(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "Capital; a critique of political economy"

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'S 1 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 process 1 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}p m , 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 \ p m 
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{p m , 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{p m , 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{p m 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 \ p m , 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{p m , 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 { p m 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 { p m 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 {p m , 
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 labor j power 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 commodity j capital 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 |p m , 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 |p m> 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 
C 2 in this second phase representing a greater value and a 
different use-value than C 1 , 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. Cuprov 6 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 { p m< 
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 {p mt 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 w T hich 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 M j C 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|p m . 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 \ p m 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 |p m 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 |p m> 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 
|p m . 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 — 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{p m> 
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|p m . 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|p m ; 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 \ p m 
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 production 9 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 9 a . 



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 l x /<> 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 g 2 , 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. 

21 End 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 

22 The 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 y 2 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-over 5 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 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 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 y 2 times. 12 V 2 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 Smith 31 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 capital 47 ^ -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 w T hich 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