We've already seen that the fixed and circulating parts of productive capital turn over in different ways and over different periods, and that even within the same business, the different parts of fixed capital have different turnover periods, because they have different lifespans and so different reproduction times. (On the real or merely apparent difference in how different parts of circulating capital turn over within the same business, see point 6 at the end of this chapter.)
1. The overall turnover of the capital advanced is the average turnover of its various parts — how to calculate it comes below. As long as we're only dealing with different lengths of time, nothing is, of course, simpler than taking their average. But:
2. Here there's not only a difference of quantity, but a difference of quality.
The circulating capital that enters the production process transfers its whole value to the product, so it must constantly be replaced in kind, through the sale of the product, if production is to go on without interruption. The fixed capital that enters the production process transfers only part of its value — the wear — to the product, and keeps on functioning in production despite that wear. So it only needs replacing in kind at longer or shorter intervals — in any case not as often as circulating capital. This need for replacement, the date when reproduction falls due, doesn't just vary in length from one part of fixed capital to another. As we've seen, part of a longer-lasting, many-year piece of fixed capital can be replaced every year, or at shorter intervals, and simply added on to the old fixed capital in kind. Other fixed capital, of a different character, can only be replaced all at once, once its working life is over.
So it becomes necessary to reduce the separate turnovers of the different parts of fixed capital to one and the same form of turnover, so that they differ only quantitatively — only in how long the turnover takes.
This sameness of kind doesn't hold if we start from P...P, the form of the continuous production process — because some elements of P must constantly be replaced in kind, and others not. But the form M...M' does give us this sameness of turnover. Take a machine worth £10,000, lasting ten years: 1/10 of it, £1,000, turns back into money every year. Over the course of a year, that £1,000 has turned from money-capital into productive capital and then commodity-capital, and from commodity-capital back into money-capital. It has returned to its original money form — just like circulating capital does, when we look at it in this form. And it makes no difference whether that £1,000 of money-capital gets turned back, at year's end, into the physical shape of a machine or not. So in working out the overall turnover of the productive capital advanced, we fix all its elements in money form, so that the return to money form is what closes the turnover. We always treat the value as advanced in money — even in a continuous production process, where this money form of the value is only the form of money of account. That's what lets us take the average.
3. It follows that even where by far the larger part of the productive capital advanced is fixed capital, whose reproduction time — and so turnover time — spans a cycle of many years, the capital-value turned over in the course of the year can still be greater than the whole value of the capital advanced, because circulating capital turns over repeatedly within that same year.
Say the fixed capital is £80,000, with a reproduction time of 10 years, so that £8,000 of it returns to its money form every year — it completes 1/10 of its turnover. Say the circulating capital is £20,000, and turns over five times a year. The total capital is then £100,000. The fixed capital turned over is £8,000; the circulating capital turned over is 5 x £20,000 = £100,000. So the capital turned over in the year is £108,000 — £8,000 more than the capital advanced. 1 + 2/25 of the capital has turned over.
4. So the value-turnover of the capital advanced separates from its real reproduction time — from the actual turnover time of its parts. Say a capital of £4,000 turns over five times a year. The capital turned over is then 5 x £4,000 = £20,000. But what comes back at the end of each turnover, to be advanced afresh, is the originally advanced capital of £4,000. Its size isn't changed by how many turnover periods it functions through as capital. (Leaving surplus-value aside.)
So in the example under point 3, on our assumptions, at the end of the year the capitalist has got back into his hands: a) a sum of £20,000, which he lays out again in the circulating parts of the capital, and b) a sum of £8,000, which has detached itself, through wear, from the value of the fixed capital advanced. Alongside this, the same fixed capital still goes on existing in the production process — but now worth only £72,000 instead of £80,000. So the production process would still need to run for nine more years before the fixed capital advanced has lived out its life, has stopped functioning either as a former of the product or a former of value, and must be replaced. The capital-value advanced, then, has to run through a cycle of turnovers — in this case, a cycle of ten yearly turnovers — and this cycle is fixed by the working life, and so the reproduction time or turnover time, of the fixed capital employed.
So to the same degree that, as the capitalist mode of production develops, the value and the lifespan of the fixed capital employed grow, the working life of an industry, and of industrial capital in each particular concern, comes to stretch over many years — say, ten years on average. But if the growth of fixed capital lengthens this life on one hand, it gets cut short on the other by the constant revolutionising of the means of production — which also keeps increasing as the capitalist mode of production develops. And with it comes the constant changing of the means of production, and the need to keep replacing them because they wear out morally, long before they're physically worn out. One can take it that for the most decisive branches of large-scale industry, this life-cycle now averages about ten years. But the exact figure doesn't matter here. What does emerge is this: this cycle of connected turnovers, running over a series of years, in which capital is held bound through its fixed part, gives rise to a material basis for the periodic crises — in which business runs through successive periods of slack, average liveliness, headlong rush, and crisis. The periods in which capital gets laid out do vary a great deal and don't line up with one another. But the crisis is always the starting point of a great wave of new investment — and so, looking at society as a whole, more or less a new material basis for the next turnover cycle.
5. Before taking up the calculation ourselves, let us see what an American economist makes of it — a passage we must examine critically.
"In some lines of business the whole of the capital advanced turns over, or circulates, several times within a year; in others, one part turns over more than once a year while another part doesn't turn over so often. It's the average period that his whole capital takes to pass through his hands — to turn over once — that a capitalist must use to work out his profit. Suppose someone has, in a given business, laid out half his capital in buildings and machinery, renewed once every ten years; a quarter in tools and the like, renewed every two years; and the last quarter, laid out in wages and raw materials, would turn over twice a year. Let his whole capital be $50,000. Then his yearly outlay will be:"
"The average time, then, in which his whole capital turns over once, is 16 months... Let's take another case: a quarter of the total capital of $50,000 circulates in 10 years; a quarter in 1 year; the remaining half twice in 1 year. Then the yearly outlay will be:"
(Scrope, Political Economy, ed. Alonzo Potter, New York 1841, pp. 142-143.)
6. Real and apparent differences in how the different parts of capital turn over. The same Scrope says, in the same place [p. 141]:
"The capital that a manufacturer, farmer, or merchant lays out in paying wages circulates fastest of all, since it's turned over perhaps once a week, if his people are paid weekly, through the weekly proceeds of his sales or of bills paid to him. The capital laid out in raw materials or finished stock circulates less quickly — it may turn over twice or four times a year, depending on the time that passes between buying the one and selling the other, assuming he buys and sells on the same length of credit. The capital sunk in tools and machines circulates more slowly still, since on average it perhaps turns over — that is, gets used up and renewed — only once every five or ten years, though some tools get used up in a single run of operations. The capital laid out in buildings — factories, shops, warehouses, barns, say, or in roads, irrigation works, and the like — seems hardly to circulate at all. But in fact these too get used up just as completely as the items already mentioned, while they contribute to production, and have to be reproduced if the producer is to go on with his operations — only with the difference that they're consumed and reproduced more slowly than the rest... The capital sunk in them perhaps turns over only once in 20 or 50 years."
Here Scrope confuses a difference that comes from payment dates and credit arrangements — affecting the flow of certain parts of circulating capital for the individual capitalist — with the turnovers that follow from the nature of capital itself. He says wages have to be paid weekly, out of the weekly proceeds from sales or bills paid. First, it should be noted that even with wages themselves, differences arise depending on how long the payment period is — that is, how long the worker has to extend credit to the capitalist — whether wages are paid weekly, monthly, every three months, every six months, and so on. Here the law set out earlier applies: the necessary quantity of the means of payment — that is, of the money-capital that has to be advanced in one go — stands in direct proportion (in the 1st and 2nd editions: inverse proportion) to the length of the payment periods.
Second: what enters the weekly product isn't only the whole of the new value added by that week's labour, but equally the value of the raw and auxiliary materials used up in making it. This value, contained in the product, circulates along with it. Through the sale of this product it takes on money form and must be turned back again into the same elements of production — and this holds just as much for labour-power as for raw and auxiliary materials. But it's already been shown (Chapter VI, II, 1) that keeping production going without a break calls for a stock of means of production — a stock that differs from one line of business to another, and, within the same line, differs again between different parts of this circulating-capital element, say coal and cotton. So although these materials have to be constantly replaced in kind, they don't have to be constantly bought afresh. How often the buying is repeated depends on the size of the stock laid in — how long it lasts before it's used up. With labour-power, no such stockpiling happens: turning it back into money proceeds hand in hand with turning back the part of the capital laid out in auxiliary and raw material. But turning money back into labour-power on one side, and into raw materials on the other, happens separately, because of the different terms on which these two are bought and paid for — one, the productive stock, bought on longer terms, the other, labour-power, on shorter ones, say weekly. On top of this, the capitalist has to keep a stock of finished goods as well as a stock for production. Setting aside difficulties in selling and the like, a given quantity may have to be produced to order: while the last part of it is still being made, the part already finished sits in storage until the whole order can be filled. Further differences in how circulating capital turns over arise as soon as some of its elements have to sit longer than others at some preliminary stage of the production process — wood drying out, for instance.
The credit system that Scrope is pointing to here, like commercial capital, modifies the turnover for the individual capitalist. On the scale of society as a whole, it modifies it only in so far as it speeds up not just production, but consumption as well.
We've already seen that the fixed and circulating parts of productive capital turn over in different ways and over different periods, and that even within the same business, the different parts of fixed capital have different turnover periods, because they have different lifespans and so different reproduction times. (On the real or merely apparent difference in how different parts of circulating capital turn over within the same business, see point 6 at the end of this chapter.)
1. The overall turnover of the capital advanced is the average turnover of its various parts — how to calculate it comes below. As long as we're only dealing with different lengths of time, nothing is, of course, simpler than taking their average. But:
2. Here there's not only a difference of quantity, but a difference of quality.
The circulating capital that enters the production process transfers its whole value to the product, so it must constantly be replaced in kind, through the sale of the product, if production is to go on without interruption. The fixed capital that enters the production process transfers only part of its value — the wear — to the product, and keeps on functioning in production despite that wear. So it only needs replacing in kind at longer or shorter intervals — in any case not as often as circulating capital. This need for replacement, the date when reproduction falls due, doesn't just vary in length from one part of fixed capital to another. As we've seen, part of a longer-lasting, many-year piece of fixed capital can be replaced every year, or at shorter intervals, and simply added on to the old fixed capital in kind. Other fixed capital, of a different character, can only be replaced all at once, once its working life is over.
So it becomes necessary to reduce the separate turnovers of the different parts of fixed capital to one and the same form of turnover, so that they differ only quantitatively — only in how long the turnover takes.
This sameness of kind doesn't hold if we start from P...P, the form of the continuous production process — because some elements of P must constantly be replaced in kind, and others not. But the form M...M' does give us this sameness of turnover. Take a machine worth £10,000, lasting ten years: 1/10 of it, £1,000, turns back into money every year. Over the course of a year, that £1,000 has turned from money-capital into productive capital and then commodity-capital, and from commodity-capital back into money-capital. It has returned to its original money form — just like circulating capital does, when we look at it in this form. And it makes no difference whether that £1,000 of money-capital gets turned back, at year's end, into the physical shape of a machine or not. So in working out the overall turnover of the productive capital advanced, we fix all its elements in money form, so that the return to money form is what closes the turnover. We always treat the value as advanced in money — even in a continuous production process, where this money form of the value is only the form of money of account. That's what lets us take the average.
3. It follows that even where by far the larger part of the productive capital advanced is fixed capital, whose reproduction time — and so turnover time — spans a cycle of many years, the capital-value turned over in the course of the year can still be greater than the whole value of the capital advanced, because circulating capital turns over repeatedly within that same year.
Say the fixed capital is £80,000, with a reproduction time of 10 years, so that £8,000 of it returns to its money form every year — it completes 1/10 of its turnover. Say the circulating capital is £20,000, and turns over five times a year. The total capital is then £100,000. The fixed capital turned over is £8,000; the circulating capital turned over is 5 x £20,000 = £100,000. So the capital turned over in the year is £108,000 — £8,000 more than the capital advanced. 1 + 2/25 of the capital has turned over.
4. So the value-turnover of the capital advanced separates from its real reproduction time — from the actual turnover time of its parts. Say a capital of £4,000 turns over five times a year. The capital turned over is then 5 x £4,000 = £20,000. But what comes back at the end of each turnover, to be advanced afresh, is the originally advanced capital of £4,000. Its size isn't changed by how many turnover periods it functions through as capital. (Leaving surplus-value aside.)
So in the example under point 3, on our assumptions, at the end of the year the capitalist has got back into his hands: a) a sum of £20,000, which he lays out again in the circulating parts of the capital, and b) a sum of £8,000, which has detached itself, through wear, from the value of the fixed capital advanced. Alongside this, the same fixed capital still goes on existing in the production process — but now worth only £72,000 instead of £80,000. So the production process would still need to run for nine more years before the fixed capital advanced has lived out its life, has stopped functioning either as a former of the product or a former of value, and must be replaced. The capital-value advanced, then, has to run through a cycle of turnovers — in this case, a cycle of ten yearly turnovers — and this cycle is fixed by the working life, and so the reproduction time or turnover time, of the fixed capital employed.
So to the same degree that, as the capitalist mode of production develops, the value and the lifespan of the fixed capital employed grow, the working life of an industry, and of industrial capital in each particular concern, comes to stretch over many years — say, ten years on average. But if the growth of fixed capital lengthens this life on one hand, it gets cut short on the other by the constant revolutionising of the means of production — which also keeps increasing as the capitalist mode of production develops. And with it comes the constant changing of the means of production, and the need to keep replacing them because they wear out morally, long before they're physically worn out. One can take it that for the most decisive branches of large-scale industry, this life-cycle now averages about ten years. But the exact figure doesn't matter here. What does emerge is this: this cycle of connected turnovers, running over a series of years, in which capital is held bound through its fixed part, gives rise to a material basis for the periodic crises — in which business runs through successive periods of slack, average liveliness, headlong rush, and crisis. The periods in which capital gets laid out do vary a great deal and don't line up with one another. But the crisis is always the starting point of a great wave of new investment — and so, looking at society as a whole, more or less a new material basis for the next turnover cycle.
5. Before taking up the calculation ourselves, let us see what an American economist makes of it — a passage we must examine critically.
"In some lines of business the whole of the capital advanced turns over, or circulates, several times within a year; in others, one part turns over more than once a year while another part doesn't turn over so often. It's the average period that his whole capital takes to pass through his hands — to turn over once — that a capitalist must use to work out his profit. Suppose someone has, in a given business, laid out half his capital in buildings and machinery, renewed once every ten years; a quarter in tools and the like, renewed every two years; and the last quarter, laid out in wages and raw materials, would turn over twice a year. Let his whole capital be $50,000. Then his yearly outlay will be:"
"The average time, then, in which his whole capital turns over once, is 16 months... Let's take another case: a quarter of the total capital of $50,000 circulates in 10 years; a quarter in 1 year; the remaining half twice in 1 year. Then the yearly outlay will be:"
(Scrope, Political Economy, ed. Alonzo Potter, New York 1841, pp. 142-143.)
6. Real and apparent differences in how the different parts of capital turn over. The same Scrope says, in the same place [p. 141]:
"The capital that a manufacturer, farmer, or merchant lays out in paying wages circulates fastest of all, since it's turned over perhaps once a week, if his people are paid weekly, through the weekly proceeds of his sales or of bills paid to him. The capital laid out in raw materials or finished stock circulates less quickly — it may turn over twice or four times a year, depending on the time that passes between buying the one and selling the other, assuming he buys and sells on the same length of credit. The capital sunk in tools and machines circulates more slowly still, since on average it perhaps turns over — that is, gets used up and renewed — only once every five or ten years, though some tools get used up in a single run of operations. The capital laid out in buildings — factories, shops, warehouses, barns, say, or in roads, irrigation works, and the like — seems hardly to circulate at all. But in fact these too get used up just as completely as the items already mentioned, while they contribute to production, and have to be reproduced if the producer is to go on with his operations — only with the difference that they're consumed and reproduced more slowly than the rest... The capital sunk in them perhaps turns over only once in 20 or 50 years."
Here Scrope confuses a difference that comes from payment dates and credit arrangements — affecting the flow of certain parts of circulating capital for the individual capitalist — with the turnovers that follow from the nature of capital itself. He says wages have to be paid weekly, out of the weekly proceeds from sales or bills paid. First, it should be noted that even with wages themselves, differences arise depending on how long the payment period is — that is, how long the worker has to extend credit to the capitalist — whether wages are paid weekly, monthly, every three months, every six months, and so on. Here the law set out earlier applies: the necessary quantity of the means of payment — that is, of the money-capital that has to be advanced in one go — stands in direct proportion (in the 1st and 2nd editions: inverse proportion) to the length of the payment periods.
Second: what enters the weekly product isn't only the whole of the new value added by that week's labour, but equally the value of the raw and auxiliary materials used up in making it. This value, contained in the product, circulates along with it. Through the sale of this product it takes on money form and must be turned back again into the same elements of production — and this holds just as much for labour-power as for raw and auxiliary materials. But it's already been shown (Chapter VI, II, 1) that keeping production going without a break calls for a stock of means of production — a stock that differs from one line of business to another, and, within the same line, differs again between different parts of this circulating-capital element, say coal and cotton. So although these materials have to be constantly replaced in kind, they don't have to be constantly bought afresh. How often the buying is repeated depends on the size of the stock laid in — how long it lasts before it's used up. With labour-power, no such stockpiling happens: turning it back into money proceeds hand in hand with turning back the part of the capital laid out in auxiliary and raw material. But turning money back into labour-power on one side, and into raw materials on the other, happens separately, because of the different terms on which these two are bought and paid for — one, the productive stock, bought on longer terms, the other, labour-power, on shorter ones, say weekly. On top of this, the capitalist has to keep a stock of finished goods as well as a stock for production. Setting aside difficulties in selling and the like, a given quantity may have to be produced to order: while the last part of it is still being made, the part already finished sits in storage until the whole order can be filled. Further differences in how circulating capital turns over arise as soon as some of its elements have to sit longer than others at some preliminary stage of the production process — wood drying out, for instance.
The credit system that Scrope is pointing to here, like commercial capital, modifies the turnover for the individual capitalist. On the scale of society as a whole, it modifies it only in so far as it speeds up not just production, but consumption as well.