their value. As in
the case of every other commodity so in that of labor-
power its value is determined by the labor necessary for
its reproduction ; that the quantity of this labor is determ-
ined by the value of the necessary subsistence of the laborer,
in other words, that it is equal to the labor required for the
reproduction of his own life's conditions, is peculiar for
this commodity (labor-power), but no more peculiar than
the fact that the value of laboring cattle is determined by
the subsistence necessary to produce this subsistence.

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

442 Capital.

terialized during the production of commodities. They con-
sist of an expenditure, not of an income or revenue — an
expenditure of labor.

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

Former Discussions of the Subject. 443

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

444 Capital.

as capital- values does not prevent them from resolving them-
selves "originally," even though in some other hands, if
we go to the bottom of the matter, and at some previous
time, into the same two portions of value, hence into two
different sources of revenue.

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

(5). Recapitulation.

The absurd formula that the three revenues, wages, profit,
and ground rent, form the three "component parts" of the
value of commodities, is due in the case of Adam Smith to
the more plausible idea that the value of commodities re-
solves itself into these three parts. However, this is like-
wise incorrect, even granted that the value of commodities
is only divisible into an equivalent of the consumed labor-
power and surplus-value created by it. But the mistake
rests here again on a deeper and truer basis. The capitalist
mode of production is conditioned on the fact that the pro-
ductive laborer sells his own labor-power, as a commodity,
to the capitalist, in whose hands it then serves merely as
an element of his productive capital. This transaction,
taking place in the circulation, — the sale and purchase of
labor-power — does not only inaugurate the process of pro-
duction, but also determines implicitly its specific character.
The production of a use-value, and even that of a commodi-
ty (for this can be done eventually by independent produc-
tive laborers), is here only a means of producing absolute

Former Discussions of the Subject. 445

or relative surplus-value for a capitalist. For this reason
we have seen in the analysis of the process of production,
that the production of absolute and relative surplus-value
determines, (1), the duration of the daily labor-process, (2),
the entire social and technical formation of the capitalist
process of production. Within this process, there is realized
the distinction between the mere conservation of value (the
value of the constant capital), the actual reproduction of
advanced value (an equivalent of labor-power), and the
production of surplus-value, that is to say, of value for which
the capitalist has neither advanced an equivalent nor will
advance one subsequently.

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

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

However, this appropriation of surplus-value, or this sepa-
ration of the production of values into a reproduction of
advanced values 'and a production of new values (surplus-
values) which do not offset any equivalent, does not alter
in any way the substance of value itself nor the nature of
the production of values. The substance of value is and
remains nothing but expended labor-power — labor inde-
pendent of the specific, useful, character of this labor — and
the production of values is nothing but the process of this
expenditure. A serf, for instance, expends his labor-power
for six days, labors for six days, and the fact of this expendi-
ture is not altered by the circumstances, that he may be
working three days for himself, on his' own field, and three
days for his lord, on the field of the latter. Both his volun-
tary labor for himself and his compulsory labor for his lord

446 Capital.

are equally labor; so far as this labor is considered with
reference to the values, or even the useful articles, created
by it, there is no difference in his six days of labor. The
difference refers merely to the distinct conditions by which
the expenditure of his labor-power during each half of his
labor-time of six days is affected. The same applies to the
necessary and surplus-labor of the wage worker.

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

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

Let us look at the product in commodities before it is
converted into money. It belongs wholly to the capitalist.

Former Discussions of the Subject. 447

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

A second portion of the value of a commodity is the value
of the labor-^power which the wage-worker sells to the capi-
talist. It is determined, the same as that of the means of
production, independently of the process of production into
which labor-power is to enter, and it is fixed in a transaction
of the circulation, the purchase and sale of labor-power, be-
fore it goes to the process of production. By means of his
function — the expenditure of labor-power — the wage-laborer
produces a value of the commodity equal to the value which
the capitalist has to pay him for the use of his labor-power.
He gives this value to the capitalist in commodities, and is
paid for it in money. The fact that this portion of the
value of commodities is for the capitalist but an equivalent
for the capital which he has to advance in wages does not
alter in any way the truth that it is a value of commodities

448 Capital.

newly created during the process of production and consist-
ing of nothing but past expenditure of labor, the same as
the surplus-value. Neither is this truth affected by the fact
that the value paid by the capitalist to the laborer assumes
the form of a revenue for the laborer, and that not only
labor-power is continually reproduced thereby, but also the
class of wage-laborers itself, and thus the basis of the entire
capitalist production.

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

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

Adam Smith identifies the production of commodities in

Former Discussions of the Subject. 449

general with capitalist production ; the means of production
are to him from the outset "capital," labor is wage-labor,
and therefore "the number of the useful and productive la-
borers is always proportional to the quantity of capital

stock which is employed in setting them to work." (Intro-
duction, page 12.) In short, the various elements of the
productive process — both objective and subjective ones — ap-
pear from the first with the masks characteristic of the pro-
cess of capitalist production. The analysis of the value of
commodities, therefore, coincides with the reflection, to what
extent this value is, on the one hand, a mere equivalent for
invested capital, and, on the other, to what extent it forms
"free" value, that is to say, value not reproducing any ad-
vance of capital, or surplus-value. The proportions of value
compared from this point of view transform themselves
clandestinely into its independent "component parts," and
finally into the "sources of all value." A further conse-
quence of this method is the alternate composition or disso-
lution of the value of commodities into revenues of various
kinds, so that the revenues do not consist of values of com-
modities, but rather the value of commodities consists of
revenues. But the fact that the value of a 'commodity may
serve as a revenue for this or that man does not change the
nature of value as such any more than the fact that the value
of a commodity as such, or of money as such, may serve as
capital changes their nature. The commodity with which
Adam Smith is dealing represents from the outset a com-
modity-capital (which consists of the value of the capital,
consumed in production plus a surplus-value), it is a com-
modity produced by capitalist methods, a result of the capi-
talist process of production. It would have been necessary,
then, to analyze first this process, and this would have im-
plied an analysis of the process of self-expansion and of the
formation of value, which it includes. Since this process is
in its turn conditioned on the circulation of commodities,
its description requires also a previous and independent
analysis of a commodity. However, even where Adam Smith
hits "esoterically" upon the correct thing in a haphazard
way, he refers to the formation of values only in the analy-

450 Capital.

sis of commodities, that is to say, in the analysis of
commodity-capital.

III. THE ECONOMISTS AFTER SMITH.36

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

In fact, Ricardo fully accepted the theory of Adam
Smith concerning the separation of the price of commodities
into wages and surplus-value (or variable capital and sur-
plus-value). The points in which he differs from him are, 1)
the composition of the surplus-value; Ricardo eliminates
ground rent as one of its necessary elements; 2), Ricardo
starts out from the price of commodities and dissects it into
these component parts. In other words, the magnitude of
value is his point of departure. The sum of its parts is as-
sumed as given, it is the starting point, while Adam Smith
frequently subverts this order and proceeds contrary to his
deeper insight, by producing the quantity of value subse-
quently by an addition of its component parts.
. Ramsay makes the following remark against Ricardo:
"Ricardo forgets that the total product is not only divided
into wages and profits, but that a portion is also required
for the reproduction of the fixed capital." (An Essay on
the Distribution of Wealth. Edinburgh, 1836, page 174.)
Ramsay means by fixed capital the same thing which I call
constant capital, for he says on page 53 : "Fixed capital
exists in a form in which it contributes toward the produc-
tion of the commodity in process of formation, but not
toward the maintenance of laborers."

36 From here to the end of the chapter, an extract from manuscript
II is presented.

Former Discussions of the Subject. 451

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

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

Among ethers, Proudhon has appropriated this discovery
of Say.

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

However, Storch forgot to tell us how the existence of this
constant portion of capital agrees with the analysis of prices
by Smith, which he has accepted, and according to which
the value of commodities consists only of wages and surplus-
value, but not of any constant capital. He realizes only

452 Capital.

through Say that this analysis of prices leads to absurd re-
sults, and his own opinion of it is "that it is impossible to
dissolve the necessary price into its simplest elements."
(Cours d' Economie Politique, Petersburg, 1815, II, page
140.)

Sismondi, who occupies himself especially with the rela-
tion of capital and revenue, and makes the peculiar formu-
lation of this relation the specific difference of his Nouveaux
Principes, did not say one scientific word, did not contrib-
ute one atom toward a clarification of this problem.

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

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

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

Simple Reproduction 453

CHAPTER XX

SIMPLE REPRODUCTION,
I. THE FORMULATION OF THE QlT£STIOW.

If we study the annual function of social capital47^ -of the
total capital whose fractional parts are the individual capi-
tals, the movements of which are simultaneously their indi-
vidual movements and links in the movements of the total
capital — and its results, that is to say, if we study the prod-
uct in commodities put forth by society during the year,
then it must become apparent how the process of reproduc-
tion of the social capital proceeds, what characteristics dis-
tinguish this process of reproduction from that of an indi-
vidual capital, and what characteristics are common to both.
The annual product includes those portions of the social
product which reproduce capital, the social reproduction, as
well as those which go to the fund for consumption, which
are consumed by capitalists and laborers, in other words,
productive and individual consumption. It comprises the
reproduction (maintenance) of the capitalist and working
classes, and thus the reproduction of the capitalist character
of the entire process of production.

It is evidently the circulation formula

r, jM— C..P..C

u ! m— c

which we have to analyze, and the consumption necessarily
plays a role in it. For the point of departure, C equal to
C plus c, the commodity-capital, comprises the constant and
variable capital as well as the surplus-value. Its movements,
therefore, include both the individual and productive con-
sumption. In the cycles M— C ...P...C— M', and P...C— M'
— C...P, the movement of the capital is the starting and fin-
ishing point. And this implies consumption, for the com-
modity, the product, must be sold. When these premises

37 From manuscript TT.

454 Capital.

are accepted, it is immaterial for the movement of the indi
vidual capitals, what becomes of these commodities subse-
quently. On the other hand, in the movement of C...C' the
conditions of social reproduction are precisely different in
this point, since it must be shown what becomes of every
portion of value of this total product of C\ In this case, the
total process of reproduction includes the process of con-
sumption by way of the circulation quite as much as the
process of reproduction of the capital itself.

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

The question which we have to face immediately, is this:
How is the value of the capital consumed in production re-
produced out of the annual product, and how does the move-
ment of this reproduction intermingle with the consumption
of surplus-value by the capitalists and of wages by the labor-
ers? We are dealing, then, first with reproduction on a sim-
ple scale. It is furthermore assumed that products are ex-
changed at their value, and that no revolution in the value
of the elements of productive capital takes place. Should

Simple Reproduction. 455

there be any divergence of prices from values, this would not
exert any influence on the movements of social capital. On
the whole, there is the same exchange of the same quantity
of products, although the individual capitalists would be
taking shares in it which would no longer be proportional to
their respective advances and to the quantities of value pro-
duced by each one. As for revolutions of value, they do
not alter anything in the proportions of the elements of
value of the various component parts of the total annual
product, provided they are universally and uniformly dis-
tributed. To the extent that they are limited and unevenly
distributed, they are disturbances, which, in the first place,
can be understood only as divergences from equal propor-
tions of value; and, in the second place, given the law ac-
cording to which one portion of the annual product repro-
duces constant, and another variable capital, a revolution
either in the value of the constant or variable capital would
not alter this law. It would change merely the relative mag-
nitude of the portions of value which serve in the one or the
other capacity, seeing that other values would have taken
the places of the original ones.

So long as we looked upon the production of value and
the value of products from the point of view of individual
capital, it was immaterial for the analysis which was the
natural form of the product in commodities, whether it was,
for instance that of a machine, of corn, or of looking
glasses. It was always but a matter of illustration, and any
line of production could serve that purpose. What we had
to consider was the immediate process of production itself,
which presented itself at every point as the process of some
individual capital. So far as reproduction was concerned, it
was sufficient to assume that that portion of the product in
commodities, which represented capital in the sphere of cir-
culation, found an opportunity to reconvert itself into its
elements of production and thus into its form of productive
capital. It likewise sufficed to assume that both the laborer
and the capitalist found in the market those commodities
for which they spend their wages and surplus-value. This
merely formal manner of presentation does not suffice in the

456 Capital.

study of the total social capital and of the value of its prod-
ucts. The reconversion of one portion of the value of the
product into capital, the passing of another portion into the
individual consumption of the capitalist and working
classes, form a movement within the value of the product
itself which is created by the total capital; and this move-
ment is not only a reproduction of value, but also of mate-
rial, and is, therefore, as much conditioned on the relative
proportions of the elements of value of the total social prod-
uct as on its use-value, its material substance.38

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

38 From manuscript VIII.

Simple Reproduction. 457

II. THE TWO DEPARTMENTS OF SOCIAL PRODUCTION.39

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

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

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

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

In each department, the capital consists of two parts :

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

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

The value of the total annual product created with the
capital of each of the two great departments of production
consists of one portion representing the constant capital c
consumed in the process of production and transferred to the
product, and of another portion added by the entire labor of
the year. This latter portion, again, consists of one part re-
producing the advanced variable capital v, and of another

39 Mainly taken from manuscript II ; the diagrams from manuscript
VIII.

458 Capital.

representing an excess over the variable capital, the surplus-
value s. And just as the value of every individual commod-
ity, so that of the entire annual product of each department
consists of c plus v plus s.

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

We shall base our analysis of simple reproduction on the
following diagram, in which c stands for constant capital,

Simple Reproduction. 459

v for variable capital, and s for surplus-value, the rate of
surplus-value between v and s being assumed at 100 per cent.
The figures may indicate millions of francs, marks, pounds
sterling, or dollars.

I. Production of Means of Production.

Capital 4000 c+1000 v=5000.

Product in Commodities. .4000 c+1000 v+1000 s=6000.
These exist in the form of means of production.

II. Production of Means of Consumption.

Capital 2000 c+500 v=2500.

Product in Commodities. .2000 c+500 v+500 s=3000.

These exist in articles of consumption.

Recapitulation: Total annual product in commodities:
I. 4000 c+1000 v+1000 s=6000 means of production.
II. 2000 c+ 500 v+ 500 s=3000 articles of consumption.
Total value 9000, exclusive of the fixed capital persisting in
its natural form, according to our assumption.

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

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

(2) The 1000 v and 1000 s of department I must likewise
be spent for articles of consumption, in other words, for
some of the products of department II. Hence they must be
exchanged for the remaining 2000 c of constant value, which
is equal in amount to them. Department II receives in re-

460 Capital.

turn an equal quantity of means of production, the product
of I, in which the value of 1000 v and 1000 s of I is in-
corporated. By this means, 2000 c of II and (1000 v +
1000 s) of I disappear out of the calculation.

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

This may serve for the present to render easier the under-
standing of the following statements.

III. THE TRANSACTIONS BETWEEN THE TWO DEPARTMENTS.

I (v + s) versus II c.

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

Now, this mutual transaction is accomplished by means
of a circulation of money, which facilitates it as much as it
renders its understanding difficult, but which is of funda-

40 Here manuscript VIII is resumed.

Simple Reproduction. 461

mental importance, because the variable portion of capital
must ever resume the form of money, of money-capital con-
verting itself from the form of money into labor-power.
The variable capital must be advanced in the form of
money in all lines of production carried on simul-
taneously, regardless of whether they belong to depart-
ment I or II. The capitalist buys the labor-power
before it enters into the process of production, but does
not pay for it except at stipulated terms, after it has
been expended in the production of use-values. He owns,
with the remainder of the value of the product, also that
portion of it which is an equivalent for the money expended
in the payment of labor-power, in other words, that portion
of the value of the product which represents variable capital.
By this portion of value the laborer has supplied the capital-
ist with the equivalent for his own wages. But it is the recon-
version of. commodities into money by their sale wThich re-
stores to the capitalist his variable capital in the form of
money-capital, which he may advance once more for the
purchase of labor-power.

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

462 Capital

As for the money which is required for the exchange of
the s portion of commodity-capital I for the second half of
constant capital II, it may be advanced in various ways. In
reality, this circulation implies innumerable small purchases
and sales of the individual capitals of both departments, the
money coming under all circumstances from these capital-
ists, since we have already disposed of the money thrown
into circulation by the laborers. It may be that one of the
capitalists of department II buys, with the money-capital he
has aside from his productive capital, means of production
from capitalists of department I, or that, vice versa, one of
the capitalists of department I buys, with funds reserved for
individual expenses, not for capital investment, articles of
consumption from capitalists of department II. A certain
supply of money, to be used either for investment as capital
or for expenditure as revenue, must be assumed to exist be-
side the productive capital in the hands of the . capitalists,
under all circumstances, as we have shown in section I and
II. Let us assume — it is immaterial what proportion we se-
lect for our purpose — that one-half of the money is advanced
by the capitalists of department II in the purchase of means
of production intended for the reproduction of their constant
capital, while the other half is spent by the capitalists of de-
partment I for articles of consumption. For instance, let
department II advance 500 pounds sterling for the purchase
of means of production from department I, thereby repro-
ducing (inclusive of the 1000 pounds sterling coming from
the laborers of department I) three-quarters of its constant
capital in its natural form ; department I buys with the 500
pounds sterling so obtained articles of consumption from II,
thus completing for one-half of the s-portion of its commod-
ity-capital the circulation c — m — c and realizing on its prod-
uct in a supply of articles of consumption. By means of this
second transaction, the 500 pounds sterling return to the
hands of the capitalists of department II, in the form of
money-capital existing beside its productive capital. On the
other hand, department I expends money to the amount of
500 pounds sterling, in anticipation of the realization on the
other half of the s-portion of its still unsold commodity-

Simple Reproduction. 463

capital, for the purchase of articles of consumption from de-
partment II. With the same 500 pounds sterling, depart-
ment II buys from I means of production, thereby reproduc-
ing in natural form its entire constant capital (1000 + 500
+ 500 = 2000), while I realizes its entire surplus-value in
articles of consumption. The entire transaction would rep-
resent a transfer of commodities valued at 4000 pounds ster-
ling with a circulation of 2000 pounds sterling in money.
This last amount is sufficient only because we have assumed
that the entire annual product is sold in bulk in a few large
transactions. The important point is here that department
II has not only reconverted its constant capital, which had
been reproduced in the form of articles of consumption,
into the form of means of production, but has also recovered
the 500 pounds sterling which it had thrown into circula-i
tion for the purchase of means of production; and that in
the same way department I possesses once more not only its
variable capital, which it had produced in the form of
means of production, in the form of money-capital, readily
convertible into labor-power, but also the 500 pounds ster-
ling expended in the purchase of articles of consumption
previously to the sale of the s-portion of its capital in antic-
ipation of its realization. It recovers these 500 pounds ster-
ling, not by this expenditure, but by the subsequent sale
of one-half of the s-portion of its commodity-capital.

In both cases, it is not merely the constant capital of
department II which is reconverted from the form of a pro-
duct into the natural form of means of production, in which
it can alone serve as capital; nor is it merely the variable
portion of the capital of I which is reconverted into its
money-form, nor the surplus-portion of the means of pro-
duction of I which is transformed into its consumable form of
revenue. It is also the 500 pounds sterling of money-capital,
advanced by department II in the purchase of means of
production previously to the sale of the corresponding por-
tion of the value of its constant capital, which return to
il; and the 500 pounds sterling expended by I for means
of consumption previously to the realization of its surplus-

464 Capita!.

value. The fact that the money advanced by II at the ex-
pense of the constant portion of its commodities, and by I
at the expense of the surplus-portion of its commodities,
returns to them is due to the circumstance that one class
of capitalists throws 500 pounds sterling into circulation
over and above the constant capital existing in the form
of commodities in department II, and another class a like
amount over and above the surplus-value existing in the
form of commodities in department I. In the last analysis,
the two departments have mutually paid one another in
full by the exchange of equivalents in the form of their
respective commodities. The money thrown into circula-
tion by each department in excess of the value of their
commodities, as a means of transacting the exchange of
these commodities, returns to each one of them out of the
circulation at the same rate in which they had contributed
to it. Neither has grown any richer thereby. Department
II possessed a constant capital of 2000 in the form of
articles of consumption plus 500 pounds sterling in
money; now it possesses 2000 in means of production
plus 500 pounds sterling in money, the same as before;
in the same way, department I possesses, as before, a
surplus-value of 1000 (consisting of commodities in the
form of means of production, now converted into a
supply of articles of consumption) plus 500 pounds
sterling. The general conclusion is this: The money
which the industrial capitalists throw into circulation
for the purpose of accomplishing the mutual exchange
of their commodities, either in account with the constant
value of the commodities, or in account with the surplus-
value existing in the commodities, to the extent that it is
spent as revenue, returns into the hands of the respective
capitalists in proportion to the amount advanced by them
for the circulation of money.

As for the reconversion of the variable capital of depart-
ment I into the form of money, this capital exists, after the
capitalists of I have invested it in wages, first in the form
of the commodities produced by the laborers. The capital-
ists have paid this capital in the form of money to these

Simple Reproduction. 465

laborers as the price of their labor-power. The capitalists
have to this extent paU for that portion of the value of
their commodities, whick is equal to the variable capital ex-
pended in the form of money. They are, for this reason,
the? owners of this portion of the commodity-product. But
that portion of the working class which is employed by
them does not buy the means of production created by it;
these laborers buy articles of consumption produced by de-
partment II. Hence the variable capital advanced by the
capitalists of I in the payment of labor-power does not re-
turn to these capitalists directly. It passes by means of the
purchases of the laborers of I into the hands of the capital-
ist producers of the requirements of life of the laborer, 01
of other commodities accessible to them ; in other words, it
passes into the hands of capitalists of II. And not until
these expend this money in the purchase of means of pro-
duction does it return by this circuitous route into the hands
of the capitalists of department I.

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

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

It remains for us to analyze the portion v plus s of the
value of the commodities of department II. This analysis
has nothing to do with the most important question which
occupies our attention in this chapter, namely the question,
to what extent the separation of the value of every individ-
ual capitalist product in commodities into c plus v plus s
applies also to the value of the entire annual product in com-
modities, even though this separation may be based on dif-

466 Capital.

ferent forms. This question is solved by the transaction
between I (v + s) and II c, and, on the other hand, by the
analysis of the reproduction of I c in the annual product
in commodities of I, to be analyzed later on.

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

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

(a) Articles of consumption required for the mainten-
ance of the laboring class, and to the extent that they are
material requirements of life, also forming a portion of the
consumption of the capitalist class, although they are fre-
quently different in quality and value. We may, for our
purposes, comprise this entire subdivision under the name of

Simple Reproduction. 467

necessary articles of consumption, regardless of whether a
product of this class, such as tobacco, is really a necessary
article of consumption from the physiological standpoint or
not. It is sufficient that it may be habitually in demand.

(b) Articles of luxury, which are consumed only by the
capitalist class, being purchased only with the surplus-value,
which never falls to the share of the laborer.

It is obvious that the variable capital advanced in the
production of the commodities of the class (a) must flow back
directly to that portion of the capitalist class of II (in other
words the capitalists of Ila) who have produced these mater-
ial requirements of life. They sell them to their own labor-
ers to the amount of the variable capital paid to them in
wages. This reflux takes place in a direct way, so far as this
entire subdivision (a) of the capitalist class of department II
is concerned, no matter how numerous may be the transac-
tions between the capitalists of the various lines of industry
interested in this department, by means of which the return-
ing variable capital is distributed pro rata. These transac-
tions are processes of circulation, whose means of circulation
are supplied directly by the money expended by the labor-
ers- It is different with subdivision lib. The entire por-
tion of the values produced in this subdivision, lib (v + s),
exists in the natural form of articles of luxury; that is to
say, articles which the laborer can buy no more than the
value of the commodities Iv existing in the form of means
of production, notwithstanding the fact that both articles
of luxury and means of production are the products of the
working class. Hence the reflux by which the variable cap-
ital advanced in this subdivision restores to the capitalist pro-
ducers its value in the form of money cannot take place
directly, but must be promoted indirectly, similarly as in the
case of Iv.

Let us assume, for instance, that v stands for 500 and s
also for 500, as they did in the case of the entire class II ;
but let the division of the variable capital and of the corre-
syonding surplus-value be as follows:

'Subdivision a) Necessities of Life: v equal to 400 and s

468 Capital.

equal to 400; hence a total quantity of necessities of life
valued at 400 v plus 400 s, equal to 800, in other words, Ila
(400 v+400s).

(Subdivision b) Articles of Luxury: Valued at 100 v
plus 100 s, equal to 200, or lib (100 v + 100 s) .

The laborers of lib have received 100 in money as pay-
ment of their labor-power, or say 100 pounds sterling. They
buy with this money articles of consumption from the cap-
italists of Ila to the same amount. This class of capitalists
buys with the same money 100 p. st. worth of the commod-
ities of lib, thereby returning to the capitalists of lib their
variable capital in the form of money.

In Ila there are available once more 400 v in money, in
the hands of the capitalists, obtained by exchange with their
laborers. Furthermore, the fourth part of the product rep-
resenting surplus-value has been transferred to the laborers
of lib, and lib (lOOv) have been purchased in the form
of articles of luxury.

Now, assuming that the capitalists of Ila and lib divide
the expenditure of their revenue in the same proportion be-
tween necessities of life and luxuries — for instance, three-
fifths for necessities and two-fifths for luxuries — the capital-
ists of Ila will spend their revenue from surplus-value,
amounting to 400 s, three-fifths, or 240, for their own pro-
duct of necessities of life, and two-fifths, or 160, for articles
of luxury. The capitalists of subdivision lib will divide
their surplus-value of 100 s in the same way: three-fifths, or
60, for necessities, and two-fifths, or 40, for articles of lux-
ury, these being produced and exchanged in their own sub-
division.

The 160 in articles of luxury received by Ila for its sur-
plus-value, pass into the hands of the capitalists of Ila in the
following manner: Of the 400 s of Ila, we have seen that
100 were exchanged in the form of necessities of life for an
equal amount of articles of luxury of lib, and furthermore
60, consisting of necessities of life, for 60 s of lib, consist-
ing of luxuries. The total calculation then stands as fol-
lows:

Simple Reproduction. 468

Ha: 400 v plus 400 s; lib: 100 v plus 100 s.

(1) 400 v of (a) are consumed by the laborers of Ila, a pari
of whose product is represented by that amount in necessi-
ties of life; the laborers buy these necessities from the cap-
italist producers of their own subdivision. These capitalists
thereby recover 400 p. st., in money, which is the value of
the variable capital paid by them to these same laborers.
They can now buy more labor-power with it.

(2) One portion of the 400 s of (a), equal to the 100 v of
(b) ; in other words, one-quarter of the surplus-value of (a)
is exchanged for luxuries in the following way : The laborers
of (b) received from the capitalists of their subdivision 100
p. st. in wages. With this amount these laborers bought one-
quarter of the surplus-value of (a), in other words, commod-
ities consisting of necessities of life. The capitalists of (a)
buy with this same money articles of luxury to the same
amount, which equals 100 v of (b), or one-half of the entire
product in luxuries of (b). In this way the capitalists of
(b) recover their variable capital in the form of money and
are enabled to resume reproduction after having invested
this amount once more in labor-power, since the entire con-
stant capital of the whole department II has been reproduced
by the exchange between I (v+s) and lie. The labor-power
of the laborers of lib, the producers of articles of luxury, is
under these circumstances, only saleable because the product
created by them as an equivalent for their own wages is con-
sumed by the capitalists of Ila. (The same applies to the
sale of the labor-power of I, since the lie for which I (v +
s) is exchanged, consists of both articles of luxury and neces-
sities of life, and that which is reproduced by means of I
(v + s) consists of the means of production of both luxuries
and necessities.)

(3) We now come to the exchange between a and b, to the
extent that it is merely a transaction between the capitalists
of these two subdivisions. So far we have disposed of the
variable capital (400) v and of one portion of the surplus-
value (100) s in (a), and of the variable capital (100) v in
(b). We had furthermore assumed that the average propor-

470 Capital.

tion of the expenditure of the capitalist revenue was in both
classes two-fifths for luxuries and three-fifths for necessities.
Apart from the 100 thus expended for luxuries, the entire
department therefore still has to spend 60 for luxuries in (a)
and the same proportion, or 40, in (b) .

(Ha) is then divided into 240 for necessities and 160 for
luxuries, or 240 + 160=400 s (Ha).

(lib) s is divided into 60 for necessities and 40 for lux-
uries; 60 + 40 = 100s (lib). The last 40 are consumed
by this class out of its own product (two-fifths of its surplus-
value) ; the 60 for necessities are obtained by this class
through the exchange of 60 of its surplus-value for 60 s of a.

We have, then, for the entire capitalist class of II, the fol-
lowing situation (v plus s in subdivision (a) consisting of
necessities, in subdivision (b) of luxuries) :

Ila (400 v + 400 s) +IIb (100 v + 100 s) = 1000; by
this transaction there is realized 500 v (a + b) + 500 s
(a + b) = 1000; the first member in this equation being
realized in 400 v of (a) and 100 s of (b), the second in 300 s
of (a) plus 100 v of (b) plus 100 s of (b).

Considering a and b, each by itself, we have the transac-
tion:

a) v + 5 = 800

400 v (a) T 240 s (a) -f 100 v (b) + 60 s (b)

b) v s _ 200

100 s (a) ^ 60 s (a) + 40 s (b) 1000

If we retain, for the sake of simplicity, the same propor-
tion between the variable and constant capital of each sub-
division (which, by the way, is not at all necessary), we ob-
tain for 400 v (a) a constant capital of 1600, and for 100 v
(b) a constant capital of 400, and we have the following
two subdivisions a and b in department II :

(Ila) 1600 c + 400 v + 400 s = 2400
(lib) 400 c + 100 v + 100 s = 600
making together

2000 c 4- 500 v + 500 s = 3000.

Accordingly, 1600 of the 2000 He in articles of consump-

Simple Reproduction. 471

tion, which are exchanged for 2000 I (v + s), are disposed of
for means of production of necessities of life, and 400 for
means of production of luxuries.

The 2000 I (v + s)., then, would be divided into (800 v
+ 800 s) I, for the 1600 means of production of necessities
of life in section a, and (200 v + 200 s) I, for the 400
means of production of luxuries in b.

A considerable part of the instruments of labor, strictly
so called, as well as of the raw and auxiliary materials,
etc., is homogeneous for both departments. But so far as
the transaction of the exchanges of the various portions of
value of the total product I (v + s) are concerned, such a
division would be immaterial. Both the above named 800 v
of I and 200 v of I are realized by the spending of wages for
articles of consumption 1000 c of II, and the money-capital
advanced for this purpose is uniformly distributed, on its re-
turn, among the capitalist producers of I, reproducing
their variable capital in money at the rate advanced by
them. On the other hand, so far as the realization of the
1000 s of I is concerned, the capitalists will likewise draw
uniformly, in proportion to the magnitude of their sur-
plus-value, 600 Ila and 400 lib out of the entire second
half of He, equal to 1000; in other words, those who make
up for the constant capital of Ila will draw 480, or three-
fifths, out of 600 c of Ila, and 320, or two-fifths, out of 400
c of lib, a total of 800; while those who make up for the
constant capital of lib will draw 120, or three-fifths out of
600 c of Ila and 80, or two-fifths out of 400 c of lib, a total
of 200. Grand total, 1000.

That which is arbitrary in this case is the proportion of
the variable to the constant capital of both I and II and
so is the uniformity of this proportion for I and II and
their subdivisions. As for this uniformity, it has been as-
sumed merely for the sake of simplifying the matter, and
it would not alter in any way the fundamental conditions
of the problem and its solution, if we had assumed different
proportions. However, the necessary result of all this, on the
basis of simple reproduction, is the following:

472 Capital.

(1) That the new product in values created by the labor
of one year in the natural form of means of production,
divisible into v plus s, must be equal to the value of the
constant capital c of the product in values created by the
other part of annual labor, reproduced in the form of arti-
cles of consumption. If it were smaller than lie, it would
be impossible for II to reproduce its entire constant cap-
ital; if it were greater, a surplus would remain unused. In
either case, the assumption of simple reproduction would
be violated.

(2) That in the case of annual product which is repro-
duced in the form of articles of consumption, the variable
capital v advanced in the form of money can be realized
by its recipients, to the extent that they are laborers pro-
ducing luxuries, only in that portion of the necessities of
life which embodies for its capitalist producers primarily
their surplus-value; so that v, invested in the production
of luxuries, is equal in value to a corresponding portion of
s produced in the form of necessities, and must be smaller
than the whole of this s, which is s of Ila; and that, finally,
the variable capital of the capitalist producers of luxuries
returns to them in the form of money only by means of the
realization of that v in this portion of s. This phenom-
enon is quite analogous to the realization of I (v +s) in
lie; only that in the second case, it is the v of lib which
is realized in a portion of s of Ila of the same value. These
conditions determine the proportions of the various quan-
tities in every distribution of the total annual product, to
the extent that it actually enters into the process of the an-
nual reproduction promoted by circulation. I (v+s) can
be realized only in lie, and lie can renew its function as a
component part of productive capital only by means of this
realization; in the same way, the v of lib can be realized
only in a portion of s of Ila, and v of lib can only thus be
reconverted into the form of money-capital. Of course, all
this applies only to the extent that it is a result of the proc-
ess of reproduction itself, so that the capitalists of ITb do
not, for instance, take up money-capital for v by

Simple Reproduction. 473

credit from others. So far as mere quantity is concerned,
the transactions for the exchange of the various portions of
the annual product can take place only in the way indicated
above, so long as the scale and the conditions determining
value remain stationary, and so long as these strict condi-
tions are not altered by the commerce with foreign
countries.

Now, if we were to say after the manner of Adam Smith
that I(v + s) resolves itself in He, and He resolves itself
into I(v + s), or, as he says more frequently and more ab-
surdly, I(v + s) constitutes the component parts of the price
(or value in exchange, as he has it) of He, and He consti-
tutes the entire component part of the value of I(v + s),
then we could and should say that the v of lib resolves itself
into s of Ha, or the s of Ha into the v of lib, or the v of lib
forms a component part of the s of Ila, or, vice versa, the
surplus-value thus resolves itself into wages, or into variable
capital, and the variable capital forms a component part
of the surplus-value. This absurdity is indeed found in
Adam Smith, since according to him wages are determined
by the value of the necessities of life, and the values of
these commodities in their turn by the value of the wages
(variable capital) and surplus-value contained in them.
He is so absorbed in the fractional parts, into which the
product in values of one working day is divided on the basis
of capitalist production — namely into v plus s — that he
quite forgets that it is immaterial in the simple exchange of
commodities, whether the equivalents existing in various
natural forms consist of paid or unpaid labor, since their
production costs in either case the same amount of labor;
and that it is also immaterial, whether the commodity of A
is a means of production and that of B an article of con-
sumption, and whether one commodity has to serve as a
component part of capital after its sale, while another passes
into the fund for consumption and is consumed, according
to Adam, as revenue. The use to which the buyer puts his
commodity does not fall within the scope of the exchange
of commodities, does not concern the circulation, and does

474 Capital.

not affect the value of the commodity. This fact is no! in
the least affected by the truth that, in the analysis of the
circulation of the annual social product as a whole, the
definite use for which it is intended, the mode of consump-
tion of the various component parts of that product, must
be taken into consideration.

In mentioning the fact that the conversion of the v of lib
into a portion of the s of Ila of the same value, and the
further transactions between the s of Ila and the s of lib,
it is by no means assumed that either the individual capi-
talists of Ila and lib or their respective totalities divide their
surplus-value in the same proportion between necessities of
life and articles of luxury. The one may spend more in this
consumption, the other more in that. On the basis of sim-
ple reproduction we have merely assumed that a sum of
values equal to the entire surplus-value is realized in a fund
for consumption. The limits are thus given. Within each
department, the one may do more in a, the other in b. But
this may compensate itself mutually, so that the capitalist
classes of a and b, each taken as a whole, each participate
in the same proportion in both of them. The proportions of
value — the proportional share of the two classes of pro-
ducers, a and b, in the total value of the product of II —
and with them a definite quantitative proportion between
the departments of production supplying those products,
are necessarily given in any concrete case ; only a proportion
chosen as an illustration is a hypothetical one. It does not
alter the qualitative elements of the proposition, if we select
another illustration; only the quantitative determinations
would be altered. But if any circumstances cause an actual
change in the proportional magnitude of a and b, then the
conditions of simple reproduction would likewise be changed
correspondingly.

Since the v of lib is realized in an equivalent portion of
the s of Ila, it follows that to the extent that the portion
of the annual product consisting of luxuries grows, absorb-
ing an increasing share of the labor-power in the production

Simple Reproduction: 475

of luxuries, to the same extent is the reconversion of variable
capital advanced by lib into money conditioned on the
prodigality of the capitalist class, who spend a considerable
portion of their surplus-value in articles of luxury. It is by
this means that the reconversion of this variable capital into
money is promoted, and thereby the existence and reproduc-
tion of the laborers employed in lib, by supplying them
with the articles of consumption necessary for their life.

Every crisis momentarily lessens the consumption of lux-
uries. It retards and checks the reconversion of the v of
lib into money-capital, permitting it only partially and
thus throwing a certain number of the laborers employed in
the production of luxuries out of employment, while it on
the other hand clogs by this means the sale of the necessary
articles of consumption and reduces it. And there are, be-
sides, the unproductive laborers who are dismissed at the
same time, laborers who receive for their services a portion
of the funds spent by the capitalists for luxuries (these
laborers are themselves luxuries), and who take part to a
very considerable extent in the consumption of necessities
of life, etc. The reverse takes place in periods of prosperity,
particularly during the times of bogus prosperity, in which
the relative value of money, expressed in commodities, de-
creases primarily for other reasons (without any other actual
revolution in values), so that the price of commodities rises
independently of their own value. It is not alone the con-
sumption of necessities of life which increases at such times.
The working class, actively re-inforced by its entire reserve
army, also enjoys momentarily articles of luxury ordinarily
out of its reach, articles which at other times constitute for
the greater part "necessities" only for the capitalist class.
This contributes to a rise in prices from this quarter.

It is purely a tautology to say that crises are caused by
the scarcity of solvent consumers, or of a paying consump-
tion. The capitalist system does not know any other modes
of consumption but a paying one, except that of the pauper
or of the "thief." If any commodities are unsaleable, it
means that no solvent purchasers have been found for them,

476 Capital.

in other words, consumers (whether commodities are bought
in the last instance for productive or individual consump-
tion). But if one were to attempt to clothe this tautology
with a semblance of a profounder justification by saying
that the working class receive too small a portion of their
own product, and the evil would be remedied by giving
them a larger share of it, or raising their wages, we should
reply that crises are precisely always preceded by a period in
which wages rise generally and the working class actually
get a larger share of the annual product intended for con-
sumption. From the point of view of the advocates of "sim-
ple" ( !) common sense, such a period should rather remove
a crisis. It seems, then, that capitalist production comprises
certain conditions which are independent of good or bad will
and permit the working class to enjoy that relative prosper-
ity only momentarily, and at that always as a harbinger of
a coming crisis.41

We saw a while ago that the proportion between the pro-
duction of necessities of life and that of luxuries requires the
division of II (v + s) into Ila and lib, and thus of He into
(Ha) c and (lib) c. Hence this division touches the char-
acter and the quantitative conditions of production to their
very roots, and is an essential factor in its general conforma-
tion.

Simple reproduction is essentially directed toward con-
sumption as an end, although the securing of surplus-value
appears as the compelling motive of the individual capital-
ists ; but surplus-value in this case, whatever may be its pro-
portional magnitude, is supposed to serve merely for the in-
dividual consumption of the capitalist.

So far as simple reproduction is a part, and the most im-
portant one at that, of annual reproduction on an enlarged
scale, consumption remains as a motive accompanying the
accumulation of wealth as an end and distinguished from it.
In reality, the matter appears more complicated, because
some partners in the loot, the surplus-value of the capitalist,
figure as consumers independently of him.

41 Advooates of the theory of crises of Rodbertus are requested to make
a note of this.

Simple Reproduction. 47*7

V. THE PROMOTION OF THE TRANSACTIONS BY THE CIRCULA-
TION OF MONEY.

So far as we have analyzed circulation up to the present,
it proceeded between the various classes of producers as indi-
cated in the following diagrams:

(1) Between class I and class II:
I. 4000 c + 1000 v + 1000 s.

II 2000 c + 500 v + 500 s.

This disposes of the circulation of He (2000), which is
exchanged for I (1000 v + 1000 s).

Leaving aside for the present the 4000 c of I, there still
remains the circulation of v + s within class II. Now II
(v + s) is subdivided between the subclasses Ila and lib in
the following manner:

(2) II. 500 v + 500 s = a (400 v + 400 s) + b (100 v +
100 s).

The 400 v of a circulate within their own subclass; the
laborers paid with these wages buy with them articles of con-
sumption, produced by themselves, from their employers,
the capitalists of Ila.

Since the capitalists of both subclasses spend three-fifths
of their surplus-value in products of Ila (necessities) and
two-fifths in products of lib (luxuries), the three-fifths of
the surplus-value of a, or 240, are consumed within the sub-
class Ila itself; likewise two-fifths of the surplus-value of b
(produced in the form of articles of luxury and existing as
such) within the subclass lib.

There remains to be exchanged between Ila and lib : On
the side of Ila: 160 s; on the side of lib: 10U v + 60 s. These
compensate one another. The laborers of lib buy with their
100 in the form of money necessities of life to that amount
from Ila. The capitalists of lib likewise buy necessities
from Ila to the amount of three-fifths, or 60, of their sur-
plus-value. The capitalists of Ila thus obtain the money re-
quired for investing, as above assumed, two-fifths of their sur-
plus-value, or 160 s, in luxuries produced by lib (100 v held
by the capitalists of lib as a product reimbursing them for

478 Capital

the wages paid by them, and 60 s). The diagram for this
transaction is

3) Ha. [400 v] + [240 s] + 160 s

b 100 v + 60 s + [40 s],

the brackets indicating the amounts circulated and con-
sumed within their own subclass.

The direct reflux of the money-capital advanced in vari-
able capital, which takes place only in the case of the capital-
ist class of Ha who produce necessities of life, is but an ex-
pression, modified by special conditions, of the previously
mentioned general law, that money advanced to the circula-
tion by producers of commodities returns to them in the
normal circulation of commodities. Consequently, if a
money capitalist stands behind the producer of commodities
and advances to the industrial capitalist money-capital (using
this term in its strictest meaning, that is to say, capital-value
in the form of money), the final point of reflux for this
money is the pocket of this money-capitalist. In this way
the mass of the circulating money belongs to that depart-
ment of money-capital which is concentrated and organized
in the form of banks, etc., although the money circulates
more or less through all hands. The way in which this de-
partment advances its capital necessitates continually the
final reflux to it in the form of money, although this takes
place by way of the reconversion of the industrial capital
into money-capital.

The circulation of commodities always requires two
things : Commodities which are thrown into circulation, and
money which is likewise thrown into it. "The process of
circulation ... . does not, like direct barter of pro-
ducts, become extinguished upon the use-values changing
places and hands. The money does not vanish on dropping
out of the circuit of the metamorphosis of a given commod-
ity. It is constantly being precipitated into new places in
the arena of circulation vacated by other commodities," etc.
(Volume I, chapter III, page 126.)

For instance, in the circulation between lie and I (v + s)
we assumed that 500 pounds sterling in gold had been ad-
vanced for it. In the innumerable processes of circulation,

Simple Reproduction. 479

into which the circulation between great social groups re-
solves itself, now this, now that producer will first appear in
one or the other group as a buyer, throwing money into cir-
culation. Quite aside from individual, circumstances, this
is conditioned on the difference of the periods of production
and thus of the turn-overs of the various commodity-capitals.
Now II buys with these 500 pounds sterling means of pro-
duction of the same value from I, and I buys from II arti-
cles of consumption valued at 500 pounds sterling. Hence
the money flows back to II, but this department does not in
any way increase its wealth by this reflux. It had thrown
500 pounds sterling in money into circulation and drew the
same amount out of it in commodities; then it sells 500
pounds sterling worth of commodities and draws out of cir-
culation the same amount in money; thus the 500 pounds
sterling flow back to it. As a matter of fact, II has thrown
into circulation 500 pounds sterling in money and 500
pounds sterling in commodities, a total of 1000 pounds
sterling. It draws out of the circulation 500 pounds
sterling in commodities and 500 pounds sterling in
money. The circulation requires for the handling of 500
pounds sterling in commodities of I and 500 pounds sterling
in commodities of II only 500 pounds sterling in money;
and whoever has first advanced money in the purchase of
commodities from other producers, recovers it when selling
his own. Hence, if department I had been the first to buy
commodities from II for 500 pounds sterling, and to sell
later on to II commodities valued at 500 pounds sterling,
these 500 pounds sterling would have returned to I instead
of II.

In class I, the money invested in wages, in other words,
the variable capital advanced in the form of money, does
not return directly in this form, but indirectly by a detour.
But in II, the 500 pounds sterling return directly from the
laborers to the capitalists, and this return is always direct,
in the case where purchase and sale takes place repeatedly
between the same persons in such a way that they are acting
alternately as buyers and sellers of commodities. The cap-
italist of II pays for the labor-power in money; he thereby

480 Capital.

incorporates his labor-power in his capital and assumes
the role of an industrial capitalist over his laborers
as wage earners only by means of this transaction in circula-
tion, which is for him merely a conversion of money-capital
into productive capital. Thereupon the laborer, who is in
the first instance a seller of his own labor-power, assumes
in the second instance the role of a buyer, a possessor of
money, while the capitalist acts now as a seller of commod-
ities. In this way the capitalist recovers the money invested
by him in wages. Unless this sale of his commodities im-
plies cheating, etc., and remains but an exchange of equiv-
alents in money and commodities, it is not a process by
which the capitalist enriches himself. He does not pay the
laborer ■twice, first in money, and then in commodities. His
money returns to him as soon as the laborer exchanges it for
his commodities.

Now, the money-capital converted into variable capital,
the money advanced for wages, plays a prominent role in
the circulation of money itself. For the laborer must live
from hand to mouth and cannot give the industrial capital-
ists any credit for long periods. Hence variable capital in
the form of money must be advanced simultaneously at in-
numerable localities in the social production in certain short
intervals, such as weeks, etc., whatever may be the various
periods of turn-over of the capitals in the different lines of
industry. These intervals succeed one another with relative
rapidity, and the shorter they are, the smaller is relatively
the total amount of money thrown into circulation through
this channel. In every country with a capitalist production
the money-capital so advanced constitutes a proportionately
influential share of the total circulation, so much more so
as the same money, before its return to its point of depart-
ure, roams through many channels and serves as a me-
dium of circulation for innumerable other businesses.

Now let us consider the circulation between I (v + s) and
lie from a different point of view.

The capitalists of I advance 1000 pounds sterling in the

Simple Reproduction. 481

payment of wages. The laborers buy with this money 1000
pounds sterling's worth of commodities from the capitalists
of II. These in turn buy with the same money means of
production from the capitalists of I. These capitalists of I
thereby recover their variable capital in the form of money,
while the capitalists of II have reconverted one-half of their
constant capital from the form of commodities into that of
productive capital. The capitalists of II advance 500 pounds
sterling more for the purchase of means of production from
the capitalists of I. The capitalists of I spend this money
in articles of consumption of II. These 500 pounds ster-
ling thus return to the capitalists of II. They advance this
amount again, in order to reconvert the last quarter of their
constant capital, existing in the form of commodities, into
means of production of I, its natural productive form. This
money flows back to I, and once more withdraws from II
articles of consumption to the same amount, returning 500
pounds sterling to II. The capitalists of II are then once
more in possession of 500 pounds sterling in money and
2000 pounds sterling of constant capital, the latter having
been reconverted from the form of commodity-capital into
that of productive capital. By means of 1500 pounds ster-
ling, a quantity of commodities valued at 5000 pounds ster-
ling has been circulated. (1) I paid 1000 pounds sterling
to his laborers for their labor-power of the same value; (2)
the laborers bought with these same 1000 pounds sterling
articles of consumption from II; (3) II bought with the
same money means of production from I, thereby restoring
to I its variable capital of 1000 pounds sterling in the form
of money; (4) II buys 500 pounds sterling's worth of
means of production from I; (5) I buys with the same 500
pounds sterling articles of consumption from II; (6) II
buys with the same 500 pounds sterling means of produc-
tion from I; (7) I buys with the same 500 pounds sterling
articles of consumption from II. Thus 500 pounds ster-
ling have returned to II, which it had thrown into circula-
tion aside from its 2000 pounds sterling in commodities and

482 Capital.

for which it did not withdraw any equivalent from circula-
tion.42

The exchange, therefore, follows this course:
(1)1 pays 1000 pounds sterling in money for labor-power,
or, in short, commodities at 1000 pounds sterling.

(2) The laborers buy with their wages amounting
to 1000 pounds sterling articles of consumption from II;
therefore we have again commodities at 1000 pounds ster-
ling.

(3) II buys with the 1000 pounds sterling received from
the laborers means of production to the same amount;
hence, once more, commodities at 1000 pounds sterling.

By this transaction the 1000 pounds sterling have re-
turned to I in the money-form of its variable capital.

(4) II buys 500 pounds worth of means of production
from I, or, commodities at 500 pounds sterling.

(5) I buys with the same 500 pounds sterling articles of
consumption from II; or, commodities at 500 pounds sterl-
ing.

(6) II buys with the same 500 pounds sterling means of
production from I; or, commodities at 500 pounds sterling.

(7) I buys with the same 500 pounds sterling articles of
consumption from II; or, commodities at 500 pounds ster-
ling.

Total amount of value of commodities converted: 500
pounds sterling.

The 500 pounds sterling advanced by II in its first addi-
tional purchase have returned to it.

This, then, is the result:

(1) I possesses variable capital in the form of money to
the amount of 1000 pounds sterling, which it had originally
advanced to the circulation. It has furthermore expended
1000 pounds sterling for its individual consumption, in the
shape of its product in commodities ; that is to say, has spent

42 This presentation differs somewhat from that given in another place
of this section farther along. There I throws likewise an additional
amount of 500 p. st. into circulation. Here II alone supplies the addi-
tional money for the circulation. But this does not alter the final
result— F. E.

Simple Reproduction. 483

money which it had originally received for the sale of
means of production to the amount of 1000 pounds sterling.

On the other hand, the natural form in which variable
capital existing in the form of money must be incorporated
in order to be preserved, in other words, labor-power, has
been maintained by consumption, and having been repro-
duced exists once more as the sole commodity which its own-
ers have for sale in order to make a living. The relation of
wage workers and capitalists, then, has likewise been repro-
duced.

(2) The constant capital of II is reproduced in its nat-
ural form, and the 500 p. st. advanced by the same depart-
ment to the circulation have likewise returned to its hands.

So far as the laborers of I are concerned, the circulation
takes place according to the simple schedule C — M — C.
Labor-power1 C — 1000 p. st. as the money-form of the
variable capital of I; M2 — necessities of life to the
amount of 1000 p. st. ; C3 — these 1000 p. st. monetize to
the same amount the constant capital of II existing in the
form of commodities, of necessities of life.

From the point of view of the capitalists of II, the pro-
cess is C — M, the transformation of a portion of their pro-
duct into money, from which it is reconverted into the ele-
ments of productive capital, namely into a portion of the
means of production required by them.

In the case of the advance of money of 500 p. st., made
by the capitalists of II in the purchase of an additional por-
tion of means of production, the money-form of that por-
tion of lie which exists as yet in the form of commodities,
of articles of consumption, is anticipated, in the transaction
M — C, in which II buys with M, and C is sold by I, the
money (II) is converted into a portion of productive cap-
ital, while C (I) passes through the transaction C — M,
changes itself into money, which, however, does not repre-
sent any component part of productive capital for I, but
merely monetized surplus-value expended solely for articles
of consumption.

In the circulation M— C . . P . . C1— M1, the first act, M — C.
is that of one capitalist, the last C1 — M1, of another (or at

484 Capital.

least in part) ; whether this C, by which M is converted into
productive capital, represents an element of constant capital,
variable capital, or surplus- value for the seller of C (who
exchanges this C for money), is immaterial for the circula-
tion of commodities itself.

Class I, so far as concerns the portion v plus s of its pro-
duct in commodities, draws more money out of circulation
than it threw in. In the first place, its 1000 p. st. of vari-
able-capital are restored to it; in the second place, it sells
means of production valued at 500 p. st. (see above trans-
action No. 4) ; one-half of its surplus-value is thus mon-
etized; then it sells once more 500 p. st.'s worth of means
of production (transaction No. 6), the second half of its sur-
plus-value, and thus its entire surplus-value is withdrawn
from circulation in the shape of money. The successive
transactions, then, have been (1) a reconversion of variable
capital into money, to the amount of 1000 p. st. ; (2) a
monetization of one-half of the surplus-value, to the amount
of 500 p. st.; (3) a monetization of the other half of the
surplus-value, to the amount of 500 p. st., altogether 1000
v plus 1000 s that have been monetized, or 2000 p. st.
Although department I threw only 1000 p. st. into circula-
tion (aside from those transactions which promote the re-
production of Ic, and which we shall analyze later), it has
withdrawn double that amount from it. Of course, the
surplus-value passes into another hand, that of II, as soon
as it has been converted into money, by being spent for arti-
cles of consumption. The capitalists of I withdrew only as
much value in money as they threw into circulation in the
form of commodities; the fact that this value is surplus-
value, that is to say, that it does not cost the capitalists any-
thing, does not alter the value of these commodities in any
way ; so far as the exchange of values in circulation is con-
cerned, that fact is entirely irrelevant. The monetization of
surplus-value is, of course, a transient act, the same as all
other phases through which the advanced capital passes in
its metamorphoses. It lasts no longer than the interval be-
tween the conversion of the commodities of I into monpy
and the subsequent conversion of the money of I into com-
modities of II,

Simple Reproduction.

485

If the turn-overs had been assumed to be shorter — or,
from the point of view of the simple circulation of commod-
ities, the number of turn-overs of the circulating money
more rapid — even less money would be required for the cir-
culation of the exchanged values of commodities; the
amount is always determined — if the number of successive
transactions is given — by the sum of the prices, or the sum
of values, of the circulating commodities. It is immaterial
for this question what proportion of this sum of values con-
sists of surplus-value or of capital-value.

If the wages of I, in our illustration, were paid four
times per year, we should have 4 times 250, or 1000. In
other words, 250 p. st. would suffice for the circulation be-
tween Iv and y2 of He, and for that between the variable
capital of I and the labor-power of the same department.
Furthermore, if the circulation between Is and lie were to
take place in four turn-overs, it would require only 250 p. st.
in money, or in the aggregate a sum of money, or a money-
capital, or 500 p. st. for the circulation of commodities
worth 5000 p. st. In that case, the surplus-value would be
converted into money by four successive transactions, mone-
tizing one-fourth each time, instead of two transactions of
one-half each time.

If department I instead of II, should assume the role of
buyer in transaction No. 4 by expending 500 p. st. for arti-
cles of consumption of the same value, II would buy means
of production with the same 500 p. st. in transaction No. 5,
I would then buy articles of consumption with the same
500 p. st. in transaction No.. 6; II would then buy means
of production with the same 500 p. st. in transaction No.
7 ; so that the 500 p. st. would finally return to I, the same
as they did in our previous illustration to II. The surplus-
value is converted into money, in this second case, by means
of an expenditure of money for articles of individual con-
sumption on the part of its capitalist producer, and this
expenditure of money discounts beforehand the revenue to
be derived from the monetization of the surplus-value still
contained in the unsold commodities. The surplus-value
is not monetized by the reflux of the 500 p. st.; for aside

486 Capital.

from 1000 p. st. in the form of commodities of Iv, depart-
ment I threw 500 p. st. in money into circulation at the
close of transaction No. 4, and this was additional money,
so far as we know, not money obtained by the sale of com-
modities. In recovering this money, department I merely
pockets once more the additional money advanced by it.
It has not monetized its surplus-value by this means. The
monetization of the surplus-value of I takes place only by
the sale of the commodities of Is, in which it is incorpor-
ated, and lasts only so long as the money obtained by the
sale of the commodities is not expended in the purchase of
new articles of consumption.

Department I buys with an additional amount of 500 p.
st. in money articles of consumption from II; after spend-
ing this money, I holds its equivalent in commodities of
II; the money returns for the first time by the purchase,
on the part of II, of commodities to the amount of 500 p. st.
from I; in other words, it returns as the equivalent of the
commodities sold by I, but these commodities do not 'cost
I anything, they constitute surplus-value for I, and thus
the money thrown into circulation by this very department
monetizes its own surplus-value. On buying for the second
time, in transaction No. 6, I has likewise obtained its equiv-
alent in commodities of II. Take it, now, that II would
not buy means of production from I. In that case, I would
have actually paid 1000 p. st. for articles of consumption,
it would have consumed its entire surplus-value as revenue,
namely 500 in its own commodities (means of production)
and 500 in money; on the other hand, it would still have
500 p. st. in commodities (means of production) in stock,
and would have gotten rid of 500 p. st. in money.

Department II, again, would have reconverted three-
fourths of its constant capital from the form of commodity-
capital into that of productive capital; but one-fourth, or
500 p. st., would be held by it in money, which, having
interrupted its function and waiting for conversion, would
be unproductive for the time being. If this condition of
things should last for any length of time, II would have to
cut down its scale of reproduction by one-fourth.

Simple Reproduction. 487

However, the 500 in means of production, which I has on
its hands, are not surplus-value existing in the form of com-
modities; they occupy the place of the 500 p. st. advanced
in money, which I possessed aside from its 1000 p. st. in
commodities. In the form of money, they would be always
convertible, as commodities they are momentarily unsal-
able. So much is evident, that simple reproduction — in
which every element of productive capital must be repro-
duced in both II and I — remains possible in this case only,
if the 500 golden birds, which I first sent flying, return to it.

If a capitalist (we have only industrial capitalists to
deal with here, who are the representatives of all others)
spends money for articles of consumption, it passes out of
his life, it goes the way of the flesh. If it returns to him,
it can do so only to the extent that he draws it out of
circulation by means of his commodity-capital. The value
of his entire annual product in commodities (which rep-
resents his commodity-capital) the same as that of every
one of its elements, that is to say, of every individual com-
modity, resolves itself, from his point of view, into constant
capital, variable capital, and surplus-value. The mone-
tization of every individual commodity (each constituting
an element of the product in commodities) is at the same
time a monetization of a certain portion of the surplus-value
contained in the entire product. In the cited case, then,
it is literally true that the capitalist himself threw the
very money into circulation by which his surplus-value is
monetized, and he did so in the purchase of articles of
consumption. Of course, it is not a question of the identical
pieces of money, but rather of a certain amount of genuine
money equal to the one (or an equal portion of the one)
which he had previously thrown into circulation to satisfy
his own individual wants.

In practice this is done in two ways: If the business
has been opened in the current year, it will take quite a
while before the capitalist will be enabled to use any por-
tion of the receipts of his business for the satisfaction of his
individual consumption. But he does not suspend his con-
sumption for all that for a single moment. He advances

488 Capital.

to himself (immaterial whether out of his own pocket or
by means of credit from others) money in anticipation of
surplus-value to be realized by him. If the businesss has
been running regularly for a period longer than the cur-
rent year, payments and receipts are distributed over differ-
ent terms of the year. But one thing continues uninter-
ruptedly, namely the consumption of the capitalist, which
anticipates a definite portion of the customary or estimated
revenue and is calculated on a certain proportion of it.
With every portion of commodities sold, a portion of the
annually produced surplus-value is also realized. But if
only as much of the produced commodities were sold dur-
ing the entire year as is required to reproduce the values
contained in the constant and variable capitals, or if prices
were to fall to such an extent that only the value of the
capital contained in it should be realized by the sale of the
entire annual product in commodities, then the anticipa-
tory character of the expenditure of money in expectation
of future surplus-value would be clearly revealed. If our
capitalist fails, then his creditors and the court investigate
whether his anticipated private expenditures were reason-
ably proportionate to the volume of his business and to the
receipts of surplus-value usually or normally correspond-
ing to it.

So far as the entire capitalist class are concerned, the
statement that they must themselves throw into circulation
the money required for the realization of their surplus-
value (eventually for the circulation of their constant and
variable capital) is not only no paradox, but is the neces-
sary premise of the entire mechanism. For there are only
two classes in this case, the working class disposing of
their labor-power, and the capitalist class owning the social
means of production and the money. It would rather be a
paradox if the working class were to advance in the first
instance out of its own pockets the money required for
the realization of the surplus-value contained in the com-
modities. But the individual capitalist makes this ad-
vance only by acting as a buyer, expending money in the
purchase of articles of consumption, or advancing money

Simple Reproduction. 489

in the purchase of elements of hi.s productive capital. He
never parts with his money unless he gets an equivalent for
it. He advances money to the circulation only in the same
way that he advances commodities to it. He acts in both
instances as the point of departure of their circulation.
The actual transaction is obscured by two circumstances :

(1) The fact that merchant's capital (the first form of
which is always money, since the merchant as such does
not create any "product" or "commodity") and money-
capital are manipulated by a special class of capitalists in
the process of circulation of industrial capital.

(2) The division of surplus-value — which must always
be first in the hands of the industrial capitalist — into
various categories, represented, aside from industrial capi-
talists, by the land owner (for ground rent), the u?urer
(for interest), etc., furthermore by the government and its
officials, by people living on their income, etc. This gentry
appear as buyers as compared to the industrial capitalist,
and to that extent as monetizers of his commodities; they
likewise throw "money" into circulation on their part and
the industrial gets it from them. But in that case, it is
always forgotten from what source they derived it origi-
nally, and continue deriving it ever anew.

VI. THE CONSTANT CAPITAL OF DEPARTMENT I.43

It remains for us to analyze the constant capital of de-
partment I, amounting to 4000 c. This value is equal to
that of the means of production consumed in the creation
of the commodity-product of I and incorporated in it. This
re-appearing value, which was not produced in the process
of production of I, but entered into it during the preceding
year in the form of constant capital, representing the defi-
nite value of his means of production, exists now in the
entire quantity of commodities not absorbed by department
II. And the value of this quantity of commodities thus

43 Manuscript II resumed here.

490 Capital.

left in the hands of the capitalists of I equals two-thirds
of the value of their entire annual commodity-product. In
the case of the individual capitalist producing some par-
ticular means of production, we were enabled to say: He
sells his commodity-product ; he converts it into money. By
converting it into money, he has also reconverted into money
the constant portion of the value of his product. With this
portion of value, thus converted into money, he then buys
his means of production once more from other sellers of com-
modities, or transforms the constant portion of the value
of his product into its natural form, in which it can resume
its function of productive constant capital. But now this
supposition becomes impossible. The capitalist class of I
comprises all the capitalists producing means of production.
Besides, the commodity-product of 4000, which is left on
their hands, is a portion of the social product which can-
not be exchanged for any other portion, because no other
portion of the annual product remains. With the exception
of these 4000, all the remainder of the product has been dis-
posed of. One portion has been absorbed by the social
fund for consumption, and another portion has to reproduce
the constant capital of department II, which has already
bargained for everything which it can exchange with L

The difficulty is solved very easily, when we remember
that the entire product of I in its natural form consists of
means of production, that is to say, of material elements of
the constant capital itself. We meet here the same phe-
nomenon which we witnessed under II, only under a differ-
ent aspect. In the case of II, the entire product consisted of
articles of consumption. Hence one portion of it, measured by
the wages plus surplus-value contained in this product, could
be consumed by its own producers. Here, in the case of I,
the entire product consists of means of production, such
as buildings, machinery, tanks, raw and auxiliary materials,
etc. One portion of them, namely that reproducing the
constant capital employed in this sphere, can, therefore, be
immediately set to work in its natural form to serve once
more as an element of productive capital. So far as it goes
into circulation, it circulates within department I. While

Simple Reproduction. 491

a portion of the commodity-product of II is individually
consumed in its natural form by its own producers, a portion
of the commodity-product of I is productively consumed
in its natural form by its capitalist producers.

In these 4000c of the commodity-product of I, the con-
stant capital-value consumed in this category re-appears in
its natural form in which it can immediately resume its
services as a productive constant capital. In department II,
that portion of the commodity-product of 3000 whose value
is equal to the wages plus the surplus-value of 1000, passes
directly into the individual consumption of the capitalists
and laborers of II, while, on the other hand, the constant
value of this commodity-product, equal to 2000-, cannot re-
enter into the productive consumption of the capitalists of
II, but must be reproduced by exchange with I.

But in department I, that portion of its commodity-pro-
duct of 6000, whose value is equal to the wages plus the
surplus-value, or 2000, does not pass into the individual
consumption of its producers, and could not on account of
its natural form. It must first be exchanged with depart-
ment II. On the other hand, the constant portion of the
value of this product, or 4000, exists in a natural form, in
which it can immediately resume its services as the constant
capital of the capitalist class of I, taking this class as an
aggregate. In other words, the entire product of department
I consists of use-values which, on account of their natural
form, can serve only as elements of constant capital, in a
capitalist system of production. One third of this product
of 6000, then, reproduces the constant capital of depart-
ment II, or 2000, and the other two thirds the constant
capital of department I.

The constant capital of I consists of a number of dif-
ferent groups of capital invested in the various lines of
production of means of production, so much in iron works,
so much in coal mines, etc. Every one of these groups of
capital, or every one of these social capital groups, is in
its turn composed of a larger or smaller number of inde-
pendently functioning individual capitals. In the first place,
the capital of society, for instance 7500 (millions, or any

492 Capital.

other denomination) is composed of various groups of cap-
ital ; the social capital of 7500 is divided into separate parts,
every one of which is invested in a special line of production,
each portion invested in some particular line of production
consists, so far as its natural composition is concerned, partly
of means of production required in that special sphere of pro-
duction, partly of the labor-power employed in that business
and adapted to its requirements. This labor-power is modi-
fied by division of labor, according to the specific labor to
be performed in each individual sphere of production. Each
portion of social capital invested in any particular line ot
production in its turn consists of the sum of all individual
capitals invested in it. This, of course, applies equally to
departments I and II.

As for the value of the constant capital re-appearing in
the form of the commodity-product of I, it re-enters in part
as means of production into the particular sphere whose
product it is (or even into the individual business), for
instance, corn into the production of corn, coal into the pro-
duction of coal, iron in the form of machines into the pro-
duction of iron, etc.

However, the partial products constituting the value of
the constant capital of I, so far as they do not return directly
to their particular or individual sphere of production,
merely change their place. They pass in their natural
form to some other sphere of production of department I,
while the product of other spheres of production of de-
partment I replaces them in their natural state. It is
merely a change of place of the products. All of them be-
come once more the elements in the reproduction of constant
capital of I, only in another group of I instead of the same
one. To the extent that an exchange takes place between
the individual capitalists of I, it is an exchange of one
natural form of constant capital for another, one kind of
means of production for another. It is an exchange of the
different individual constant parts of capital of I among
themselves. Unless the products serve directly as means of
production in their own line, they are transferred to
another line and thus naturally replace one another. In

Simple Reproduction. 493

other words (similarly to what we saw in the case of the
surplus value II), every capitalist of I draws on this con-
stant capital of 4000, of which he is part owner, to the
extent of his share, in means of production required by
him. If production were socialized, instead of capitalistic,
it is evident that these products of department I would
just as regularly be redistributed as means of production
to the various lines of production of this department, for
purposes of reproduction, one portion remaining directly in
that sphere of production which created it, another passing
over to other lines of production of the same department,
thereby entertaining a constant mutual exchange between
the various lines of production of this department.

VII. VARIABLE CAPITAL AND SURPLUS- VALUE IN BOTH DE-
PARTMENTS.

The total value of the articles of consumption annually
produced is equal to the value of the variable capital of II
produced during the year plus the newly created surplus-
value of II (in other words, equal to the value newly pro-
duced by II during the year) plus the value of the variable
capital of I reproduced during the year and the newly
produced surplus-value of I (in other words, plus the value
created by I during the year).

On the assumption of simple reproduction, then, the
total value of the annually produced articles of consumption
is equal to the annual product in values, in other words,
equal to the total value produced during that year by social
labor. And it must be so, for the reason that this entire
value is consumed, on the basis of simple reproduction.

The total social working day is divided into two parts:
(1) Necessary labor, which creates in the course of the year
a value of 1500 v; (2), surplus labor, which creates an ad-
ditional value, or surplus-value, of 1500 s. The sum of these
values, 3000, is equal to the value of the annually produced
articles of consumption of 3000. The total value of articles
of consumption produced during the year is therefore equal
to the total value produced by the social working day dur-

494 Capital.

ing the year, equal to the value of the variable social capital
plus the social surplus-value, equal to the total new product
of the year.

But we know that the total value of the commodities of
II, the articles of consumption, is not produced in this
department of social production, although these two classes
of value are identical. They are identical, because the
value of the constant capital re-appearing in department
II is equal to the value newly produced by I (value of vari-
able capital plus surplus value) ; so that I (v+s) can
buy that portion of the product of II which represents the
value of the constant capital of the producers in department
II. This shows why the value of the product of the capitalists
of II, from the point of view of society, may be resolved
into v + s, although from their standpoint it is divided
into c + v + s. It is because lie is equal to I (v + s), and
because these two elements of the social product are mutually
exchanged in their natural forms, so that after this exchange
lie exists once more in means of production, and I (v + s)
in articles of consumption.

And it is this circumstance which induced Adam Smith
to claim that the value of the annual product resolves itself
into v + s. But this is not true, in the first place, except
for that part of the annual product which consists of ar-
ticles of consumption; and in the second place, it does not
apply in the sense that this total value is entirely pro-
duced by department II, so that its value in products would
be equal to the variable capital advanced by II plus the
surplus-value produced by II. It is true only in the sense
that II(c + v + s) is equal to II (v + s)+I(v +s), or be-
cause He is equal to I (v + s).

It follows, furthermore:

Although the social working day (that is to say, the
labor expended by the entire working class during the whole
year), like every individual working day, is divided only
in two parts, namely into necessary labor and surplus-labor,
and although the value produced by this working day like-
wise resolves itself into but two parts, namely into the value
of variable capital, or that portion with which the laborer

Simple Reproduction. 495

buys his own means of reproduction, and the surplus-value
which the capitalist may spend for his own individual con-
sumption, nevertheless, from the point of view of society,
one portion of the social working day is exclusively devoted
to the production of new constant capital, namely of pro-
ducts exclusively intended for service as means of produc-
tion in the labor-process and thus as constant capital in
the accompanying process of self-expansion. According to
our assumption, the total social working day is represented
by a money-value of 3000, only one third of which, or 1000,
is produced in department II, which manufactures articles
of consumption, that is to say, commodities in which the
entire value of the variable capital and the entire surplus-
value of society is finally realized. According to this as-
sumption, two thirds of the social working day are em-
ployed in the production of new constant capital. Although,
from the standpoint of the individual capitalists and
laborers of department I, these two thirds of the social
working day serve merely for the production of variable
capital plus surplus-value, the same as the last third
of the social working day in department II, neverthe-
less, from the point of view of society, and of the use-value
of the product, these two thirds of the social working day
serve only for the reproduction of constant capital in pro-
cess of productive consumption or already so consumed.
From the individual point of view, these two thirds of the
working day, while producing a total value equal only to
the value of the variable capital plus surplus-value, so far
as its producer is concerned, nevertheless do not produce
any use-values of the kind on which wages or surplus-value
could be expended; for their products are means of pro-
duction.

It must be noted, in the first place, that no portion of the
social working day, whether in I or in II, serves for the
production of the value of the constant capital employed
and serving in these two great spheres of production. They
produce only additional value, namely 2000 I(v + s)-f-
constant capital, represented by 4000 Ic + 2000 He. The
1000 II (v + s), an addition to the existing value of the

496 Capital.

new value produced in the form of means of production
is not yet constant capital. It merely is intended to be
used as such in the future.

The entire product of II, the articles of consumption,
viewed concretely as a use-value, in its natural form, is a
creation of the one third of the social working day con-
tributed by II. It is the product of labor in its concrete
form, such as the labor of weaving, baking, etc., performed
in this department as the subjective element of the labor
process. But the constant portion of the value of this pro-
duct of II re-appears only in a new use-value, in a new
natural form, namely that of articles of consumption, while
it existed previously in the form of means of production.
Its value has been transferred by the labor-process from its
old natural form to its new natural form. But this value
of these two thirds of the product, or 2000, has not been
produced in this year's productive process of II-

Just as, from the point of view of the labor-process, the
product of II is the result of the function of new living
labor and means of production previously given to it, which
are the material objects in which it incorporates itself, so,
from the point of view of the process of reproduction, the
value of the product of II, or 3000, is composed of the new
value (500 v + 500 s = 1000) produced by the newly added
one third of the social working day and of a constant value,
in which two thirds of a previous social working day are
embodied, which passed away before the present process
of production of II. This portion of the value of the pro-
duct of II is materialized in a portion of the product itself.
It exists in a quantity of articles of consumption valued
at 2000, or two thirds of a social working day- This is the
new use-form in which it re-appears. The exchange of a
portion of the articles of consumption of 2000 lie for means
of production of I equal to I (1000 v + 1000 s) represents,
therefore, indeed an exchange of two thirds of a social
working day which do not constitute any portion of this
year's labor, but passed away previously to this year, for
two thirds of the social working day newly addGd this year.
Two thirds of this year's social working day could not

Simple Reproduction. 497

serve in the production of constant capital and yet at the
same time constitute variable capital plus surplus-value for
their own producers, unless they were compelled to ex-
change with a portion of the value of the annually con-
sumed articles of consumption, in which two thirds of a
working day spent and realized, not this year, but pre-
viously, are incorporated. It is an exchange of two thirds
of this year's working day with two thirds of a preceding
working day, an exchange of this year's labor with that
of a previous year. This, then explains the riddle, how
it is that the product in values of an entire social working
day may resolve itself into variable capital plus surplus-
value, although two thirds of this working day were not
expended in the production of articles, in which variable
capital or surplus-value can be realized, but rather in the
production of means of production for the replacement of
capital consumed during this year. The explanation is
simply that two thirds of the value of the product of II,
in which the capitalists and laborers of I realize the value
of the variable capital and surplus-value produced by them
(and which constitute two thirds of the value of the entire
annual product), are, so far as their value is concerned,
the product of two thirds of a social working day passed
previously to this year.

The sum of the social product of I and II, comprising
means of production and articles of consumption, so far
as its concrete use-value in its natural form is concerned,
is indeed the result of this year's labor, but only to the
extent that this labor is regarded as useful and concrete,
not as an expenditure of labor-power and creator of values.
And even so, it is concrete labor only in the sense that the
means of production have transformed themselves into this
year's new product by dint of the living labor operating on
them. On the other hand, it is also true that this year's
labor could not have transformed itself into products with-
out the help of means of production, of instruments of pro-
duction and materials, which existed independently of it.

498 Capital

VIII. THE CONSTANT CAPITAL IN BOTH DEPARTMENTS.

The analysis of the total value of the product of 9000,
and of the categories into which it is divided, does not pre-
sent any greater difficulties than that of the value produced
by some individual capital. It is rather identical with it.

In the present instance, the entire social product of this
year contains three social working days, each of one year.
The value represented by «ach one of these working days
is 3000, so that the value of the total nroduct is 3 X 3000,
or 9000.

Furthermore, the following portions of this working time
belong to a period previous to that of the process of pro-
duction which we now analyze: In department I, four
thirds of a working day (with a product valued at 4000),
and in department II, two thirds of a working day (with
a product valued at 2000), making a total of two social
working days with a product valued at 6000. For this
reason, 4000 Ic + 2000 He = 6000 c figure as the value of
the means of production, or value of the constant capital,
re-appearing in the total product of society-

Furthermore, one third of the social working day of one
year newly added by department I is necessary labor, or
labor reproducing the value of the variable capital of 1000
Iv and paying the price of the labor employed by I. In
the same way, one sixth of the social working day of II is
necessary labor valued at 500. Hence we have 1000 I v +
500 II v = 1500 v, expressing the value of one half of the
social working day, the value of the first half of the work-
ing day added this year and consisting of necessary labor.

Finally, in department I, one third of the social working
day of this year, with a product valued at 1000, is surplus-
labor, and one sixth of one working day in department II,
with a product valued at 500, is likewise surplus-labor.
Together they constitute the other half of the newly added
social working day, with a total value of surplus-labor
amounting to 1000 I s + 500 II s = 1500 s.

Simple Reproduction. 499

This, then, is the situation:

Constant portion of capital in terms of the value of the
social product (c) : Two working days expended previously
to the present process of production, worth 6000 in value.

Necessary labor (v) expended during the present year:
One half of one working day expended during the present
year, worth 1500 in value.

Surplus-labor (s) expended during the present year: One-
half of one working day expended during the present year,
worth 1500 in value.

Product in values of annual labor (v + s), 3000.

Total value of product (c + v + s), 9000.

The difficulty, then, does not consist in the analysis of
the social product in values. It arises in the comparison
of the component parts of the value of the social product
with its material elements.

The constant, merely re-appearing, portion of value is
equal to the value of that part of this product which con-
sists of means of production, and it is incorporated in that
part.

The product in values of the current year, equal to v + s,
is equal to the value of that part of this product, which
consists of articles of consumption, and is incorporated in
it.

But with the exception of cases immaterial for this analy-
sis, means of production and articles of consumption are
vastly different kinds of commodities, products of widely
different natural forms and use-value, and, therefore, pro-
ducts of radically different classes of concrete labor. The
labor which employs machinery in the production of neces-
sities of life is vastly different from the labor which makes
machinery. The entire working day of the current year,
which is 3000 in terms of value, figures as an expenditure
in the production of articles of consumption valued at 3000,
in which no portion of any constant value re-appears, since
these 3000, equal to 1500 v + 1500 s, resolve themselves
onlv into variable capital-value and surplus-value. On the
other hand, the constant capital-value of 6000 re-appears in
a class of producti quite different from articles of consump-

500 Capital.

tion, namely in means of production, while as a matter of
fact no portion of the present annual working day figures
as an expenditure in the production of these new products.
It appears rather that this entire working day consists only
of classes of labor which do not result in means of produc-
tion, but in articles of consumption. We have already
solved this mystery. The product in values of the labor
of the present year is equal to the value of the products of
department II, the total value of the newly produced ar-
ticles of consumption. But the value of these products
is greater by two thirds than that portion of the annual
labor which has been expended in the production of articles
of consumption (department II). Only one third of the
annual labor has been expended in their production. Two
thirds of this annual labor have been expended in the
production of means of production, that is to say, in de-
partment I. The value of the product created during this
time in I, equal to the variable capital-value plus surplus-
value produced in I, is equal to the constant capital-value of
II re-appearing in articles of consumption of II. Hence
they may be mutually exchanged and take one another's
place in their natural form. The total value of the articles
of consumption of II is, therefore, equal to the sum of the
new product in values of I and II, or II (c + v +s) is equal
to 1 (v + s)+II(v + s), in other words, equal to the sum
of the new values produced by the labor of the current year
in the form of v + s.

On the other hand, the total value of the means of pro-
duction of I is equal to the sum of the constant capital-
values re-appearing in the form of means of production of
I and in that of articles of consumption of II, in other
words, equal to the sum of the constant capital-values re-
appearing in the total product of society. This total value
is equal in terms of value to four thirds of a working day
preceding the process of production of I and two thirds of a
working day preceding the process of production of II, in all
equal to two annual working days.

The difficulty in the analysis of the annual social pro-
duct arises, therefore, from the fact that the constant por-

Simple Reproduction. 501

tion of value is represented by a different class of products
(means of production) than the new portion of value (v +
s) added to this constant portion and represented by articles
of consumption. Thus the appearance is created, so far as
the question of values is concerned, as though two thirds
of the consumed mass of products were reproduced in a new
form, without any labor having been expended by society
in their production. This is not so in the case of an
individual capital. Every individual capitalist employs
some particular concrete class of labor, which transforms
the means of production peculiar to it into products. For
instance, the capitalist may be a manufacturer of machines,
the constant capital expended by him during the current
year may be 6000 c, the variable capital 1500 v, the surplus-
value 1500 s, the product 9000, represented, say, by 18
machines of 500 each. The entire product in this instance
consists of the same form, of machines. If he produces
various kinds, each one is calculated separately. The entire
product in commodities is the result of the labor expended
during the current year in machine manufacture by a
combination of the same concrete labor with the same kind
of means of production. The various portions of the value
of the product therefore present themselves in the same-
natural form : 12 machines represent 6000 c, 3 machines
1500 v, and 3 machines 1500 s. It is evident that the value
of the 12 machines is equal to 6000 c, not merely because
there is incorporated in these machines labor performed
previously to the manufacture of these machines and not
expended in their making. The value of the means of pro-
duction for 18 machines did not transform itself into .ma-
chines of its own doing, but the value of these 12 machines
(consisting itself of 4000 c + 1000 v + 1000 s) is equal to
the total value of the constant capital-value contained in the
18 machines. The machine manufacturer must, therefore,
sell 12 of the 18 machines, in order to recover his expended
constant capital, which he requires for the reproduction of
18 new machines. On the other hand, the thing would be
inexplicable, if the result of the labor expended solely in the
manufacture of machines, were to be : On the one hand, 6

502 Capital.

machines of 1500 v + 1500 s, on the other iron, copper,
screws, belts, etc., to the amount of 6000 s, in other words,
the natural means of production of the machines which
the individual machine-building capitalist does not produce
himself, but must secure by way of the process of circula-
tion. And yet it seemed at the first glance as though the
reproduction of the annual product of society took place in
this absurd way.

The product of an individual capital, that is to say, of
every aliquot part of the social capital endowed with a life
oi its own and acting independently, has some natural form.
The only condition is that this product must have a certain
use-value, which endows it with the character of a member
of the world of commodities fit for circulation. It is im-
material and a matter of hazard, whether or not it can go
back as a means of production into the same process of
production from which it came as a product, in other words,
whether that portion of its value as a product, in which
the constant capital is incorporated, has a natural form,
in which it can actually serve again as constant capital. If
it has not, then this portion of the value of the product
is reconverted into the form of its material elements by
means of sale and purchase, and thus the constant capital
is reproduced in the natural form adapted to its function.

It is different with the product of the total social capital.
All the material elements of reproduction in their natural
form must be a part of this product. The consumed con-
stant portion of capital can be reproduced by the pro-
duction as a whole only to the extent that the entire re-
appearing constant capital is represented in the product
by the natural form of new means of production, which
can actually serve as constant capital. Simple reproduction
being assumed, the value of that portion of the product
which consists of means of production must be equal to the
constant portion of the value of social capital.

Furthermore : Individually considered, the capitalist pro-
duces in the value of his product by means of the newly
added labor only his variable capital plus surplus-value,

Simple Reproduction. 503

while the constant value is transferred by the concrete form
of the newly added labor to the product.

Socially considered, that portion of the social working
day which produces means of production, adding new value
to them and transferring to them at the same time the value
of the means of production consumed in their manufacture,
creates nothing but new constant capital, which is intended
to replace that consumed in the shape of the old means of
production, that is to say of the constant capital consumed
in department I and II. It creates only product intended
for productive consumption. The entire \alue of this pro-
duct, then, is a value which can serve only as a new con-
stant capital, which can buy back only constant capital
in its natural form, and which, for this reason, resolves itself
neither into variable capital nor surplus-value, looking at
it from the social point of view. On the other hand, if that
portion of the social working day which produces articles
of consumption does not create any portion of the social
capital intended for reproduction, it creates only products
intended, in their natural form, to realize the value of the
variable capital and surplus-value of departments I and II.

Speaking of looking at things from the point of view of
society as a whole, in this instance at the aggregate product
of society, which comprises both the reproduction of social
capital and individual consumption, we must not follow
the manner copied by Proudhon from bourgeois economy,
which looks upon this matter as though a society with a
capitalist mode of production would lose its specific his-
torical and economic characteristics by being taken as a
unit. Not at all. We have, in that case, to deal with the
aggregate capitalist. The aggregate capital appears as the
capital stock of all individual capitalists combined. This
stock company shares with many other stock companies
the peculiarity that every one knows what he puts in, but
not what he will get out of it.

504 Capital.

IX. A RETROSPECT ON ADAM SMITH, STORCH, AND RAMSAY.

The total value of the social product amounts to 9000
equal to 6000 c+1500 v+1500 c, in other words, 6000
represent the value of the means of production, and 3000
that of the articles of consumption. The value of the social
revenue (v + s), then, amounts to only one third of the
value of the total product, and the totality of the con-
sumers, laborers as well as capitalists, can draw on the total
social product for commodities only to the amount of this
third, for the purpose of individual consumption. On the
other hand, 6000, or two thirds, of the value of the product,
are the value of the constant capital which must be repro-
duced in its natural form. Means of production to this amount
must again be incorporated in the productive fund. Storch
recognizes this without being able to prove it: "It is clear
that the value of the annual product is distributed partly
to capital and partly to profits, and that each one of these
portions of the value of the annual product is regularly
employed in buying the products which the nation needs
both for the maintenance of its capital and for stocking its
fund for consumption. * * * * The products which con-
stitute the capital of a nation are not consumable." (Storch,
Considerations sur la nature du revenu national. Paris,
1824, page 150.)

Adam Smith, however, has promulgated this strange
dogma, which is believed to this day, not only in the pre-
viously mentioned form, according to which the entire value
of the social product resolves itself into revenue, that is
to say, into wages plus surplus-value, or, as he expresses it,
into wages plus profit (interest) plus ground rent, but also
in the still more popular form, according to which the
consumers must ultimately pay to the producers the entire
value of the product. This is to this day one of the best
established commonplaces, or rather of the eternal truths
of the so-called science of political economy. This is illus-
trated in the following plausible manner: Take any article,
for instance linen shirts. First, the spinner of linen yarn

Simple Reproduction. 505

has to pay the flax grower the entire value of the flax, in
other words the value of flax seed, fertilizers, cattle feed,
etc., plus the value transferred to the product from the fixed
capital of the flax grower, such as buildings, agricultural im-
plements, etc. ; furthermore the wages paid in the produc-
tion of the flax; the surplus-value incorporated in the flax
(profit, ground rent) ; finally the cost of transportation
of the flax from its place of production to the spinnery.
Next, the weaver has not only to reimburse the spinner for
linen yarn, for the price of the flax, but also for that por-
tion of the value of machinery, buildings, etc., in short of
the fixed capital, which is transferred to the yarn, further-
more all the auxiliary materials consumed in the spinning
process, the wages of the spinners, the surplus-value, etc.,
and so forth in the case of the bleaching process, the trans-
portation of the finished linen, and finally the shirtmaker,
who has to pay the entire price of all preceding producers,
who supplied him only with his raw material. There is
now a further addition of value by his hands, either by
means of constant capital which is consumed in the shape
of materials of labor, auxiliary materials, etc., used in the
making of shirts, or by means of labor expended in it, which
adds the value of the wages of the shirtmakers plus the
surplus-value of the shirt manufacturer. Now let this entire
product in shirts cost ultimately 100 p. st., and let this be
the aliquot part of the total annual value in products ex-
pended by society in shirts. The consumers of the
shirts pay these 100 p. st., that is to say the value
of all the means of production, and of the wages
plus surplus-value of the flax grower, spinner, weaver,
bleacher, shirtmaker, and all carriers. This is quite true.
Indeed, every child can see that. But now they continue:
The same is true of the value of all other commodities. It
should rather be said that this is true of the value of all
articles of consumption, of the value of that portion of the
social product which passes into consumption, in other
words, that portion of the value of the social product which
may be expended as revenue. It is true that the sum of
the value of all these commodities is equal to the value

506 Capital

of all the means of production (constant portions of capital)
consumed in their creation, plus the value added by the last
labor expended on them (wages plus surplus-value). Hence
the totality of the consumers can pay for this entire sum
of values, because, although the value of each individual
commodity is made up by c + v + s, nevertheless the sum
of the values of all commodities passing into consumption,
taken at its maximum, can be equal only to that portion
of the value of the social product, which resolves itself into
v + s, in other words, equal to that value which the labor
expended during the current year has added to the existing
means of production representing the value of the constant
capital. As for the value of the constant capital, we have
seen that it is reproduced out of the mass of social products
in a twofold way. First, by an exchange of the capitalists
of II, who produce articles of consumption, with the cap-
italists of I, who produce the means of production- And
here is the source of the phrase that what is capital for one
is revenue for the other. But this is not the actual state of
affairs. The 2000 II c, existing in the shape of articles of
consumption valued at 2000, constitute a constant capital-
value for the capitalists of class II- They cannot consume
it themselves, although the product must be consumed on
account of its natural form. On the other hand, the 2000
I (v + s) are wages plus surplus-value produced by the
capitalist and working classes of I. They exist in the
natural form of means of production, of things in a shape
in which their own value cannot be consumed. We have
here, then, values to the amount of 4000, only one half of
which, either before or after the change, reproduce constant
capital, while the other half form revenue. In the second
place, the constant capital of I is reproduced in its natural
form, partly by exchange among the capitalists of I, partly
by reproduction in a natural form in each individual busi-
ness.

The phrase that the entire annual value in products must
be ultimately paid by the consumer would be correct only
in the case that we were to include in the term consumer
two vastly different classes, namely individual consumers

Simple Reproduction. 507

and productive consumers. But to say that one portion
of the product must be consumed productively is precisely
to say that it must serve as capital and cannot be consumed
as revenue.

On the other hand, if we divide the total value of the entire
product, equal to 9000, into 6000 c+1500 v+1500 s, and look
upon the 3000 (v+s) in the light of a revenue, then the
variable capital seems to disappear and capital, socially
speaking, seems to consist only of constant capital. For
that which appeared originally as 1500 v has resolved itself
into a portion of the social revenue, into wages, the revenue
of the working class, and has thus lost its character of
capital. This conclusion is actually drawn by Ramsay. Ac-
cording to him, capital, socially considered, consists only
of fixed capital, but he means by fixed capftal the constant
capital, that quantity of values which consists of means of
production, whether these are instruments or materials of
labor, such as raw materials, partly finished products, aux-
iliary materials, etc. He calls the variable capital a cir-
culating capital: "Circulating capital consists only of sub-
sistence and other necessaries advanced to the workmen
previously to the completion of the produce of their labor.

* * * * Fixed capital alone, not circulating, is properly
speaking a source of national wealth. * * * * Circulating
capital is not an immediate agent in production, nor es-
sential to it at all, but merely a convenience rendered neces-
sary by the deplorable poverty of the mass of the people-

* * * * Fixed capital alone constitutes an element of cost
of production in a national point of view." (Ramsay, 1, c,
pages 23 to 26, selected.) Ramsay defines fixed capital, by
which he means constant capital, more closely in the follow-
ing words : "The length of time during which any portion
of the product of that labor" (namely labor bestowed on
any commodity) "has existed as fixed capital i. e., in a form
in which, though assisting to raise the future commodity,
it does not maintain laborers." (Page 59.)

Here we see once more the confusion created by Adam
Smith by drowning the distinction between constant and
variable capital in that of fixed capital and circulating

508 Capital.

capital. The constant capital of Ramsay consists of means
of production, his circulating capital of articles of consump-
tion. Both of them are commodities of a given value. The
one can no more create any surplus-value than the other.

X. CAPITAL AND REVENUE: VARIABLE CAPITAL AND WAGES.44

The entire annual production, the entire product of a
year, is the product of the useful labor of that year. But
the value of this total product is greater than that portion
of it in which the labor-power expended on production dur-
ing the last year is incorporated. The product in values
of this year, the new value created in its course in the form
of commodities, is smaller than the value of the product,
that is to say, THE TOTAL VALUE OF THE COM-
MODITIES FINISHED DURING THE ENTIRE YEAR.
The difference obtained by deducting from the total value
of the annual product that portion of value which was
added by the labor of the last year, is not an actually repro-
duced value, but merely one re-appearing in a different form
of existence. It is value transferred to the annual product
from previously existing value, which may be of an earlier
or later date, according to the wear of the constant portions
of capital which have participated in that year's annual
labor-process, a value which may be derived from some
means of production which were first created during the
year before last or in years even previous to that. It is under
all circumstances a value transferred from means of pro-
duction of former years to the product of the year under
discussion.

Take our formula. We then have after the exchange of
the elements, hitherto considered, between I and II, and
within II :

(I) 4000 c+1000 v+1000 s (these last realized in articles
of consumption of II c) = 6000.

44 The following is from manuscript VIII.

Simple Reproduction. 509

(II) 2000 c (reproduced by exchange with I [v+s]) +
500 v + 500 s = 3000.

Sum of values 9000.

Value newly produced during the year is incorporated
only in v and s. The sum of the product in values of this
year is therefore equal to the sum of v + s, that is to say,
2000 I (v + s) +1000 II (v + s) = 3000. All other portions
of value in the products of this year are merely transferred
values, derived from the value of means of production,
previously produced and consumed in the annual production.
Aside from the value of 3000, the current annual labor
has not produced anything in the way of values. That
3000 represents its entire annual product in values.

Now, we have seen thcfc the 2000 I (v + s) of department
II replace its 2000 II c in the natural form of means of
production. Two thirds of the annual labor, then, expended
in department I, have newly produced the constant capital
of II, both as regards its value and its natural form. Socially
speaking, two thirds of the labor expended during the entire
year have created a new constant capital-value, which is
realized in a natural form meeting the requirements of
department II. The greater portion of the annual labor
of society, then, has been spent in the production of new
constant capital (means of production representing capital-
value) in order to replace the value of the constant capital
expended in the production of articles of consumption-
That which distinguishes in this case capitalist society from
a society of savages is not, as Senior thinks,45 that it is
a privilege and peculiarity of a savage to expend his labor
during a certain time which does not secure for him any
revenue convertible into articles of consumption, but the
distinction is the following:

(a) Capitalist society employs more of its available
annual labor in the production of means of production

45 "When a savage manufactures bows, he carries on an industry, but
he does not practice any abstinence." (Senior, Principes foundamentaux
de 1'Economie Politique, traduction Arrivabene, Paris, 1836, page 308.)
"The more society advances, the more abstinence it requires." (Ibidem,
page 342.) Compare "Capital," volume I, chapter XXIV, 3, page 608.

510 Capital.

(and thus of constant capital) which are not convertible
into revenue in the form of wages or surplus-value, but
can serve only as capital.

(b) When a savage makes bows, arrows, stone hammers>
axes, baskets, etc., he knows very well that he did not
spend the time so employed in the production of articles
of consumption, but that he has simply stocked his supply
of means of production, and nothing else. Furthermore,
a savage commits a grave economic sin by his utter indif-
ference so far as waste of time is concerned, for Tyler«
tells us of him that he takes sometimes a whole month to
make one arrow.

* The current conception, by which some political econom-
ists seek to get rid of the theoretical difficulty, in other words,
of the understanding of the real state of affairs, the con-
ception that a thing may be capital for one and revenue
for another, and vice versa, is only partially true, and it
becomes wholly wrong, when it is made general, since it
then implies a complete misunderstanding of the entire pro-
cess of transactions taking place in annual reproduction and
at the same time a misunderstanding of the actual basis of
the partial truth.

We now review the actual conditions, on which the par-
tial correctness of this conception rests, and we shall at the
same time expose the wrong conception of these conditions.

(1) The variable capital serves as capital in the hands
of the capitalist and as revenue in the hands of the wage
worker.

The variable capital exists first in the hands of the capi-
talist as money-capital; and it performs the function of
money-capital, when he buys labor-power with it. So long
as it persists in the form of money in his hands, it is
nothing but a given value existing in the form of money,
in other words, a constant and not a variable magnitude.
It is only a potential variable capital, owing to its con-
vertibility into labor power. It becomes actually a variable
capital only after divesting itself of its money-form and as-

"e E. B. Tyler, Forschungen ueber die Urgesehichte der Menschheit,
translated by H. Mueller. Leipsic, no date, page 240.

Simple Reproduction. 511

suming the form of labor-power serving as an element of
productive capital in the capitalist process.

The money which first served in the function of the
money-form of the variable capital for the capitalist, now
serves in the hands of the laborer as the money-form of his
revenue, which he derives from the ever repeated sale of
his labor-power.

We have here but the simple fact that the money in the
hands of the buyer, in this case the capitalist, passes from
these hands into those of the seller, in this case a seller
of labor-power, the wage-worker. It is not the variable
capital which serves twice, first as capital for the capitalist
and then as revenue for the laborer. It is merely the same
money, which exists first in the hands of the capitalist as
the money-form of his variable capital representing a poten-
tial variable capital, and which serves in the hands of the
laborer as an equivalent for sold labor-power, as soon as the
capitalist' has converted it into labor-power. But the fact
that the same money serves another useful purpose in the
hands of the buyer than in those of the seller is a peculiar-
ity of the sale and purchase of all commodities-
Apologists in political economy present the matter in a
wrong light, as we can see best when we keep our eye ex-
clusively, without taking any notice of the following trans-
actions, on the transaction in circulation indicated by
M — L (a variation of M — C), the conversion of money
into labor-power on the part of the capitalist buyer, which
is L — M (C — M), a conversion of the commodity labor-
power into money, on the part of the seller, the laborer.
They say: "The same money realizes in this instance two
capitals; the buyer — the capitalist — converts his money-
capital into living labor-power, which he incorporates in
his productive capital; on the other hand, the seller, the
laborer, converts his commodity, his labor-power, into
money, which he spends as his revenue, and this enables
him to resell his labor-power in ever repeated turns and
thereby to maintain it. His labor-power, then, represents
his capital in the form of a commodity, which yields him
a continuous revenue." Labor-power is indeed his wealth

512 Capital,

(ever self-renewing and reproductive), not his capital. It
is the only commodity which he must and can sell con-
tinually, in order to live, and which does not serve as capi-
tal until it reaches the hands of the capitalist. The fact
that a man is continually compelled to sell his labor-power
(himself) to another man proves to those apologetic econ-
omists that he is a capitalist, for lo! he is continually sell-
ing his "commodity," himself. In that case, a slave is also
a capitalist, although he is sold by another for once and all
as a commodity, for the nature of this commodity, a labor-
ing slave, has the peculiarity that its buyer does not only
make it work every new day, but also provides it with the
food which enables it to do ever new work — (compare on
this point the remarks of Sismondi and Say in their letters
to Malthus.)

(2) In the exchange of 1000 I v + 1000 I s for 2000
II c, we see that what is constant capital for one (2000 II c)
is variable capital and surplus-value, or in short, revenue
for others; and what is variable capital and surplus-value
(2000 I (v + s), or in short, revenue for one, becomes
constant capital for another.

Let us first look at the exchange of I v for II c, beginning
with the point of view of the laborer.

The aggregate laborer of I has sold his labor-power to the
aggregate capitalist of I for 1000; he receives this value in
money as his wages. With this money, he buys from II
articles of consumption of the same value. The capitalist
ot II meets him only in the role of a seller of commodities,
nothing else, even if the laborer buys from his own capital-
ist, as he does in the exchange of 500 II v, as we have seen
above. The form of circulation through which his com-
modity, labor-power, passes, is that of the simple circulation
of commodities for the mere purpose of consumption in
the satisfaction of needs, the form C (labor-power) — M — C
(articles of consumption). The result of this transaction
in circulation is that the laborer maintains himself as a
labor-power for a capitalist, and in order to continue main-
taining himself as such, he must continually renew the
transaction L (C) — M — C. His wages are realized in ar«

Simple Reproduction. 513

tides of consumption, they are spent as revenue, and, taking
the working class as a whole, are again and again spent as
a revenue.

Now let us look at the same transaction, the exchange
of I v for II c, from the point of view of the capitalist.
The entire commodity-product of II consists of articles of
consumption, of things intended for annual consumption,
serving in the realization of revenue for some one, in the
present case for the aggregate laborer of I- But so far as
the aggregate capitalist of II is concerned, one portion ef
his commodity-product, equal to 2000, is now the form of
the constant portion of the value of his productive capital
converted into commodities. It must be reconverted from
the iorm of commodities into its natural form, in which
it may serve again as the constant portion of a productive
capital. What the capitalist of II has accomplished so far
is that he has reconverted one half (1000) of the constant
portion of his capital, which had been reproduced in the
shape of commodities, into the form of money by means of
sale to the laborers of I. Hence it is not the variable capi*
tal I v, which has been exchanged for this first half of the
value of the constant capital of II, but simply the money
which served I as money-capital in the exchange for labor-
power has thus been transferred to the possession of the
seller of labor-power, and for him it did not represent any
capital, but merely revenue in the form of money, which is
to be expended in the purchase of articles of consumption.
The money to the amount of 1000, on the other hand,
which has come into the hands of the capitalists of TT by
means of the transaction with the laborers of I, cannot as
yet serve as the constant element of the productive capital
of II. For the present it is but the money-form of the
commodity-capital of II, to be commuted into fixed or cir-
culating portions of constant capital. Department II now
buys with the money received from the laborers of I, the
buyers of its commodities, means of production from I to
the amount of 1000. By this means the constant value
of the capital of II is renewed to the extent of one half of
its total amount in its natural form, in which it can serve

514 Capital.

once more as an element of the productive capital of II.
The circulation in this instance took the course C — M — C,
that is to say, articles of consumption to the amount of
1000 — money to the amount of 1000 — means of production
to the amount of 1000.

But C — M — C represents here the movement of capital.
C, when sold to the laborers, is converted into M, and this
M is converted into means of production. It is the recon-
version of commodities into the material elements of which
this commodity is made. On the other hand, just as the
capitalist of II plays only the role of a buyer of com-
modities with regard to I, so the capitalist of I acts only as
a seller of commodities with regard to II. Department I
bought originally labor-power valued at 1000 with that
amount of money intended for service as variable capital.
It has therefore received an equivalent for the 1000 v which
it expended in money. This money now belongs to the
laborers, who spend it in purchases from II. Department I
cannot recover this money from II unless it secures the
amount by the sale of commodities of the same value to II.

Department I first had a certain sum of money amount-
ing to 1000 and destined to serve as variable capital. The
money performs this service by its exchange for labor-power
to the same amount. The laborer in his turn supplied as
a result of the process of production a quantity of com-
modities (means of production) to the amount of 6000,
of which one sixth, or 1000, are equivalent in value to the
variable portion of capital advanced in money. This vari-
able portion of value no more serves as variable capital so
long as it retains the form of commodities than it did while
in the form of money. It serves as variable capital only
after its conversion into living labor-power, and only so
long as this labor-power serves in the process of production.
So long as this value was incorporated in money, it repre-
sented only potential variable capital. But it had at least a
form, in which it was immediately convertible into labor-
power. But in the form of commodities, the same variable
value is but potential money, it must first assume the form
of money by means of the sale of commodities, in the

Simple Reproduction. 5J5

present instance by the sale of 1000 in value of com-
modities of I to department II. The movement of the cir-
culation passes here through the form 1000 v (money) —
1000 c (labor-power) — 1000 c (commodities equivalent in
value to the variable capital) — 1000 v (money); in other
words, M— C . . . C— M ( identical with M— L . . . C— M ) .
The process of production intervening between C. . .C does
not belong to the sphere of circulation. It does not figure
in the mutual exchange of the various elements of annual
reproduction, although this exchange includes the re-
production of all the elements of productive capital, the
constant as well as the variable element (labor-power). All
the participants in this exchange appear either as buyers,
or as sellers, or as both. The laborers appear only as buyers
of commodities. The capitalists act alternately as buyers
and sellers, and within certain limits only on one side,
either as buyers of commodities or as sellers of commodities.

The result is that department I possesses once more the
variable part of the value of its capital in the form of
money, from which alone it is immediately convertible
into labor-power, in other words, department I once more
holds its variable capital value in the only form in which
it can again be advanced as an actual variable element
of its productive capital. On the other hand, the laborer
must again act as a seller of commodities, of his labor-
power, before he can act as a buyer of commodities.

So far as the variable capital of department II (500 II v)
is concerned, the circulation between the capitalists and
laborers of the same department takes place without any
intermediate transactions, since we look upon it as taking
place between the aggregate capitalist and the aggregate
laborer of II.

The aggregate capitalist of II advances 500 v for the pur-
chase of labor-power to the same amount. In this case, the
aggregate capitalist is a buyer, the aggregate laborer a sel-
ler. Thereupon the laborer acts as a buyer of a portion
of the commodities produced by himself, using the money
received for his labor-power. In this case, the capitalist
is the seller. The laborer has reproduced for the capitalist

516 Capital.

the money paid in the purchase of labor-power by means
of a portion of the newly produced commodity-capital of II,
amounting to 500 v in commodities. The capitalist then
holds in the form of commodities the same v, which he
had in the form of money before the exchange for labor-
power; while the laborer has realized the value of his labor-
power in money, and uses this money by spending it as
his revenue in the purchase of articles of consumption pro-
duced by himself. It is an exchange of the revenue of the
laborer in money for a portion of the commodities in which
he has himself reproduced 500 of the value of the variable
capital of the capitalist employing him. In this way this
money returns to the capitalist of II as the money-form of
his variable capital An equivalent value of revenue in
the form of money thus reproduces variable value of capital
in the form of commodities.

The capitalist does not increase his wealth by recovering
the money paid by him to the laborer in the purchase of
labor-power through the sale of an equivalent quantity of
commodities to the laborer. He would really pay the laborer
twice, if he were to pay him first 500 in the purchase of
labor-power, and then give him in addition thereto a quan-
tity of commodities valued at 500, after the laborer had
produced them. On the other hand, if the laborer were to
produce nothing but an equivalent in commodities valued
at 500 for the price of his labor-power of 500, the capitalist
would be no better off after the transaction than before it.
But the laborer has actually reproduced a product of 3000.
He has preserved the constant portion of the value of the
product, that is to say, the value of the means of produc-
tion incorporated in the product, to the amount of 2000, by
converting it into a new product. He has furthermore
added to this existing value a value of 1000 (v + s). (The
idea that the capitalist grows richer by the return of 500
in money is advanced by Destutt de Tracy, as shown in
detail in section XIII of this chapter.)

By the purchase of articles of consumption to the value of
500 on the part of the laborer of II, the capitalist of II
recovers the value of 500 II v, which he had just held in

Simple Reproduction. hYi

the shape of commodities, but which he now holds in the
form of money, in which he advances it originally. The
immediate result of this transaction, as of any other sale
of commodities, is the conversion of a given value from
the form of commodities into that of money. Nor is the
resulting reflux of the money to its point of departure any-
thing specific. If capitalist of II had bought, with 500 of
money, commodities from the capitalist of I, and then sold
to the capitalist of I commodities valued at 500, he would
likewise have recovered 500 in money. This sum of 500 in
money would merely have served for the circulation of
commodities valued at 1000, and according to a law pre-
viously mentioned, the money would have returned to the
one starting it into circulation.

But the 500 in money, which have returned to the capi-
talist of II, represent at the same time a renewed potential
variable capital. Why is this so ? Money, and money-capital,
is a potential variable capital only to the extent that it is
convertible into labor-power. The return of 500 p. st in
money to the capitalist of II is accompanied by the return
of the labor-power of II to the market. The return of
both of these at opposite poles — and to this extent the re-
appearance of 500 in money not merely in the capacity of
money, but of variable capital in the form of money — is
conditioned on one and the same process. The money of
500 returns to the capitalist of II, because he sold to the
laborers of II articles of consumption valued at 500, for
which the laborer spent his wages, in order to maintain him-
self and his family and thus his labor-power. In order to
be able to live on and act again as a buyer of commodities
he must again sell his labor-power. The return of 500 in
money to the capitalist of II is therefore at the same time
a return, or a staying, of labor-power in the capacity of a
commodity purchasable with 500 in money, and thereby
a return of 500 in money to its capacity of potential vari-
able capital.

As for the v of department II b, which produces articles
of luxury, this (II b)v is treated the same as I v. The
money which renews the variable capital of the capitalists

518 Capital.

of II b in the form of money returns to them in a round-
about way through the hands of the capitalists of II a. But
it makes nevertheless a difference, whether the laborers buy
their articles of consumption by direct purchase from the
same capitalist producers to whom they sell their labor-
power, or whether they buy from capitalists of another de-
partment, through whose hands the money returns indirectly
to the capitalists of their own department. Since the work-
ing class live from hand to mouth, they buy just as long as
they have the means. It is different with the capitalists,
for instance in the transaction between 1000 II c and 1000
I v. The capitalist does not live from hand to mouth. His
compelling motive is the utmost self-expansion of his capi-
tal. Now, if circumstances seem to promise greater ad-
vantages to the capitalist of II by holding on to his money
for a while, instead of immediately renewing his constant
capital, then the return of 1000 II c in money to I is re-
tarded. This implies a retardation in the return of 1000
I v to the form of money, and in that case the capitalist
of I cannot continue his business on the same scale, unless
he can draw on some reserve capital. Generally speaking,
reserve capital in the form of money is always necessary,
in order to be able to work without interruption, regardless
of the rapid or slow reflux of the variable portion of capital-
value in money-

If the transactions of the various elements of the current
annual reproduction are to be investigated, the results of
the labor of the preceding year, which has come to a close,
must also be taken into consideration. The process of pro-
duction which resulted in the product of the present year,
is past and incorporated in its products, and so much more
is this the case with the process of circulation preceding the
process of production or running parallel with it, by which
potential variable capital is transformed into actual vari-
able capital, in other words, the sale and purchase of labor-
power. The labor-market is not a part of the commodity-
market which concerns us here. For the laborer has not
only disposed of his labor-power before this, but also sup-
plied an equivalent of the price of his labor-power in the

Simple Reproduction. 519

shape of commodities, aside from the surplus-value created
by him. He has furthermore his wages in his pocket and
figures during the present transactions only as a buyer of
commodities (articles of consumption). On the other hand,
the annual product must contain all the elements of re-
production, must renew all the elements of productive capi-
tal, above all its most important element, the variable capi-
tal. And we have seen, indeed, that the result of the present
transactions, so far as the variable capital is concerned, is
this: The laborer as a buyer of commodities, by means of
the expenditure of his wages, and the consumption of the
purchased commodities, reproduces his labor-power, this
being the only commodity which he has to sell. Just as the
money advanced in the purchase of this labor-power by the
capitalists returns to them, so labor-power returns to the
market to be once more exchanged for this money. The
result in the special case of 1000 I v is that the capitalists
of I hold 1000 v in money and the laborers of I offer them
1000 in labor-power, so that the entire process of reproduc-
tion of I can be renewed. This is one result of the process
of circulation.

On the other hand, the expenditure of the wages of the
laborers of I drew on II for articles of consumption to the
amount of 1000 II c, transforming them from commodities
into money. Department II reconverted them into the
natural form of its constant capital, by purchasing from I
commodities valued at 1000 v and thus restoring to I the
value of its variable capital in money.

The variable capital of I passes through three metamor-
phoses, which are only indicated in the circulation of the
annual product or do not appear at all in it.

(1) The first form is 1000 I v in money, which is con-
verted into labor-nower of the same value. This transaction
does not itself appear in the exchange of commodities be-
tween I and II, but its result is seen in the fact that the
working class of I approach the capitalist seller of com-
modities of II with 1000 in money, just as the working
class of II approach the capitalist of II with 500 in money in
order to buy his 500 II v of commodities.

520 Capital.

(2) The second form is the only one in which variable
capital actually varies and serves as variable capital. In
this form, a power which creates values takes the place of
given values offered in exchange for it. It belongs ex-
clusively to the process of production which is past.

(3) The third form, in which the variable capital as such
performs its function in the process of production, is the
annual product in values, which in the case of I amounts
to 1000 v plus 1000 s, or 2000 I (v+s) . In the place of its
original value of 1000 in money we have a value of double
this amount, or 2000, in commodities. The variable capital-
value of 1000 is therefore only one half of the product in
values created by it as an element of productive capital.
The 1000 I v in commodities are an exact equivalent of the
variable part of capital originally advanced in money. But
in the form of commodities they are but potential money
(they do not become money until they are sold), so that
they are still less directly money-capital. They finally be-
come money-capital by the sale of the commodities of 1000
I v to II c, and by the hurried reappearance of labor-power
as a purchasable commodity, as a material for which 1000 v
in money may be exchanged.

During all these transactions the capitalist of I contin-
ually holds the variable capital in his hands; (1) originally
as money-capital; (2) then as an element of his productive
capital; (3) still later as a portion of the value of his com-
modity-capital, in the form of the value of commodities;
(4) finally once more in money which seeks the company
of labor-power for the purpose of exchange. During the
process of production, the capitalist has the variable capital
in his control as a labor-power creating values, but not as
a value of a given magnitude. But since he never pays the
laborer until the laborer's power has been applied for a
certain length of time, he always holds in his hands the
value created by labor for its own reproduction and the
surplus-value in excess of this, before he pays him.

Seeing that the variable capital always stays in the hands
of the capitalist, it cannot be claimed in any way that it
converts itself into revenue for any one. On the contrary,

Simple Reproduction. 521

1000 I v converts itself into money by its sale to II, whose
constant capital it reproduces to the extent of one half in its
natural form.

That which resolves itself into revenue is not the variable
capital of I, represented by 1000 v in money. This money
has ceased to serve as the money-form of the variable capital
of I as soon as it has converted itself into labor-power, just
as the money of any other seller of commodities ceases to
represent any of his property as soon as he has exchanged
it for commodities of some other seller. The transactions
which the money paid as wages makes in the hands of the
working class are not transactions of variable capital, but of
the value of their labor-power converted into money. So
are the transactions of the product in values (2000 I (v+s) ) ,
created by the working class, only transactions of commod-
ities belonging to the capitalists, which do not concern the
laborers. However, the capitalist, and still more his theoret-
ical interpreter, the political economist, can rid himself only
with the greatest difficulty of the idea that the money paid
to the laborer is still the capitalist's money. If the capitalist
is a producer of money, then the variable portion of value
— in other words, the equivalent in commodities which re-
produces for him the price of the labor-power bought by
him — appears immediately in the form of money, so that
it can serve again as variable money-capital without the
circuitous routj of a reflux. But so far as the laborer of II
is concerned — aside from the laborer who produces articles
of luxury — 500 v exists in the form of commodities in-
tended for the consumption of the laborer, which he, the
aggregate laborer, buys by direct purchase from the same
aggregate capitalist to whom he had sold his labor-power.
The variable portion of the capital of II, so far as its natural
form is concerned, consists of articles of consumption, the
greater portion of which are intended for the consumption
of the laboring class. But it is not the variable capital which
is spent in this form by the laborer. It is the wages, the
money of the laborer, which by its realization in these
articles of consumption restores to the capitalist the vari-
able capital 500 II v in its money-form. The variable capi-

522 Capital.

tal II v is reproduced in articles of consumption, the same
as the constant capital 2000 II c. The one resolves itself
no more into revenue than the other does. In either case
it is the wages which resolve themselves into revenue-
It is a weighty fact in the circulation of the annual pro-
duction that the expenditure of wages restores both the con-
stant and variable capital to the form of money-capital,
in the one case 1000 II c, in the other 1000 I v and 500 II v
(In the case of the variable capital either by means of a
direct or indirect reflux).

XI. REPRODUCTION OF THE FIXED CAPITAL.

A great difficulty in the analysis of the transactions in
annual reproduction is the following. Take the simplest
form in which the matter may be presented, as follows :

(I.) 4000 c + 1000 v + 1000 s +
(II.) 2000 c+ 500 v+ 500 s = 9000.

This resolves itself finally into

4000 I c +2000 lie + 1000 I v + 500 II v + 1000 I s
+ 500 II s = 6000 c + 1500 v + 1500 s = 9000.

One portion of the value of the constant capital, to the
extent that it consists of instruments of production in the
strict meaning of the term (as a distinct section of the
means of production) is transferred from the instruments of
labor to the product of labor (commodities) ; these instru-
ments of labor continue to serve as elements of productive
capital in their old natural form- It is their wear and tear,
the loss in value experienced by them after a certain period
of service, which re-appears as an element of value in the
commodities produced by means of them, which is trans-
ferred from the instruments of labor to the product of labor.
In a question of annual reproduction, therefore, only those
elements of fixed capital demand consideration, which last
longer than one year. If they are completely worn out
within one year, then they must be completely reproduced
by the annual reproduction, and the point of issue does not
concern them at all. It may happen in the case of machines

Simple Reproduction. 523

and other lasting forms of fixed capital — and it frequently
does happen — that certain parts of them must be completely
reproduced within one year, although the organism of the
building or machine as a whole lasts a much longer time.
These partial organs belong in the same category with the
elements of fixed capital which must be reproduced within
one year.

This element of the value of commodities must not be con-
founded with the cost of repairs. If a commodity is sold,
this element is turned into money, the same as all others.
But after it lias been turned into money, its difference from
all other elements becomes apparent. The raw and auxiliary
materials consumed in the production of commodities must
be replaced in their natural form, in order that the repro-
duction of commodities may begin anew (or that the pro-
duction of commodities in general may be continuous). The
labor-power embodied in them must also be renewed by fresh
labor-power. For this reason, the money realized on the
commodities must be continually reconverted into- these ele-
ments of productive capital, a conversion of money into com-
modities. It does not alter the matter that raw and auxiliary
materials, for instance, are bought in large quantities in cer-
tain intervals, so that they constitute a productive supply,
and need not be secured by new purchases during those
intervals. Nor does it matter that the money coming in
through the sale of commodities, to the extent that it is
intended for the purchase of those means of production,
may accumulate while they last, so that this portion of con-
stant capital appears temporarily in the role of money-capi-
tal suspended from its active function. It is not a revenue-
capital. It is productive capital suspended in the form of
money- The renewal of the means of production must con-
tinue all the time, but the form of their renewal — with
reference to the circulation — may vary. The new purchases,
the transactions in the circulation by which they are re-
newed, may take place in more or less prolonged intervals,
and a large amount may be invested at one stroke in a cor-
respondingly large supply of means of production. Or,
the intervals between purchases may be small, and in that.

524 Capital.

case small amounts of money are invested in correspond-
ingly small supplies of means of production. But this does
not alter the matter itself. The same applies to labor-
power. Wherever production is carried on continuously
throughout the year on the same scale, there the consumed
labor-power must be continuously replaced by new labor-
power. Where work depends on seasons, or different portions
of the work are done at different periods, as in agriculture,
there the purchases of labor-power are relatively smaller.
But the money received through the sale of commodities,
so far as it represents the value of the wear and tear of
fixed capital, is not reconverted into that component part
of productive capital whose loss in value it makes good. It
settles down beside the productive capital and retains the
form of money. This precipitation of money is repeated,
until the period of reproduction, consisting of a small or
great length of time has elapsed, during which the fixed
element of constant capital continues to perform its func-
tion in the process of production in its old natural form. As
soon as the fixed element, such as buildings, machinery,
etc., has been worn out and can no longer serve in the pro-
cess of production, its value exists fully in money, in the
sum of money precipitated by the values which had been
gradually transferred by the fixed capital to the commod-
ities in whose production it assisted, and which had been
converted into money by the sale of these commodities.
This money then serves to replace the fixed capital (or its
elements, since its various elements have a different dur-
ability) in its natural form and thus to renew this part
of the productive capital in reality. This money is, there-
fore, the money-form of a part of the value of the pro-
ductive capital, namely of its fixed part. The formation of
this hoard is thus a factor in the capitalist process of repro-
duction, it is the reproduction and storage, in the form
of money, of the value of the fixed capital, or its individual
elements, until such time as the fixed capital, shall be worn
out, until it shall have transferred its entire value to the
commodities produced and must be reproduced in its
natural form. And this money does not lose the form of

Simple Reproduction. 525

a hoard and resume its activity in the process of reproduc-
tion of capital promoted by the circulation, until it is re-
converted into new elements of fixed capital which will
replace the worn-out elements-

The transactions disposing of the annual product in com-
modities can no more be dissolved into a mere direct ex-
change of its individual elements than the simple circula-
tion of commodities can be regarded as identical with a
simple exchange of commodities. Money plays a specific
role in this circulation, which is particularly marked by
the manner in which the value of the fixed capital is re-
produced. (It is left to a later analysis to ascertain how
the matter would present itself, if production were collective
and no longer a production of commodities.)

Let us now return to our fundamental diagram, which
showed in department II the formula 2000 c +500 v +
500 s. All the articles of consumption produced in the
course of the year are in that case valued at 3000. And
every one of the different elements of the commodities com-
posing the total quantity of the product consists, so far as
its value is concerned, of 2-3 c +1-6 v + 1-6 s, or in per-
centages, QQ 2-3 c + 16 2-3 v + 16 2-3 s. The various kinds
of commodities of department II may contain different pro-
portions of constant capital. The fixed portion of their
constant capitals may be different. The duration of this
fixed portion, its wear and tear and therefore that portion
of value which it transfers by degrees to the commodities,
produced by its assistance, may also differ. But that is im-
material. So far as the process of social reproduction is
concerned, it is only a question of transactions between de-
partments II and I. These two departments are here con-
fronted by each other only as social masses. Hence the
proportional magnitude of the portion c of the value of the
commodity-product of II (which is the only essential one
in the settlement of the present question) gives the average
proportion, if all the branches of production classed under
II are taken as a whole.

Every kind of commodities (and they are largely the
same kinds) classed under 2000 c + 500 v + 500 s thus

526 Capital.

shares uniformly in the value to the extent of 66 2-3 % c -f
16 2-3 % v + 16 2-3 % s. This applies equally to every 100
of the commodities classed under c, or v, or s.

The commodities in which the 2000 are incorporated
may be further divided into

(1) 1333 1-3 c + 333 1-3 v + 333 1-3 s=2000 c,
Those under 500 v may be divided into

(2) 333 1-3 c + 83 1-3 v + 83 1-3 s = 500 v.
Those under 500 s may be divided into

(3) 333 1-3 c + 83 1-3 v + 83 1-3 s = 500 s.

Now, if we add these three formulae, we have 1333 1-3 c
+ 333 1-3 c + 333 1-3 c = 2000 c. Furthermore 333 1-3 v
H-83 1-3 v + 83 1-3 v=500 v. And the same in the case
of s. The addition gives the same total value of 3000 as
above.

The entire constant capital-value contained in the quan-
tity of commodities of II represented by 3000 is therefore
incorporated in 2000 c, and neither 500 v nor 500 s contain
an atom of it. The same is true of v and s in the case of
500 v and 500 s.

In other words, the entire quantity of constant capital-
value, embodied in the commodities of II and reconvertible
either into its natural or its money-form, exists in 2000 c.
Everything referring to the conversion of the constant
value of the commodities of II is therefore dealing only
with the movements of 2000 c of II. And these transactions
can be made only with 1000 v + 1000 s of I.

In the same way, all remarks made with reference to the
transactions of the constant capital-value of department I
are confined to a consideration of 4000 I c.

(1) The Reproduction of the Value of the Worn-out
Part in the Form of Money.

Let us first consider the diagram

I. 4000 c + 1000 v -f 1000 s
II 2000 c + 500 v + 500 s

The exchange of the commodities represented by 2000
II c for commodities of I of the same value (1000 v +
1000 s) is conditioned on the assumption that the entire

Simple Reproduction. 52T

2000 II c are reconverted from their natural form into that
of the elements of the constant capital of II, produced by I.
But the value of the commodities of 2000 c, of which the
constant capital of II consists, contains an element making
good the loss in the value of fixed capital, which is not to be
immediately reproduced in its natural form, but converted
into money and accumulated until such time as shall re-
quire the natural reproduction of the fixed capital on ac-
count of its having been completely worn out. Every year
registers the finish of some fixed capital which must be re-
newed in this or that individual business, or this or that
line of industry. In the case of one and the same individual
capital, this or that portion of its fixed capital must be re-
newed, since its elements have a different durability. In
examining annual reproduction, even on a simple scale,
that is to say, disregarding all accumulation, we do not be-
gin at the very beginning of things. The year which we
study is one in the flow of many, it is not the year of the
first birth of capitalist production. The various capitals
invested in the numerous lines of production of depart-
ment II are, therefore, of different age. Just as a great
many persons die annually in the service of these lines of
production, so scores of fixed capitals expire annually in
the same service and must be restored in their natural form
by means of the accumulated fund of money. To that ex-
tent the exchange of 2000 II c for 2000 I (v + s) implies
a conversion of 2000 II c from the form of commodities
(articles of consumption) into that of natural elements of
constant capital, which consist not only of raw and auxili-
ary materials, but also of natural elements of fixed capital,
such as machinery, tools, buildings, etc. The wear and tear,
which must be reproduced in money in the value of 2000
II c, by no means corresponds to the volume of the actively
engaged fixed capital, since a portion of this must be repro-
duced every year in its natural form. The necessary prepa-
ration for this reproduction is an accumulation of money
in preceding years on the part of the capitalists of II. And
the same condition holds good for the current year as well
as for the preceding ones.

528 Capita!.

In the transaction of I (1000 v + 1000 s) it must be noted
that the magnitude I(v + s) does not contain any elements
of constant capital, so that none of it implies a reproduc-
tion of wear and tear, that is to say, of elements transferred
from the fixed portion of some constant capital to the com-
modities which represent the natural form of v + s. On
the other hand, such elements do exist in II c and consti-
tute that portion of value due to fixed capital which is not
immediately converted from money into its natural form,
but first accumulated in the form of money. The exchange
between I (1000 v+1000 s) and 2000 II c, therefore, pre-
sents the difficulty, that the means of production of I, which
are the natural form of (1000 v + 1000 s), are to be ex-
changed to the full value of 2000 for articles of consump-
tion of II, while the 2000 II c of articles of consumption
cannot be offered entirely in exchange for 1(1000 v +
1000 s), because a portion of them, corresponding in value
to the wear and tear of the fixed capital, must be accumu-
lated in the form of money and do not serve as a medium
of circulation during the current period of annual repro-
duction which we are examining. But the money paying
for this element of wear and tear incorporated in the value
of 2000 II c can come only from department I, since II
cannot pay for its own articles, but must secure pay-
ment for them by selling them, and since we have assumed
that I (1000 v+1000 s) buys the full amount of commodi-
ties of 2000 II c. Hence department I must supply the
money to cover that wear and tear of II c. Now, according
to the rules previously determined, money advanced to the
circulation returns to that capitalist producer who later on
throws an equal amount of commodities into the circula-
tion. It is evident that department I, in buying II c,
cannot transfer commodities worth 2000 to department II
and yield up to it every time an additional amount of
money, without any equivalent returning by way of the
circulation. Otherwise department I would buy the com-
modities II c at a price exceeding their value. If depart-
ment II actually exchanges its 2000 c for 1(1000 v -I-

Simple Reproduction. 529

1000 s), then it has no further claims on department I,
and the money circulating in this transaction returns either
to I or to II, according to whether I or II acted first as a
buyer. And in that case department II would have recon-
verted the entire value of its commodity-capital into the
natural form of means of production, contrary to our as-
sumption that it would not reconvert an aliquot portion dur-
ing the current period of annual reproduction into the nat-
ural form of fixed elements of its constant capital. Depart-
ment II could not secure a balance of money in its favor, un-
less it sold a value of 2000 to department I and bought less
than that from department I, for instance, only 1800. In
that case department I would have to make good the bal-
ance of 200 in money, which would not return to it, be-
cause it would not have recovered this amount by an equiv-
alent surrender of commodities to the circulation. Only
then could II have a fund of money which it could place to
the credit of the wear and tear of its fixed capital. But
then we should also have an overproduction of means of
production to the amount of 200 on the part of department
I, and the basis of our diagram would be destroyed, which
assumed reproduction on the same scale, in other words, a
complete proportionality between the various systems of
production. We should have done away with one difficulty
and created another, which would be still worse.

As this problem offers peculiar difficulties and has never
been mentioned by political economy, we shall consider one
by one all possible solutions (at least apparent solutions),
or rather all possible formulations of the problem.

In the first place, we had just assumed that department
II sells commodities valued at 2000 to department I, but
buys from it only 1800 worth. The value of the commodi-
ties of 2000 c contains 200 for wear and tear of fixed capi-
tal, which must be accumulated as money. The value of
2000 c would therefore be dissolved into 1800, which would
be exchanged for means of production of I, and 200 for
the reproduction of worn-out elements of fixed capital, which
would be held in the form of money after the sale of 2000

530 Capital.

II c to department I. Expressed in terms of value, this would
be 2000 II c = 1800 c + 200 w, this w standing for wear and
tear.

We should then be studying the transaction
I. 1000 v + 1000 s

II. 1800 c + 200 w.

Department I buys with 1000 p. st., which the labours
have received as wages in payment for their labor-power,
1000 II c of articles of consumption. Department II buys
with the same 1000 p. st. means of production from depart-
ment I from the lot 1000 v. The capitalists of I thus re-
cover their variable capital in the form of money and can
employ it next year in the purchase of labor-power to the
same amount, that is to say, they can reproduce the variable
portion of their productive capital in its natural form. —
Department II furthermore advances 400 p. st. and buys
means of production from the lot I s, and department I s
buys with the same 400 p. st. articles of consumption from
II c. The 400 p. st. advanced by the capitalists of II have
thus returned to them, but only as an equivalent for sold
commodities. Department I now buys from II articles of
consumption to the amount of 400 p. st. ; II buys from I 400
worth of means of production, thereby returning the 400 p.
st. to department I.

So far, then, we have the following calculation : Depart-
ment I b throws into circulation 1000 v+800 s in commodi-
ties; it also throws into circulation, in money, 1000 p. st.
of wages and 400 p. st., thus facilitating its transaction with
II. After the transaction is closed, department I has 1000
v in money, 800 s exchanged for articles of consumption
from 800 II c, and 400 p. st. in money.

Department II throws into circulation 1800 c in com-
modities (articles of consumption) and 400 p. st. in money.
At the close of the transaction it has 1800 in commodities
(means of production from department I) and 400 p. st.
in money.

There still remain on the side of department I 200 s in
means of production, and on the side of II 200 c (w) in
articles of consumption.

Simple Reproduction. 531

According to our assumption department I buys with
200 p. st. the articles of consumption II w, valued at the
same amount. But II holds these 200 p. st., since 200 w
represents wear and tear and is not immediately recon-
verted into means of production. Therefore 200 I s cannot
be sold. One-tenth of the surplus-value of I cannot be re-
alized by any exchange, cannot be converted from the nat-
ural form of means of production into that of articles of
consumption.

This does not only contradict our assumption of repro-
duction on a simple scale, but it is not even a hypothesis
which would explain the payment of 200 II w in money.
It is another way of saying that it cannot be explained.
Since it cannot be demonstrated in what manner 200 w is
converted into money, it is assumed that department I is
obliging enough to supply the money, just because it is not
able to convert its own remainder of 200 s into money. This
is as much a legitimate method of analysis as the assump-
tion that 200 p. st. fall every year from the clouds in order
to convert 200 II w into money.

But the absurdity of such an assumption does not become
evident at once, if I s, instead of appearing, as it does in this
case, in its primitive mode of existence — that is to say as an
element of the value of means of production, as an element
of the value of commodities which must be converted into
money by their capitalist producers — appears in the hands
of capitalist stockholders, for instance as ground rent in the
hands of land owners, or as interest in the hands of money-
lenders. Now, if that portion of the surplus-value of com-
modities, which the industrial capitalist yields in the form
of ground rent or interest to other shareholders in the sur-
plus-value, cannot be in the long run converted into money
by the sale of the commodities, then there is an end to the
payment of rent and interest, and the land owners or recipi-
ents of interest can no longer serve in the role of miraculous
interlopers, who convert aliquot portions of the annual re-
production into money by spending their revenue. The same
is true of the expenditures of all so-called unproductive la-
borers, state officials, physicians, lawyers, etc., and others

532 Capital

who serve economists as an excuse for explaining inexplic-
able things, in the role of the "general public."

Nor does it improve the matter, if the direct transaction
between departments I and II, the two great departments
of capitalist producers, is circumvented and the merchant
is dragged in as a mediator, in order to overcome all diffi-
culties with his "money." In the present case, for instance,
200 I s must ultimately be sold to the industrial capitalists
of II. It may pass through the hands of a number of mer-
chants, but the last of them will find himself in the same
predicament, in which the capitalists of I were at the out-
set, that is to say he cannot sell the 200 I s to the capitalists
of II. And this amount, being arrested in its course, cannot
renew the same process with department I.

We see, then, that, aside from our ultimate purpose, it is
quite necessary to view the process of reproduction in its
fundamental simplicity, in order to get rid of all obscuring
interference and dispose of the false subterfuges, which as-
sume the semblance of scientific analysis, but which cannot
be removed so long as the process of social reproduction is
immediately analyzed in its concrete and complicated form.

The law that under normal conditions of reproduction —
whether it be on , a simple or on an enlarged scale — the
money advanced by the capitalist producer to the circula-
tion must return to its point of departure (no matter wheth-
er the money is his own or borrowed) excludes decidedly the
hypotheses that 200 II w can be converted into money by an
advance of money on the part of department I.

(2) The Reproduction of Fixed Capital in its Natural Form.

Having disposed of the above hypothesis, only such hy-
potheses remain as assume the possibility of a reproduction
of the worn-out fixed capital partly in money and partly
in its natural form.

We had assumed in the preceding case

(a) That 1000 p. st. had been paid in wages by depart-
ment I and spent by the laborers for articles of consump-
tion of II c to the same amount.

It is a simple affirmation of fact that these 1000 p. st. are

Simple Reproduction. 533

advanced by I in money. Wages must be paid
in money by the various capitalist producers. This money
is then spent by the laborers for articles of con-
sumption and serves the sellers of articles of con-
sumption in their turn as a medium of circulation in
the conversion of their constant capital from a commodity-
capital into a productive capital. It passes indeed through
many channels (store keepers, house owners, tax collectors,
unproductive laborers, such as physicians, etc., who are
needed by the laborer himself) and therefore it flows only
in part directly from the hands of the laborer of I into
those of the capitalist of II. Its flow may be retarded more
or less and the capitalist may therefore require more re-
serve funds of money. But all this is ruled out of the analy-
sis of the simplest fundamental form.

(b) We had furthermore assumed that department I ad-
vances at a certain time 400 p. st. in money for the pur-
chase of articles from II and that this money returns to
it, while at some other time department II advances also
400 p. st. for the purchase of commodities from I and like-
wise recovers this money. This assumption must be granted,
for it would be arbitrary to think that only the capitalist
class of I, or only that of II, should advance the money re-
quired for the exchange of their commodities. Now, since
we have shown (under 1) that it would be absurd to think
that department I should throw money into circulation in
order to promote the conversion of 200 II w into money,
there would remain only the seemingly still more absurd
hypothesis that department II itself should advance this
money, by which that portion of the value of its commodi-
ties which makes good the depreciation of its fixed capital
through wear and tear is converted into money. For in-
stance, that portion of value which is lost by the spinning
machine of Mr. X. in the process of production re-appears
as a portion of the value of the yarn. That which his
spinning machine loses on the one hand through wear and
tear, is supposed on the other hand to be accumulated by
him in money. Now take it that X. buys 200 p. st.'s worth
of cotton from Y. and advarices 200 p. st. in money for

534 Capital.

this purpose. Y then buys from him 200 p. st.'s worth of
yarn, and X. now accumulates this money as a fund for the
reproduction of the worn-out portion of his machine. This
would simply amount to the statement that X., aside from
his production, its product, and the sale of this product,
keeps 200 p. st. in reserve, in order to make good to him-
self the depreciation of his machine, in other words, that
he not only loses 200 p. st. by the depreciation of his ma-
chine, but must also put up 200 p. st. additional every year
out of his own pocket in order to be finally able to buy a
new spinning machine.

This looks only seemingly absurd. For the producers
of department II are capitalists whose fixed capital is in
various stages of its reproduction. In the case of some of
them it has arrived at the stage where it must be entirely
renewed in its natural form. In the case of the others it
is more or less removed from this stage. All the capital-
ists of these last named stages have this in common, that
their fixed capital is not actually reproduced, that is to say,
not actually renewed in its natural form by a new specimen
of the same kind, but that its value is successively accumu-
lated in money. The first class of the capitalists of II are
in the same (or almost the same) position as they were at
the establishment of their business, when they came on the
market with their money-capital in order to convert this
money partly into constant (fixed and circulating) capital,
partly into labor-power (variable capital). They have once
more to advance this money to the circulation, the value
of fixed constant capital as well as that of circulating con-
stant and variable capital.

Hence, if we assume that half of the 400 p. st. thrown
into circulation by the capitalist class of II for the purpose
of transacting business with department I comes from
those capitalists of II who have to reproduce by means of
the sale of their commodities not only their means of pro-
duction so far as they are circulating capital, but also to
buy with money new fixed capital in its natural form,
while the other half of the capitalists of II reproduce with
their money only the circulating portion of their constant

Simple Reproduction. 535

capital in its natural form, but not the fixed portion, then
there is no contradiction in the statement that these 400 p.
st., when returned by department I in exchange for articles
of consumption, arc variously distributed among these two
classes of department II. They return to department II,
but they do not return into the same hands. They are dis-
tributed within this department and pass from one of its
sections to another.

One section of II has secured means of production whose
value is covered by their commodities, and has furthermore
converted 200 p. st. of money into natural elements of new
fixed capital. The money thus spent does not return to this
section by way of the circulation until after a succession
of years and is gradually accumulated by the sale of pro-
ducts created by this fixed capital and bearing the value of
its worn-out portion.

But the other section of II did not purchase any com-
modities from I for 200 p. st. That section is rather paid
with the money which the first section of II spent for ele-
ments of its fixed capital. The first section of II has its
fixed capital-value once more in a natural form, while the
second section is still engaged in accumulating money for
the purpose of renewing its fixed capital later on.

The basis on which we now have to work, after the pre-
vious transactions have been closed, is the remainder of the
commodities still to be exchanged by the two departments;
400 s on the part of I, and 400 c on the part of II.47 We
assume that II advances 400 p. st. in money for the ex-
change of commodities aggregating 800 in value. One-half,
or 200 p. st., must be advanced under all circumstances by
that section of He which has accumulated 200 in money
for making good the depreciation by wear and tear and
which has to reconvert this fund into the natural form
of its fixed capital.

Just as constant capital-value, variable capital-value, and

47 These figures do not coincide with those previously assumed. But
this does not alter the substance of the argument, since it is merely a
question of proportions. — F. E.

536 Capita!.

surplus-value — being the elements of the value of the com-
modity-capital of II and I — may be represented by propor-
tional quantities of the commodities of II and I, so that por-
tion of the value of the constant capital which is not to be
converted into the natural form of fixed capital for the
present, but rather to be accumulated in money, may like-
wise be represented. A certain quantity of commodities of
II (in the present case one-half of the remainder of 400,
or 200) is as yet the bearer of the value of this deprecia-
tion, which has to be converted into money by sale. (The
first section of the capitalists of II, who renew their fixed
capital in its natural form, may have done so with a por-
tion of its depreciation by means of a corresponding por-
tion of the remaining commodities, but they still have to
realize 200 in money.)

The second 200 of the 400 thrown into circulation by
II in this remaining transaction buy circulating elements
of constant capital from I. A portion of these 200 p. st.
may be thrown into circulation by both sections of II, or
only by the one not renewing its fixed capital in its natural
form.

Department I, then, secures with these 400 p. st. in
the first place commodities valued at 200 p. st., consisting
only of elements of fixed capital; in the second place, com-
modities valued at 200 p. st., reproducing only natural ele-
ments of the circulating portion of the constant capital of
II. Department I has then sold its entire annual product
in commodities, so far as it is sold to department II. And
the value of one-fifth, or 400 p. st., is now held in its hands
in the form of money. This money is monetized surplus-
value which must be spent as revenue for articles of con-
sumption. Department I having bought with its 400 p.
st. the entire stock of department II, valued at 400, this
money flows back to II.

Now we may assume three possibilities. Let us name
those capitalists of II, who renew their fixed capital in its
natural form, section 1, and those, who accumulate the
equivalent for the depreciation of fixed capital, section 2.
The three possibilities are: (a) That the 400 still remain-

Simple Reproduction. 537

ing in the shape of commodities of II may make good cer-
tain portions of the circulating part of the constant capital
of both section 1 and section 2 (perhaps one-half for each) ;
(b) that section 1 has already sold all its commodities, so
that section 2 has for sale all of the 400; (c) that section
2 has sold all but the 200 which are the bearers of the
value of depreciation.

Then we have the following distributions:

(a) Of the value of the commodities still in the hands
of department II, namely 400 c, section 1 holds 100, and
section 2 holds 300; 200 out of the 300 represent deprecia-
tion. In that case section 1 originally advanced 300 of the
400 in money returned by department I for commodities
of II, namely 200 in money, for which it secured elements
of fixed capital from I, and 100 in money for the promotion
of its transaction with I. Section 2, on the other hand, ad-
vanced only 100 of the 400, likewise for the promotion of
its exchange with I.

Remember, then, that section 1 advanced 300, and sec-
tion 2 advanced 100 of the 400.

Now these 400 return in the following manner: Sec-
tion 1 recovers only one-third of the money advanced by it,
or 100. But it has in place of the other 200 a renewed fixed
capital. Section 1 has given money to department I for
these elements of fixed capital, but sold no more com-
modities. So far as this money is concerned, section 1 has
met department I for the purpose of buying, but not of
selling later on. This money cannot return to section 1,
otherwise it would receive the elements of fixed capital from
I as a gift. So far as the last third of its advanced money is
concerned, section 1 first acted as a buyer of circulating ele-
ments of its constant capital. The same money serves de-
partment I for the purchase of the remainder of the com-
modities of section 1, valued at 100. This money, then, re-
turns to section 1 of department II, because it acts as a seller
of commodities soon after having acted as a buyer. If this
money did not return, then section 1 of department II would
have given to department I a sum of 100 in money for com-
modities of the same value and in addition thereto 100 in

538 Capital.

commodities, in other words, it would have given away its
commodities as a present.

On the other hand, section 2 receives 300 in money back,
while it has advanced only 100 in money. As a buyer it
first threw 100 in money into circulation, and these it re-
ceives back when acting as a seller. And it receives 200
more, because it acts only as a seller of commodities to that
amount, but not in turn as a buyer. Hence the money can-
not return to department I. The value of the depreciation
of the fixed capital is thus balanced by the money thrown
into circulation by section 1 of department II in the pur-
chase of elements of fixed capital. But it reaches, the hands
of section 2, not as money of section 1, but as money of
department I.

(b) Under these conditions the remainder of He is dis-
tributed so that section 1 has 200 in money, and section 2
has 400 in commodities.

Section 1 has sold all of its commodities, but 200 in money
are a changed form of the fixed elements of its constant
capital which it has to renew in their natural form. It acts
only as a buyer in the present case and receives in exchange
for its money the same value in commodities of department
I having the natural form of elements of its fixed capital.
Section 2 has to throw 200 p. st. into circulation, at a
maximum (if department I does not advance any money
for the transaction between I and II), since it is to the ex-
tent of one-half of the value of its commodities only a seller
to I, not a buyer from I.

It recovers from the circulation 400 p. st. It gets 200,
because it has advanced them as a buyer and recovers them
as a seller of commodities of the same value. It receives an-
other 200, because it sells commodities of that value to 1
without buying an equivalent from I.

(c) Section 1 has 200 in money and 200c in commodities.
Section 2 has 200c (w) in commodities.

Section 2 has not any advance of money to make under
these circumstances, because it does not act any more in
the role of a buyer from I, but only bs a seller, so that it
must wait till some one wants to buy from it.

Simple 'Reproduction. 539

Section 1 advances 400 p. st. in money, of which 200 serve
for a mutual exchange with department I, while 200 are
used to buy from I. The last 200 serve in the purchase of
the elements of fixed capital.

Department I buys from section 1 commodities to the
value of 200 with 200 p. st. in money, so that section 1 thus
recovers the money it had advanced for its transaction with
I. And I buys with the other 200 p. st., which it has like-
wise received from section 1, commodities valued at 200 from
section 2, which thus recovers the value of the depreciation
of its fixed capital.

The matter would not be altered by the assumption that,
in the case of (c), department II instead of section 1 of this
department should advance the 200 in money required for
the exchange of the existing commodities. If I buys in that
case first 200 in commodities from section 2 of department
II — assuming that this section has only this much left to
sell — then the 200 p. st. do not return to I, since section 2
of department II no longer acts in the role of buyer. But
section 1 of department II has in that case 200 p. st. to
spend in buying and 200 in commodities to offer for sale,
making a total of 400 which it has to trade with depart-
ment I. 200 p. st. in money then return to department I
from section 1 of department II. When I spends them again
in the purchase of 200 in commodities from section 1 of
department II, then they return to department I as soon as
section 1 of department II buys the second half of the 400
in commodities from I. Section 1 of department II has spent
200 p. st. in the purchase of elements of fixed capital, with-
out selling anything in return. Therefore this money does
not return to it, but serves to monetize the remaining 200 c of
commodities of section 2 of department II, while the 200 p.
st. in money advanced by I for the promotion of the transac-
tions return to it by way of section 1 of department II, not
section 2. In the place of its commodities of 400 it has
secured an equivalent, and t^je 200 p. st. in money advanced
by it for transacting business to the extent of 800 in com-
modities have likewise returned to it. Everything is there-
fore settled.

540 Capital

The difficulty encountered in the transaction between
I (1000 v+1000 s) and II 2000 c was reduced to the diffi-
culty of balancing accounts between I 400 s and II (section

1) 200 in money plus 200 c in commodities plus (section

2) 200 c in commodities. Or, to make the matter still clearer,
1 (200 s +200 s) against II (200 in money of section 1 plus
200 c in commodities of section 1 plus 200 c in commodities
of section 2).

Since section I of department II exchanges 200c for com-
modities of department I representing 200s, and since all
the money circulating in this exchange of 400 commodities
between I and II returns to him who first advances it, be
he I or II, this money promoting the exchange between I
and II is not an element of the problem which troubles us
here. Or, to express it differently, if we assume that the
money used in the transaction between 200 I s (commodities)
and 200 lie (commodities of section 1, department II) serves
only as a medium of payment, not as a medium of pur-
chase and therefore not as a "medium of circulation," strictly
speaking, it is evident that the means of production valued
at 200 are exchanged for articles of consumption valued at
200, because the commodities of 200 I s and 200 He (sec-
tion 1) are equivalent in value, that therefore the money
serves here merely ideally, and that neither side has to
advance any money to the circulation for the payment of
any balance. Hence the problem does not show itself in its
clearest form, until we eliminate the commodities of 200 I s
and their equivalent, the commodities of 200 He (section
1), from both sides.

After the elimination of these two amounts of commod-
ities of equal value, which balance one another in I and II,
the remainder of the transaction shows the problem dearly,
namely I 200s in commodities against II (200c in money of
section 1 plus 200c in commodities of section 2).

It is evident that section 1 of department II buys with 200
in money the elements of its fixed capital from 200
I s. The fixed capital of section 1, department II, is there-
by renewed in its natural form, and the surplus-value of I,
to the amount of 200, is converted from the form of commod-

Simple Reproduction. 541

ities (means of production representing elements of fixed
capital) into that of money. Department I buys with this
money articles of consumption from section 2, department
II, and the result for II is that section 1 has renewed a fixed
element of its constant capital in its natural form ; and that
section 2 has stored up another element in money which is
destined to make good the depreciation of its fixed capital.
And this continues every year, until this last element is also
renewed in its natural form.

The first condition is here evidently that this fixed ele-
ment of constant capital II, which must annually be recon-
verted into money to the full extent of its value and, there-
fore, entirely reproduced in its natural form (section 1),
should be equal to the annual depreciation of the other fixed
element of constant capital II, which continues its function
in its old natural form and whose depreciation, represented
by the value transferred by it to the commodities produced
by it, is first accumulated in money. Such a balance of value
would seem to be a law of reproduction on the same scale.
This is equivalent to saying that the proportional division
of labor in department I, which puts out means of produc-
tion, must remain unchanged, to the extent that it produces
partly circulating, partly fixed portions of the constant capi-
tal of department II.

Before we analyze this more closely, we must first see how
the matter looks, if the remaining amount of II c ( 1 ) is not
equal to the remainder of II c (2). It may be larger or
smaller. Let us study either case.

First Case.

I. 200 s.

II. (1) 220 c in money plus (2) 200 c in commodities.
In this case II c (1) buys with 200 p. st. the commodities

of 200 I s, and I buys with the same money the commod-
ities of 200 II c (2), in other words, that portion of the fixed
capital which has to be accumulated in money. This por-
tion is thus converted into money. But 20 II c (1) cannot
be reconverted into the natural form of fixed capital.
It seems that we might remedy this inconvenience by mak-

542 Capital.

ing the remainder of I s 220 instead of 200, so that only
1780 instead of 1800 of the 2000 I would be disposed of by
former transactions. Then we should have:

I. 220 s.

II. (1) 220 c in money plus (2) 200 c in commodities.
Section 1 of II c buys with 220 p. st. in money the 220 I s,

and I buys with 200 p. st. the 200 II c (2) of commodities.
But now 20 p. st. in money remain on the side of I, a por-
tion of surplus-value which it can hold only in money, with-
out being able to spend it in articles of consumption. The
difficulty is thus merely transferred from section 1, depart-
ment II c, to I s.

Let us now assume, on the other hand, that section 1, II
c, is smaller than section 2, II c, then we have:

Second Case.

I. 200 s in commodities.

II. (1) 180 c in money plus (2) 200 c in commodities.
Section 1, department II, buys with 180 p. st. in money

the commodities of 180 I s. Department I buys with the
same money commodities of the same value from section 2,
department II, that is to say, 180 II c (2). There remain
20 I s unsaleable on one side, and 20 [I e of section 2 on the
other. In other words, commodities valued at 40 remain
unsaleable.

It would not help us any to make the remainder of I equal
to 180. It is true, there would not be any surplus in I under
these circumstances, but the same surplus of 20 would re-
main unsaleable in section 2 of department II and could
not be converted into money.

In the first case, where section 1 of department II is greater
than section 2 of department II, there remains a surplus of
money in section 1 of department II and cannot be converted
into fixed capital ; or, if the remainder in I s is assumed to
be equal to II c (1), the same surplus in money remains
inconvertible into articles of consumption in I s.

In the second case, where II c (1) is smaller than II c
(2), there remains a deficit of money on the side of 200 I s
and II c (2), and an equal surplus of commodities on both

Simple Reproduction. 543

sides, or, if the remainder of I s is assumed to be equal to
II c (2), there remains a deficit of money and a surplus of
commodities in II c (2).

If we assume the remainder of I s to be always equal to
II c (1) — seeing that production is determined by demand,
and reproduction is not altered by the fact that there may be
a greater output of fixed elements of capital this year, and a
greater output of circulating elements of constant capitals
I and II next year — then I s could not be reconverted into
articles of consumption in the first case, unless I brought
with it a portion of the surplus-value of II and accumulated
it in money instead of consuming it; in the second case
there would be no other way out but an expenditure of the
money on the part of I itself, an assumption which we have
already rejected.

If II c (1) is greater than II c (2), then the importation
of foreign commodities is required for the employment of the
money-surplus in I s. If II c (1) is smaller than 11 c (2),
then an exportation of commodities (articles of consump-
tion) is required for the realization of the value of the de-
preciation of II c in means of production. In either case,
foreign trade is necessary.

Even assuming that, on the basis of simple reproduction
on the same scale, the productivity of all lines of industry,
and thus the proportional relation of the value of their com-
modities, would remain unchanged, there would neverthe-
less be an incentive for production on an enlarged scale when-
ever the two last named cases may occur, in which II c (1) is
greater or smaller than II c (2).

(3) Results.

With reference to the reproduction of the fixed capital,
the following general remarks may be made:

If a larger portion of the fixed element of II c expires
this year than last and must be reproduced in its natural
form — all other circumstances remaining the same, that is to
say, not only the scale of production, but also the productiv-
ity of labor, etc. — then that portion of the fixed capital,
which is as yet only declining and must be temporarily ac-

544 Capital.

cumulated in money until its term of expiration arrives,
must decline in the same proportion, since we have assumed
that the sum of the fixed capital serving in II (also the sum
of its values) remains unchanged. This implies the follow-
ing consequences: If a greater portion of the commodity-
capital of I consists of elements of the fixed capital of II c,
then a correspondingly smaller portion consists of circulat-
ing elements of II c, because the total production of I for
II c remains unchanged. If one of these portions increases,
then the other decreases, and vice versa. On the other hand,
the total production of II also retains the same volume. But
how is this possible, if the production of its raw materials,
half-wrought products, and auxiliary materials (the circulat-
ing elements of the constant capital of II) decreases? In
the second place, a greater portion of fixed capital of II c,
restored to its money-form, flows into department I, in order
to be reconverted from its money-form into its natural form.
In other words, there is a greater flow of money into depart-
ment I, aside from the money circulating between I and II
merely for the transaction of their business, more money
which does not merely serve as a medium for the mutual
exchange of their commodities, but acts onesidedly in pur-
chase without a corresponding sale. At the same time the
quantity of commodities of II c, the bearers of the value of
the depreciation of fixed capital, would have decreased
proportionately. This is that quantity of commodities
of II which is not exchanged for commodities of I,
but must be converted into money of I. More money
would have flown from II into I for onesided purchase,
and there would be fewer commodities of II which would
stand only in the relation of a buyer toward I. Under these
circumstances a great portion of I s — for I v has already been
converted into commodities of II — would not be convertible
into commodities of II, but would be held in the form of
money.

The opposite case, in which the reproduction of expired
fixed capitals of a certain year exceeds that of the deprecia-
tion, need not be discussed in detail after the preceding state-
ments.

Simple Reproduction. 545

The result would be a crisis — a crisis in production —
in spite of the fact that reproduction had taken place on
the same scale.

In short, unless a constant proportion between expiring
(and about to be renewed) fixed capital and still continuing
(merely transferring the value of its depreciation to its
product) fixed capital is assumed, so long as reproduction
takes place on a simple scale under the same conditions, such
as productivity, volume, intensity of labor, the mass of cir-
culating elements to be reproduced in one case would remain
the same while the mass of fixed elements to be reproduced
would have been increased. Therefore the aggregate produc-
tion of I would have to increase, or, there would be a deficit
in the reproduction, even aside from money matters.

In the other case, if the proportional magnitude of the
fixed capital of II, to be reproduced in its natural form,
should decrease and the elements of the fixed capital of II,
which must be merely accumulated in money, should in-
crease in the same ratio, then the quantity of the circulat-
ing elements of the constant capital of II, reproduced by I,
would remain unchanged, while that of the fixed elements
about to be reproduced would have decreased. Hence there
would be either a decrease in the aggregate production of I,
or a surplus (the same as previously a deficit) which could
not be converted into money.

It is true that the same labor may, in the first case, sup-
ply a greater product with an increase in its productivity,
extension, or intensity, and so the deficit could be covered in
the first case. But such a change could not take place with-
out a transfer of capital and labor from one line of produc-
tion of department I to another, and every transfer would
cause monetary disturbances. Furthermore, to the extent
that an expansion and intensification of labor would in-
crease, department I would have to exchange more of its
value for less value of II. In other words, there would be
a depreciation of the product of I.

The reverse would take place in the second case, where I
must contract its production, which implies a crisis for its
laborers and capitalists, or produce a surplus, which implies

546 Capital.

another crisis. Such a surplus is not an evil in itself, but
it is an evil under the capitalist system of production.

Foreign trade could relieve the pressure in either case. In
the first case it would convert products of I held in the form
of money into articles of consumption, in the second case
it would dispose of the surplus of commodities. But foreign
trade, so far as it does not merely reproduce certain elements
of production, only transfers these contradictions to a wider
sphere and gives them a greater latitude.

Once that the capitalist mode of production is abolished,
the problem resolves itself into the simple proposition that
the magnitude of the expiring portion of fixed capital, which
must be reproduced in its natural form every year (which
served in our illustration for the production of articles of
consumption), varies in successive years. If it is very large
in a certain year (in excess of the average mortality, the same
as among men), then it is so much smaller in the next year.
The quantity of raw materials, half wrought articles, and
auxiliary materials required for the annual production of
the articles of consumption — other circumstances remaining
the same — does not decrease in consequence. Hence the ag-
gregate production of means of production would have to
increase in the one case and decrease in the other. This can
be remedied only by a continuous relative overproduction.
There must be on the one hand a certain quantity of fixed
capital in excess of that which is immediately required; on
the other hand there must be above all a supply of raw
materials, etc., in excess of the actual requirements of annual
production (this applies particularly to articles of consump-
tion). This sort of reproduction may take place when soci-
ety controls the material requirements of its own reproduc-
tion. But in capitalist society it is an element of anarchy.

This illustration of fixed capital, on the basis of an un-
changed scale of reproduction, is convincing. A dispropor-
tion of the production of fixed and circulating capital is one
of the favorite arguments of political economists in explain-
ing productive crises. That such a disproportion can and
must arise even when the fixed capital is merely preserved
by renewal is new to them. And yet, it can and must arise

Simple Reproduction. 547

even on the assumption of an ideal and normal production
on the basis of a simple reproduction of the already existing
capital of society.

XII. THE REPRODUCTION OF THE MONEY SUPPLY.

One element has so far been entirely disregarded, namely
the annual reproduction of gold and silver. To the extent
that these metals serve as material for articles of luxury,
gilding, etc., they do not deserve any special mention, any
more than any other products. But they play an important
role as money-material, as potential money. For the sake
of simplicity, we regard only gold as material for money.

According to older statements, the entire annual produc-
tion of gold amounts to about 8 — 900,000 lbs., equal to about
1100 to 1250 million marks (264 to 392.5 million dollars).
But according to Soetbeer48 it amounts to only 170,675 kilo-
grams, valued at about 476 million marks on an average of
the years 1871 to 1875. Of this amount, Australia supplied
about 167, the United States 166, Russia 93 million marks.
The remainder is distributed over various countries in sums
of less than 10 million marks each. The annual production
of silver, during the same period, amounted to somewhat
less than 2 million kilograms, valued at 354.5 million marks.
Of this amount, Mexico supplied about 108, the United
States 102, South America about 67, Germany about 26 mil-
lion, etc.

Among the countries with predominating capitalist pro-
duction only the United States are producers of gold and
silver. The capitalist countries of Europe obtain almost all
their gold and by far the greater part of their silver from
Australia, the United States, Mexico, South America, and
Russia.

But we transfer the gold mines into the country with capi-
talist production whose annual reproduction we are analyz-
ing, for the following reasons:

48 Ad. Soetbeer, Edelmetall-produktion. Gotha. 1S75.

548 Capital

Capitalist production does not exist at all without for-
eign commerce. But when we assume annual reproduction
on a given scale, we also assume that foreign commerce re-
places home products only by articles of other use-value, or
natural form, without affecting the relations of value, such
as those of the two categories known as means of production
and articles of consumption and their transactions, nor the
relations of constant capital, variable capital, and surplus-
value, into which the value of the products of each of these
categories may be dissolved. The introduction of foreign
commerce into the analysis of the annually reproduced value
of products can, therefore, produce only confusion, without
furnishing any new point in the aspect or solution of the
problem. For this reason we leave it aside. And conse-
quently gold as a direct element of annual reproduction is
not regarded as a commodity imported from a foreign coun-
try.

The production of gold, like that of metals generally, be-
longs to department I, which occupies itself with means of
production. Let us assume that the annual production of
gold amounts to 30 (from reasons of expediency, although
it is far too high compared to the other figures of our dia-
grams). Let this value be resolved into 20 c+5 v+5 s;
20 c is to be exchanged for other elements of department I
c, and this is to be studied later; but the 5 v+5 s are to be
exchanged for elements of II c, namely, articles of consump-
tion.

As for the 5 v, every gold producing business begins by
buying labor-power. This is done, not with money pro-
duced by this particular business, but with a portion of
the money existing in the land. The laborers buy with
this 5 v articles of consumption from II, and this
department buys with the same money means of pro-
duction from I. Let us say that II buys from I gold
for elements of its commodities (elements of constant capi-
tal) to the value of 2, then 2 v flow back to the gold pro-
ducers of i in money which was formerly in circulation,
If II does not buy any more material from I, then I buys
from II by throwing its gold into circulation, for gold can

Simple Reproduction. 549

buy any commodity. The difference is only that I does not
act as a seller, but as a buyer, in that case. The gold pro-
ducers of I can always get rid of their product, for it is
always in a form which may be directly exchanged.

Take it that some producer of yarn has paid 5 v to his
laborers, who create for him in return — aside from a sur-
plus-product— yarn to the amount of 5. The laborers buy
values worth 5 from II c, and II c buys with the same
5 in money yarn from I, and this 5 in money flows back
to the producer of yarn. Now we had assumed that I g
(meaning the producer of gold) advanced to his laborers
5 v in money which had previously belonged to the circula-
tion. The laborers spend it for articles of consumption,
but only 2 of the 5 return from II to I g. However, I g
can begin his process of reproduction anew, just as well as
the producer of yarn. For his laborers have supplied him
with 5 in gold, 2 of which he sold, and 3 of which he still
has, so that he has but to coin it, 49 or exchange it for bank
notes, in order that his entire variable capital may be im-
mediately in his hands, without the intervention of II.

Even this very first process of annual reproduction has
wrought a change in the quantity of money actually or
virtually in circulation. We assumed that II c bought 2 v
from I g for material, and that I g invested 3 in II as the
money-form of its variable capital. In other words, 3 of the
amount of money supplied by the new gold production
remained within department II and did not return to I.
According to our assumption II has satisfied its needs for
gold material. The 3 remain in its hands as a hoard of
gold. Since they cannot constitute any elements of its con-
stant capital, and since II had previously enough money-
capital for the purchase of labor-power; since, furthermore,
these additional 3 g, with the exception of the element
making good the loss through depreciation, have no func-
tion to perform within II c, for a portion of which they

49 "A considerable quantity of gold bullion ... is taken by the
gold diggers directly to the Mint in San Francisco." — Reports of H. M.
Secretaries of Embassy and Legation. 1879. Part III, p. 337.

550 Capital.

were exchanged (they could only serve to cover a shortage
in the element making good loss through depreciation, in
the case that section 1 of department II should be smaller
than section 2 of department II, which would be accidental) ;
and since, on the other hand, the entire commodity-pro-
duct of II c, with the exception of the element making
up for depreciation, must be exchanged for means of pro-
duction of I (v-fs) ; therefore this money must be en-
tirely transferred from II c to II s, no matter whether it
exists in necessities of life or articles of luxury, and vice
versa, a corresponding value of commodities must be trans-
ferred from lis to II c. Result : A portion of the surplus-
value is accumulated as a hoard of money.

In the second year of reproduction, when the same pro-
portion of annually produced gold continues to be used
as material, 2 will again flow back to I g, and 3 will be re-
produced in its natural form, that is to say, it will be set
aside in department II as a hoard, etc.

With reference to the variable capital in general, it may
be said that the capitalist of I g must continually advance
money for the purchase of labor-power, the same as every
other capitalist. But so far as these wages are concerned,
it is not he, but his laborers who buy from II. He can
never appear as a buyer, transferring gold to II, without the
initiative of II. But to the extent that II buys material
from him for the purpose of converting its constant capital
II c into a gold supply, a portion of the v of I g flows back
to it from II in the same way that it does to other capitalists
of I. And so far as this is not the case, he reproduces his
v in gold direct from his product. But to the extent that
the v advanced by him in money does not flow back to him
from II, a portion of the existing medium of circulation
(received from I and not returned to it) is converted by II
into a hoard and a portion of its surplus-value is not con-
verted into articles of consumption. Since new gold mines
are continually opened or old ones re-opened, a certain
proportion of the money invested by I g in v is always
money existing previously to the new gold production, and
passing from I g by way of its laborers into II, where it be-

Simple Reproduction. 551

cnnes an element in the formation of a hoard, or as much
of it as is not returned from II to I g.

But as for (Ig)s, department I g can always act as a
buyer in this case. It throws its s in the shape of gold into
circulation and withdraws from it in return articles of con-
sumption of II c. The gold is there used in part as material,
and thus serves as a real element of the constant portions
c of productive capital II. And any portion of the gold
not so employed becomes once more an element in the
formation of a hoard in the role of that part of II s which
retains the shape of money. We see, then, — aside from I c
which we reserve for a later analysis — that even simple re-
production, excluding accumulation strictly so called,
namely reproduction, on an enlarged scale, inevitably in-
cludes the accumulation, or hoarding, of money. 50 And
as this is annually repeated, it explains the assumption
from which we started in the analysis of capitalist produc-
tion, namely that a supply of money corresponding to the
exchange of commodities i* in the hands of the capitalists
of departments I and II at the beginning of the reproduc-
tion. Such an accumulation takes place even after deducting
the amount of gold lost by the depreciation of money in
circulation.

It is a matter of course, that the quantity of money
accumulated on all sides increases in proportion to the ad-
vancing age of capitalist production, and that the quantity
annually added to this hoard by the production of new
gold decreases proportionately, although the absolute quan-
tity thus added may be considerable- We revert once more
in general terms to the objection raised against Tooke and
contained in the question : How is it possible that every
capitalist draws a surplus-value in money out of the circula-
tion, in other words, draws more money out of the circula-
tion than he throws into it, seeing that the capitalist class
must be the ultimate source which throws all money into
circulation ?

50 The analysis of the exchange of newly produced gold within the
constant capital of department I is not contained in the manuscnot. —
F. E.

552 Capital.

We reply by summarizing the statements made previously
(in chapter XVII) :

(1 ) The only essential assumption, namely, that there is
money enough available for the exchange of the various
elements of annual reproduction, is not touched by the fact
that a portion of the value of commodities consists of sur-
plus-value. Take it that the entire production belonged to
the laborers, so that their surplus-labor were done for them-
selves, not for the capitalists, then the quantity of circulat-
ing commodity-values would be the same and, other cir-
cumstances remaining equal, would require the same
amount of money for circulation. The question in either
case is therefore only: Where does the money come from
which serves as a medium of exchange for this quantity of
commodity-values ? It is not at all : Where does the money
come from which monetizes the surplus-value?

It is true, to repeat it once more, that every individual
commodity consists of c + v + s, and the circulation of the
entire quantity of commodities therefore requires a certain
quantity of money for the circulation of the capital c + v,
and another for the circulation of s, the revenue of the
capitalists. For the individual capitalist as well as for the
entire capitalist class, the money in which they advance
capital is distinct from the money in which they spend their
revenue. Where does this last money come from? Simply
from the entire quantity of money available in society, a
portion of which circulates as the revenue of the capitalists.
We have already seen in previous instances that every capi-
talist establishing a new business recovers the money which
he spent for his maintenance in the purchase of articles of
consumption, by the process of converting his surplus-value
into money, once that his business is fairly under way.
But generally speaking the difficulty is due to two sources:

In the first place, if we analyze only the circulation and
the turn-over of capital, regarding the capitalist merely as
a personification of capital, not as a capitalist consumer and
sport, then we see indeed that he is continually thrf*w«i3r
surplus-value into circulation as a part of his commodity-
capital, but we never see money as a form of revenue in his

Simple Reproduction. 553

hands. We never see him throwing money into circulation
for the consumption of his surplus-value.

In the second place, if the capitalist class throw a certain
amount of money into circulation in the shape of revenue,
it seems as though they were paying an equivalent for this
portion of the total annual product, so that this portion is
then no longer surplus-value. But the surplus product in
which the surplus value is incorporated does not cost the capi-
talist anything. As a class, they possess and enjoy it gratu-
itously, and the circulation of money cannot alter this fact.
The alteration due to this circulation consists marely in the
fact that every capitalist, instead of consuming his surplus-
product in its natural form, a thing which is generally im-
possible, draws commodities of all sorts up to the amount
of his surplus-value out of the general stock of the annual
surplus-product of society and appropriates them for his
own use. But the mechanism of the circulation has shown
that the capitalist class, while throwing money into the
circulation for the purpose of spending their revenue, also
recover this money from the circulation, so that they can
continue the same process over and over; so that, as a class
of capitalists, they always remain in possession of the
amount of money necessary for the monetization of their
surplus-value. Hence, seeing that the capitalist does not
only withdraw his surplus-value from the market in the
form of commodities for his individual consumption, but
also the money which he has paid for these commodities,
it is evident that he secures the commodities without paying
an equivalent for them. They do not cost him anything,
although he pays money for them. If I buy commodities
for one pound sterling and recover this money from the
seller by means of a surplus product which I got for nothing,
it is obvious that I have received the commodities gratis-
The continual repetition of this transaction does not alter
the fact that I continually secure commodities and con-
tinually remain in possession of my pound sterling, al-
though I release it temporarily in the purchase of the com-
modities. The capitalist continually retains this money as

554 Capital.

an equivalent of surplus-value that has not cost him any-
thing.

We have seen that with Adam Smith the entire value of
the social product resolves itself into revenue, into v +s,
so that the constant capital-value is set down as zero. It
follows necessarily that the money required for the circula-
tion of the yearly revenue must also suffice for the circula-
tion of the entire annual product, so that, in our illustra-
tion, the money of 3000 required for the circulation of
the articles of consumption of the same value must also suf-
fice for the circulation of the entire annual product valued at
9000. This is indeed the opinion of Adam Smith, and it
is repeated by Th. Tooke. This erroneous conception of
the ratio of the quantity of money required for the realiza-
tion of the revenue to the quantity of money required for
the circulation of the entire social product is a necessary
result of misapprehending, thoughtlessly conceiving the
manner in which the various elements of material and value
of the total annual product are reproduced and annually re-
newed. It has already been refuted by us.

Let us listen to Smith and Tooke themselves.

Smith says in Book II, chapter 2: "The circulation of
every country may be divided into two parts : the circulation
of the merchants among themselves and the circulation be-
tween merchants and consumers. Although the same pieces
of money, paper or metal, may be used now in the one, now
in the other circulation, both of them nevertheless take place
continually side by side, and each one of them requires
therefore a certain quantity of money of this or that kind
in order to keep moving. The value of the commodities
circulating among the various merchants can never exceed
the value of the commodities circulating between merchants
and consumers; for whatever the merchants may buy must
be sold ultimately to the consumers. As the circulation
between the merchants is wholesale, it generally requires
a rather large sum for every exchange. The circulation
between merchants and consumers, on the other hand, is
mostly retail and requires often but very small sums of
monev: one shilling, or even half penny, suffices sometimes.

Simple Reproduction. 555

But small sums circulate much more rapidly than large
ones. * * * * Although the annual purchases of all con-
sumers are therefore at least" — this at least is rich — "equal
in value to those of the merchants, they may nevertheless
be effected, as a rule, with a much smaller quantity of
money," etc.

Th. Tooke remarks to this passage of Adam Smith (in
"An Inquiry into the Currency Principle," London, 1844,
pages 34 to 36) : "There cannot be any doubt that the
distinction here made is essentially correct. * * * * The ex-
change between merchants and consumers includes also the
payment of wages, which are the principal means of the con-
sumers. * * * * All transactions between merchant and mer-
chant, that is to say, all sales from the producer or importer,
through all gradations of intermediate processes of manu-
facture, etc., down to the retail merchant or export mer-
chant, may be dissolved into movements transferring capital.
But transfers of capital do not necessarily imply, nor indeed
carry actually with them, in the great number of exchanges,
a real cession of bank notes or coin — I mean a substantial,
not a fictitious, cession — at the time of transfer. * * * * The
total amount of exchanges between merchants and mer-
chants must in the last instance be determined and limited
by the amount of exchanges between merchants and con-
sumers."

If this last sentence stood by itself, one might think that
Tooke stated simply the fact of a ratio between the ex-
changes of merchants and merchants and those of mer-
chants and consumers, in other words, a ratio between the
value of the total annual revenue and the value of the
capital with which it is produced. But this is not the case.
He explicitly endorses the view of Adam Smith. A special
criticism of his theory of circulation is therefore super-
fluous.

(2) Every industrial capital, when beginning its career,
throws at one single investment enough money into circula-
tion to cover its entire fixed element, which it recovers but
gradually in the course of years by the sale of its annual
products. Thus it throws at first more money into circula-

556 Capital.

tion than it recovers from it. This is repeated at every re<
newal of its entire capital in a natural form. It is repeated
every year in a certain number of enterprises whose fixed
capital must be renewed in its natural form. It is repeated
in fragments at every repair, every partial renewal of fixed
capital. While more money is on the one hand withdrawn
from circulation than is thrown into it, the opposite takes
place on the other hand.

In all lines of industry whose period of production — as
distinguished from the working period — extends over a long
term, money is continually thrown into circulation during
this period by the capitalist producers, either in payment
for labor-power employed, or in the purchase of means of
production to be consumed. Means of production are thus
directly withdrawn from the commodity market, and articles
of consumption jither indirectly by the laborers spending
their wages, or directly by the capitalists, who do not by any
means stop consuming, although they do not immediately
throw any equivalent on the market, in the shape of com-
modities. During this period, the money thrown by them
into circulation serves for the conversion of the value of com-
modities, including the surplus value embodied in them,
into money. This element becomes very important in an
advanced stage of capitalist production in the case of lengthy
enterprises, such as are undertaken by stock companies, for
instance the construction of railways, canals, docks, large
municipal buildings, iron ships, drainage of land on a large
scale, etc.

(3) While the other capitalists, aside from the invest-
ment of fixed capital, draw more money out of the circula-
tion than they threw into it in the purchase of labor-power
and the circulating elements of capital, the gold and silver
producing capitalists, on the other hand throw only money
into the circulation, aside from the precious metals which
serve as raw material, while they withdraw only commod-
ities from it. The constant capital, with the exception of
the depreciated portion, furthermore the greater portion of
the variable capital and the entire surplus-value, with the
exception of the hoard which is eventually accumulated in

Simple Reproduction. 557

the hands of these capitalists, is thrown into the circulation
as money.

(4) On one side, various things circulate as commodities
which were not produced during the current year, such as
real estate, houses, etc., furthermore products whose period
of production extends over more than one year, such as
cattle, wood, wine, etc. It is important to emphasize in this
respect that aside from the quantity of money required for
the immediate circulation, there is always a certain quantity
in a latent state which may enter into service when so re-
quired. Furthermore, the value of such products circulates
often in fractions and gradually, for instance, the value of
houses in the rents of a number of years.

On the other hand, not all movements of the process of
reproduction are promoted by the circulation of money.
The entire process of production, once that its elements have
oeen purchased, is excluded from it. Furthermore all prod-
ucts, which the producer consumed directly in his own
individual or productive consumption- Under this head be-
longs also the board of agricultural laborers.

The quantity of money, then, which circulates the annual
product, exists in society, having been gradually accumu-
lated. It does not belong to the values produced during the
current year, with the exception of the gold used for making
good the loss of depreciated money .

This presentation of the matter assumes the exclusive
circulation of precious metals as money, and the simplest
form of cash purchases and sales, although even plain met-
als, as a basis of circulation, may serve as money, and have
actually so served in history and have been the fundament
for the development of a credit system and of certain por-
tions of its mechanism.

This assumption is not made from mere considerations
of method, although these are important enough, as demon-
strated by the fact that Tooke and his school as well as his
adversaries were continually compelled in their controversies
concerning the circulation of bank notes to revert to the
hypothesis of a purely metallic circulation. They were com-
pelled to do so subsequently, and did so very superficially,

558 Capital.

because they thus reduced to an incidental point what should
have been the point of departure of their analysis.

But the simplest study of the circulation of money in its
primitive form, which is the immanent factor of the pro-
cess of annual reproduction, demonstrates:

(a) Assuming capitalist production to be developed to
the point where the wage system predominates, money-cap-
ital evidently plays a prominent role, seeing that it is the
form in which the variable capital is advanced. To the ex-
tent that the wage system develops, all products are con-
verted into commodities and must, therefore, pass through
the stage of money as one phase of their metamorphoses,
with a few important exceptions. The quantity of circulat-
ing money must suffice for this conversion of commodities
into money, and the greater part of this quantity is fur-
nished in the form of wages, in that money, which is the
money-form of the variable capital advanced by the in-
dustrial capitalists in payment for labor-power, and which
serves in the hands of the laborers overwhelmingly as a
medium of circulation (of purchase). It is quite the reverse
undsr a system of natural economy such as was predom-
inant under every form of vassalage (including serfdom),
and still more in more or less primitive communities,
whether they are infected by conditions of vassalage or
slavery, or not.

In a slave system, the money-capital invested in the pur-
chase of slaves plays the role of the fixed capital in money-
form, which is but gradually replaced after the expiration
of the active life period of the slaves. Among the Athenians,
therefore, the gain realized by a slave owner through the
industrial employment of his slaves, or indirectly by hiring
them out to other industrial employers (for instance mine
owners), was regarded merely as an interest (with sinking
fund) on the advanced money-capital, just as the industrial
capitalist under capitalist production places a portion of the
surplus^value plus the depreciation of his fixed capital to
the account of interest and renewal of his fixed capital- This
is also the rule in the case of capitalists offering fixed capital,
such as houses, machinery, etc., for rent. Mere household

Simple Reproduction. 559

slaves, who perform the necessary services or are kept
as luxuries are not considered here. They correspond
to the modern servant class. But the slave system
— so long as it is the dominant form of productive
labor in agriculture, manufacture, navigation, etc., as
it was in the advanced states of Greece and Rome —
preserves an element of natural economy. The slave market
maintains its supply of labor-power by war, piracy, etc., and
this rape is not promoted by a process of circulation, but
by the natural appropriation of the labor-power of others
by physical force. Even in the United States, after the con-
version of the neutral territory between the wage labor
states of the North and the slave labor states of the South
into a slave breeding region for the South, where the slave
thus raised for the market had become an element of annual
reproduction, this method did not suffice for a long time,
so that the African slave trade was continued as long as
possible for the purpose of supplying the market.

(b) The natural flux and reflux of money by the ex-
change of the annual products on the basis of capitalist pro-
duction; the advances of fixed capital in one bulk to the
full value and the gradual and prolonged recovery of this
outlay from the circulation in the course of successive years,
in other words, the gradual reconstitution of fixed capital
in money by the annual formation of a hoard, which is dif-
ferent from the simultaneous accumulation of a hoard based
on the annual production of new gold; the different length
of time in which money is advanced according to the dura-
tion of the periods of reproduction of commodities, and in
which money must, therefore, be accumulated anew, before
it can be recovered from the circulation by the sale of com-
modities; the different length of time for which money
must be advanced, resulting even from the different dis-
tances of the places of production from their selling market;
furthermore the differences in the magnitude and period
of the reflux according to the relative size or condition of
the productive supplies in the various lines of business and
in the individual businesses of the same line, and with them
the terms at which the elements of constant capital are

560 Capital.

bought — all this taking place during the year of reproduc-
tion, it was necessary that all these different factors should
be noted and brought home by experience in order to give
rise to a systematization of the mechanical aids of the credit-
system and to an actual discovery of whatever capital was
available for lending.

This is further complicated by a difference between lines
of business whose production proceeds continuously under
normal conditions on the same scale, and those which are
carried on at different scales at different periods of the year,
such as agriculture.

XIII. DESTUTT DE TRACY S THEORY OF REPRODUCTION.

As an illustration of the confused and at the same time
boastful thoughtlessness of political economists - analyzing
social reproduction, the great logician Destutt de Tracy may
serve (compare volume I, page 181, footnote 1), whom even
Ricardo took seriously, calling him a very distinguished
writer.

This distinguished writer makes the following revelations
concerning the entire process of social reproduction and
circulation :

"One may ask me how these industrial capitalists can
make such large profits and out of whom they can draw
them. I reply that they do so by selling everything which
they produce for more than it has cost to produce ; and that
they sell

(1) to one another to the extent of the entire share of
their consumption, intended for the satisfaction of their
needs, which they pay with a portion of their profits ;

(2) to the wage workers, both those whom they pay and
those whom the idle capitalists pay; from these wage
workers they recover the entire wages in this way, except
what little they may save;

(3) to the idle capitalist, whom they pay with a por-
tion of their revenue which they have not spent for the
wages of the laborers employed by them directly; so that the

Simple Reproduction. 561

entire rent, which they pay them annually, flows back to
them in this way." (Destutt de Tracy, Traite de la
volonte et de ses effets. Paris, 1821. Page 239.)

In other words, the capitalists enrich themselves by
mutually getting the best of one another in the exchange
of that portion of their surplus-value which they reserve
for their individual consumption, or consume as revenue.
For instance, if this portion of their surplus-value, or of
their profits, is 400 p. st., this sum is supposed to be increased
to, say, 500 p. st. by mutually selling their respective shares
at an excess of 25% over the normal. Bat if all do the
same, the result will be just what it would have been if they
had mutually sold their shares at their normal values. They
merely need in that case 500 p. st. in money for the circula-
tion of commodities valued at 400 p. st., and this would
seem to be rather a method of impoverishing than of en-
riching themselves, since it means that they are compelled
to reserve a large portion of their total wealth unproduc-
tively in the state of a medium of circulation. The out-
come is simply that the capitalist class can divide only 400
p. st.'s worth of commodities among themselves for their
individual consumption, after nominally raising prices all
around, but that they do one another the favor of circulat-
ing 400 p. st.'s worth of commodities by means of a quantity
of money which would just as well circulate 500 p. st.'s
worth of commodities.

And this is saying nothing about the fact that the as-
sumption deals here only with a "portion of their profits,"
or any supply of commodities representing profits. But
Destutt undertook precisely to tell us where these profits
come from. The quantity of money required to circulate
it represents a very subordinate question. It seems that the
quantity of commodities, in which the profit is incorporated,
is produced by the circumstance that the capitalists do not
only sell these commodities to one another (an assumption
which is quite fine and profound), but also mutually sell
them too dearly. Thus we are acquainted with the secret
of the wealth of the capitalists. It is on a par with the

562 Capital.

secret of Reuter's funny "Inspector Braesig" who discovered
that the great poverty is due to the great "pauvrete."

(2) The same capitalists, furthermore, sell "to the wage
workers, both those whom they pay and those whom the idle
capitalists pay; from these wage workers they recover the
entire wages in this way, except what little they may save."

According to Destutt, then, the reflux of the money-capi-
tal advanced to the laborers as wages, is the second source
of the wealth of the capitalists.

For instance, if the capitalists have paid 100 p. st. to their
laborers as wages, and if these same laborers buy from the
same capitalists commodities of this same value of 100 p. st.,
so that what the capitalists have advanced to the laborers
as wages returns to the capitalists when the laborers spend
it for commodities, then the capitalists get richer- A com-
mon mortal would think that the capitalists recover only
their 100 p. st., which they possessed before this transac-
tion. At the beginning of the transaction they have 100 p.
st. They buy labor-power valued at 100 p. st. This labor-
power, so bought, produces commodities of a certain value,
which, so far as we know, amounts to 100 p. st. By selling
these commodities for 100 p. st. to their laborers, the capital-
ists recover 100 p. st. in money. The capitalists then have
once more 100 p. st., the same as before, and the laborers
have 100 p- st.'s worth of commodities which they have
themselves produced. It is hard to understand how that
can make the capitalists any richer. If they did not recover
the 100 p. st., then they would have to pay first 100 p. st.
to the laborers in wages and then to give them their product
for nothing, although it is also worth 100 p. st. The reflux
of this money might therefore at best explain, why the
capitalists do not get any poorer by this transaction, but
not, why they get richer by it.

It is another question, how the capitalists got possession
of the 100 p. st., and why the laborers, instead of working
for their own account, are compelled to exchange their
labor-power for this money. But this is a fact which is self-
explanatory for a thinker of Destutt's caliber.

Simple Reproduction. 563

However, Destutt himself is not quite satisfied with his
solution. He did not simply tell us that the capitalists get
richer by spending a sum of 100 p. st. in money and then
recovering the same amount He had not plainly spoken
of a reflux of 100 p. st. which merely explains why this
money is not lost. He had told us that the capitalists get
richer "by selling everything which they produce for more
than it has cost to produce."

Consequently the capitalists must also get richer by their
transaction with the laborers by selling too dearly to them.
Very well ! "They pay wages * * * * and all this flows back
to them by the expenditures of all these people who pay
them more" (for the products) "than they cost the capital-
ists in wages." (Page 240.) In other words, the capitalists
pay 100 p. st. in wages to the laborers, and then they sell
to these laborers their own product at 120 p. st., so that they
not only recover their 100 p. st., but also gain 20 p. st. That
is impossible. The laborers can pay for the commodities
only with the money which they receive in the form of
wages. If they get only 100 p. st. in wages, they can buy
only 100 p. st.'s worth, not 120 p. st.'s worth. This is there-
fore impracticable. But there is still another way. The
laborers buy from the capitalists commodities for 100 p. st.,
but receive only 80 p. st.'s worth. They are cheated out of
20 p. st. Then the capitalists have certainly gained 20 p. st.,
because he practically pays 20% less than the actual value
for labor-power. This is equivalent to cutting wages 20%
by a circuitous route.

The capitalists would accomplish the same end if they
paid the laborers in the first place only 80 p. st.. in wages
and gave them only 80 p. st.'s worth of commodities in ex-
change. This seems to be the normal way for the class of
capitalists as a whole, for according to Destutt the laboring
class must "receive sufficient wages" (page 219), since their
wages must be at least sufficient to maintain them alive and
working, "to gain the barest subsistence" (page 180). If
the laborers do not receive such sufficient wages, then that
means according to the same Destutt "the death of industry"
(page 208), which does not seem to be a way by which the

564 Capital.

capitalists can get richer. But whatever may be the scale of
wages, paid by the capitalists to the laborers, they have a
certain value, for instance, 80 p. st. If the capitalist class
pays the laborers 80 p. st., then it has to supply them with
commodities worth 80 p. st. in exchange for these wages,
and the reflux of this sum does not make the capitalists any
richer. If the capitalists pay the laborers 100 p. st- in wages,
and supply them in exchange for 100 p. st. only with
80 p. st.'s worth of commodities, then they pay 20% above
the normal scale in wages and supply on the other hand
20% less in commodities.

In other words, the fund from which the capitalist class
would derive its profits, would be made up of deductions
from the normal scale of wages of the laborers, by paying
less than its value for labor-power, in other words, less than
the value of the necessities of life required for the normal
reproduction of the laborer. If the normal scale of wages
were paid, which is supposed to be the case according to
Destutt, there can be no fund for profits, neither for the
industrial nor for the idle capitalists.

Hence Destutt should have reduced the entire secret of
how the capitalist class get richer, to these words : A deduc-
tion from the wages of the laborers. In that case the other
sources of surplus- value, which he mentions under (1) and
(3), would not exist.

Under these conditions all the countries, in which the
money paid to the laborers in wages is reduced to the value
of the articles of consumption required for the subsistence
of the working class, would not have any fund for the con-
sumption, of capitalists, nor any fund for the accumulation
of capital. In other words, there would be no fund permit-
ting a capitalist class to live, and therefore no capitalist
class- And according to Destutt this would be the case in
all wealthy and developed countries with an old civilization.
for in them, "in our deeprooted old societies, the fund from
which wages are paid * * * * is an almost constant magni-
tude" (page 202).

Even with a deduction from the wages, the capitalist does
not enrich himself by first paying the laborer 100 p. st. in

Simple Reproduction. 565

wages and then supplying him with 80 p. st.'s worth of
commodities for 100 p. st. of wages, in other words, by cir-
culating 80 p. st.'s worth of commodities by means
of 100 p. st., an excess of 20%. The capitalist gets richer
by appropriating, aside from the surplus-value — that portion
of the product in which surplus-value is incorporated — 20%
of that portion of the product which the laborer should
receive in exchange for his wages: The capitalist class
would not gain anything by the silly method which Destutt
assumes. They pay 100 p. st. for wages and give to the
laborer for these 100 p. st. a part of his own product valued
at 80 p. st- But in the next transaction they must again
advance 100 p. st. for the same purpose. They would thus
indulge in the useless sport of advancing 100 p. st. in money
and giving in exchange therefor 80 p. st. in commodities,
instead of paying 80 p. st. and exchanging it for 80 p. st.
in commodities. That is to say, they would be continually
advancing a money-capital which is 20% in excess of the
normal required for the circulation of their variable capital.
That is a very peculiar method to get rich.

(3) The capitalist class, finally, sells "to the idle capital-
ists, whom they pay with a portion of their revenue which
they have not spent for the wages of the laborers employed
by them directly; so that the entire rent, which they pay
them annually, flows back to them in this way."

We have seen a while ago that the industrial capitalists
pay with a portion of their profits "the entire share of their
consumption, intended for the satisfaction of their needs."
Take it, then, that their profits amount to 200 p. st. And
let them consume 100 p. st. of this in their individual con-
sumption. But the other half, or 100 p. st., does not belong
to them. It belongs to the "idle" capitalists, that is to
say, to those who take ground rent and lend money on in-
terest. In other words, they have to pay 100 p. st. to this
gentry. Let us assume that this gentry use 80 p. st. for their
individual consumption, and 20 p- st. for the purchase of
servants, etc. They buy with those 80 p. st. articles of con-
sumption from the industrial capitalists. These capitalists,
then give up commodities valued at 80 p. st. and receive in

566 Capital.

return 80 p. st. in money, or four fifths of the 100 p. st. paid
by them to the idle capitalists under the name of rent, in-
terest, etc. The servant class, who are the wage workers
directly in attendance upon the idle capitalists, have received
20 p. st. from their masters. These servants likewise buy
articles of consumption from the industrial capitalists to the
amount of 20 p. st. In this way these capitalists recover
also the last 20 p. st., or the last fifth, of the 100 p. st., which
they have paid to the idle capitalists for rent, interest, etc.,
while they give up in return commodities valued at 20 p. st.

At the close of this transaction the industrial capitalists
have recovered the full 100 p. st., which they paid to the idle
capitalists for rent, interest, etc., in money. But one half of
their surplus products, valued at 100 p. st., have passed
from their hands into the fund for the individual consump^
tion of the idle capitalists.

It is evidently immaterial for the present question,
whether the division of the 100 p. st. among the idle capi-
talists and their dependent wage workers is drawn into this
discussion or not. The matter is simple: Their rent, in-
terest, in short, their share in the surplus-value of 200 p. st..
is paid to them by the industrial capitalists in money to thf
amount of 100 p. st. With these 100 p. st. they buy directly
or indirectly articles of consumption from the industrial
capitalists. They return the 100 p. st. in money to them and
take from them instead articles of consumption valued at
100 p. st.

This completes the reflux of the 100 p. st. paid by the in-
dustrial capitalists to the idle capitalists. Is this transac-
tion a means of making the industrial capitalists any richer,
as Destutt imagines? Before this transaction they had
values amounting to 200 p. st., 100 being money and 100
articles of consumption. After the transaction they have
only one half of the original amount of values. They have
once more 100 p. st. in money, but they have lost the ar-
ticles of consumption valued at 100 p. st., which have passed
into the possession of the idle capitalists. In other words,
they have become poorer to the extent of 100 p. st., instead
of being richer. If, instead of first choosing the circuitous

Simple Reproduction. 567

route of paying out 100 p. st. in money, and then receiving
this money back in payment for articles of consumption
valued at 100 p. st., they had paid rent, interest, etc., directly
in the natural form of commodities, then they would not
recover any 100 p. st. in money, because they did not throw
that amount of money into the circulation. In the case of a
payment in commodities, the transaction would simply have
been confined to keeping one-half of the surplus product
of 200 p. st. for themselves and giving the other half to the
idle capitalists without receiving any equivalent in return.
Even Destutt would not have been able to consider this a
means of getting richer.

Of course, the land and capital borrowed by the industrial
capitalists from the idle capitalists and paid for by a por-
tion of their surplus-value in the form of ground rent and
interest, etc., are profitable for them, for they constitute one
of the conditions for the production of any commodity, and
more especially of that portion of the product, which creates
surplus-value, or in which surplus-value is incorporated.
This profit flows from the use of the borrowed land and
capital, not out of the price paid for them. This price rather
constitutes a deduction from the profit. Or one would have
to contend, that the industrial capitalists do not get richer,
but poorer, if they are enabled to keep the other half of their
surplus-value, instead of being compelled to give it up. This
is the confusion which results from the indiscriminate mix-
ing up of such phenomena of circulation as a reflux of
money with the distribution of the product, which is merely
promoted by this circulation.

And yet the same Destutt is so sharp as to remark:
"Whence come the revenues of these idle people? Do they
not come out of the rent paid by them out of the profits
of those who put the capitals of the former to work, that is
to say, who pay with the funds of the former a certain
kind of labor which produces more than it costs, in other
words, the profits of the industrial capitalists? It is always
necessary to revert to them, in order to find the source of
wealth. It is they who in reality feed the wage workers em-
ployed by the idle capitalists." (Page 246).

568 Capital.

In other words, in this quotation the rent, etc., of the idle
capitalists is a deduction from the profit of the industrial
capitalists. In former quotations it was a means of enriching
them.

But at least one consolation is left for our friend Destutt.
These good industrials treat the idle capitalists in the same
way that they have treated one another and their laborers.
They sell them all commodities too dearly, for instance, at
a raise of 20%. Now there are two possibilities. The idle
capitalists either have other funds of money aside from the
100 p. st. which they receive from the industrials, or they
have not. In the first case, the industrials sell them com-
modities valued at 100 p. st. at a price of, say, 120 p. st. In
other words, they recover by the sale of their commodities
not only the 100 p. st. paid to the idle capitalists, but also
20 p. st. of new values. Now, how stands the account ? They
have given away 100 p. st. in commodities for nothing, for
the 100 p. st. that paid for their commodities were their
own money. Their own commodities have been paid with
their own money. In other words, they have lost 100 p. st.
But they have also received an additional sum of 20 p. st.
in the price of their commodities. In other words, 20 p. st.
of gain. Balance this against the loss of 100 p. st., and you
still have a loss of 80 p. st. Never a plus, always a minus.
The advantage taken by the industrials over the idle capital-
ists has reduced the loss of the industrials, but for all that it
has not transformed a reduction of their wealth into an
increase of wealth. But this method cannot go on in-
definitely, for the idle capitalists cannot pay year after year
120 p. st., if they receive only 100 p. st.

There remains the other possibility. The industrials sell
commodities valued at 80 p. st. in exchange for the 100 p. st-
paid to the idle capitalists. In this case, they still give away
80 p. st. for nothing, in the form of rent, interest, etc. By
means of cheating the industrials have reduced their tribute
to the idlers, but it nevertheless is exacted from them the
same as ever, and the idlers are enabled, on the same theory,
assuming the prices to depend on the free will of the sellers,

Simple Reproduction. 569

to demand in the future 120 p. st. instead of 100 p. st. as
rent and interest on their land and capital.

This brilliant analysis is quite worthy of that depth of
thought which copies on the one hand from Adam Smith
that " labor is the source of all wealth" (page 242), that the
industrial capitalists "employ their capital for the payment
of labor that reproduces it with a profit" (page 246), and
which concludes on the other hand that these industrial
capitalists "maintain all the other people, are the only ones
who increase the public wealth, and create all the means
for our enjoyment" (page 242), that it is not the capitalists
who are maintained by the laborers, but the laborers who
are maintained by the capitalists, for the brilliant reason
that the money, with which the laborers are paid, does not
remain in their hands, but continually returns to the capi-
talists in payment of the commodities produced by the
laborers. "They receive only with one hand, and return with
the other. Their consumption must therefore be regarded
as being due to those who pay their wages." (Page 235).

After this exhaustive analysis of social reproduction and
consumption, as promoted by the circulation of money,
Destutt continues: "This is what perfects this perpetuum
mobile of wealth, this movement which, though ill under-
stood" (I should say so!) "yet has justly been named cir-
culation. For it is indeed a circulation and always returns
to its point of departure. This is the point where produc-
tion is accomplished." (Pages 139, 140.)

Destutt, that very distinguished writer, membre de I'ln-
stitut de France et de la Societe Philosophique de Phila-
delphie, and indeed to a certain extent a beacon light
among the vulgar economists, finally requests his readers to
admire the wonderful lucidity with which he has presented to
them the course of the social process, the flood of light which
he has poured over the matter, and he is condescending
enough to communicate to his readers, where all this light
somes from. This must be read in the original in order to
be appreciated.

"On remarquera, j'espere, combien cette maniere de con-

570 Capital.

siderer la consommation de nos richesses est corcordante
avec tout oe que nous avons dit a propos de leur production
et de leur distribution, et en meme temps quelle clarte elle
repand sur toute la marche de la societe. D'ou viennent
cet accord et cette luciditef De ce que nous avons ren-
contre la verite. Cela rappelle 1' effet de ces miroirs ou les
objets se peignent nettement et dans leurs justes propor-
tions, quand on est place dans leur vrai point-de-vue, et ou
tout parait confus et desuni, quand on est trop pres ou
trop loin." (Pages 242, 243). (It will be noted, I hope,
how much this manner of viewing the consummation of our
wealth is in accord with all we have said concerning its pro-
duction and distribution, and also how much light it throws
on the entire course of society. Whence come this accord
and this lucidity ? It is due to the fact that we have met truth
face to face. This recalls the effect of those mirrors, in
which the objects are reflected clearly and in their true pro-
portions, when we are placed in their correct focus, but in
which everything appears confused and distorted, when we
are too close or too far away from them) .

There you have the bourgeois idiocy in all its beatitude!

Accumulation and Reproduction. 571

CHAPTER XXI.51

ACCUMULATION AND REPRODUCTION ON AN ENLARGED SCALE.

It has been shown in Volume I, how accumulation works
in the case of the individual capitalist. By the conversion
of the commodity-capital into money, the surplus-product,
in which the surplus-value is incorporated, is also mone-
tized. The capitalist reconverts the surplus-value thus
monetized into additional natural elements of his product-
ive capital. In the next cycle of production the increased
capital furnishes an increased product. But what happens
in the case of the individual capital, must also show in the
annual reproduction of society as a whole, just as we have
seen it done in the case of reproduction on a simple scale,
where the successive precipitation of the depreciated ele-
ments of fixed capitals in the form of money, accumulated
as a hoard, also makes itself felt in the annual reproduc-
tion of society.

If a certain individual capital amounts to 400 c + 100
v, with an annual surplus-value of 100 s, then the product
in commodities amounts to 400 c + 100 v + 100 s. This
amount of 600 is converted into money. Of this money,
again, 400 c are converted into the natural form of con-
stant capital, 100 v into labor-power, and — provided that
the entire surplus-value is accumulated — 100 s are converted
into additional constant capital by their transformation into
natural elements of productive capital. The following as-
sumptions go with this case: (1) That this amount is suf-
ficient under the given technical conditions either to expand
the existing constant capital, or to establish a new indus-
trial business. But it may also happen that surplus-value
must be converted into money and this money hoarded for

51 From here to the end manuscript VIII.

572 Capital.

a much longer time, before these steps may be taken, before
actual accumulation, or expansion of production, can take
place. (2) It is furthermore assumed that production on
an enlarged scale has actually been in process previously.
For in order that the money (the surplus-value hoarded as
money) may be converted into elements of productive capi-
tal, these elements must be available on the market as com-
modities. It makes no difference whether they are bought
as finished products, or made to order. They are not paid
for until they are finished, and at any rate, until actual re-
production on an enlarged scale, an expansion of hitherto
normal production, has taken place so far as they are con-
cerned. They had to be present potentially, that is to say,
in their elements, for it required only an impulse in the
form of an order, that is to say, a purchase preceding their
actual existence and anticipating their sale, in order to
stimulate their production. The money on one side in that
case calls forth expanded reproduction on the other, be-
cause the possibility for it exists without the money. For
money in itself is not an element of actual reproduction.

For instance, capitalist A, who sells during one year, or
during a number of successive years, certain quantities of
commodities produced by him, thereby converts that por-
tion of the commodities, which bears surplus-value, the
surplus-product, or, in other words, the surplus-value pro-
duced by himself, successively into money, accumulates it
gradually, and thus makes for himself a new potential
money-capital. It is potential money-capital on account of
its capacity and destination of being converted into the
elements of productive capital. But practically he merely
accumulates a simple hoard, which is not an element of
actual production. His activity for the time being consists
only in withdrawing circulating money out of circulation.
Of course, it is not impossible that the circulating money
thus laid away by him was itself, before it entered into cir-
culation, a portion of some other hoard. This hoard of A,
which is potentially a new money-capital, is not an addi-
tion to the social wealth, any more than it would be if it

Accumulation and Reproduction. 573

were spent in articles of consumption. But money, when
withdrawn from circulation, having previously circulated,
may have been held somewhere as a hoard, or may have
been the money-form of wages, may have monetized means
of production or other commodities, may have circulated
portions of constant capital or of the revenue of some capi-
talist. It is no more new wealth than money, considered
from the standpoint of the simple circulation of commodi-
ties, is the bearer, not only of its simple value, but also of its
tenfold value, because it may have been turned over ten
times a day and realized ten different values of commodi-
ties. The commodities exist without it, and it remains
what it is (or becomes even less by depreciation) whether
in one turn-over or in ten. Only in the production of gold
— to the extent that the output of gold contains a surplus-
product and is the bearer of surplus-value — is new value
created (potential money), and the new output of gold in-
creases the money-material of potential new money-capitals
only to the extent that it enters entirely into the circula-
tion.

Although the surplus-value hoarded in the form of money
is not an addition to the social wealth, it represents an ad-
dition to the potential money-capital, on account of the func-
tion for which it is hoarded. (We shall see later that new
money-capital may arise in still another way than by th(
gradual monetization of surplus-value.)

Money is withdrawn from circulation and accumulated
as a hoard by the sale of commodities without a subsequent
purchase. If this operation is conceived as one taking place
universally, then it seems inexplicable where the buyers are
to come from, since in that case everybody would want to
sell in order to hoard, and none would want to buy. And
it must be so conceived, since every individual capital may
be in process of accumulation.

If we were to conceive of the process of circulation as
one taking place in a straight line between the various di-
visions of annual reproduction — which would be incorrect,
as it consists with a few exceptions of mutually retroact-

574 Capital.

ive movements — then we should have to start out from the
producer of gold (or silver) who buys without selling, and
to assume that all others sell to them. In that case the
entire social surplus-product of the current year would pass
into his hands, representing the entire surplus-value of the
year, and all the other capitalists would distribute among
themselves their relative shares in his surplus-product,
which consists naturally of money, gold being the natural
form of his surplus-value. For that portion of the product
of the gold producer, which has to make good his active
capital, is already tied up and disposed of. The surplus-
value of the gold producer, in the form of gold, would then
be the only fund from which all other capitalists would
have to derive the material for the conversion of their an-
nual surplus-product into gold. The magnitude of its value
would then have to be equal to the entire annual surplus-
value of society, which must first assume the guise of a
hoard. Absurd as this assumption would be, it would ac-
complish nothing more than to explain the possibility of a
universal formation of a hoard at the same period. It
would not further reproduction itself, except on the part
of the gold producer, one single step.

Before we solve this seeming difficulty, we must distin-
guish between the accumulation in department I (produc-
tion of means of production) and in department II (pro-
duction of articles of consumption). We start out from I.

I. ACCUMULATION IN DEPARTMENT I.

(1). The Formation of a Hoard.

It is evident that both the investments of capital in the
numerous lines of industry constituting department I, and
the different individual investments of capital within each
of these lines of industry, according to their age, that is
to say, the space of time during which they have served,
quite aside from their volume, technical conditions, market
conditions, etc., must be in different stages of the process

Accumulation and Reproduction. 575

of successive transformation from surplus-value into poten-
tial money-capital. It is immaterial whether this money-
capital is to serve for the expansion of the active capital,
or for the establishment of new industrial enterprises, which
constitute the two forms of expansion of production. One
portion of the capitalists, then, is continually converting its
potential capital, when grown to a sufficient size, into pro-
ductive capital, that is to say, they buy with the money
hoarded by the monetization of surplus-value means of pro-
duction, additional elements of constant capital. Another
portion of the capitalists is meanwhile still engaged in ac-
cumulating potential money-capital. Capitalists belonging
to these two categories meet as buyers and sellers, each one
of them exclusively in one of these roles.

For instance, let A sell 600, representing 400 c + 100 v
+ 100 s, to B, who may represent more than one buyer.
A sells 600 in commodities for 600 in money, of which
100 are surplus-value which he withdraws from circulation
and hoards in the form of money. But these 100 in money
are but the money-form of the surplus-product in which a
value of 100 was incorporated. The formation of a hoard,
then, is not a production, nor is it an increment of pro-
duction. The action of the capitalist consists merely in
withdrawing from circulation 100 obtained by the sale of
his surplus-product, in holding and hoarding this amount.
This operation is carried on, not alone on the part of A,
but at numerous points of the periphery of circulation by
other capitalists, named A', A", A"', all of whom work bus-
ily at this sort of accumulation. These numerous points at
which money is withdrawn from circulation and accumu-
lated in numerous individual hoards appear as so many
obstacles of circulation, because they stop the movement of
money and deprive it of its capacity to circulate for a cer-
tain length of time. But it must be remembered that hoard-
ing takes place in the simple circulation of commodities
long before it is based on the capitalist mode of production.
The quantity of money existing in society is always greater
than the amount in actual circulation, although this varies

576 Capital.

according to circumstances. We meet the same hoards, and
the same accumulation of hoards, at this stage, but now it
is a factor immanent in the capitalist process of production.

One can understand the pleasure felt by some men when
all these potential capitals, by their concentration in the
hands of bankers, etc., by means of the credit system, be-
come disposable, "loanable capital," money-capital, which
is no longer merely passive and a dream of the future, but
active usury-capital, self-expanding capital.

However, A accomplishes the formation of a hoard only
to the extent that he acts as a seller, so far as his surplus-
product is concerned, not as a buyer. His successive pro-
duction of surplus-products, the bearers of his surplus-value
convertible into money, is therefore a promise for the for-
mation of his hoard. In the present case, where we are
dealing only with the circulation within department I, the
natural form of the surplus-product, and of the total pro-
duct of which it is a part, is that of an element of con-
stant capital of I, that is to say, it belongs to the category of
a means of production creating means of production. We
shall see presently what becomes of it, what function it
performs, in the hands of the buyers such as B, B', B", etc.

It must be particularly noted at this point that A, while
withdrawing money from circulation and hoarding it, on
the other hand throws commodities into it without with-
drawing other commodities in return. The capitalists B,
B', B", etc., are thereby enabled to throw only money into
it and withdraw only commodities from it. In the present
case, these commodities, according to their natural form
and destination, become a fixed or circulating element of
the constant capital of B, B', etc. We shall hear more
about this anon, when we shall deal with the buyer of the
surplus-product, with B, B', etc.

We remark by the way: Once more we find here, as we
did in the case of simple reproduction, that the disposal of
the various elements of annual reproduction, that is to say,
their circulation which must comprise the reproduction of

Accumulation and Reproduction. 57T

the capital to the point of replacing its various elements,
such as constant, variable, fixed, circulating, money and
commodity-capital, is not conditioned on the mere purchase
of commodities followed by a corresponding sale, or a mere
sale followed by a corresponding purchase, so that there
would actually be a bare exchange of commodity for com-
modity, as the political economists assume, especially the
free trade school from the time of the physiocrats and Adam
Smith. We know that the fixed capital, once that its in-
vestment is made, is not replaced during the entire period
of its function, but serves in its old form, until its value is
gradually precipitated in the form of money. Now we have
seen that the periodical renewal of the fixed capital of lie
[the entire value of the capital of lie being converted into
elements of I valued at (v + s)] pre-supposes on the one
hand the mere purchase of the fixed portion of lie, which
is reconverted from the form of money into its natural
form, and to which corresponds the mere sale of Is; and
presupposes on the other hand the mere sale on the part of
lie, the sale of its fixed (depreciating) value, which is pre-
cipitated in money and to which corresponds the mere pur-
chase of I s. In order that the transaction may take place
normally in this case, it must be assumed that the mere
purchase on the part of II c is equal in value to the mere
sale on the part of II c, and that in the same way the mere
sale of I s to lie, section 1, is equal in value to the mere
purchase from department lie, section 2. Otherwise simple
reproduction is interrupted. The mere sale on one side
must be offset by a mere purchase on the other. It must
likewise be assumed that the mere sale of that portion of I s,
which forms the hoards of A, A', A" is balanced by the
mere purchase of that portion of I s, which converts the
hoards of B, B', B", into elements of additional productive
capital.

So far as the balance is restored by the fact that the buyer
acts later on as a seller to the same amount, and vice versa,
the money returns to the side that has advanced it in the
first place, which sold first before it bought again. But the

578 Capital.

actual balance, so far as the exchange of commodities itself
is concerned, that it to say, the disposal of the various por-
tions of the annual product, is conditioned on the equal
value of the commodities exchanged for one another.

But to the extent that only one-sided exchanges are made,
a number of mere purchases on one hand, a number of
mere sales on the other — and we have seen that the normal
disposal of the annual product on the basis of capitalist
production requires such onesided metamorphoses — the
balance can be maintained only on the assumption that the
value of the onesided purchases and onesided sales is the
same. The fact that the production of commodities is the
general form of capitalist production implies the role which
money is playing not only as a medium of circulation, but
also as money-capital, and creates conditions peculiar for
the normal transaction of exchange under this mode of
production, and therefore peculiar for the normal course
of reproduction, whether it be on a simple, or on an ex-
panded scale. These conditions become so many causes of
abnormal movements, implying the possibility of crises,
since a balance is an accident under the crude conditions of
this production.

We have also seen that there is indeed, in the exchange
of I v for a corresponding value of II c, an ultimate renewal
of the value of the commodities of II by an equivalent
value of commodities of I, so that the sale of the commodi-
ties of the aggregate capitalist of II is balanced subsequently
by the purchase of commodities from I to the same amount.
This restitution takes place. But it is not an exchange
which takes place between the capitalists of I and II in the
disposal of their relative commodities. II c sells its com-
modities to the working class of I. This class meets it one-
sidedly in the role of a buyer of commodities, and it meets
that class onesidedly as a seller of commodities. With the
money so obtained II c meets the aggregate capitalist of I
onesidedly as a buyer of commodities, and the aggregate
capitalist of I meets it onesidedly as a seller of commodi-
ties to the extent of I v. It is only by means of this sale

Accumulation and Reproduction. 579

of commodities that department I finally reproduces its
variable capital in the form of money-capital. Just as one-
sidedly as the capitalist class of I faces that of II in the role
of a seller of commodities to the extent of I v, so does that
class face its working class in the role of a buyer of com-
modities, a buyer of labor-power. And just as one-sidedly
as that working class faces the capitalists of II in the role
of a buyer of commodities (namely of articles of consump-
tion), so it faces the capitalists of I as a seller of commodi-
ties, namely, a seller of its labor-power.

The continual offer of labor-power on the part of the
working class of I, the reconversion of a portion of the
commodity-capital of I into the money-form of variable
capital, the renewal of a portion of the commodity-capital
of II by natural elements of the constant capital of II c —
all these are necessary premises dovetailing into one an-
other, but they are promoted by a very complicated process
including three processes of circulation which occur inde-
pendently of one another, but intermingle. The complicated-
ness of this process presents so many opportunities for ab-
normal deviations.

(2). The Additional Constant Capital.

The surplus-product, the bearer of surplus-value, does
not cost its appropriators, the capitalists of I, anything.
They are in no way obliged to advance any money or com-
modities in order to secure it. An advance means even in
the writings of the physiocrats the general form of value
materialized in elements of productive capital. Hence what
they advance is nothing but their constant and variable
capital. The laborer preserves by his labor not only their
constant capital; he reproduces not only the value of their
variable capital by creating corresponding qualities of new
values; he supplies them also by his surplus-labor with sur-
plus-values in the form of surplus-products. By the suc-
cessive sale of this surplus-product, they accumulate a hoard,
additional potential money-capital. In the present case, this
surplus-product consists at the outset of means of produc-

580 Capital.

tion used in the creation of means of production. It is not
until it reaches the hands of B, B', B", etc. (I), that this
surplus-product serves as additional constant capital. But
it is virtually that even in the hands of the accumulators
of hoards, the capitalists A, A', A", (I), before it is sold.
If we consider merely the volume of values of the repro-
duction on the part of I, then we are still moving within
the limits of simple reproduction, for no additional capital
has been set in motion for the purpose of creating this vir-
tual additional constant capital (the surplus-product), nor
has any greater amount of surplus-labor been performed
than that done on the basis of simple reproduction. The
difference is here only one of the form of the surplus-labor
performed, of the concrete nature of its particularly useful
service. It is expended in means of production for depart-
ment I c instead of II c, in means of production of means
of production instead of means of production of articles of
consumption. In the case of simple reproduction it had
been assumed that the entire surplus-value was spent as reve-
nue in commodities of II. Hence it consisted only of such
means of production as restore the constant capital of II c in
its natural form. In order that the transition from simple to
expanded reproduction may take place, the production in
department I must be enabled to create fewer elements for
the constant capital of II and more for that of I. This
transition, which will not always take place without difficul-
ties, is facilitated by the fact that some of the products of
I may serve as means of production in either department.

Considering the matter merely from the point of view of
the volume of values, it follows, then, that the material re-
quirements of expanded reproduction are produced within
simple reproduction. It is simply a question of the expen-
diture of the surplus-labor of the working class of I for
the production of means of production, the creation of vir-
tual additional capital of I. The virtual additional money-
capital, created on the part of A, A', A", by the successive
sale of their surplus-product, which was formed without any
capitalist expenditure of money, is in this case simply the

Accumulation and Reproduction. 581

money-form of the additional means of production made
by I.

The production of virtual additional capital expresses in
our case (we shall see that it may also be formed in a dif-
ferent way) merely the fact that it is a phenomenon of
the process of production itself, the production of elements
of productive capital in a particular form.

The production of virtual additional money-capital on a
large scale, at numerous points of the periphery of circu-
lation, is therefore but a result and expression of a multi-
farious production of virtual additional productive capi-
tal, whose rise does not itself require any additional ex-
penditure of money on the part of the industrial capital-
ists.

The successive transformation of this virtual additional
productive capital into virtual money-capital (hoard) on
the part of A, A', A", etc., (I), conditioned on the suc-
cessive sale of their surplus-product, which is a repeated
onesided sale without a compensating purchase, is accom-
plished by a repeated withdrawal of money from circula-
tion and a corresponding formation of a hoard. This
hoarding, except in the case of buyers who are gold pro-
ducers, does not in any way imply an addition to the wealth
in precious metals, but only a change of function on the
part of money previously circulating. A while ago it served
as a medium of circulation, now it serves as a hoard, as a
virtual additional money-capital in process of formation.
In other words, the formation of additional money-capital
and the volume of the precious metals existing in a cer-
tain country are not directly connected facts.

Hence it follows furthermore: The greater the product-
ive capital already serving in a certain country (including
the labor-power incorporated in it as the producer of the
surplus-product), the more developed the productive power
of labor and at the same time the technical appliances for
the rapid extension of the production of means of produc-
tion, the greater furthermore the quantity of the surplus-

582 Capital

product both as to value and mass, so much greater is

(1) The virtual additional productive capital in the form
of a surplus-product in the hands of A, A', A", etc., and

(2) The mass of this surplus-product transformed into
money, in other words, the virtual additional money-capital
in the hands of A, A', A". The fact that Fullerton, for in-
stance, will have nothing to do with any overproduction in
the ordinary meaning of the term, but only with the over-
production of capital, meaning money-capital, shows how
pitifully little even the best bourgeois economists under-
stand of the mechanism of their own system.

While the surplus-product, directly produced and appro-
priated by the capitalists A, A', A" (I), is the actual basis
of the accumulation of capital, that is to say, of expanded
reproduction, although it does not actually serve in this
capacity until it reaches the hands of the capitalists B, B',
B", etc. (I), it is quite unproductive in its chrysalis stage
of money, of a hoard representing virtual money-capital in
process of formation. It runs parallel with the process of
production, but moves outside of it. It is a dead weight of
capitalist production. The desire to utilize this surplus-
value, while accumulating as virtual money-capital, for the
purpose of deriving profits or revenue from it, finds in the
credit system and paper securities its consummation. Mon-
ey-capital thereby gains in another form an enormous in-
fluence on the course and the stupendous development of
the capitalist system of production.

The surplus-product converted into virtual money-cap-
ital will grow so much more in volume, the greater the ag-
gregate amount of capital actually engaged which produced
it by its function. With the absolute increase of the vol-
ume of the annually reproduced virtual money-capital its
segmentation also becomes easier, so that it is more rapidly
invested in a certain business, either in the hands of the
same capitalist or in those of others (for instance members
of the family, in the case of a division of inheritances, etc.).
By segmentation of money-capital I mean in this case that
it is wholly detached from the parent capital in order to be

Accumulation and Reproduction. 583

invested as a new money capital in a new and independent
business.

While the sellers of the surplus-product, A, A', A", etc.,
(I), have obtained it as a direct outcome of the process of
production, which does not require any additional act of
circulation aside from the advance of constant and variable
capital made even in simple reproduction; and while they
thereby construct the real basis for a reproduction on an
expanded scale, seeing that they manufacture virtually ad-
ditional capital — the attitude of B, B', B" ", etc., (I), is
different. (1) The surplus-product of A, A', A", etc., does
not actually seive as additional constant capital until it
reaches the hands of B, B', B", etc. (We leave out of con-
sideration for the present the other elements of productive
capital, the additional labor-power, in other words, the ad-
ditional variable capital). (2) In order that the surplus-
product may reach their hands, they must buy it.

In regard to point 1, it may be noted that a large por-
tion of the surplus-product (virtual additional constant cap-
ital) is produced by A, A', A", (I), in the course of the
current year, but may not serve as industrial capital in the
hands of B, B', B", (I), until next year, or still later. With
reference to point 2, the question is: Whence comes the
money required for the process of circulation?

To the extent that the products created by B, B', B", etc.,
(I), re-enter in their natural form into their own process,
it goes without saying that a corresponding portion of their
own surplus-product is transferred directly (without any
intervention of circulation) to their productive capital and
becomes an element of additional constant capital. To the
same extent they do not help to convert any surplus-pro-
duct of A, A', A", etc., (I), into money. Aside from this
where does the money come from? We know that they
have formed their hoard in the same way as A, A', etc., by
the sale of their respective surplus-products. Now they
have arrived at the point where their accumulated hoard of
virtual money-capital is to enter effectually upon its func-
tion as additional money-capital. But this is merely turn-

584 Capital.

ing around in a circle. The question still remains: Where
does the money come from, which the various B's (1) with-
drew from the circulation and accumulated?

Now we know from the analysis of simple reproduction,
that the capitalists of I and II must have a certain amount
of ready money in their hands, in order to be able to dis-
pose of their surplus-products. In that case, the money
which served only for the spending of revenue in articles
of consumption returned to the capitalists in the same
measure in which they advanced it for the purpose of dis-
posing of their commodities. Here the same money re-ap-
pears, but in a different function. The A's and B's supply
one another alternately with the money for converting their
surplus-product into virtual additional capital, and throw
the newly formed money-capital alternately into circulation
as a medium of purchase.

The only assumption made in this case is that the amount
of money existing in a certain country (the velocity of cir-
culation, etc., being the same) suffices for both the active
circulation and the reserve hoard. It is the same assump-
tion which had to be made in the case of the simple cir-
culation of commodities, as we have seen. Only the func-
tion of the hoards is different in the present case. Further-
more, the existing amount of money must be larger, first,
because all the products (with the exception of the newly
produced precious metals and the few products consumed
by the producer himself) are produced as commodities
under capitalist production and must, therefore, pass
through the stage of money ; secondly, because on a capital-
ist basis the quantity of the commodity-capital and the
volume of its value is not only absolutely greater, but also
grows with much greater rapidity; thirdly, an ever more
voluminous variable capital must be converted into money-
capital; fourthly, with the extension of production, the
formation of new money-capital keeps step, so that the ma-
terial for it must be available in the form of a hoard.

While this is a common truism for the first phase of capi-
talist production, in which even the credit system is ac-
companied by a prevalence of metallic circulation, it ap-

Accumulation and Reproduction. 585

plies even to the most developed phase of the credit system
to the extent that metallic circulation remains its basis.
On the one hand, the additional production of precious
metals may exert a disturbing influence on the prices of
commodities according to whether it is abundant or scarce,
not only in long, but also in very short intervals. On
the other hand, the entire mechanism of credit is continu-
ally occupied in reducing the actual metallic circulation to
a relatively more and more decreasing minimum by means
of sundry operations, methods, and technical devices. To
the same extent are the artificiality of the entire mechanism
and the possibility of disturbing its normal flow increased.

It may be that the different B, B', B", etc., (I), whose
virtual new capital enters upon its active function, are
compelled to buy from one another their product (portions
of their surplus-product) or to sell it to one another. In
that case the money advanced by them for the circulation
of their surplus-product flows back under normal condi-
tions to the different B's in the same proportion in which
they advanced it for the circulation of their respective
commodities. If the money circulates as a medium of pay-
ment, then only balances are to be paid so far as the alter-
nate purchases and sales do not cover one another. But it
is important to assume here, as everywhere, metallic circula-
tion in its simplest form, because then the flux and reflux,
the balancing of accounts, in short all elements appearing
as consciously directed processes under the credit system,
appear as forms independent of the credit system, show
themselves in their primitive form instead of their later,
reflected, one.

(3). The Additional Variable Capital.

Hitherto we have been dealing only with additional con-
stant capital. Now we must direct our attention to a consid-
eration of the additional variable capital.

We have explained at great length in volume I that
labor-power is always held available under the capitalist
system of production, and that more labor can be set in

586 Capital.

motion, if necessary, without increasing the number of
laborers, or quantity of labor-power, employed. We need
not detail this any further for the present, but assume with-
out ceremony that the portion of the newly created money-
capital which is to be converted into variable capital will
always find as much labor-power as it cares to transform.
It has also been explained in volume I that a certain capi-
tal may expand its volume of production within certain lim-
its without any accumulation. But now we are dealing with
the accumulation of capital in the strict meaning of the
term, so that the expansion of production is conditioned on
the conversion of surplus-value into additional capital, and
thus on an expansion of the basis of productive capital.

The gold producer can accumulate a portion of his golden
surplus-value as a virtual money-capital. As soon as it
reaches a sufficient volume, he can transform it directly
into new variable capital, without first selling his surplus-
product. In the same way he can convert it into the ele-
ments of constant capital. But in this last case, he must
find the material elements of constant capital at hand. This
may be accomplished by having each producer working to
stock his supply, as was hitherto assumed, and then bring-
ing his finished product on the market, or by having them
work to fill orders. The actual expansion of production,
that is to say, the surplus-product, is assumed in either case,
in the one case as actually on hand, in the other as virtually
available, because ordered.

II. ACCUMULATION IN DEPARTMENT 2.

We have hitherto assumed that the capitalists A, A', A",
etc., (I), sell their surplus-product to the capitalists B, B',
B", etc., who belong to the same department. But take it
now that A (I) converts his surplus-product into gold by
selling it to a capitalist B in department II. This can be
done only by the sale of means of production on the part
of A (I) to B(II) without a subsequent purchase of articles
of consumption, in other words, only by a one-sided sale on
A's part. Now we have seen that II c cannot be converted

Accumulation and Reproduction. 587

into the natural form of productive constant capital unless
not only I v, but also at least a portion of I s, is exchanged
for a portion of II c, which II c exists in the form of ar-
ticles of consumption. But now that A has converted his
I s into gold by making this exchange impossible and with-
drawing the money obtained from II c out of circulation,
instead of spending it for articles of consumption of II c,
there is indeed on the part of A (I) a formation of addi-
tional virtual money-capital, but on the other hand there is
a corresponding portion of the value of the constant capital
B (II) held in the form of commodity-capital, unable to
transform itself into natural productive constant capital. In
other words, a portion of the commodities of B(II), and at
that a portion which must be sold if he wishes to reconvert his
entire constant capital into its productive form, has become
unsaleable. To that extent there is an over production,
which clogs reproduction, even on the same scale.

In this case, the additional virtual money-capital on the
side of A (I) is indeed a gilded form of surplus-product
(surplus-value) , but the surplus-product (surplus-value) as
such is as yet but a phenomenon of simple reproduction,
not of reproduction on an expanded scale. In order that the
reproduction of II c may take place on the same scale,
I (v+s) must ultimately be exchanged for II c, and this
applies at all events to a portion of I " By the sale of his
surplus-product to B(II), A (I) has supplied to B(II) a
certain portion of the value of constant capital in its natural
form. But at the same time he has rendered an equal por-
tion of the value of the commodities of B(II) unsaleable
by withdrawing the money from circulation and not mak-
ing a compensating purchase. Hence, if we view the entire
social reproduction, which comprises both the capitalists of
I and II, then the conversion of the surplus-product of
A (I) into a virtual money-capital implies the impossibility
of reconverting an equal portion of the value of the com-
modity-capital of B(II) into productive (constant) capital,
in other words, not a virtual production on an enlarged
scale, but an obstruction of simple reproduction, a deficit
in the simple reproduction. As the formation and sale of

688 Capital.

the surplus-product of A (I) are normal phenomena of sim-
ple reproduction, we have here even on the basis of simple
reproduction the following mutually interdependent phe-
nomena: The formation of virtual additional money-capital
in department I (implying underconsumption in depart-
ment II) ; the stagnation of commodities of department II
which cannot be reconverted into productive capital (imply-
ing a relative overproduction in department IT) ; a surplus
of money-capital in department I and a deficit in the repro-
duction of department II.

Without pausing any longer at this point, we simply
repeat that we had assumed in the analysis of simple repro-
duction that the entire surplus-value of I and II is spent as
revenue. As a matter of fact, however, one portion of the
surplus-value is spent as revenue, and another is converted
into capital. Actual accumulation can take place only on
this condition. That accumulation should take place at the
expense of consumption, is, as a general assumption, an illu-
sion contradicting the nature of capitalist production. For
it takes for granted that the aim and compelling motive of
capitalist production is consumption, instead of the gain of
surplus-value and its capitalization, in other words, ac-
cumulation.

Let us now take a closer look at the accumulation in
department II.

The first difficulty with reference to II c, that is to say
the conversion of an element of the commodity-capital of
II into the natural form of constant capital of II, concerns
simple reproduction.

Let us take the formula previously used.

(1000 v + 1000 s) I are exchanged for 2000 lie.

Now, if one half of the surplus-product of I, or 500 s, is
reincorporated in department I as constant capital, then
this portion, being detained in department I, cannot take
the place of any portion of II c. Instead of being converted
into articles of consumption, it is made to serve as an addi-
tional means of production in department T itself (and it

Accumulation and Reproduction. 589

must be noted that in this section of the circulation be-
tween I and II the exchange is actually mutual, consisting
of a double change of position, different from the substitu-
tion of 1000 I v for 1000 II c by the laborers of I). It can-
not perform this function simultaneously in I and II. The
capitalist cannot spend the value of his surplus-product for
articles of consumption, and at the same time consume the
surplus-product itself productively, by incorporating it in
his productive capital. Instead of 2000 I(v + s), only
1500 are exchangeable for 2000 II c, namely 1000 v + 500
s of I. But 500 I c cannot be reconverted from the form of
commodities into productive constant capital of II. Hence there
would be an overproduction in department II, equal in volume
to the expansion of production in department I. This over-
production of II might react to such an extent on depart-
ment I that even the reflux of the 1000 v spent by the labor-
ers of I for articles of consumption of II might take place
but partially, so that these 1000 would not return to the
hands of the capitalists of I in the form of variable money-
capital. In that case, these capitalists would be hampered
even in reproduction on a simple scale by the mere attempt
of expanding it. And it must be remembered in this con-
nection that department I had actually resumed only sim-
ple reproduction, and that only the elements classified in
our diagram were differently grouped with a view of ex-
panding in the future, say, next year.

One might attempt to circumvent this difficulty in the
following way : The 500 II c which are held by the capital-
ists, and cannot be immediately converted into productive
capital, do not by any means represent any overproduction,
but are, on the contrary, a necessary element of reproduc-
tion, which we have so far neglected. We have seen that a
money supply must be accumulated at many points by with-
drawing it from circulation, either for the purpose of facili-
tating the formation of new money-capital in department
I, or to the end of temporarily holding the gradually de-
preciating portion of the fixed capital in the form of money.
But since we have placed all the available money and com-
modities exclusively into the hands of the capitalists of I

590 Capital.

and II, when we made up our diagram, eliminating mer-
chants, money-changers, and bankers, and all merely con
suming and not directly producing classes, it follows that
the formation of supplies of commodities in the hands of
their respective producers is here indispensable in order to
keep the machinery of reproduction in motion. The 500
II c now held in stock by the capitalists of II therefore rep-
resent the supply of articles of consumption by which the
continuity of the process of consumption included in the
process of reproduction is promoted. This means in the
present case the transition from this year into next. The
fund for consumption, which is as yet in the hands of its
sellers and producers cannot fall to the point of zero and
begin with zero next year, any more than such a thing can
take place in the transition from to-day to to-morrow. Since
new supplies of commodities must be continually accumu-
lated, even though their volume may differ, our capitalist
producers of department II must have a reserve capital,
which enables them to continue their process of produc-
tion, although one portion of their productive capital is
temporarily tied up in the shape of commodities. Our
assumption is all the time that they combine the business
of a merchant with that of a producer. Hence they must
also have at their disposal an additional money-capital,
which would be in the hands of merchants, if the various
functions in the process of reproduction were distributed
among independent capitalists.

But we would reply to this argument: (1) That the
forming of such supplies and the necessity for it applies to
all capitalists, those of I as well as of II. Considering them
in their capacity as sellers of commodities, they differ only
by the fact that they sell different kinds of commodities.
A supply of commodities of II implies a previous supply
of commodities of I. If we neglect this supply on one side,
we must also do so on the other. But if we count them in on
both sides, the problem is not altered in any way. (2) Just
as this year closes on the side of II with a supply of com-
modities for next year, so it was opened by a supply of
commodities on the same side- taken over from last year.

Accumulation and Reproduction. 591

In the analysis of annual reproduction, reduced to its ab-
stract form, we must therefore strike it out at both ends.
By leaving this year in possession of its entire production,
including the supply held for next year, we take from it
the supply of commodities transferred from last year, and
thus we have actually to deal with the aggregate product of
an average year as the object of our analysis. (3) The sim-
ple circumstance that the difficulty which must be overcome
did not show itself in the analysis of simple reproduction
proves that it is a specific phenomenon due merely to the
different arrangement of the elements of department I with
a view to reproduction, an arrangement without which re-
production on an expanded scale cannot take place at all.

III. DIAGRAMMATIC PRESENTATION OF ACCUMU-
LATION.

We now study reproduction by means of the following
diagram :

tv v I. 4000 c + 1000 v + 1000 s = 6000 ) - . , OOKO

Diagram a) n l50Q c J 376 v J 376 s = 2252 } Tota1' 8252

We note in the first place that the total volume of the
annual product is smaller than that of the first diagram,
being 8252 instead of 9000. We might just as well assume
a much larger sum, for instance one ten times larger. We
have chosen a smaller sum than in our first diagram, in
order to demonstrate, that reproduction on an enlarged
scale (which is here regarded merely as a production car-
ried on with a larger investment of capital) has nothing
to do with the absolute volume of the product, and that
it implies merely a different arrangement, a different dis-
tribution of functions to the various elements of a certain
product, so that it is but a simple reproduction so far as the
value of the product is concerned. It is not the quantity^
but the destination of the given elements of simple repro-

592 Capital.

duction which is changed, and this change is the material
basis of a subsequent reproduction on an enlarged scale.52
We might vary the diagram by changing the proportions
between the variable and constant capital. For instance
this way:

Diaeram b) L 4000 c + 875 v + 875 s = 5750 ) T . , r2ko
Uiagram b) n 1750 c + 376 v + 376 s = 2h02 \ lotal» ww

In this case, the diagram would be arranged for repro-
duction on a simple scale, so that the surplus-value would
be entirely consumed as revenue, instead of being accumu-
lated. In either case, that of (a) as well as (b), we have
an annual product of the same value. Only (b) has the
functions of its elements arranged in such a way that repro-
duction is resumed on the same scale, while in the case of
(a) the arrangement forms the material basis of reproduc-
tion on an enlarged scale. For in the case of (b), the fac-
tors (875 v + 875 s) I, equal to 1750 I(v + s), are ex-
changed without any remainder for 1750 II c, while in the
case of (a), the exchange of (1000 v + 1000 s)I, equal to
2000 (v + s)I, for 1500 II c leaves a surplus of 500 Is for
accumulation in department I.

Now let us analyze diagram (a) closer. Let us assume
that both I and II accumulate one half of their surplus-
value, that is to say, convert it into an additional element
of capital instead of spending it as revenue. When one
half of 1000 I s, or 500, are accumulated in one form or an-
other, that is to say, invested as additional money-capital,
converted into additional productive capital, then only
(1000 v + 500 s)I are spent as revenue. Hence 1500 is
here inserted as the normal size of II c. We need not ex-
amine the exchange between 1500 I(v + s) and 1500 He
any more, because this has already been done under the
head of simple reproduction. Nor does 4000 I c require any
attention, since its re-arrangement was likewise discussed

52 This puts an end, once for all, to the feud over the accumulation
of capital between James Mill and S. Bailey, which we have discussed
from our point of view in volume I, chapter XXIV, section 5, foot notes
on pages 622 and 623, namely the feud concerning the extensibility of
the effects of industrial capital without changing its magnitude. We
shall revert to this later.

Accumulation and Reproduction. 593

under the head of simple reproduction, although this re-
arrangement is now preparing for a new reproduction on
an enlarged scale.

The only thing which remains for us to examine is 500
I s and (376 v + 376 s)II, both as regards the internal con-
ditions of the two departments and the movements between
them. Since we have assumed that department II is like-
wise accumulating one half of its surplus-value, 188 are to
be converted into capital, of which one fourth, or 47, or, to
round it off, 48, are variable capital, so that 140 remain to
be converted into constant capital.

Here we come across a new problem, whose very existence
must appear strange to the current idea that commodities
of one kind are exchanged for commodities of another kind,
or commodities for money and the same money for com-
modities of another kind. The 140 II c can be converted
into productive capital only by exchanging them for com-
modities of I s of the same value. It is a matter of course
that that portion of I s which must be exchanged for II s
must consist of means of production, which may either be
fit for service in the production of both I and II, or ex-
clusively adapted to the production of II. This change of
place can be made only by means of a onesided purchase
on the part of II, as the entire remaining surplus-product
of 500 I s, which we shall presently examine, is reserved for
accumulation in department I and cannot be exchanged for
commodities of II; in other words, it cannot be simul-
taneously accumulated and consumed by I. Therefore de-
partment II must buy 140 I s for cash without recovering
this money by a subsequent sale of its commodities to I.
And this is a process which is continually repeated in every
new annual production, so far as it is reproduction on an
enlarged scale. Where does II get the money for this?

It rather seems as though department II were a very un-
profitable field for the formation of new money-capital, by
means of simple hoarding, which accompanies actual ac-
cumulation and is its basis under capitalist production.

We have first 376 II v. The money-capital of 376, ad-
vanced for labor-power, returns through the purchase of

594 Capital.

commodities of II continually as variable capital to the
capitalists of II. This continually repeated departure from
and return to the starting point, the pocket of the capital-
ist, does not add in any way to the money moving in this
cycle. This, then, is not a source of the accumulation of
money. Nor can this money be withdrawn from circula-
tion in order to form a hoard, or virtual new money-capital.

But stop ! Isn't there a chance to make a little profit?

We must not forget that class II has the advantage over
class I that its laborers must buy back from it the com-
modities produced by themselves. Department II is a buyer
of labor-power and at the same time a seller of the com-
modities to the owners of the labor-power employed by it.
Department II, then, may do two things.

(1) It may depress the wages below its average level,
and this privilege it shares with department I. By this
means a portion of the money serving in the function of
variable capital is released, and if this process is continu-
ally repeated, it may become a normal source of hoarding,
and thus of virtual additional money-capital in department
II. Of course we are not referring to a casual stolen profit
here, since we are speaking of a normal formation of capi-
tal. But it must not be forgotten that the wages actually
paid (which determine the magnitude of the variable capi
tal under normal conditions) do not depend on the benevo-
lence of the capitalists, but must be paid under certain con-
ditions. This does away with this expedient as a source of
additional money. If we assume that 376 v is the variable
capital at the disposal of department II, we cannot suddenly
substitute the hypothesis that the capitalists pay only 350 v
instead of 376 v, merely because we are confronted by a
new problem.

(2) On the other hand, department II, taken as a whole,
has the above mentioned advantage over I that it is at the
same time a buyer of labor-power and a seller of commodi-
ties to its own laborers. Every industrial country furnishes
the most tangible proofs to what extent this may be ex-
ploited, by paying nominally the normal wages, but grab-
bing, or in plain words, stealing back a large portion with-

Accumulation and Reproduction. 595

out a corresponding equivalent in wages; by accomplishing
the same thing either through the truck system, or through
a falsification of the medium of circulation (perhaps in a
way that cannot be punished by law) . England and Amer-
ica furnish such instances. (Illustrate this by some strik-
ing examples). This is the same operation as under (1),
only disguised and carried out by a detour. Therefore it
must likewise be rejected as an explanation of the present
problem. The question is here of actually paid, not of
nominal wages.

We see that some extraordinary disfigurations on the face
of capitalism cannot be used in an objective analysis of the
mechanism of capitalism as an excuse to get over some
theoretical difficulties. But strange to say, the great major-
ity of my bourgeois critics score me as though I had
wronged the capitalists by assuming in volume I of this
work that they really pay labor-power at its value, a thing
which they rarely do! (Here I may exercise some of the
magnanimity attributed to me by quoting Schaeffle.)

In short, we cannot accomplish anything with 376 II v
for the solution of this question.

But it seems to be still more impossible to do anything
with 376 II s. Here the capitalists of the same department
are standing face to face, mutually buying and selling their
articles of consumption. The money required for these
transactions serves only as a medium of circulation and
must flow back to the interested parties in the normal course
of things, to the extent that they have advanced it to the
circulation, in order to pass again and again over the same
course.

There seem to be only two ways by which this money
can be withdrawn from circulation for the purpose of form-
ing virtual additional money-capital. Either one portion of
the capitalists of II cheats the others and thus robs them of
their money. We know that no preliminary expansion of
the circulating medium is necessary for the formation of
new money-capital. All that is necessary is that money
should be withdrawn from circulation by certain parties and
hoarded. It would not alter the case, if this money were

596 Capital.

stolen, so that the formation of additional money-capital on
the part of a portion of the capitalists of II would be ac-
companied by a positive loss of money on the part of oth-
ers. The cheated capitalists would have to live a little less
gaily, that would be all.

Or, a certain portion of II s, represented by necessities of
life, might be directly converted into new variable capital
of department II. How that is done, we shall examine at
the close of this chapter (in section IV).

(1) First Illustration.

A. Diagram of Simple Reproduction.

I. 4000 c + 1000 v + 1000 s = 6000 ) ^ . . AAAA
II. 2000 c + 500 v + 500 s = 3000 j" iotal> 900°-

B. Initial Diagram for Accumulation on an Expanded

Scale.

I. 4000 c + 1000 v + 1000 s = 6000 > ~ . . ftAAA

II. 1500 c + 750 v + 750 s = 3000 J iotal> 900°-

Assuming that in diagram B one half of the surplus-
value of I, amounting to 500, is accumulated, we have first
to accomplish the change of place between (1000 v + 500
s)I, or 1500 I(v + s), and 1500 He. Department I then
keeps 4000 c and 500 s, the last sum being accumulated.
The exchange between (1000 v + 1000 s)I and 1500 II c is
a process of simple reproduction, which has been examined
previously.

Let us now assume that 400 of the 500 I s are to be con-
verted into constant capital, and 100 into variable capital.
The transactions within the 400 s of I, which are to be capi-
talized, have already been discussed. They can be immedi-
ately annexed to I c, and in that case we get in depart-
ment I
4400 c +1000 v+100 s (these last to be converted into

100 v).

Department II buys from I for the purpose of accumu-

Accumulation and Reproduction. 597

lation the 100 Is (existing in means of production), which
thus become additional constant capital in department II,
while the 100 in money, which this department pays for
them, are converted into the money-form of the additional
variable capital of I. We then have for I a capital of 4400
c + 1100 v (these last in money), a total of 5500.

Department II has now 1600 c for its constant capital.
In order to be able to operate this, it must advance 50 v in
money for the purchase of new labor-power, so that its vari-
able capital grows from 750 to 800. This expansion of the
constant and variable capital of II by a total of 150 is sup-
plied out of its surplus-value. Hence only 600 of the 750
II s remain for the consumption of the capitalists of II,
whose annual product is now distributed as follows:

II. 1600 c + 800 v + 600 s (fund for consumption), a
total of 3000. The 150 s, produced in articles of consump-
tion, which have been converted into (100 c + 50 v)II, pass
entirely into the consumption of the laborers in this form.
100 being consumed by the laborers of 1(100 Iv), and 50
by the laborers of 11(50 II v), as explained above. Depart-
ment II, where the total product is prepared in a form suit-
able for accumulation, must indeed reproduce surplus-value
in the form of necessary articles of consumption exceeding
the other portions by 100. If reproduction really starts on
an expanded scale, then the 100 of variable money-capital
of I flow back to II through the hands of the laborers of I,
while II transfers 100 s in commodities to I and at the same
time 50 in commodities to its own laborers.

The change made in the arrangement for the purpose of
accumulation now presents the following aspect:

I. 4400 c+ 1100 v + 500 fund for consumption = 6000
II. 1600 c+ 800 v + 600 fund for consumption = 3000

Total, as before, 9000

Of these amounts, the following are capital :

I. 4400 c + 1100 v (money) = 5500 >
II. 1600 c + 800 v (money)= 2400 / iotal> 7yU0

598 • Capital.

while production started out with

I. 4000 c + 1000 v =5000 >„,.-, „OKA
II. 1500 c+ 750 v = 2250 f iota1' 725a

Now, if actual accumulation takes place on this basis, that
is to say, if reproduction is actually undertaken with this
increased capital, we obtain at the end of next year:

I. 4400 c + 1100 v + 1100 s = 6600 ) -, . . OQnA
II. 1600 c + 800 v + 800 s = 3200 j lotal> ybUU-

Then let department I continue accumulation at the same
atio, so that 550 s are spent as revenue, and 550 s accumu-
lvted. In that case, 1100 Iv are first replaced by 1100 I c,
and 550 Is must be realized in an equal amount of com-
modities of II, making a total of 1650 I(v + s). But the
constant capital of II, which is to be replaced, amounts only
to 1600, and the remaining 50 must be made up out of 800
II i). Leaving aside the money aspect of the matter, we have
as a result of this transaction:

I. 4400 c + 550 s (to be capitalized) ; furthermore, real-
ized in commodities of II for the fund for consumption of
the capitalists and laborers of I, 1650 (v + s).

II. 1650 c (50 added from II s as indicated above) +
800 v ■+■ 750 s (fund for the consumption of the capitalists).

But if the old proportion is maintained in II between v
and c, then 25 v additional must be advanced for 50 c, and
these must be taken from 750 s. Then we have

II. 1650 c + 825 v + 725 s.

In department I, 550 s must be capitalized. If the former
proportion is maintained, 440 of this amount form constant
capital, and 110 variable capital. These 110 must be eventu-
ally taken out of 725 II s, that is to say, articles of con-
sumption to the value of 110 are consumed by the laborers
of I instead of the capitalists of II, so that the latter are
compelled to capitalize these 110 s which they cannot con-
sume. This baves 615 II s of the 725 II s. But if II thus
converts these 110 into additional constant capital, it requires
an additional variable capital of 55. This again must be
taken out of '\ts surplus value. Subtracting this amount
from 615 II & we find that only 560 II s remain for the

Accumulation and Reproduction. 599

consumption of the capitalists of II, and we obtain the fol-
lowing values of capital after accomplishing all actual and
potential transfers:

I. (4400c+440 c)+ (llOOv + 110v)=4840c+1210v =6050

II. (1600c+ 50 c + 110c)+(800v+ 25v+ 55v)=1760c+880v=2640

Total 8690

If things are to proceed normally, accumulation in II
must take place more rapidly than in I, because that por-
tion of I (v + s) which must be converted into commodi-
ties of II c, would otherwise grow more rapidly than II c,
for which it can alone be exchanged.

If reproduction is continued on this basis and with other-
wise unchanged conditions, then we obtain at the end of the
following year:

I. 4840 c + 1210 v + 1210 s = 7260 ) Tftt_i 1n 7H0
II. 1760 c + 880 v + 880 s = 3520 / ' '

If the rate of division of the surplus-value remains un-
changed, then the capitalists of I have first to spend as rev-
enue 1210 v and one-half of s, or 605, a total of 1815. This
revenue fund is again larger than II c by 55. These 55 must
be taken from 880 s, leaving 825. Furthermore, the con-
version of 55 II s into II c implies another deduction from
II s for a corresponding variable capital of 27.5, leaving
for consumption 797.5 II s.

Department I has now to capitalize 605 s. Of these 484
are constant, and 121 variable capital. The last named
sum, deducted from 797.5 II s, leaves 676.5 II s. Depart-
ment II, then, converts another 121 into constant capital
and requires another variable capital of 60.5 for it, which
likewise comes out of 676.5 II s, leaving for consumption
616.

Then we have the following capitals :

I. Constant capital : 4840 -f- 484 = 5324.

Variable capital : 1210 -f 121 = 1331.

II. Constant capital : 1760 -f 55 -f 121 = 1936.
Variable capital : 880 + 27.5 -f- 60.5 = 968.

Totals : I. 5324 o + 1331 v = 6655 ) n , A x . nccn
II. 1936 c + 968 v = 2904 } Grand total 9559'

600 Capital.

And at the end of the year the product is

I. 5324 c + 1331 v + 1331 s = 7986 > m /.
II. 1936 c + 968 v + 968 s = 3872 j Total> 11,858.

Repeating the same calculation and rounding off the frac-
tions, we get at the end of the following year the product:

1. 5856 c + 1464 v + 1464 s = 8784 \ nQQ

II. 2129 c + 1065 v + 1065 s = 4249 ] lotal> 13,033.

And at the end of the following year:

I. 6442 c + 1610 v + 1610 s = 9662 ) _, 4 .
II. 2342 c + 1172 v + 1172 s = 4686 j" lotal> J-4,348.

In the course of four years of reproduction on an ex-
panded scale the aggregate capital of I and II has risen
from 5400 c + 1750 v = 7150 to 8784 c + 2782 v = 11,566,
in other words at the rate of 100: 160. The total surplus-
value was originally 1750, it is now 2782. The consumed
surplus-value was originally 500 for I and 535 for II, a to-
tal of 1035. In the last year it was 732 for I and 985 for
II, a total of 1690. It has therefore grown at the rate of
100 : 163.

(2). Second Illustration.

Now take the annual product of 9000, which is alto-
gether a commodity-capital in the hands of the industrial
capitalist class, a form in which the average ratio of the
variable to the constant capital is that of 1 : 5. This pre-
supposes a considerable development of capitalist produc-
tion and accordingly of the productivity of social labor, a
previous expansion of the scale of production to a consid-
erable extent, and finally a development of all circumstances
which bring about a relative overpopulation among the
working class. The annual product will then be divided
as follows, after rounding off the various fractions:

I. 5000 c+1000 v+1000 s=7000 > m , . ftnAA
II. 1430 c+ 285 v+ 285s=2000J" iotai' JUUU-

Now take it that the capitalist class of I consumes one-
half of its surplus-value, or 500, and accumulates the other

Accumulation and Reproduction. 601

half. In that case (1000 v+500 s) I, or 1500, must be con-
verted into 1500 II c. Since II c amounts to only 1430, it
is necessary to take 70 from the surplus-value. Subtracting
this sum from 285 II s leaves 215 II s. Then we have:

I. 5000 c + 500 s (to be capitalized) + 1500 (v + s) in
the fund set aside for consumption by capitalists and labor-
ers.

II. 1430 c + 70 s (to be capitalized) + 285 v + 215 s.
As 70 II s are directly annexed by II c, a variable capital

of 70-5, or 14, is required to set this additional constant capi-
tal in motion. These 14 must come out of the 215 s, so that
only 201 remain, and we have:

II. (1430 c + 70 c) + (285 v + 14 v) +201 s.

The disposal of 1500 I (v + V2 s) is a process of simple
reproduction, and this has been dealt with. However, a
few peculiarities remain to be noted here, which arise from
the fact that in reproduction on an expanding scale I (v
+ y% s) is not made up solely by way of II c, but by II c
plus a portion of II s.

It goes without saying that as soon as we assume a pro-
cess of accumulation, I (v + s) is greater than II c, not
equal to II c, as it is in simple reproduction. For in the
first place, department I incorporates a portion of its own
surplus-product in its productive capital, and converts five-
sixths of it into constant capital, so that it cannot exchange
these five-sixths simultaneously for articles of consump-
tion of department II. In the second place, department I
has to supply out of its surplus-product the material for
the accumulation of the constant capital of II, just as II
has to supply I with the material for the variable capital,
which sets in motion a portion of the surplus-product of I
used as additional constant capital. We know that the ac-
tual variable capital consists of labor-power, and therefore
the additional must consist of the same thing. It is not the
capitalist of I who among other things buys from II a sup-
ply of necessities of life for his laborers, or accumulates
them for this purpose, as the slaveholder had to do. It is the
laborers themselves who trade with II. But this does not
prevent the capitalist from regarding the articles of con-

602 Capital.

sumption of his eventual additional labor-power as so many
means of production and maintenance of that labor-power,
or the natural form of his variable capital. His own imme-
diate operation, in the present case that of department I,
consists in merely storing up the new money-capital re-
quired for the purchase of additional labor-power. As soon
as he has incorporated this labor-power in his productive
capital, the money becomes a medium for the purchase of
commodities of II on the part of this labor-power, which
must find these articles of consumption at hand.

By the way, the capitalist and his press are often dis-
satisfied with the way in which the laborer spends his
money and with the commodities of II for which he spends
it. On such occasions the capitalist philosophizes, babbles
of culture, and dabbles in philanthropical talk, for instance
after the manner of Mr. Drummond, the Secretary of the
British Legation in Washington. According to him, "The
Nation" (a journal) contained on the last of October, 1879,
an interesting article, which contained the following pas-
sages "The laborers have not kept step in their civilization
with the progress of inventions; a mass of objects have be-
come accessible to them which they do not know how to
make use of, and for which they do not create a market."
(Every capitalist naturally wants the laborer to buy his
commodities.) "There is no reason why the laborer should
not desire as much comfort as the clergyman, the lawyer,
and the physician, who earn the same amount as he."
(This class of clergymen, lawyers, and physicians have in-
deed to be satisfied with wishing for a good many com-
forts!) "But he does not do so. The question is still, how
he may be raised as a consumer by a rational and healthy
method; not an easy question, since his whole ambition
does not reach beyond a reduction of his hours of labor, and
the demagogue incites him to this rather than to elevating
his condition by an improvement of his intellectual and
moral qualities." (Reports of H. M.'s Secretaries of Embassy
and Legation on the Manufactures, Commerce, etc., of the
countries in which they reside. London, 1879, page 404.)

Long hours of labor seem to be the secret of the rational

Accumulation and Reproduction. 603

and healthy method, which is to elevate the condition of the
laborer by an improvement of his - intellectual and moral
faculties and to make a rational consumer of him. In order
to become a rational consumer of the commodities of the
capitalist, he should above all begin to let the capitalist con-
sume his labor-power irrationally and unhygienically —
but the demagogue prevents him ! What the capitalist means
by a rational consumption, is evident wherever he is con-
descending enough to engage directly in the trade with his
own laborers, in the truck system, which includes also
among other lines the supplying of homes to the laborers,
so that the capitalist is at the same time a landlord.

The same Drummond, whose beautiful soul is enamored
of the capitalist attempts to elevate the working class, tells
in the same report among other things of the cotton goods
manufacture in the Lowell and Lawrence Mills. The board-
ing and lodging houses for the factory girls belong to the
company that owns the factories. The landladies of these
houses are in the pay of the same company and act ac-
cording to its instructions. No girl is permitted to stay
out after 10 p. m. Then comes a gem: The special police
of the company patrol the surrounding country, in order
to prevent a violation of this rule. After 10 p. m., no girl
can leave or enter any of these houses. No girl can live any-
where but on the land of the company, and every house on
this land brings about 10 dollars per week in rent. And
now we see the rational consumer in his full glory: "But
since the omnipresent piano is found in many of the best
lodging houses of the working girls, music, singing, and
dancing play a prominent role at least among those, who
after ten hours of unremitting labor at the loom need a
change after this monotony rather than actual rest." (Page
412) But the main secret of making a rational consumer
of the laborer is yet to be told. Mr. Drummond visits the
cutlery factory of Turner's Falls, Connecticut River, and
Mr. Oakman, the treasurer of the company, after telling him
that especially American table knives beat the English
goods in quality, continues: "But we shall beat England
also in the matter of prices, we are ahead of it in quality

604 Capital.

even now, that is acknowledged; but we must have lower
prices, and we shall get them as soon as we get our steel
cheaper and bring down our labor." (427). A reduction
of wages and long hours of labor, that is the essence of the
rational and healthy method which is to elevate the laborer
to the dignity of a rational consumer, in order that he may
create a market for the mass of objects which civilization
and the progress of invention have made accessible to him.

To repeat, then, just as department I has to supply the
additional constant capital of II out of its surplus-value, so
II supplies the additional variable capital for I. Depart-
ment II accumulates for itself and for I, so far as the vari-
able capital is concerned, by reproducing a greater portion
of its total product, especially of its surplus-product, in the
shape of necessary articles of consumption.

I (v + s), in the case of production on the basis of in-
creasing capital, must be equal to II c plus that portion of
the surplus-product which is re-incorporated as capital, plus
the additional portion of constant capital required for the
expansion of the production of II; and the minimum of
this expansion is that without which actual accumulation,
that is to say, an actual expansion of the production of I,
is impossible.

Reverting now to the case which we examined last, we
find that it has the peculiarity that II c is smaller than I
(v + % s), smaller than that portion of the product of
I which is spent as revenue for articles of consumption, so
that a portion of the surplus-product of II, equal to 70, is at
once realized for the purpose of disposing of the 1500 I (v
+ s) . As for II c, equal to 1430, it must, other circumstances
remaining the same, be reproduced out of an equal amount
of I (v+s), in order that simple reproduction may take
place, and to that extent we need not pay any more atten-
tion to it. It is different with the additional 70 II c. That
which is for I merely an exchange of revenue for articles
of consumption, is for II more than a mere reconversion of

Accumulation and Reproduction. 605

its constant capital from the form of commodity-capital
into its natural form, as it is in simple reproduction, for it
is a process of direct accumulation, a transformation of a
portion of its surplus-product from the form of articles of
consumption into that of constant capital. If I buys with
70 p. st. in money (money-reserve for the conversion of
surplus-value) the 70 II s, and if II does not buy in ex-
change 70 I s, but accumulates the 70 p. st. as money-
capital, then this money is indeed always the expression of
an additional product (namely the surplus-product of II,
the equivalent of which it is), although this is not a product
which returns into the production ; but in that case this ac-
cumulation of money on the part of II would be the evi-
dence that 70 I s in means of production are unsaleable.
There would be a relative overproduction in I, correspond-
ing to a simultaneous break in the reproduction of II.

But apart from this, the following point must be noted:
During the time in which the 70 in money, which came
from I, have not as yet returned to it, or have but partially
done so, by the purchase of 70 I s on the part of II, this
70 in money figures entirely or in part as additional virtual
money-capital in the hands of II. This is true of every
transaction between I and II, before the mutual replace-
ment of their respective commodities has accomplished the
reflux of the money to its starting point. But the money,
under a normal condition of things, figures here only tem-
porarily in this role. In the credit system, however, where
all momentarily released money is to be used immediately
as an active additional money-capital, such a temporarily
released money-capital may be engaged, for instance, in new
enterprises of I, while it still would have to liquidate addi-
tional products held in other enterprises. It must also be
noted that the annexation of 70 I s to the constant capital of
II requires at the same time an expansion of the variable
capital of II to the extent of 14. This implies, similarly
as it did in the direct incorporation of the surplus-product
of I s in capital I c, that the reproduction in II is alreadv
in process with a view to further capitalization; in other
words, it implies the expansion of that portion of the

606 Capital

surplus-product, which consists of necessary articles of con-
sumption.

The product of 9000, in the second illustration, must be
distributed in the following manner for the purpose of re-
production, when 500 I s is to be capitalized. We merely
consider the commodities in this case and leave aside the
circulation of money.

I. 5000 c + 500 s (to be capitalized) + 1500 (v + s) fund
for consumption, a total of 7000 in commodities.

II. 1500 c + 299 v + 201 s, a total of 2000 in commodi-
ties. Grand total, 9000 in commodities.

Capitalization takes place in the following manner:
In department I, the 500 s, which are capitalized, divide
themselves into five-sixths, or 417 c, plus one-sixth, or 83 v.
The 83 v draw an equal amount out of II s, which buys ele-
ments of constant capital and adds them to II c. An in-
crease of II c by 83 implies an increase of II v by one-fifth
of 83, or 17. We have, then, after this transaction

I. (5000 c + 417 s) + (1000 v + 83 s) = 5417 c -f- 1083 v = 6500

II. (1500 c + 83 s) + ( 299 v + 17 s) = 1583 c + 316 v = 1899

Total 8399

The capital in I has grown from 6000 to 6500, or by 1-12.
That of II has grown from 1715 to 1899, or by nearly 1-9.

The reproduction on this basis in the second year brings
the capital at the end of that year up to the following figures :

1 1. (5417 c + 452 s) c + (1083 v + 90 s) v = 5869 c + 1173 v = 7042.
II. (1583c + 42 s + 90 s) c + (316 v + 8s + 18s) v = 1715c + 342 v = 2057.

And at the end of the third year, we have as a product:

I. 5869 c + 1173 v + 1173 s.
II. 1715 c + 342 v + 342 s.

If department I then accumulates as before one-half of
its surplus-value, we find that I (v + % s), 1173 v + 587
(% s), amount to 1760, more than the entire 1715 II c,
namely an excess of 45. This must again be balanced by
annexing an equal amount of means of production to II c,
which thus grows by 45. This again requires an addition

Accumulation and Reproduction. 607

of one-fifth, or 9, to II v. Furthermore, the capitalized 587

I s are divided into five-sixths and one-sixth respectively,
that is to say, 489 c and 98 v. These last 98 imply a new
addition of 98 to the constant capital of II, and this again
an increase of the variable capital of II by one-fifth, or 20.
Then we have.

I. (5869 c + 489 s) c + (1173 v -f 98 s) v = 6385 c + 1271 v = 7629.

II. (1715 c +45s + 98s)c + (342 v + 9 s + 20 s) v = 1858 c + 371 v = 2229.

Total capital 9858

In three years of reproduction on an increasing scale the
total capital of I has grown from 6000 to 7629, and that of

II from 1715 to 2229, or the total social capital from 7715
to 9858.

(3). Exchange of II c Under Accumulation.

In the exchange of I (v+s) with II c we meet with dif-
ferent cases.

Under simple reproduction, both of them must be equal
and take one another's places, otherwise simple reproduction
cannot proceed smoothly, as we have seen.

Under reproduction on an expanded scale, it is above all
the rate of accumulation which is important. In the pre-
ceding cases we had assumed that the rate of accumulation
in department I was equal to one-half of I s, and also that
it remained constant from year to year. We changed
merely the proportion in which this accumulated capital
was divided between variable and constant capital. We then
had three cases.

(1) I (v + %s) equal to II c, which is therefore smaller
than I (v + s) . This must always be the case, otherwise I
cannot accumulate.

(2) I (v+Mjs) greater than II c. In this case the ex-
change is effected by adding a corresponding portion of II
s to II c, so that this becomes equal to I (v + % s) . In this
case, the transaction in department II is not a simple re-
production of its constant capital, but accumulation, an
augmentation of its constant capital by that portion of its
surplus-product which it exchanges for means of production

608 Capital.

of I. This augmentation implies at the same time a corre-
sponding addition to the variable capital of II out of its
own surplus-product.

(3) I (v + %s) smaller than lie. In this case depart-
ment II had not fully reproduced its constant capital by
means of exchange and had to make good the deficit by a
purchase from I. But this did not require any further ac-
cumulation of variable capital on the part of II, since its
constant capital was brought only to its full size by this
operation. On the other hand, that portion of the capital-
ists of I who accumulate only additional money-capital, had
already accomplished a part of this accumulation by this
transaction.

The premise of simple reproduction, that I (v + s) is
equal to II c, is irreconcilable with capitalist production,
although this does not exclude the possibility that a certain
year in an industrial cycle of 10 or 11 years may not show
a smaller total production than the preceding year, so that
there would not have been even a simple reproduction,
compared to the preceding year. Indeed, considering the
natural growth of population per year, simple reproduction
could take place only in so far as a correspondingly larger
number of unproductive servants would partake of the 1500
representing the aggregate surplus-product. But accumula-
tion of capital, actual capitalist production, would be im-
possible under .such circumstances. The fact of capitalist
production therefore excludes the possibility of II c being
equal to I (v + s) . Nevertheless it might occur even under
capitalist production that in consequence of the process of
accumulation during a preceding number of periods of
production II c might not only be equal, but even greater
than I(v + s). This would mean an overproduction in
II and could not be compensated in any other way than by
a great crash, in consequence of which some capital of II
would be transferred to I. It does not alter the relations
of I (v -f s), if a portion of the constant capital of II re-
produces itself, as happens, for instance, in the employment
of home raised seeds in agriculture. This portion of II c
has no more reference to the exchange between I and II

Accumulation and Reproduction. 609

than has I c. Nor does it alter the matter, if a portion of
the products of II are of such a nature that they may serve
as means of production in I. They are covered by a portion
of the means of production supplied in II by I, and this
portion must be deducted on both sides at the outset, if we
wish to analyze without any obscuring interference the ex-
change between the two great departments of social produc-
tion, the producers of means of production and the produc-
ers of articles of consumption.

To repeat, then, under capitalist production I (v + s)
cannot be equal to II c, in other words, the two cannot bal-
ance. On the other hand, naming I s-x that portion of I s
which is spent by the capitalists as revenue, we see that I
(v + s-x) may be equal to, greater or smaller than, II c.
But I (v + s-x) must always be smaller than II (c + s),
namely, as much smaller as that portion of II s which must
be consumed under all circumstances by the capitalist class
of II.

It must be noted that in this presentation of accumula-
tion the value of the constant capital, so far as it is a portion
of the value of the commodity-capital, which it helped to
produce, is not exactly represented. The fixed portion of
the newly accumulated constant capital is transferred to the
commodity-capital only gradually and periodically accord-
ing to the different nature of these fixed elements. Where-
ever raw materials and halfwrought articles are employed
in large quantities for the production of commodities, the
commodity-capital therefore consists overwhelmingly of ob-
jects replacing circulating constant elements and variable
capital. (On account of the turn-over of the circulating
elements this method may nevertheless be adopted. It is
then assumed that the circulating portion together with
that portion of value which the fixed capital has transfer-
red to it is turned so often during the year that the aggre-
gate sum of the commodities supplied is equal in value to
all the capital invested in the annual production.) But
wherever only auxiliary materials are used for machine
work, and no raw material, there v, the labor element, must
reappear in the commodity-capital as its largest factor.

610 Capital.

While in the calculation of the rate of profit the surplus-
value is figured on the total capital, regardless of whether
the fixed elements transfer periodically much or little value
to the product, the fixed portion of constant capital is in-
cluded in the calculation of the value of any periodically
created commodity-capital only to the extent that it yieldf
a certain average of value to the product.

IV. CONCLUDING REMARKS.

The original source for the money of II is v + s of the
gold producers in department I, exchanged for a portion of
II c. Only to the extent that the gold producer accumu-
lates surplus-value or converts it into means of production
of I, in other words, to the extent that he expands his pro-
duction, does his v + s stay out of department II. On the
other hand, to the extent that the accumulation of gold on
the part of the gold producer himself leads ultimately to
an expansion of production, a portion of the surplus-value
of gold production not spent as revenue passes into depart-
ment II as additional variable capital of the gold producers,
promotes the accumulation of new hoards in II and sup-
plies it with means by which to buy from I without having
to sell to it immediately. From this money derived from
I (v -f s) of gold production must be deducted that portion
of gold which is employed by certain lines of II as raw ma-
terial, etc., in short as an element for building up their con-
stant capital. An element of preliminary reproduction,
for the purpose of future expanded production, is created
for either I or II under the following conditions: For I
only when a portion of I s is sold onesidedly, without a
balancing purchase, to II and serves there as additional
constant capital; for II, when the same case occurs on the
part of I with reference to the variable capital ; furthermore
when a portion of the surplus-value spent by I as revenue
is not covered by II c, so that a portion of II s is bought
with it and thus converted into money. If I (v + s-x) is

Accumulation and Reproduction. 611

greater than II c, then II c need not for its simple repro-
duction make up in commodities of I what I has taken
out of II s. The question is, to what extent hoarding may
take place within the exchange of the capitalists of II among
themselves, an exchange which can consist only of a mutual
crossing of II s. "We know that direct accumulation takes
place within II by means of direct conversion of a portion
of II s into variable capital (just as department I con-
verts a portion of I s directly into constant capital). In
the various stages of accumulation within the different
lines of business of II, and for the individual capitalists of
these lines, the matter explains itself, with the self-under-
stood modifications, in the same way as in I. One side is
still engaged in hoarding and sells without buying, the
other is on the point of actual expansion of reproduction
and buys without selling. The additional variable money-
capital is first advanced for additional labor-power, but
this, in its turn, buys articles of consumption from the
hoarding owners of the additional articles of consumption
used by the laborers. To the extent that these owners
hoard the money, it does not return to its point of depart-
ure.

END OP VOLUME TWO.

INDEX.

Accumulated Wealth, insignificant
compared to productive forces, 370.

Accumulation, of additional capital, its
diagramatic presentation, 591.

Additional Capital, in production of
precious metals not withdrawn in
money, but increased by production
of more precious metals, 377.

Additional Capital, its function in
differences of turn-over, 311.

Additional Capital, required for normal
conservation of fixed capital, belongs
to the circulating capital, 200.

Advanced Capital, a clear conception
of its nature necessary for under-
standing of turn-over, 352.

Agricultural Capital, its peculiar move-
ments, 112.

Auction Sales, their effect on the
market supply of commodities, 291.

Auxiliary Materials, circulate only
their value by transfer to the pro-
duct, like the fixed capital, 180.

Auxiliary Materials, do not circulate
their value piecemeal, like fixed
capital, but transfer it wholly to the
product, like raw materials, 186.

Auxiliary Materials, mistakenly classi-
fied by Ramsay as fixed capital, 180.

Auxiliary Materials, some of them may
transfer both substance and value to
the product, 186.

Average Rate of Profit, problem offered
by Engels to official economists, 28.

B

Bailey, his idea of value, 121.
Bookkeeping, unproductive expense of
circulation, 151.

Capital, an expression of labor, 81.

Capital, distinctive mark of its com-
modity-form from its money-form, 55.

Capital, in a fallow state, 139.

Capital, industrial defined, 59. (See
also Industrial Capital, Productive
Capital, and Agricultural Capital.)

Capital, its different functions ex-
pressed through different forms, 57.

Capital, its individual and social role
in circulation, 64, 110.

Capital, its money-form superior to its
commodity-form from a capitalist
point of view, 84.

Capital, its forms differ when individ-
ually and socially considered, 426.

Capital, its release in the various
periods of turn-over, 300.

Capital, latent, must increase in pro-
portion as reproduction is irregular,
161.

Capital, rotation of its different forms,
58.

Capitalist, must be money-capitalist in
his relation to the laborer, 68.

Capitalist Production, its development
increases commodity-supply, 163.

Capitalist Production, its influence on
building trade, 266.

Capitalist Production, its main ele-
ments, 44.

Circulating Capital, a portion always
in the form of released capital, 320.

Circulating Capital, consists of raw
and auxiliary • materials and labor-
power, 186.

Circulating Capital, distinguished from
capital of circulation, 218.

Circulating Capital, its elements con-
tinually reproduced in their natural
form, not interruptedly as those of
fixed capital, 191.

Circulating Capital, its form conceals
surplus-value, 248.

Circulating Capital, not distinguished
by economists from variable capital,
182.

Circulation, agents of, paid by agents
of production, 144.

Circulation, does not change its un-
productive character by transfer, 148.

Circulation, illusive character of its
typical formula, 69.

Circulation, its expenses, see expenses.

Circulation, of commodities, its gen-
eral laws do not apply to func-
tional sections of cycles of individ-
ual capital, 129.

Circulation, its role in determining the
meaning of fixed and circulating
capital, 246.

Circulation, its three cycles simul-
taneous phases of industrial capital,
115.

Circulation, its three diagrams, 114.

Circulation, of capitalist commodities,
influence circulation of other com-
modities, 125.

Circulation, of commodities, its law,
378.

Circulation, of money, has for its
starting point the capitalist class,
384.

Circulation, necessary in process of
reproduction, but itself unproductive,
149.

Circulation, time _ of, 138. (See also
time of circulation).

Classification, of reproduction, in a
vague way, 131.

Commercial Crisis, caused by irregu-
larities in the turn-over of capital,
365.

Commercial Crisis, interferes with
smooth flow of reproduction, 475.

Commercial Crisis, through lack of
balance in production, 545.

Commodities, formation of supply may
require productive labor and add
value to product, 156.

613

614

Index.

Commodities, formation of normal sup-
ply an expense adding value, 167.

Commodities, formation of abnormal
supply, decreases value, 168.

Commodities, general formation of
supply, 155.

Commodities, the ideal and real
separation of the value of different
kinds, 75.

Commodities, their voluntary and in-
voluntary supply, 166.

Commodities, the typical form of pro-
ducts under capitalism, 43.

Commodities, when revenue and when
capital, 449.

Commodity-Capital, its transformation
into Money-Capital, 48.

Commodity-Capital, different circula-
tion as surplus-value and capital-
value, 76.

Commodity-Capital, general formula
of its circulation, 98.

Commodity-Capital, separation of its
value into capital-value and surplus-
value, 53, 102.

Complaints, of employers characteristic
of early stage of capitalist develop-
ment, 41.

Concentration of Capital, promoted by
credit, 268.

Consumption, individual, of capitalist,
not included in formula of repro-
duction of money-capital, 56, 66.

Consumption, individual and produc-
tive interrelated, 106.

Consumption, not identical with sale,
86.

Consumption, productive, a part of the
cycle of capital, 85.

Continuity, essential to capitalist re-
production, 116, 118, 119.

Credit, complicates relations between
originally advanced capital and capi-
talized surplus-value, 368.

Credit, not analyzed in volume II,
(See volume III).

Credit-System, its influence on individ-
ual and social turn-over of capital,
214.

Crisis, commercial, new basis for
cycles of turn-over, 211.

Crisis, commercial, due to decrease in
exchange of capitals, 87.

Crop Rotation, its influence on turn-
over of capital, 282.

Demand, may be demand for payment
or demand for consumption, 87.

Depreciation, allowed for in capital
calculation as necessary, 203.

Depreciation of fixed Capital, through
disuse, adds value to product, 276.

Destutt de Tracy, his theory of re-
production criticized, 560.

Differences, real and apparent, in turn-
over of component parts of capital,
212.

Distance, of markets, affects turn-over
of capital, 285.

Distribution, its meaning in capitalist
production, 40.

Division of _ Labor, does not make an
unproductive function productive,
152.

Elements of Production, their different
forms, 45.

Exchange, between constant and vari-
able capitals of the two depart-
ments of reproduction, 462.

Exchange, between the two depart-
ments of reproduction, 460.

Exchange, within department II, for
reproduction, 465.

Expansion of capital, intensive and
extensive, 195.

Expenses of Circulation, 147.

Expenses of Circulation, due to
storage and formation of supply,
enter in part into value of commodi-
ties, 157.

Expenses of Circulation, general rule
determining whether they add value
or not, 169.

Expenses of Circulation, genuine, 147.

Expenses of Circulation, if preserving
use-value of product, preserve also
exchange-value, 158.

Expenses of Storage, may add valut
and surplus-value to the product,
155.

Expenses of Transportation, add valui
to product, 170.

Fixed Capital, its peculiar form, 178.

Fixed Capital, its circulation only s
circulation of value, not of substance,
179.

Fixed Capital, difficulty in analyzing
role of money in reproduction o{
wear and tear, 529.

Fixed Capital, its distinction from cir-
culating capital not due to theii
different role in production but to
their different mode of turn-over, 189-

Fixed Capital, its distinction from cir-
culating capital refers only to prod
uctive capital, not to commodity-
capital and money-capital, 190.

Fixed Capital, its durability deter-
mines ratio of its transfer of value,
179.

Fixed Capital, its effectiveness, in-
creased by more intensive exploita-
tion of labor without an increase of
capital, 409.

Fixed Capital, its individual elements
have different periods of turn-over,
192.

Fetishism, typical of bourgeois
economy, 257.

Fixed Capital, accumulation of a re-
serve fund of money for its repro-
duction, 185.

Fixed Capital, distinguished from cir-
culating capital by different mode
of turn-over, 187.

Fixed Capital, its peculiar role in the
turn-over of capital, 185.

Fixed Capital, its reproduction in a
natural form, 532.

Fixed Capital, its turn-over comprizes
several turn-overs of circulating
Capital, 190.

Index.

615

Fixed Capital, its value advanced in
one lump sum, but recovered in in-
stallments, 190.

Fixed Capital, mistaken for constant
capital, 182.

Fixed Capital, may lose its character
as such under certain circumstances,
181, 183.

Fixed Capital, not necessarily immov-
able, 240.

Fixed Capital, requires periodical in-
vestment of additional capital for
repairs and labor-power, 198.

H

Hoard, of money, its development into

loanable capital, 576.
Hoard, of money, its formation under

reproduction on an enlarged scale,

574.
Hoarding, a phase in the circulation

of capital, 60.

I

Industrial Capital, its first and sub-
sequent investments, 70.

Industrial Capital, its individual
volume depends on social conditions,
117.

Industrial Capital, makes independent
money-capital and commodity-capital
subordinate to itself, 63.

Industrial Capital, only a part actively
engaged in process of production, if
production is to proceed uninter-
ruptedly, 305.

Interest, not analyzed in volume II,
see volume III.

Irregularities, in the process of repro-
duction, 130.

Labor, advanced by laborer to capi-
talist, 247.

Labor, resolves itself into necessary
and surplus-labor, 443.

Labor, spent in keeping fixed capital
in normal working order is an ele-
ment of circulating capital, 197.

Laborer, his point of view concerning
his relation to money-capital, 38.

Labor-Power, its decreasing proportion
to the means of production, 134.

Labor-Power, its quantitative and
qualitative relation to money-capital,
33.

Labor-Power, its productive consump-
tion, 42.

Labor-Power, social, a portion of it
expended in the production of gold
and silver, 375.

Labor-Time, its role in the process of
production, 141.

Labor-Time, small compared to time
of production in timber raising, 272.

Latent Capital, its different forms, 330.

Latent Capital, not productive of sur-
plus-value, 342.

Legislation, distinguishes between
natural wear and tear of fixed capi-
tal and occasional repairs, 201.

M

Machinery, when fixed capital and
when merely commodity-capital, 181.

Manuscripts of Marx for volume II,
8, 9, 10, 11.

Manuscripts of Marx, for volume III,
12.

Market Combinations, their effect on
the turn-over of capital, 364.

Market-Prices, of products, may mean
loss or gain of capital, 334.

Marx, Karl, his theory of surplus-value
vindicated, 24.

Material, when circulating and when
fixed capital, 251.

Means of Production, their relation to
money-capital, 34.

Mechanism of capitalism, its abnor-
malities are not a sound basis for
theoretical analysis of capitalist
economics, 595.

Merchants' Capital, its relation to in-
dustrial capital, 126.

Money, a homogeneous medium for
measuring the turn-over of capital,
209.

Money, advanced in exchange of com-
modities flows back to advancing
capitalist, 478.

Money, as a reserve fund, 96.

Money, in circulation, its quantity so
much smaller the more frequently it
is advanced, 480.

Money, in excess of value of commodi-
ties does not increase value in cir-
culation, 464.

Money, its relation to money-capital,
35.

Money, its role as a hoard, 95.

Money, its role in the reproduction of
the wear and tear of fixed capital,
526.

Money, not consumed productively or
individually, 154.

Money, historical order of its forms,
128.

Money, increased speed of its circula-
tion does not necessarily mean a
more rapid turn-over of capital, 395.

Money, may be capital in one hand and
revenue in another, 511.

Money, the quantity used for the cir-
culation of the annual product must
have been produced in previous
years, except the small amount
needed to make up for depreciation,
557.

Money, the tangible form of value, 65.

Money-Capital, additional, when re-
quired, 122.

Money-Capital, composition of value of
its elements, 47.

Money-Capital, its circulation the
typical form of circulation of in-
dustrial capital, 67.

Money-Capital, its own limitations and
their influence in limiting social
capital, 412.

Money-Capital, its three stages of cir-
culation, 31.

Money-Capital, its first stage of cir-
culation analyzed, 32.

Money-Capital, its second stage of cir-
culation, 41.

616

Index.

Money-Capital, its third stage o£ cir-
culation, 4(5.

Money-Capital, its transformation into
productive capital, 36.

Money-Capital, latent, its different
forms, 402. (See also Latent and
Potential Capital).

Money-Capital, virtual, its growth
through hoarded surplus-value, 582.

Money-Capital, released by mechanism
of turn-over, 322.

Money, reproduction of its supply, 547.

Money-Capital, significance of its cycles
as surplus-value and capital-value, 51.

Money-Capital, two errors of con-
ception, 39.

Money-Capital, two observations con-
cerning its money-form, 52.

Money-System, common to all stages
of commodity-production, 132.

Money System, its characteristic sig-
nature, 37.

Overproduction, a necessary con-
sequence of reproduction on an en-
larged scale, 202.

Owen, Richard, his communism based
upon Ricardo's economics, 21.

Phlogistic Theory, its analogy to
theory of surplus-value, 23.

Physiocrats, do not confuse capital of
circulation with circulating capital,
250.

Physiocrats, their theory of fixed and
circulating capital, 215.

Physiocrats, their theory of reproduc-
tion, 414.

Potential Capital, 290.

Prices, confusion of cause and effect
in their fluctuations, 393.

Prices, effect of their change on turn-
over of Capital. 326.

Prices, their fall requires additional
money-capital to fill up turn-over,
327.

Prices, their rise releases capital in
turn-over, 328.

Production, see Capitalist Production.

Production, of precious metals, a dead
expense of social labor-power and
means of production, 399.

Production, of precious metals throws
additional money into circulation,
396.

Production, social, its two departments,
457.

Production, social, its volume reduced
by production of precious metals,
411.

Production, time of, 138. (See also
Time of Production.)

Productive Capital, its function re-
quires combination of labor-power
and means of production, 109.

Productive Capital, its periodical re-
production, 72.

Productive Capital, its reproduction on
an enlarged scale, 89.

Productive Capital, its simple repro-
duction, 73.

Productive Industries, without com-
modities, 61.

Productive Supply, 281, 302.

Profit, average rate of, solution of
problem promised in volume III, 28.

Profit, not analyzed in volume II, see
volume III.

Proportion, of quantities and qualities
of elements of production determines
scale of reproduction, 94.

Prosperity, of working class an in-
dication of approaching crisis, 476.

Railroads, their development shortens
turn-over of capital, 286.

Railroads, their extension builds up
the world market, 287.

Recapitulation, of what has gone be-
fore on the subject of production
and circulation in volumes I and
II, 406.

Release of Capital, does not take place
when working period equal to cir-
culation period, 319.

Release, of capital, in the turn-over,
300.

Released Capital, its amount deter-
mined by differences of turn-over,
317.

Released Capital, passes into money
market, 323.

Released Capital, the opinion of Engels
concerning its significance, 324.

Repairs, juggling with this term and
reproduction, 205.

Repairs, not clearly distinguished from
reproduction, 204.

Reproduction, comprises productive
and individual consumption, 405. '

Reproduction, its entire cycle, 404.

Reproduction, its general formula P-P'
does not indicate capitalist character
of production as does M-M,' 104.

Reproduction, its scale varied by
rapidity of transformation of com-
modity-capital into money-capital
49.

Reproduction, of the capitals of the
two departments of production, 459.

Reproduction, of social capital, on an
enlarged scale, 571.

Reproduction, of values and of sub-
stance, 454.

Reproduction, on a simple scale, 455.

Reproduction, on a simple scale, found
in reproduction on an enlarged scale,
456.

Reserve Fund, of money, not a part
of money-capital in functien, 97.

Ricardo, David, accepted the theory
of Adam Smith concerning com-
position of value, 450.

Ricardo, David, failure of his school,
27.

Ricardo, David, his conception of sur-
plus-value criticized, 18, 19.

Ricardo, David, his confusion of fixed,
circulating variable and constant
capital criticized, 255.

Ricardo, David, his definition of fixed
and circulating capital, 254.

Ricardo, David, his vise of the theory
of fixed and circulating capital, 241*

Index.

en

Rodbertus, his charge of plagiarism

refuted, 12, 13, 14.
Rodbertus, his theory of ground rent

analyzed, 15.
Rotation, of money distinguished from

its circulation, 394.

Sale, of commodities, its amount in-
fluences turn, 331.

Savage Producer, indifferent to labor
time, 510.

Sinking Fund, for reproduction of
fixed capital, 206.

Sinking Fund, for fixed capital, its role
in the formation of a money-hoard,
207.

Sismondi, his conception of merchants'
capital, 127.

Sismondi, his theory of commercial
crises, 26.

Smith, Adam, believed that the entire
value of the social product resolved
itself into wages and surplus-value,
504.

Smith, Adam, his analysis of capital
and revenue, 436.

Smith, Adam, his analysis of capital
and revenue dissected, 437.

Smith, Adam, his composition of value
criticized, 419.

Smith, Adam, his conception of the
composition of the value of com-
modities, 418.

Smith, Adam, his confusion in the mat-
ter of fixed and circulating capital
transmitted to other economists, 227.

Smith, Adam, his confusion of fixed
and circulating capital criticized, 216
to 244.

Smith, Adam, his idea that the value
of products must be paid in last in-
stance by consumers is true only,
if by "consumers" is meant both in-
dividual and productive consumers,
506.

Smith, Adam, his inconsistencies ex-
posed, 429.

Smith, Adam, his juggling with con-
stant capital, 430.

Smith, Adam, his progress and short-
comings in the formulation of a
theory of fixed and circulating capi-

n tal, 216, 220, 221.

Smith, Adam, his retrogression in the
analysis of reproduction, 415.

Smith, Adam, his shallow conception
of the amount of money required for
the circulation of the annual pro-
duct, 554.

Smith, Adam, his theory of surplus-
value criticized, 16, 17.

Smith, Adam, mistakes supply of use-
values for supply of commodities,
159.

Smith, Adam, realizes significance of
departments of means of production
and means of consumption, 421.

Smith, Adam, results of his confusion
summed up, 258.

Smith, Adam, the scientific parts of

his theory of reproduction summed up,
424.

Social Plan, not followed in capitalist
production, 196.

Speculation, its influence in the cir-
culation of capital, 362.

Surplus, of products, an evil under
Capitalism, 546.

Surplus-Value, apparent contradic-
tions in its law, 343.

Surplus-Value, appropriated in pro-
duction, distributed in circulation,
445.

Surplus-Value, hoarded as latent
money-capitalj 369.

Surplus- Value, in simple reproduction,
374^

Surplus- Value, influence of circulation
on its rate misinterpreted, 340.

Surplus-Value, influence of its accumu-
lation on circulation, 367.

Surplus- Value, its accumulation, not
its expenditure as private revenue,
essential in capitalist production,
136.

Surplus-Value, its capitalization ex-
pressed by formula P-P,' 91.

Surplus- Value, its circulation under
accumulation, 397.

Surplus- Value, its function in the turn-
over, 338.

Surplus- Value, its rate and mass in the
turn-over of capital, 339.

Surplus-Value, its realization in com-
modity-capital, 50.

Surplus- Value, its role in buying and
selling, 133.

Surplus-Value, laws relating to it are
in force only for capital actually in-
vested in working process, 341.

Surplus-Value, money for its realization
thrown into circulation by capitalist
class, 385.

Surplus- Value, spent as revenue, is
eliminated from the cycle of capital,
79.

Surplus- Value, used for reproduction
of fixed capital, its peculiar role in
circulation, 367.

Suspended Capital, see Released Capi-
tal, 321.

Swindling, its influence in the circula-
tion of capital, 362.

Time of Circulation, its influence on
the scale of production, 295.

Time of Production, greater than work-
ing period, 273.

Time of production, in agriculture, its
influence on house industry, 275.

Time of Production, its difference from
the working time particularly ap-
parent in agriculture, 274.

Transportation, its improvement re-
duces time of circulation, 332.

Technical Revolutions, their influence
on values, 121.

Thompson, William, quoted as a rep-
resentative of Utopian socialists, 21.

Time of Circulation, 138.

Time of Circulation, causes concealing
its unproductive character, 143.

Time of Circulation, its absolute limit
the durability of commodities, 145.

Time of Circulation, limits time of
production, 142.

Time of Circulation, not productive of
surplus-value, 142.

(518

Index.

Time of Production, includes delays of
product in process of production, 138.

Transportation, its development does
not reduce latent supply of com-
modities, but merely changes its
form, 162.

Transportation, its peculiar productive
character in circulation, 172.

Transportation, produces change of
location, 62.

Turn-Over, effect of its prolongation
on small farmers, 269.

Turn-Over, of Capital, its differences
basis of terms of credit, 288.

Turn-Over, of capital, differences of
its three formulae, 174.

Turn-Over, of capital, distinguished
from reproduction of its parts, 210.

Turn-Over, of capital, inaccuracy of
terms, 307.

Turn-Over, of capital, influence of com-
parative length of its periods of cir-
culation and production on differ-
ences, 305.

Turn-Over, of capital invested in cattle
raising shortened by new strains,
270.

Turn-Over, of Capital, its cycles, 208.

Turn-Over, of capital, its cycles ex-
panded or contracted by reserve
capital, 304.

Turn-Over, of capital, its influence on
the rate of surplus-value, 358.

Turn-Over, of capital, its role in the
process of circulation, 135.

Turn-Over, of capital, its time deter-
mined by sum of time of production
plus time of circulation, 176.

Turn-Over, of capital, its time from
capitalist point of view signifies time
of return of original capital, 177.

Turn-Over of capital, means return of
advanced value to its original form
plus surplus-value, 173.

Turn-Over, of Capital, significance of
different cycles for formation of sur-
plus-value and of product, 175.

Value, additional created by latent

capital, 140.
Value, influence of its reduction on

reproduction of capital, 123.
Value, its revolutions do not change

proportions of its elements, 455.
Value, its selfdeveloping and automatic

nature, 120.
Value, of annual social product, diffi-

cult to analyze, because its constant
portion consists of different class of
products than its new portion, 501.

Value, of commodities, dissected, 447.

Value, of product, distinguished from
product in values, 508.

Value, of Commodities, only tempo-
rarily changed by fluctuations in
wages, 392.

Value, of past labor and capital in
specious argument of Carey, 410.

Variable Capital, formulae of its turn-
over, 347, 348, 349.

Variable Capital, its individual role in
the turn-over, 354.

Variable Capital, its turn-over coin-
cides only with first phase of turn-
over of circulating constant capi-
tal, 337.

Variable Capital, its turn-over from a
social point of view, 359.

Variable Capital, no revenue for
laborer, 520.

w

Wage- Laborer, in circulation, unpro-
ductive, 150.

Wages, a part of past labor used as
a draft upon future labor, 82.

Wages, their depression below normal
level a means of releasing variable
capitable, 594.

"Wear and Tear, defined as transfer of
value to the product and loss of
use-value, 194.

Wear and Tear, of fixed capital, cal-
culated on its average life-time, 109.

Wear and Tear, of fixed capital, due
to use, natural forces, condition of
material, 193.

Wear and Tear, virtual, 193.

Working Day, social, the value of its
product always contains a part of
the value of past labor, 497.

Working Period, a continuous succes-
sion of productive periods insured
by division of capital into produc-
tive and reserve capital, 303.

Working- Period, its differences cause
difference in turn-over and amount
of capital required, 261.

Working-Period, its different forms,
260.

Working- Period, its prolongation re-
quires additional circulating capital,
264,

Working Period, shortened by produc-
tivity of labor, 267.

Y CAI tORNIA * RAr

UNIVERSITY OF CALIFORNIA LIBRARY

Los Angeles

This book is DUE on the last date stamped below.

Bl

QL JAN
MAY 2

RETURNED OC

1989

0 7 2004

THE MHKAKY

ib

58 00

29 3074

HB
*01
M36kE
v.2
cop. 2

UC SOUTHERN REGIONAL LIBRARY FACILITY

A 001 197 972 1

r1