The three figures can be set out as follows, if we let Tc stand for the whole circulation process:
Put all three forms together, and every condition the process needs appears as something the process itself produces — its result, not just its starting point. Each stage appears as a starting point, a point passed through, and a point of return. The whole process presents itself as a unity of production and circulation: production becomes the means by which circulation happens, and circulation becomes the means by which production happens.
All three circuits share one thing: the valorization of value is the governing purpose, the driving motive. In circuit I this shows up in the very form of the notation. Form II begins with P, the process of valorization itself. In form III the circuit begins with value already valorized and closes with value valorized afresh — even when the movement simply repeats itself at the same scale.
As long as we look only at the fact that a sale, C-M, is a purchase, M-C, for the buyer, and a purchase, M-C, is a sale, C-M, for the seller, the circulation of capital is just an ordinary exchange of commodities, and the laws about the quantity of money in circulation set out earlier (Volume I, Chapter 3, Section 2) still hold. But if we do not stop at this formal side, and instead look at the real connection between the changes of form undergone by different individual capitals — that is, at how the circuits of individual capitals are linked together as the partial movements making up the reproduction process of the total social capital — then this connection cannot be explained by the mere change of form between money and commodities.
In a circle that keeps turning, every point is at once a starting point and a point of return. If we stop the rotation, not every starting point is a point of return any more. We have seen that each particular circuit not only presupposes the others implicitly, but that repeating the circuit in one form necessarily includes running through the circuit in the other forms too. So the whole difference between the three forms presents itself as merely formal — or even merely subjective, a difference that exists only for whoever is looking at it.
As long as each of the three circuits is treated as a particular form of movement that different individual industrial capitals happen to be in, this difference between them only ever shows up between one capital and another. But in reality, every individual industrial capital is in all three at once. The three circuits, the forms in which the three shapes of capital reproduce themselves, run on continuously side by side. Part of a capital's value, say the part now functioning as commodity-capital, is turning into money-capital, while at the same time another part is leaving the production process and entering circulation as new commodity-capital. So the circuit-form C'...C' is continually being traced out, and the same is true of the other two forms. The reproduction of capital in each of its forms, and at each of its stages, is just as continuous as the change of these forms into one another and the successive passage through the three stages. Here, then, the whole circuit really is the unity of its three forms.
So far we have assumed that the whole value of a capital appears at any one moment entirely as money-capital, or entirely as productive capital, or entirely as commodity-capital. So we had, for example, the £422 first entirely as money-capital, then entirely converted into productive capital, and finally as commodity-capital: yarn worth £500 (containing £78 of surplus-value). On this assumption, the different stages are so many interruptions of one another.
As long as the £422 stays in money form — that is, until the purchases M-C, labour-power and means of production, are completed — the whole capital exists and functions only as money-capital. As soon as it is converted into productive capital, it functions as neither money-capital nor commodity-capital. Its whole circulation process is interrupted, just as its whole production process is interrupted whenever it is functioning in one of the two circulation stages, whether as money or as commodities.
On this picture, then, the circuit P...P would present itself not only as the periodic renewal of productive capital, but equally as an interruption of its own function, the production process, until the circulation process has been completed; instead of running continuously, production would proceed in fits and starts, starting up again only after intervals of random length, depending on how quickly or slowly the two stages of circulation are got through. This is the position, for instance, of a Chinese artisan who works only to private order and whose production stops until a new order comes in.
Every part of a capital that is in motion goes through exactly this same movement, each part taking its turn in succession. Take, for example, the 10,000 lb of yarn that is a spinner's weekly product. This 10,000 lb of yarn leaves the sphere of production entirely and enters the sphere of circulation; the capital-value contained in it has to be turned entirely into money-capital, and as long as it stays in the form of money-capital, it cannot go back into the production process. It first has to enter circulation and be turned back into the elements of productive capital, labour-power and means of production. The circuit of capital is one continuous interruption: leaving one stage, entering the next; shedding one form, existing in another. Each of these stages not only presupposes the other but at the same time excludes it.
Continuity, however, is the mark of capitalist production, and it is required by capitalism's own technical basis — even if it cannot always be achieved without qualification. So let us see how the matter actually stands.
While, say, the 10,000 lb of yarn goes onto the market as commodity-capital and is turned into money (whether that money serves as means of payment, means of purchase, or merely as money of account), new cotton, coal, and so on takes its place in the production process — already turned back out of money form and commodity form into the form of productive capital, and beginning to function as such. At the very same time as the first 10,000 lb of yarn is being converted into money, an earlier 10,000 lb of yarn is already going through the second stage of its circulation, turning back from money into the elements of productive capital.
All the parts of the capital go through the circuit process one after another, while existing at the same time in different stages of it. So industrial capital, in the continuity of its circuit, exists simultaneously in all its stages and in the different functional forms that correspond to them. For the part that is turning from commodity-capital into money for the first time, the circuit C'...C' is only just opening; but for industrial capital as a whole, as a moving totality, the circuit C'...C' has already been completed. With one hand money is advanced, with the other it is taken in; the opening of the circuit M...M' at one point is
The opening of the circuit M...M' at one point is, at the same time, its return at another point. The same holds for productive capital.
The real circuit of industrial capital, in its continuity, is therefore not just a unity of the circulation process and the production process, but a unity of all three of its circuits. But capital can only be this unity in so far as each different part of the capital passes in succession through the phases of the circuit that follow one another, moving from one phase, one functional form, into the next — so that industrial capital, as the whole made up of these parts, exists at the same time in the different phases and functions, and so traces out all three circuits at once. Here, the succession of each part is made possible by the coexistence of the parts, that is, by the division of the capital. In just this way, in the organized factory system, the product is continually at the different stages of its formation at the same time as it is passing from one stage of production to the next.
Because an individual industrial capital is a definite magnitude, depending on the capitalist's means and having a definite minimum size for each branch of industry, definite proportions have to hold when it is divided up. The size of the capital on hand governs the scale of the production process; this in turn governs the scale of the commodity-capital and money-capital that function alongside the production process. But this coexistence, which is what makes the continuity of production possible, only exists through the movement of the parts of the capital, in which they pass through the different stages one after another. The coexistence is itself only the result of the succession.
Suppose, for example, that C'-M' gets stuck for one part — the commodity cannot be sold. Then the circuit of that part is interrupted, and its replacement by fresh means of production does not happen; the parts that follow, emerging as C' from the production process, find their own change of function blocked by the parts ahead of them. If this goes on for some time, production is cut back and the whole process is brought to a halt. Every hold-up in the succession throws the coexistence into disorder; every hold-up at one stage causes a greater or lesser hold-up in the whole circuit — not just of the stuck part of the capital, but of the whole individual capital.
The next form the process presents is that of a succession of phases, so that capital's move into a new phase is conditioned by its leaving the previous one. Each particular circuit therefore also has one of the functional forms of capital as its starting point and its point of return. On the other hand, the total process really is the unity of the three circuits, which are the different forms in which the
continuity of the process expresses itself. The total circuit presents itself, for each functional form of capital, as that form's own specific circuit — and each of these circuits is a condition for the continuity of the total process; the circuit of one functional form is a condition for the circuit of the other. It is a necessary condition for the total production process, especially for social capital, that it is at the same time a reproduction process, and therefore a circuit for each of its moments.
Different fractional parts of the capital pass in succession through the different stages and functional forms. Each functional form, even though it is always a different part of the capital that appears in it, thereby traces out its own circuit at the same time as the others do theirs. One part of the capital — but always a changing one, constantly being reproduced — exists as commodity-capital turning into money; another as money-capital turning into productive capital; a third as productive capital turning into commodity-capital. The constant presence of all three forms is mediated by the circuit of the total capital passing through exactly these three phases.
As a whole, capital is then present at the same time, side by side in space, in its different phases. But each part is constantly passing, one after another, out of one phase, one functional form, into the next, so functioning in turn in all of them. The forms are thus flowing forms, whose simultaneous presence is mediated by their following one after another. Each form follows the others and precedes them, so that one part of the capital returning to a given form depends on another part returning to a different form. Each part continually traces out its own circuit, but it is always a different part of the capital that is in that form at any moment — and these particular circuits are only simultaneous and successive moments of the total course.
Only in the unity of the three circuits is the continuity of the total process actually realized, instead of the interruption described above. The total social capital always has this continuity, and its process always has the unity of the three circuits.
For individual capitals, the continuity of reproduction is in places interrupted, more or less. First, at different times the masses of value are often distributed unevenly across the different stages and functional forms. Second, depending on the nature of the commodity being produced — that is, on the particular sphere of production the capital is invested in — these portions can be distributed differently. Third, continuity can be more or less interrupted in branches of production that depend on the season, whether because of natural conditions (agriculture, herring fishing, and so on) or because of conventional arrangements, as with so-called seasonal work. The process runs most regularly and uniformly in the factory and in mining. But this variety among branches of production makes no difference to the general forms of the circuit process.
Capital, as value that valorizes itself, is not only a set of class relations, a definite social character resting on labour existing as wage-labour. It is also a movement, a circuit process through different stages, which itself in turn includes three different forms of the circuit process. It can therefore only be grasped as movement, not as a thing at rest. Those who treat the independence value takes on as a mere abstraction forget that the movement of industrial capital is exactly this abstraction in action. Here value passes through different forms, different movements, in which it preserves itself and at the same time valorizes itself, grows larger.
Since what concerns us here, for now, is just the form of the movement, we are leaving aside the revolutions in value that capital-value can undergo in the course of its circuit. But it is clear that, whatever revolutions in value occur, capitalist production can exist and go on existing only for as long as capital-value is being valorized — that is, for as long as value, having become independent, keeps tracing out its circuit process — and that means only for as long as the revolutions in value are in some way overcome and evened out. The movements of capital appear as the actions of the individual industrial capitalist, who functions as buyer of commodities and labour, seller of commodities, and productive capitalist, and so mediates the circuit through his own activity. If the social capital-value undergoes a revolution in value, it can happen that an individual capital succumbs to it and goes under, because it cannot meet the conditions of that movement in value.
The more acute and frequent the revolutions in value become, the more the automatic movement of value-that-has-made-itself-independent asserts itself against the foresight and calculation of the individual capitalist, acting with the force of an elemental natural process; the more the course of normal production is subordinated to abnormal speculation; the greater the danger to the existence of individual capitals. So these periodic revolutions in value confirm exactly what they are supposed to refute: the independence that value takes on as capital, and which capital's own movement preserves and sharpens.
This sequence of metamorphoses that processing capital goes through involves a constant comparison between the change in the magnitude of the capital's value achieved in the circuit and its original value. The independence value takes on with respect to the power that creates value, labour-power, is set going in the act M-L (the purchase of labour-power) and is realized during the production process as the exploitation of labour-power. But this taking-on of independence by value does not appear again within this circuit itself, in which money, commodities, and the elements of production are merely alternating forms of capital-value in process — a circuit in which the past magnitude of value is compared with the capital's present, altered magnitude.
Bailey, arguing against the independence that value takes on and that characterizes the capitalist mode of production — which he treats as an illusion held by certain economists — writes: "Value is a relation between cotemporary commodities, because such only admit of being exchanged with each other."
Bailey's claim is directed against comparing the values of commodities across different periods of time — a comparison which, once the value of money is fixed for each period, simply means comparing how much labour it took, in the different periods, to produce the same kind of commodity. This comes from his general misunderstanding, on which exchange-value equals value, the form of value is value itself; so that commodity-values supposedly stop being comparable the moment they are not actively functioning as exchange-values, that is, are not really being exchanged against one another. He has not the slightest inkling that value functions as capital-value, as capital, precisely in so far as it remains identical with itself, and gets compared with itself, across the different phases of its circuit — phases which are by no means simultaneous but occur one after another.
To look at the formula of the circuit in its pure form, it is not enough to assume that commodities are sold at their value; we also have to assume that this happens with everything else staying the same. Take, for instance, the form P...P, setting aside any technical revolutions within the production process that might devalue a particular capitalist's productive capital, and setting aside too any knock-on effect that a change in the value-elements of productive capital might have on the value of an existing stock of commodity-capital, which can rise or fall if a stock of it is held.
Suppose C', the 10,000 lb of yarn, is sold at its value of £500; £422, that is 8,440 lb of the yarn, replaces the capital-value contained in C'. But if the value of cotton, coal, and so on has risen (we are leaving aside mere price fluctuations here), then this £422 may not be enough to replace the elements of productive capital in full; extra money-capital is needed, and money-capital gets tied up. The reverse happens if those prices have fallen: money-capital is set free.
The process runs completely normally only if the value-relations stay constant; in fact it proceeds only so long as the disturbances even out over repeated turns of the circuit. The bigger the disturbances, the more money-capital the industrial capitalist needs to hold in order to be able to wait for things to even out. And since, as capitalist production advances, the scale of each individual production process keeps expanding, and with it the minimum size of the capital that has to be advanced, this factor joins the others that increasingly turn the function of the industrial capitalist into a monopoly of big money-capitalists, whether acting alone or in combination.
It is worth noting in passing here: when a change in the value of the elements of production occurs, a difference shows up between the form M...M' on the one hand, and P...P and C'...C' on the other.
In M...M', the formula for newly invested capital, which first appears as money-capital, a fall in the value of the means of production — raw materials, auxiliary materials, and so on — will call for a smaller outlay of money-capital than before the fall, in order to set up a business of a given size. This is because the scale of the production process (given a constant level of development of the productive power of labour) depends on the mass and extent of the means of production that a given quantity of labour-power can work up — not on the value of those means of production, nor on the value of the labour-power itself (which only affects the extent of valorization). The reverse holds too: if the elements that make up productive capital rise in value, more money-capital is needed to found a business of a given size.
In both cases, only the amount of money-capital to be newly invested is affected: in the first case money-capital becomes surplus to requirements, in the second it gets tied up — provided that the growth of new individual industrial capitals in a given branch of production goes on in the usual way.
The circuits P...P and C'...C' only present themselves as M' at all in so far as the movement of P and C' is at the same time accumulation — that is, in so far as additional surplus-value, s, in money form, is being converted into money-capital. Apart from this, they are affected differently from M...M' by a change in the value of the elements of productive capital; and here too we again leave aside the knock-on effect of such a change in value on the components of the capital that are caught up in the production process itself.
Here it is not the original outlay that is directly affected, but an industrial capital already caught up in its process of reproduction, not in its first circuit — that is, C'...C, the reconversion of commodity-capital back into its elements of production, in so far as those elements themselves consist of commodities. When there is a fall in value (or in price), three cases are possible. The reproduction process may simply continue on the same scale; then part of the money-capital previously needed is set free, and an accumulation of money-capital takes place — without any real accumulation (production on an extended scale), and without the conversion of s, surplus-value, into an accumulation fund that would set that real accumulation going and accompany it. Or the reproduction process is extended to a larger scale than it otherwise would have been, if the technical proportions allow this. Or else a larger stock of raw materials and so on is built up.
The reverse happens when the value of the elements that replace the commodity-capital rises. Reproduction then no longer takes place on its normal scale (work goes on for a shorter time, for instance); or extra money-capital has to come in to keep it going at the old scale (money-capital gets tied up); or the accumulation fund of money, if there is one, is used wholly or partly not to extend the reproduction process but simply to keep it running at the old scale. This too is money-capital getting tied up — except that here the extra money-capital does not come from outside, from the money market, but from the industrial capitalist's own resources.
But modifying circumstances can arise with P...P and C'...C' too. Suppose our cotton spinner holds a large stock of cotton — that is, a large part of his productive capital is in the form of a cotton stockpile. Then part of his productive capital is devalued if the price of cotton falls; conversely, if cotton prices have risen, this part of his productive capital increases in value. On the other hand, if he has large quantities fixed in the form of commodity-capital, say in cotton yarn, then when cotton falls, part of his commodity-capital — indeed part of the whole capital currently in circulation — is devalued; and the reverse happens when cotton prices rise.
Finally, take the process C'-M-C. If C'-M, the realization of the commodity-capital, has already happened before the change in the value of the elements of C, then the capital is affected only in the way considered in the first case, namely in the second act of circulation, M-C. But if the change happens before C'-M has taken place, then, other things staying equal, a fall in the price of cotton brings about a corresponding fall in the price of the yarn, and a rise in the price of cotton brings about a corresponding rise in the price of the yarn. The effect on the different individual capitals invested in the same branch of production can vary a great deal, depending on the different circumstances each of them happens to be in.
The setting free and tying up of money-capital can equally well arise from differences in how long the circulation process takes — that is, from differences in the speed of circulation. But that belongs to the discussion of turnover. Here we are only interested in the real difference that shows up, with respect to a change in the value of the elements of productive capital, between M...M' and the other two forms of the circuit process.
In the phase of circulation M-C, in an era of already-developed and so dominant capitalist production, a large part of the commodities making up mp, the means of production, will themselves be someone else's functioning commodity-capital. So, from the seller's side, C'-M', this is a turning of commodity-capital into money-capital. But this does not hold universally — quite the opposite. Within its own circulation process, wherever industrial capital is functioning either as money or as a commodity, the circuit of industrial capital — whether as money-capital or as commodity-capital — crosses with the commodity circulation of the most varied social modes of production, so far as those, too, are commodity production.
It makes no difference whether the commodity is the product of slave-based production, or of peasants (Chinese, Indian ryots), or of a community (Dutch East India), or of state production (as found, based on serfdom, in earlier periods of Russian history), or of half-wild hunting peoples, and so on: as commodities and money they stand opposite the money and commodities in which industrial capital presents itself, and they enter its circuit just as much as they enter the circuit of the surplus-value that commodity-capital carries, so far as that surplus-value is spent as revenue — that is, into both branches of commodity-capital's circulation. It does not matter what kind of production process they came from; as commodities they function on the market, and as commodities they enter the circuit of industrial capital just as they enter the circulation of the surplus-value it carries.
So it is the all-round character of their origins — the market existing as a world market — that marks out the circulation process of industrial capital. What holds for foreign commodities holds for foreign money too: just as commodity-capital confronts it only as a commodity, this money functions, facing it, only as money — here, money functions as world money.
Here, however, two things need to be noted.
First: as soon as the act M-mp is complete — money used to buy the means of production — those commodities stop being commodities.
The means of production become one of the ways industrial capital exists, in its functional form as P, productive capital. But with this, their origin is wiped out: they now exist only as forms in which industrial capital exists, absorbed into it.
Still, it remains true that replacing them requires reproducing them, and to that extent the capitalist mode of production depends on modes of production that lie outside its own stage of development. But its tendency is to turn all production into commodity production as far as possible; its chief means for doing this is exactly this drawing of outside production into its own circulation process — and developed commodity production is itself capitalist commodity production. Wherever industrial capital gets a foothold, it pushes this transformation forward everywhere, and with it, the turning of all direct producers into wage-labourers.
Second: the commodities entering the circulation process of industrial capital — which includes the necessary means of subsistence into which variable capital is converted, once it has been paid out to the workers, so as to reproduce labour-power — whatever their origin, whatever the social form of the production process they come from, confront industrial capital itself already in the form of commodity-capital: in the form of trading capital, or merchant's capital. And this, by its very nature, takes in commodities from every mode of production.
Just as the capitalist mode of production presupposes production on a large scale, so it necessarily presupposes selling on a large scale too — selling to the merchant, not to the individual consumer. So far as this consumer is himself a productive consumer, that is, an industrial capitalist — so far, in other words, as the industrial capital of one branch of production supplies another branch with means of production — direct sale by one industrial capitalist to many others also takes place (in the form of orders, and so on). To that extent, every industrial capitalist is a direct seller, his own merchant — which, incidentally, he also is when he sells to the merchant.
Trade in commodities, as a function of merchant's capital, is something we take as given, and it develops further and further as capitalist production develops. So we bring it in now and then, to illustrate particular sides of the capitalist circulation process; but in the general analysis of that process, we assume direct sale without the merchant stepping in between, because bringing the merchant in hides various moments of the movement.
See Sismondi, who lays the matter out rather naively:
'Trade employs a considerable capital which, at first glance, appears to form no part of the capital whose movement we have traced in detail. The value of the cloth piled up in the draper's warehouses seems, at first, to have nothing at all to do with that part of the year's output which the rich give to the poor as wages, to make them work. Yet this capital has done nothing but replace the one we spoke of.
To see clearly how wealth grows, we took it from its creation and followed it through to its consumption. There, the capital used in cloth manufacture, say, seemed to us always the same; exchanged for the consumer's income, it split into only two parts: one served as the manufacturer's income, as product [German text: 'as profit'], the other served as the workers' income, as wages, while they went on making new cloth.'
'But it was soon found that, for everyone's benefit, it was better for the different parts of this capital to replace one another — that if a hundred thousand crowns were enough for the whole circulation between manufacturer and consumer, these hundred thousand crowns should be split equally between the manufacturer, the wholesale merchant, and the retail merchant. The first, with only a third, did the same work he had done with the whole, because the moment his manufacturing was finished, he found the merchant as a buyer far sooner than he would have found the consumer. The wholesale merchant's capital, in turn, was replaced far sooner by the retail merchant's ... The difference between the wages advanced and the price paid by the final consumer had to make up the capitals' profit. It was divided between manufacturer, merchant, and retailer, once they had split these functions among themselves, and the work done was the same, even though it now took three people and three portions of capital instead of one.' (New Principles, I, pp. 139, 140.) — 'All' (the merchants) 'took part indirectly in production; for production, since its aim is consumption, can only be considered complete once it has brought the thing produced within the consumer's reach.' (Ibid., p. 137.)
'Trade employs a considerable capital which, as it seems at first sight, forms no part of the capital whose movement we have described in detail. The value of the cloth piled up in the draper's warehouses seems, at first, to have nothing to do with that part of the year's output which the rich give to the poor as wages, to make them work. This capital, however, has merely replaced the other one we spoke of.
To see clearly how wealth develops, we traced it from its creation through to its consumption. Doing so, the capital used in cloth manufacture, say, seemed to us always the same; exchanged for the consumer's income, it split into only two parts: one part represented, as product, the manufacturer's income, the other, as wages, the workers' income, while they produced new cloth.'
'Yet it was soon found that, to everyone's advantage, it was better for the different parts of this capital to replace one another — that if 100,000 thalers were enough for the whole circulation between manufacturer and consumer, these 100,000 thalers should be split equally between manufacturer, wholesale merchant, and retailer. The first now did the same work with only a third that he had done before with the whole, because as soon as his manufacturing was finished, he found the merchant as a buyer far sooner than he would have found the consumer. The wholesale merchant's capital, for its part, was replaced far sooner by the retailer's ... The difference between the wages advanced and the price paid by the final consumer had to make up the capitals' profit. It was shared between manufacturer, merchant, and retailer, once they had divided these functions among themselves, and the work done was the same, even though it now took three people and three portions of capital in place of one person and one capital.' ... — 'All' (the merchants) 'took part indirectly in production; for production, since its goal is consumption, can only be regarded as complete once it has brought the product within the consumer's reach.'
In looking at the general forms of the circuit — and indeed throughout the whole of this second book — we take money to mean metallic money, leaving aside symbolic money, mere tokens of value that only certain states use, and leaving aside credit money too, which is not yet developed at this stage.
First, this follows the historical order: credit money plays no part, or only a small one, in the earliest period of capitalist production. Second, the need for this order is also proved on theoretical grounds, since everything critical that Tooke and others have worked out so far about the circulation of credit money has forced them, again and again, to come back to considering how things would look on the basis of purely metallic circulation.
But it should not be forgotten that metallic money can function just as much as a means of purchase as a means of payment. For simplicity, in this Volume 2 we generally take it only in the first of these functions.
The circulation process of industrial capital — which forms only part of its full individual circuit — is governed, so far as it is simply a sequence of events within general commodity circulation, by the general laws set out earlier (Volume 1, Chapter 3). The same mass of money, say £500, sets more and more industrial capitals in circulation one after another (or more individual capitals in their form as commodity-capital), the greater the velocity of money's circulation — that is, the faster each individual capital runs through its series of commodity or money metamorphoses.
So the same mass of capital-value needs less money for its circulation the more money functions as a means of payment — the more, say, mere balances have to be settled when a commodity-capital is replaced by its means of production, and the shorter the terms of payment, as with the payment of wages.
On the other hand, if we assume the velocity of circulation and all other circumstances stay the same, the mass of money that has to circulate as money-capital is fixed by the sum of the prices of the commodities (price multiplied by the mass of commodities) — or, given the mass and values of the commodities, by the value of money itself.
But the laws of general commodity circulation hold only so far as the circulation process of capital is a series of simple circulation acts — not so far as these acts are functionally determined sections of the circuit of individual industrial capitals.
To make this clear, it is best to look at the circulation process in its unbroken connection, as it appears in the two forms:
As a mere series of circulation acts, the circulation process — whether as C-M-C or as M-C-M — represents only the two opposite series of commodity-metamorphoses, and each single metamorphosis in turn includes the opposite metamorphosis on the side of the other, foreign commodity or foreign money that it faces.
C-M, from the commodity-owner's side, is M-C from the buyer's side; the first metamorphosis of the commodity in C-M is the second metamorphosis of the commodity now appearing as M — and the reverse holds in M-C. So what has been shown about the intertwining of one commodity's metamorphosis at one stage with another commodity's metamorphosis at another stage holds for the circulation of capital too, so far as the capitalist is functioning as buyer and seller of a commodity, his capital therefore functioning as money facing someone else's commodity, or as a commodity facing someone else's money.
But this intertwining is not also an expression of an intertwining of the capitals' metamorphoses.
First, M-C<mp> can, as we have seen, represent an intertwining of the metamorphoses of different individual capitals. For example, the commodity-capital of the cotton spinner — yarn — is replaced in part by coal. Part of his capital is in money form and gets turned from that into commodity form, while the capital of the capitalist coal-producer is in commodity form and so gets turned into money form; here, the very same act of circulation represents opposite metamorphoses of two industrial capitals (belonging to different branches of production) — that is, an intertwining of the series of metamorphoses of these capitals.
But as we have seen, the mp into which the money is converted need not be commodity-capital in the strict sense — need not be a functional form of industrial capital at all, need not have been produced by a capitalist. It is always M-C on the one side and C-M on the other, but not always an intertwining of capital-metamorphoses. Further, M-L, the purchase of labour-power, is never an intertwining of capital-metamorphoses, since labour-power is indeed the worker's commodity, but it only becomes capital once it has been sold to the capitalist.
On the other hand, in the process C'-M', the M' need not be transformed commodity-capital at all; it can be the turning into money of the commodity labour-power, that is, wages — or of a product made by an independent worker, a slave, a serf, or a community.
Second, however, the functionally determined role that each metamorphosis occurring within one individual capital's circulation process plays does not at all mean that, in another capital's circuit, it represents the matching opposite metamorphosis — this assuming, that is, that we take the whole production of the world market as run capitalistically.
For example, in the circuit P...P, the M' into which C' is turned can, on the buyer's side, be only the turning into money of his surplus-value (if the commodity is an article of consumption); or in M'-C' (where the capital, that is, enters accumulated), it may go, for the seller of mp, only to replace his capital advance — or it may not re-enter his capital's circulation at all, if it branches off instead into spending as revenue.
So how the various components of the total social capital — of which the individual capitals are only independently functioning parts — replace one another in the circulation process, both as regards capital and as regards surplus-value, does not follow from the simple intertwinings of metamorphoses found in commodity circulation, which the processes of capital circulation share with all other commodity circulation. It calls for a different kind of inquiry altogether.
So far, people have made do with phrases that, looked at closely, contain nothing but vague notions borrowed simply from the intertwinings of metamorphoses that belong to commodity circulation in general.
One of the most obvious peculiarities of the circuit of industrial capital, and so of capitalist production itself, is this: on one side, the elements that make up productive capital come from the commodity market and must constantly be renewed from it, bought as commodities; on the other side, the product of the labour process comes out of that process as a commodity, and must constantly be sold again as a commodity.
Compare a modern tenant farmer of Lowland Scotland with an old-fashioned smallholder on the continent. The Scottish farmer sells his whole product, and so has to replace every element of it on the market, right down to the seed. The smallholder consumes most of his product directly, buys and sells as little as he can, and makes his own tools, clothing, and so on, as far as possible.
This pattern — always buying, always selling — has led people to set natural economy, money economy, and credit economy against one another as the three characteristic economic forms in which social production moves.
First, these three forms are not stages of development standing on equal footing. So-called credit economy is itself only a form of money economy, so far as both names describe relations of commerce, ways of dealing, between the producers themselves. In fully developed capitalist production, money economy shows up only as the basis on which credit economy rests. Money economy and credit economy, then, correspond only to different stages in the development of capitalist production — they are in no way separate, self-standing forms of commerce set against natural economy. With just as much right, one could line up the very different forms of natural economy as equal-ranking partners to those two.
Second: in the terms money economy and credit economy, what is being singled out and named as the distinguishing feature is not the economy itself — that is, not the process of production — but the way the different agents or producers deal with one another that goes along with that economy. The same ought to be done for the first term. So instead of natural economy, it should be called exchange economy. A completely self-enclosed natural economy — the Inca state in Peru, for example — would fall under none of these categories at all.
Third: money economy is common to every kind of commodity production, and the product turns up as a commodity in the most varied social organizations of production. It would then be only the scale on which the product is produced as an article of trade, as a commodity — and so also the scale on which its own formative elements would in turn have to re-enter, as articles of trade, as commodities, the economy they came from — that would count as characterizing capitalist production.
In fact capitalist production is commodity production as the general form of production — but it is that, and becomes more and more that as it develops, only because labour itself here shows up as a commodity: because the worker sells his labour, that is, the working of his labour-power, and does so, as we are assuming, at its value, a value fixed by what it costs to reproduce it. To the degree that labour becomes wage-labour, the producer becomes an industrial capitalist; so capitalist production — and with it commodity production — only shows up in its full extent once the direct rural producer, too, is a wage-labourer.
In the relation between capitalist and wage-labourer, the money relation, the relation of buyer and seller, becomes a relation built into production itself. But at bottom this relation rests on the social character of production, not on the way people deal with one another; it is the other way round — the way of dealing grows out of that social character. It fits the outlook of the businessman, whose whole head is full of striking deals, to see things backwards: to treat the mode of commerce as the foundation, rather than seeing that it rests on the character of the mode of production.
The capitalist puts less value into circulation in the form of money than he draws out of it, because he puts more value into it in the form of commodities than he took out of it in the form of commodities. So far as he simply acts as capital in person, as an industrial capitalist, what he supplies in commodity-value is always greater than what he demands in commodity-value.
If his supply and his demand matched each other in this respect, that would mean his capital had not been turned to any profit at all: it would not have functioned as productive capital; the productive capital would have turned into commodity-capital carrying no surplus-value; during production it would have drawn no surplus-value in commodity form out of labour-power — in short, it would not have functioned as capital at all. He really must "sell dearer than he has bought" — but he only manages this because, through the capitalist process of production, he has turned the cheaper commodity he bought, cheaper because of lesser value, into one of greater value, and so a dearer one. He sells dearer not because he sells above the value of his commodity, but because he sells a commodity whose value is above the sum of the values of what went into producing it.
The rate at which the capitalist turns his capital to profit is higher the bigger the gap between what he supplies and what he demands — that is, the bigger the excess of the commodity-value he supplies over the commodity-value he demands.
So the capitalist's aim is not for supply and demand to match — it is for the widest possible mismatch, with supply running as far ahead of demand as it can.
What holds for the individual capitalist holds for the capitalist class as a whole.
So far as the capitalist simply personifies industrial capital, his own demand consists only in demand for means of production and for labour-power. Looked at by value, his demand for means of production is smaller than the capital he advanced: he buys means of production of lesser value than the value of his capital — and so of far lesser value still than the commodity-capital he supplies.
The capitalist's demand for labour-power, by contrast, is fixed by value as the ratio of his variable capital to his total capital, that is, v to C — and so, proportionally, it becomes ever smaller in capitalist production compared with his demand for means of production. He is, to a steadily growing degree, a bigger buyer of means of production than of labour-power.
Since the worker turns almost all of his wage into means of subsistence, and the greatest part of it into necessary means of subsistence, the capitalist's demand for labour-power is at the same time, indirectly, a demand for the means of consumption that go into the working class's consumption. But this demand equals v and not one atom more. (If the worker saves part of his wage — we necessarily leave all credit relations aside here — that just means he is turning part of his wage into a hoard, and to that extent is not acting as a demander, a buyer, at all.)
The outer limit of the capitalist's demand is C, that is, c plus v. But his supply is c plus v plus s. So if his commodity-capital is made up of 80c plus 20v plus 20s, his demand is 80c plus 20v — which, by value, is one sixth smaller than his supply. The bigger the percentage of s he produces, that is, the rate of profit, the smaller his demand becomes relative to his supply.
Even though the capitalist's demand for labour-power, and so indirectly for necessary means of subsistence, keeps shrinking as production advances compared with his demand for means of production, it must not be forgotten, on the other hand, that his demand for means of production is always, day in and day out, smaller than his capital. So his demand for means of production must always fall short in value of the commodity-product turned out by a capitalist working with an equal capital, and otherwise in the same circumstances, who supplies him with those means of production. That there are many such capitalists, not just one, changes nothing here.
Say his capital is £1,000, and its constant part £800; then his demand on all of them together is £800. Together, at an equal rate of profit, whatever share of the £1,000 falls to each one of them, and whatever part that share forms of each one's total capital, they supply him, per £1,000 of their own capital, means of production worth £1,200. So his demand covers only two thirds of their supply — while, by value, his own total demand is only four fifths of his own total supply.
We must now bring in, briefly, a look at turnover. Say his total capital is £5,000, of which £4,000 is fixed and £1,000 circulating; on the assumption above, that £1,000 is 800c plus 200s. His circulating capital has to turn over five times a year for his total capital to turn over once a year. His commodity-product then comes to £6,000, that is, £1,000 more than the capital he advanced — which again gives the same ratio of surplus-value as before: 5,000 C to 1,000s, or 100 (c plus s) to 20s. So this turnover changes nothing in the ratio between his total demand and his total supply: the first stays one fifth smaller than the second.
The capitalist's fixed capital is due for renewal every ten years, so he writes off a tenth, £400, each year. This leaves him with only £3,600 of value still in fixed capital, plus £400 in money. So far as repairs are needed, and they don't go beyond the average, they are nothing but an investment of capital that he simply makes a bit later. We can treat the matter as though he had already included the cost of repairs when he valued his fixed capital, to the extent this enters the yearly commodity-product — so that it is already folded into the one-tenth write-off. (If his need for repairs actually comes in under the average, that's a gain for him, just as it's a loss if it comes in over — though this evens out across the whole class of capitalists working in the same branch of industry.)
In any case: even though, with his total capital turning over once a year, his yearly demand stays at £5,000, the same as the capital-value he originally advanced, it grows with respect to the circulating part of his capital, while it steadily shrinks with respect to the fixed part.
Now let us turn to reproduction. Suppose the capitalist consumes the whole surplus-value and converts only the original amount of capital, C, back into productive capital. Now the capitalist's demand equals his supply in value. But this is not true with respect to the movement of his capital as such. As a capitalist, he exercises demand for only four fifths of his supply, by value; the remaining fifth he consumes as a non-capitalist — not in his role as capitalist, but for his own private need or pleasure.
The capitalist's reckoning then works out as follows, worked out in percentages:
This assumption — that the capitalist's demand fully matches his supply — is the same as assuming that capitalist production does not exist, and so that the industrial capitalist himself does not exist. For capitalism is already done away with at its very foundation the moment we assume that enjoyment, not enrichment as such, is the driving motive.
But this assumption is also technically impossible to carry through. The capitalist has to do more than build up a reserve capital against price swings and to be able to wait for the most favourable moment to buy and sell; he has to accumulate capital so as to expand production with it and build technical advances into his productive setup.
To accumulate capital, the capitalist first has to take part of the surplus-value that has flowed to him in money form out of circulation, and let it grow as a hoard, until it has reached the size needed to expand the existing business or open a side business. As long as this hoarding goes on, it does not add to the capitalist's demand: the money is immobilized — it withdraws from the commodity market no equivalent in commodities to match the money-equivalent it earlier withdrew from that market for the commodities he supplied.
Credit is left out of account here. And it would count as credit if, for example, the capitalist deposited the money with a bank on a current account, at interest, as it piled up.
The three figures can be set out as follows, if we let Tc stand for the whole circulation process:
Put all three forms together, and every condition the process needs appears as something the process itself produces — its result, not just its starting point. Each stage appears as a starting point, a point passed through, and a point of return. The whole process presents itself as a unity of production and circulation: production becomes the means by which circulation happens, and circulation becomes the means by which production happens.
All three circuits share one thing: the valorization of value is the governing purpose, the driving motive. In circuit I this shows up in the very form of the notation. Form II begins with P, the process of valorization itself. In form III the circuit begins with value already valorized and closes with value valorized afresh — even when the movement simply repeats itself at the same scale.
As long as we look only at the fact that a sale, C-M, is a purchase, M-C, for the buyer, and a purchase, M-C, is a sale, C-M, for the seller, the circulation of capital is just an ordinary exchange of commodities, and the laws about the quantity of money in circulation set out earlier (Volume I, Chapter 3, Section 2) still hold. But if we do not stop at this formal side, and instead look at the real connection between the changes of form undergone by different individual capitals — that is, at how the circuits of individual capitals are linked together as the partial movements making up the reproduction process of the total social capital — then this connection cannot be explained by the mere change of form between money and commodities.
In a circle that keeps turning, every point is at once a starting point and a point of return. If we stop the rotation, not every starting point is a point of return any more. We have seen that each particular circuit not only presupposes the others implicitly, but that repeating the circuit in one form necessarily includes running through the circuit in the other forms too. So the whole difference between the three forms presents itself as merely formal — or even merely subjective, a difference that exists only for whoever is looking at it.
As long as each of the three circuits is treated as a particular form of movement that different individual industrial capitals happen to be in, this difference between them only ever shows up between one capital and another. But in reality, every individual industrial capital is in all three at once. The three circuits, the forms in which the three shapes of capital reproduce themselves, run on continuously side by side. Part of a capital's value, say the part now functioning as commodity-capital, is turning into money-capital, while at the same time another part is leaving the production process and entering circulation as new commodity-capital. So the circuit-form C'...C' is continually being traced out, and the same is true of the other two forms. The reproduction of capital in each of its forms, and at each of its stages, is just as continuous as the change of these forms into one another and the successive passage through the three stages. Here, then, the whole circuit really is the unity of its three forms.
So far we have assumed that the whole value of a capital appears at any one moment entirely as money-capital, or entirely as productive capital, or entirely as commodity-capital. So we had, for example, the £422 first entirely as money-capital, then entirely converted into productive capital, and finally as commodity-capital: yarn worth £500 (containing £78 of surplus-value). On this assumption, the different stages are so many interruptions of one another.
As long as the £422 stays in money form — that is, until the purchases M-C, labour-power and means of production, are completed — the whole capital exists and functions only as money-capital. As soon as it is converted into productive capital, it functions as neither money-capital nor commodity-capital. Its whole circulation process is interrupted, just as its whole production process is interrupted whenever it is functioning in one of the two circulation stages, whether as money or as commodities.
On this picture, then, the circuit P...P would present itself not only as the periodic renewal of productive capital, but equally as an interruption of its own function, the production process, until the circulation process has been completed; instead of running continuously, production would proceed in fits and starts, starting up again only after intervals of random length, depending on how quickly or slowly the two stages of circulation are got through. This is the position, for instance, of a Chinese artisan who works only to private order and whose production stops until a new order comes in.
Every part of a capital that is in motion goes through exactly this same movement, each part taking its turn in succession. Take, for example, the 10,000 lb of yarn that is a spinner's weekly product. This 10,000 lb of yarn leaves the sphere of production entirely and enters the sphere of circulation; the capital-value contained in it has to be turned entirely into money-capital, and as long as it stays in the form of money-capital, it cannot go back into the production process. It first has to enter circulation and be turned back into the elements of productive capital, labour-power and means of production. The circuit of capital is one continuous interruption: leaving one stage, entering the next; shedding one form, existing in another. Each of these stages not only presupposes the other but at the same time excludes it.
Continuity, however, is the mark of capitalist production, and it is required by capitalism's own technical basis — even if it cannot always be achieved without qualification. So let us see how the matter actually stands.
While, say, the 10,000 lb of yarn goes onto the market as commodity-capital and is turned into money (whether that money serves as means of payment, means of purchase, or merely as money of account), new cotton, coal, and so on takes its place in the production process — already turned back out of money form and commodity form into the form of productive capital, and beginning to function as such. At the very same time as the first 10,000 lb of yarn is being converted into money, an earlier 10,000 lb of yarn is already going through the second stage of its circulation, turning back from money into the elements of productive capital.
All the parts of the capital go through the circuit process one after another, while existing at the same time in different stages of it. So industrial capital, in the continuity of its circuit, exists simultaneously in all its stages and in the different functional forms that correspond to them. For the part that is turning from commodity-capital into money for the first time, the circuit C'...C' is only just opening; but for industrial capital as a whole, as a moving totality, the circuit C'...C' has already been completed. With one hand money is advanced, with the other it is taken in; the opening of the circuit M...M' at one point is
The opening of the circuit M...M' at one point is, at the same time, its return at another point. The same holds for productive capital.
The real circuit of industrial capital, in its continuity, is therefore not just a unity of the circulation process and the production process, but a unity of all three of its circuits. But capital can only be this unity in so far as each different part of the capital passes in succession through the phases of the circuit that follow one another, moving from one phase, one functional form, into the next — so that industrial capital, as the whole made up of these parts, exists at the same time in the different phases and functions, and so traces out all three circuits at once. Here, the succession of each part is made possible by the coexistence of the parts, that is, by the division of the capital. In just this way, in the organized factory system, the product is continually at the different stages of its formation at the same time as it is passing from one stage of production to the next.
Because an individual industrial capital is a definite magnitude, depending on the capitalist's means and having a definite minimum size for each branch of industry, definite proportions have to hold when it is divided up. The size of the capital on hand governs the scale of the production process; this in turn governs the scale of the commodity-capital and money-capital that function alongside the production process. But this coexistence, which is what makes the continuity of production possible, only exists through the movement of the parts of the capital, in which they pass through the different stages one after another. The coexistence is itself only the result of the succession.
Suppose, for example, that C'-M' gets stuck for one part — the commodity cannot be sold. Then the circuit of that part is interrupted, and its replacement by fresh means of production does not happen; the parts that follow, emerging as C' from the production process, find their own change of function blocked by the parts ahead of them. If this goes on for some time, production is cut back and the whole process is brought to a halt. Every hold-up in the succession throws the coexistence into disorder; every hold-up at one stage causes a greater or lesser hold-up in the whole circuit — not just of the stuck part of the capital, but of the whole individual capital.
The next form the process presents is that of a succession of phases, so that capital's move into a new phase is conditioned by its leaving the previous one. Each particular circuit therefore also has one of the functional forms of capital as its starting point and its point of return. On the other hand, the total process really is the unity of the three circuits, which are the different forms in which the
continuity of the process expresses itself. The total circuit presents itself, for each functional form of capital, as that form's own specific circuit — and each of these circuits is a condition for the continuity of the total process; the circuit of one functional form is a condition for the circuit of the other. It is a necessary condition for the total production process, especially for social capital, that it is at the same time a reproduction process, and therefore a circuit for each of its moments.
Different fractional parts of the capital pass in succession through the different stages and functional forms. Each functional form, even though it is always a different part of the capital that appears in it, thereby traces out its own circuit at the same time as the others do theirs. One part of the capital — but always a changing one, constantly being reproduced — exists as commodity-capital turning into money; another as money-capital turning into productive capital; a third as productive capital turning into commodity-capital. The constant presence of all three forms is mediated by the circuit of the total capital passing through exactly these three phases.
As a whole, capital is then present at the same time, side by side in space, in its different phases. But each part is constantly passing, one after another, out of one phase, one functional form, into the next, so functioning in turn in all of them. The forms are thus flowing forms, whose simultaneous presence is mediated by their following one after another. Each form follows the others and precedes them, so that one part of the capital returning to a given form depends on another part returning to a different form. Each part continually traces out its own circuit, but it is always a different part of the capital that is in that form at any moment — and these particular circuits are only simultaneous and successive moments of the total course.
Only in the unity of the three circuits is the continuity of the total process actually realized, instead of the interruption described above. The total social capital always has this continuity, and its process always has the unity of the three circuits.
For individual capitals, the continuity of reproduction is in places interrupted, more or less. First, at different times the masses of value are often distributed unevenly across the different stages and functional forms. Second, depending on the nature of the commodity being produced — that is, on the particular sphere of production the capital is invested in — these portions can be distributed differently. Third, continuity can be more or less interrupted in branches of production that depend on the season, whether because of natural conditions (agriculture, herring fishing, and so on) or because of conventional arrangements, as with so-called seasonal work. The process runs most regularly and uniformly in the factory and in mining. But this variety among branches of production makes no difference to the general forms of the circuit process.
Capital, as value that valorizes itself, is not only a set of class relations, a definite social character resting on labour existing as wage-labour. It is also a movement, a circuit process through different stages, which itself in turn includes three different forms of the circuit process. It can therefore only be grasped as movement, not as a thing at rest. Those who treat the independence value takes on as a mere abstraction forget that the movement of industrial capital is exactly this abstraction in action. Here value passes through different forms, different movements, in which it preserves itself and at the same time valorizes itself, grows larger.
Since what concerns us here, for now, is just the form of the movement, we are leaving aside the revolutions in value that capital-value can undergo in the course of its circuit. But it is clear that, whatever revolutions in value occur, capitalist production can exist and go on existing only for as long as capital-value is being valorized — that is, for as long as value, having become independent, keeps tracing out its circuit process — and that means only for as long as the revolutions in value are in some way overcome and evened out. The movements of capital appear as the actions of the individual industrial capitalist, who functions as buyer of commodities and labour, seller of commodities, and productive capitalist, and so mediates the circuit through his own activity. If the social capital-value undergoes a revolution in value, it can happen that an individual capital succumbs to it and goes under, because it cannot meet the conditions of that movement in value.
The more acute and frequent the revolutions in value become, the more the automatic movement of value-that-has-made-itself-independent asserts itself against the foresight and calculation of the individual capitalist, acting with the force of an elemental natural process; the more the course of normal production is subordinated to abnormal speculation; the greater the danger to the existence of individual capitals. So these periodic revolutions in value confirm exactly what they are supposed to refute: the independence that value takes on as capital, and which capital's own movement preserves and sharpens.
This sequence of metamorphoses that processing capital goes through involves a constant comparison between the change in the magnitude of the capital's value achieved in the circuit and its original value. The independence value takes on with respect to the power that creates value, labour-power, is set going in the act M-L (the purchase of labour-power) and is realized during the production process as the exploitation of labour-power. But this taking-on of independence by value does not appear again within this circuit itself, in which money, commodities, and the elements of production are merely alternating forms of capital-value in process — a circuit in which the past magnitude of value is compared with the capital's present, altered magnitude.
Bailey, arguing against the independence that value takes on and that characterizes the capitalist mode of production — which he treats as an illusion held by certain economists — writes: "Value is a relation between cotemporary commodities, because such only admit of being exchanged with each other."
Bailey's claim is directed against comparing the values of commodities across different periods of time — a comparison which, once the value of money is fixed for each period, simply means comparing how much labour it took, in the different periods, to produce the same kind of commodity. This comes from his general misunderstanding, on which exchange-value equals value, the form of value is value itself; so that commodity-values supposedly stop being comparable the moment they are not actively functioning as exchange-values, that is, are not really being exchanged against one another. He has not the slightest inkling that value functions as capital-value, as capital, precisely in so far as it remains identical with itself, and gets compared with itself, across the different phases of its circuit — phases which are by no means simultaneous but occur one after another.
To look at the formula of the circuit in its pure form, it is not enough to assume that commodities are sold at their value; we also have to assume that this happens with everything else staying the same. Take, for instance, the form P...P, setting aside any technical revolutions within the production process that might devalue a particular capitalist's productive capital, and setting aside too any knock-on effect that a change in the value-elements of productive capital might have on the value of an existing stock of commodity-capital, which can rise or fall if a stock of it is held.
Suppose C', the 10,000 lb of yarn, is sold at its value of £500; £422, that is 8,440 lb of the yarn, replaces the capital-value contained in C'. But if the value of cotton, coal, and so on has risen (we are leaving aside mere price fluctuations here), then this £422 may not be enough to replace the elements of productive capital in full; extra money-capital is needed, and money-capital gets tied up. The reverse happens if those prices have fallen: money-capital is set free.
The process runs completely normally only if the value-relations stay constant; in fact it proceeds only so long as the disturbances even out over repeated turns of the circuit. The bigger the disturbances, the more money-capital the industrial capitalist needs to hold in order to be able to wait for things to even out. And since, as capitalist production advances, the scale of each individual production process keeps expanding, and with it the minimum size of the capital that has to be advanced, this factor joins the others that increasingly turn the function of the industrial capitalist into a monopoly of big money-capitalists, whether acting alone or in combination.
It is worth noting in passing here: when a change in the value of the elements of production occurs, a difference shows up between the form M...M' on the one hand, and P...P and C'...C' on the other.
In M...M', the formula for newly invested capital, which first appears as money-capital, a fall in the value of the means of production — raw materials, auxiliary materials, and so on — will call for a smaller outlay of money-capital than before the fall, in order to set up a business of a given size. This is because the scale of the production process (given a constant level of development of the productive power of labour) depends on the mass and extent of the means of production that a given quantity of labour-power can work up — not on the value of those means of production, nor on the value of the labour-power itself (which only affects the extent of valorization). The reverse holds too: if the elements that make up productive capital rise in value, more money-capital is needed to found a business of a given size.
In both cases, only the amount of money-capital to be newly invested is affected: in the first case money-capital becomes surplus to requirements, in the second it gets tied up — provided that the growth of new individual industrial capitals in a given branch of production goes on in the usual way.
The circuits P...P and C'...C' only present themselves as M' at all in so far as the movement of P and C' is at the same time accumulation — that is, in so far as additional surplus-value, s, in money form, is being converted into money-capital. Apart from this, they are affected differently from M...M' by a change in the value of the elements of productive capital; and here too we again leave aside the knock-on effect of such a change in value on the components of the capital that are caught up in the production process itself.
Here it is not the original outlay that is directly affected, but an industrial capital already caught up in its process of reproduction, not in its first circuit — that is, C'...C, the reconversion of commodity-capital back into its elements of production, in so far as those elements themselves consist of commodities. When there is a fall in value (or in price), three cases are possible. The reproduction process may simply continue on the same scale; then part of the money-capital previously needed is set free, and an accumulation of money-capital takes place — without any real accumulation (production on an extended scale), and without the conversion of s, surplus-value, into an accumulation fund that would set that real accumulation going and accompany it. Or the reproduction process is extended to a larger scale than it otherwise would have been, if the technical proportions allow this. Or else a larger stock of raw materials and so on is built up.
The reverse happens when the value of the elements that replace the commodity-capital rises. Reproduction then no longer takes place on its normal scale (work goes on for a shorter time, for instance); or extra money-capital has to come in to keep it going at the old scale (money-capital gets tied up); or the accumulation fund of money, if there is one, is used wholly or partly not to extend the reproduction process but simply to keep it running at the old scale. This too is money-capital getting tied up — except that here the extra money-capital does not come from outside, from the money market, but from the industrial capitalist's own resources.
But modifying circumstances can arise with P...P and C'...C' too. Suppose our cotton spinner holds a large stock of cotton — that is, a large part of his productive capital is in the form of a cotton stockpile. Then part of his productive capital is devalued if the price of cotton falls; conversely, if cotton prices have risen, this part of his productive capital increases in value. On the other hand, if he has large quantities fixed in the form of commodity-capital, say in cotton yarn, then when cotton falls, part of his commodity-capital — indeed part of the whole capital currently in circulation — is devalued; and the reverse happens when cotton prices rise.
Finally, take the process C'-M-C. If C'-M, the realization of the commodity-capital, has already happened before the change in the value of the elements of C, then the capital is affected only in the way considered in the first case, namely in the second act of circulation, M-C. But if the change happens before C'-M has taken place, then, other things staying equal, a fall in the price of cotton brings about a corresponding fall in the price of the yarn, and a rise in the price of cotton brings about a corresponding rise in the price of the yarn. The effect on the different individual capitals invested in the same branch of production can vary a great deal, depending on the different circumstances each of them happens to be in.
The setting free and tying up of money-capital can equally well arise from differences in how long the circulation process takes — that is, from differences in the speed of circulation. But that belongs to the discussion of turnover. Here we are only interested in the real difference that shows up, with respect to a change in the value of the elements of productive capital, between M...M' and the other two forms of the circuit process.
In the phase of circulation M-C, in an era of already-developed and so dominant capitalist production, a large part of the commodities making up mp, the means of production, will themselves be someone else's functioning commodity-capital. So, from the seller's side, C'-M', this is a turning of commodity-capital into money-capital. But this does not hold universally — quite the opposite. Within its own circulation process, wherever industrial capital is functioning either as money or as a commodity, the circuit of industrial capital — whether as money-capital or as commodity-capital — crosses with the commodity circulation of the most varied social modes of production, so far as those, too, are commodity production.
It makes no difference whether the commodity is the product of slave-based production, or of peasants (Chinese, Indian ryots), or of a community (Dutch East India), or of state production (as found, based on serfdom, in earlier periods of Russian history), or of half-wild hunting peoples, and so on: as commodities and money they stand opposite the money and commodities in which industrial capital presents itself, and they enter its circuit just as much as they enter the circuit of the surplus-value that commodity-capital carries, so far as that surplus-value is spent as revenue — that is, into both branches of commodity-capital's circulation. It does not matter what kind of production process they came from; as commodities they function on the market, and as commodities they enter the circuit of industrial capital just as they enter the circulation of the surplus-value it carries.
So it is the all-round character of their origins — the market existing as a world market — that marks out the circulation process of industrial capital. What holds for foreign commodities holds for foreign money too: just as commodity-capital confronts it only as a commodity, this money functions, facing it, only as money — here, money functions as world money.
Here, however, two things need to be noted.
First: as soon as the act M-mp is complete — money used to buy the means of production — those commodities stop being commodities.
The means of production become one of the ways industrial capital exists, in its functional form as P, productive capital. But with this, their origin is wiped out: they now exist only as forms in which industrial capital exists, absorbed into it.
Still, it remains true that replacing them requires reproducing them, and to that extent the capitalist mode of production depends on modes of production that lie outside its own stage of development. But its tendency is to turn all production into commodity production as far as possible; its chief means for doing this is exactly this drawing of outside production into its own circulation process — and developed commodity production is itself capitalist commodity production. Wherever industrial capital gets a foothold, it pushes this transformation forward everywhere, and with it, the turning of all direct producers into wage-labourers.
Second: the commodities entering the circulation process of industrial capital — which includes the necessary means of subsistence into which variable capital is converted, once it has been paid out to the workers, so as to reproduce labour-power — whatever their origin, whatever the social form of the production process they come from, confront industrial capital itself already in the form of commodity-capital: in the form of trading capital, or merchant's capital. And this, by its very nature, takes in commodities from every mode of production.
Just as the capitalist mode of production presupposes production on a large scale, so it necessarily presupposes selling on a large scale too — selling to the merchant, not to the individual consumer. So far as this consumer is himself a productive consumer, that is, an industrial capitalist — so far, in other words, as the industrial capital of one branch of production supplies another branch with means of production — direct sale by one industrial capitalist to many others also takes place (in the form of orders, and so on). To that extent, every industrial capitalist is a direct seller, his own merchant — which, incidentally, he also is when he sells to the merchant.
Trade in commodities, as a function of merchant's capital, is something we take as given, and it develops further and further as capitalist production develops. So we bring it in now and then, to illustrate particular sides of the capitalist circulation process; but in the general analysis of that process, we assume direct sale without the merchant stepping in between, because bringing the merchant in hides various moments of the movement.
See Sismondi, who lays the matter out rather naively:
'Trade employs a considerable capital which, at first glance, appears to form no part of the capital whose movement we have traced in detail. The value of the cloth piled up in the draper's warehouses seems, at first, to have nothing at all to do with that part of the year's output which the rich give to the poor as wages, to make them work. Yet this capital has done nothing but replace the one we spoke of.
To see clearly how wealth grows, we took it from its creation and followed it through to its consumption. There, the capital used in cloth manufacture, say, seemed to us always the same; exchanged for the consumer's income, it split into only two parts: one served as the manufacturer's income, as product [German text: 'as profit'], the other served as the workers' income, as wages, while they went on making new cloth.'
'But it was soon found that, for everyone's benefit, it was better for the different parts of this capital to replace one another — that if a hundred thousand crowns were enough for the whole circulation between manufacturer and consumer, these hundred thousand crowns should be split equally between the manufacturer, the wholesale merchant, and the retail merchant. The first, with only a third, did the same work he had done with the whole, because the moment his manufacturing was finished, he found the merchant as a buyer far sooner than he would have found the consumer. The wholesale merchant's capital, in turn, was replaced far sooner by the retail merchant's ... The difference between the wages advanced and the price paid by the final consumer had to make up the capitals' profit. It was divided between manufacturer, merchant, and retailer, once they had split these functions among themselves, and the work done was the same, even though it now took three people and three portions of capital instead of one.' (New Principles, I, pp. 139, 140.) — 'All' (the merchants) 'took part indirectly in production; for production, since its aim is consumption, can only be considered complete once it has brought the thing produced within the consumer's reach.' (Ibid., p. 137.)
'Trade employs a considerable capital which, as it seems at first sight, forms no part of the capital whose movement we have described in detail. The value of the cloth piled up in the draper's warehouses seems, at first, to have nothing to do with that part of the year's output which the rich give to the poor as wages, to make them work. This capital, however, has merely replaced the other one we spoke of.
To see clearly how wealth develops, we traced it from its creation through to its consumption. Doing so, the capital used in cloth manufacture, say, seemed to us always the same; exchanged for the consumer's income, it split into only two parts: one part represented, as product, the manufacturer's income, the other, as wages, the workers' income, while they produced new cloth.'
'Yet it was soon found that, to everyone's advantage, it was better for the different parts of this capital to replace one another — that if 100,000 thalers were enough for the whole circulation between manufacturer and consumer, these 100,000 thalers should be split equally between manufacturer, wholesale merchant, and retailer. The first now did the same work with only a third that he had done before with the whole, because as soon as his manufacturing was finished, he found the merchant as a buyer far sooner than he would have found the consumer. The wholesale merchant's capital, for its part, was replaced far sooner by the retailer's ... The difference between the wages advanced and the price paid by the final consumer had to make up the capitals' profit. It was shared between manufacturer, merchant, and retailer, once they had divided these functions among themselves, and the work done was the same, even though it now took three people and three portions of capital in place of one person and one capital.' ... — 'All' (the merchants) 'took part indirectly in production; for production, since its goal is consumption, can only be regarded as complete once it has brought the product within the consumer's reach.'
In looking at the general forms of the circuit — and indeed throughout the whole of this second book — we take money to mean metallic money, leaving aside symbolic money, mere tokens of value that only certain states use, and leaving aside credit money too, which is not yet developed at this stage.
First, this follows the historical order: credit money plays no part, or only a small one, in the earliest period of capitalist production. Second, the need for this order is also proved on theoretical grounds, since everything critical that Tooke and others have worked out so far about the circulation of credit money has forced them, again and again, to come back to considering how things would look on the basis of purely metallic circulation.
But it should not be forgotten that metallic money can function just as much as a means of purchase as a means of payment. For simplicity, in this Volume 2 we generally take it only in the first of these functions.
The circulation process of industrial capital — which forms only part of its full individual circuit — is governed, so far as it is simply a sequence of events within general commodity circulation, by the general laws set out earlier (Volume 1, Chapter 3). The same mass of money, say £500, sets more and more industrial capitals in circulation one after another (or more individual capitals in their form as commodity-capital), the greater the velocity of money's circulation — that is, the faster each individual capital runs through its series of commodity or money metamorphoses.
So the same mass of capital-value needs less money for its circulation the more money functions as a means of payment — the more, say, mere balances have to be settled when a commodity-capital is replaced by its means of production, and the shorter the terms of payment, as with the payment of wages.
On the other hand, if we assume the velocity of circulation and all other circumstances stay the same, the mass of money that has to circulate as money-capital is fixed by the sum of the prices of the commodities (price multiplied by the mass of commodities) — or, given the mass and values of the commodities, by the value of money itself.
But the laws of general commodity circulation hold only so far as the circulation process of capital is a series of simple circulation acts — not so far as these acts are functionally determined sections of the circuit of individual industrial capitals.
To make this clear, it is best to look at the circulation process in its unbroken connection, as it appears in the two forms:
As a mere series of circulation acts, the circulation process — whether as C-M-C or as M-C-M — represents only the two opposite series of commodity-metamorphoses, and each single metamorphosis in turn includes the opposite metamorphosis on the side of the other, foreign commodity or foreign money that it faces.
C-M, from the commodity-owner's side, is M-C from the buyer's side; the first metamorphosis of the commodity in C-M is the second metamorphosis of the commodity now appearing as M — and the reverse holds in M-C. So what has been shown about the intertwining of one commodity's metamorphosis at one stage with another commodity's metamorphosis at another stage holds for the circulation of capital too, so far as the capitalist is functioning as buyer and seller of a commodity, his capital therefore functioning as money facing someone else's commodity, or as a commodity facing someone else's money.
But this intertwining is not also an expression of an intertwining of the capitals' metamorphoses.
First, M-C<mp> can, as we have seen, represent an intertwining of the metamorphoses of different individual capitals. For example, the commodity-capital of the cotton spinner — yarn — is replaced in part by coal. Part of his capital is in money form and gets turned from that into commodity form, while the capital of the capitalist coal-producer is in commodity form and so gets turned into money form; here, the very same act of circulation represents opposite metamorphoses of two industrial capitals (belonging to different branches of production) — that is, an intertwining of the series of metamorphoses of these capitals.
But as we have seen, the mp into which the money is converted need not be commodity-capital in the strict sense — need not be a functional form of industrial capital at all, need not have been produced by a capitalist. It is always M-C on the one side and C-M on the other, but not always an intertwining of capital-metamorphoses. Further, M-L, the purchase of labour-power, is never an intertwining of capital-metamorphoses, since labour-power is indeed the worker's commodity, but it only becomes capital once it has been sold to the capitalist.
On the other hand, in the process C'-M', the M' need not be transformed commodity-capital at all; it can be the turning into money of the commodity labour-power, that is, wages — or of a product made by an independent worker, a slave, a serf, or a community.
Second, however, the functionally determined role that each metamorphosis occurring within one individual capital's circulation process plays does not at all mean that, in another capital's circuit, it represents the matching opposite metamorphosis — this assuming, that is, that we take the whole production of the world market as run capitalistically.
For example, in the circuit P...P, the M' into which C' is turned can, on the buyer's side, be only the turning into money of his surplus-value (if the commodity is an article of consumption); or in M'-C' (where the capital, that is, enters accumulated), it may go, for the seller of mp, only to replace his capital advance — or it may not re-enter his capital's circulation at all, if it branches off instead into spending as revenue.
So how the various components of the total social capital — of which the individual capitals are only independently functioning parts — replace one another in the circulation process, both as regards capital and as regards surplus-value, does not follow from the simple intertwinings of metamorphoses found in commodity circulation, which the processes of capital circulation share with all other commodity circulation. It calls for a different kind of inquiry altogether.
So far, people have made do with phrases that, looked at closely, contain nothing but vague notions borrowed simply from the intertwinings of metamorphoses that belong to commodity circulation in general.
One of the most obvious peculiarities of the circuit of industrial capital, and so of capitalist production itself, is this: on one side, the elements that make up productive capital come from the commodity market and must constantly be renewed from it, bought as commodities; on the other side, the product of the labour process comes out of that process as a commodity, and must constantly be sold again as a commodity.
Compare a modern tenant farmer of Lowland Scotland with an old-fashioned smallholder on the continent. The Scottish farmer sells his whole product, and so has to replace every element of it on the market, right down to the seed. The smallholder consumes most of his product directly, buys and sells as little as he can, and makes his own tools, clothing, and so on, as far as possible.
This pattern — always buying, always selling — has led people to set natural economy, money economy, and credit economy against one another as the three characteristic economic forms in which social production moves.
First, these three forms are not stages of development standing on equal footing. So-called credit economy is itself only a form of money economy, so far as both names describe relations of commerce, ways of dealing, between the producers themselves. In fully developed capitalist production, money economy shows up only as the basis on which credit economy rests. Money economy and credit economy, then, correspond only to different stages in the development of capitalist production — they are in no way separate, self-standing forms of commerce set against natural economy. With just as much right, one could line up the very different forms of natural economy as equal-ranking partners to those two.
Second: in the terms money economy and credit economy, what is being singled out and named as the distinguishing feature is not the economy itself — that is, not the process of production — but the way the different agents or producers deal with one another that goes along with that economy. The same ought to be done for the first term. So instead of natural economy, it should be called exchange economy. A completely self-enclosed natural economy — the Inca state in Peru, for example — would fall under none of these categories at all.
Third: money economy is common to every kind of commodity production, and the product turns up as a commodity in the most varied social organizations of production. It would then be only the scale on which the product is produced as an article of trade, as a commodity — and so also the scale on which its own formative elements would in turn have to re-enter, as articles of trade, as commodities, the economy they came from — that would count as characterizing capitalist production.
In fact capitalist production is commodity production as the general form of production — but it is that, and becomes more and more that as it develops, only because labour itself here shows up as a commodity: because the worker sells his labour, that is, the working of his labour-power, and does so, as we are assuming, at its value, a value fixed by what it costs to reproduce it. To the degree that labour becomes wage-labour, the producer becomes an industrial capitalist; so capitalist production — and with it commodity production — only shows up in its full extent once the direct rural producer, too, is a wage-labourer.
In the relation between capitalist and wage-labourer, the money relation, the relation of buyer and seller, becomes a relation built into production itself. But at bottom this relation rests on the social character of production, not on the way people deal with one another; it is the other way round — the way of dealing grows out of that social character. It fits the outlook of the businessman, whose whole head is full of striking deals, to see things backwards: to treat the mode of commerce as the foundation, rather than seeing that it rests on the character of the mode of production.
The capitalist puts less value into circulation in the form of money than he draws out of it, because he puts more value into it in the form of commodities than he took out of it in the form of commodities. So far as he simply acts as capital in person, as an industrial capitalist, what he supplies in commodity-value is always greater than what he demands in commodity-value.
If his supply and his demand matched each other in this respect, that would mean his capital had not been turned to any profit at all: it would not have functioned as productive capital; the productive capital would have turned into commodity-capital carrying no surplus-value; during production it would have drawn no surplus-value in commodity form out of labour-power — in short, it would not have functioned as capital at all. He really must "sell dearer than he has bought" — but he only manages this because, through the capitalist process of production, he has turned the cheaper commodity he bought, cheaper because of lesser value, into one of greater value, and so a dearer one. He sells dearer not because he sells above the value of his commodity, but because he sells a commodity whose value is above the sum of the values of what went into producing it.
The rate at which the capitalist turns his capital to profit is higher the bigger the gap between what he supplies and what he demands — that is, the bigger the excess of the commodity-value he supplies over the commodity-value he demands.
So the capitalist's aim is not for supply and demand to match — it is for the widest possible mismatch, with supply running as far ahead of demand as it can.
What holds for the individual capitalist holds for the capitalist class as a whole.
So far as the capitalist simply personifies industrial capital, his own demand consists only in demand for means of production and for labour-power. Looked at by value, his demand for means of production is smaller than the capital he advanced: he buys means of production of lesser value than the value of his capital — and so of far lesser value still than the commodity-capital he supplies.
The capitalist's demand for labour-power, by contrast, is fixed by value as the ratio of his variable capital to his total capital, that is, v to C — and so, proportionally, it becomes ever smaller in capitalist production compared with his demand for means of production. He is, to a steadily growing degree, a bigger buyer of means of production than of labour-power.
Since the worker turns almost all of his wage into means of subsistence, and the greatest part of it into necessary means of subsistence, the capitalist's demand for labour-power is at the same time, indirectly, a demand for the means of consumption that go into the working class's consumption. But this demand equals v and not one atom more. (If the worker saves part of his wage — we necessarily leave all credit relations aside here — that just means he is turning part of his wage into a hoard, and to that extent is not acting as a demander, a buyer, at all.)
The outer limit of the capitalist's demand is C, that is, c plus v. But his supply is c plus v plus s. So if his commodity-capital is made up of 80c plus 20v plus 20s, his demand is 80c plus 20v — which, by value, is one sixth smaller than his supply. The bigger the percentage of s he produces, that is, the rate of profit, the smaller his demand becomes relative to his supply.
Even though the capitalist's demand for labour-power, and so indirectly for necessary means of subsistence, keeps shrinking as production advances compared with his demand for means of production, it must not be forgotten, on the other hand, that his demand for means of production is always, day in and day out, smaller than his capital. So his demand for means of production must always fall short in value of the commodity-product turned out by a capitalist working with an equal capital, and otherwise in the same circumstances, who supplies him with those means of production. That there are many such capitalists, not just one, changes nothing here.
Say his capital is £1,000, and its constant part £800; then his demand on all of them together is £800. Together, at an equal rate of profit, whatever share of the £1,000 falls to each one of them, and whatever part that share forms of each one's total capital, they supply him, per £1,000 of their own capital, means of production worth £1,200. So his demand covers only two thirds of their supply — while, by value, his own total demand is only four fifths of his own total supply.
We must now bring in, briefly, a look at turnover. Say his total capital is £5,000, of which £4,000 is fixed and £1,000 circulating; on the assumption above, that £1,000 is 800c plus 200s. His circulating capital has to turn over five times a year for his total capital to turn over once a year. His commodity-product then comes to £6,000, that is, £1,000 more than the capital he advanced — which again gives the same ratio of surplus-value as before: 5,000 C to 1,000s, or 100 (c plus s) to 20s. So this turnover changes nothing in the ratio between his total demand and his total supply: the first stays one fifth smaller than the second.
The capitalist's fixed capital is due for renewal every ten years, so he writes off a tenth, £400, each year. This leaves him with only £3,600 of value still in fixed capital, plus £400 in money. So far as repairs are needed, and they don't go beyond the average, they are nothing but an investment of capital that he simply makes a bit later. We can treat the matter as though he had already included the cost of repairs when he valued his fixed capital, to the extent this enters the yearly commodity-product — so that it is already folded into the one-tenth write-off. (If his need for repairs actually comes in under the average, that's a gain for him, just as it's a loss if it comes in over — though this evens out across the whole class of capitalists working in the same branch of industry.)
In any case: even though, with his total capital turning over once a year, his yearly demand stays at £5,000, the same as the capital-value he originally advanced, it grows with respect to the circulating part of his capital, while it steadily shrinks with respect to the fixed part.
Now let us turn to reproduction. Suppose the capitalist consumes the whole surplus-value and converts only the original amount of capital, C, back into productive capital. Now the capitalist's demand equals his supply in value. But this is not true with respect to the movement of his capital as such. As a capitalist, he exercises demand for only four fifths of his supply, by value; the remaining fifth he consumes as a non-capitalist — not in his role as capitalist, but for his own private need or pleasure.
The capitalist's reckoning then works out as follows, worked out in percentages:
This assumption — that the capitalist's demand fully matches his supply — is the same as assuming that capitalist production does not exist, and so that the industrial capitalist himself does not exist. For capitalism is already done away with at its very foundation the moment we assume that enjoyment, not enrichment as such, is the driving motive.
But this assumption is also technically impossible to carry through. The capitalist has to do more than build up a reserve capital against price swings and to be able to wait for the most favourable moment to buy and sell; he has to accumulate capital so as to expand production with it and build technical advances into his productive setup.
To accumulate capital, the capitalist first has to take part of the surplus-value that has flowed to him in money form out of circulation, and let it grow as a hoard, until it has reached the size needed to expand the existing business or open a side business. As long as this hoarding goes on, it does not add to the capitalist's demand: the money is immobilized — it withdraws from the commodity market no equivalent in commodities to match the money-equivalent it earlier withdrew from that market for the commodities he supplied.
Credit is left out of account here. And it would count as credit if, for example, the capitalist deposited the money with a bank on a current account, at interest, as it piled up.