c. Universal Money.
When money leaves the home sphere of circulation, it strips off the local garbs which it there assumes, of a standard of prices, of coin, of tokens, and of a symbol of value, and re- turns to its original form of bullion. In the trade between the markets of the world, the value of commodities is expressed so as to be universally recognised. Hence their independent value-form also, in these cases, confronts them under the shape of universal money. It is only in the markets of the world that money acquires to the full extent the character of the commodity whose bodily form is also the immediate social in- carnation of human labour in the abstract. Its real mode of existence in this sphere adequately corresponds to its ideal concept.
Within the sphere of home circulation, there can be but one commodity which, by serving as a measure of value, becomes money. In the markets of the world a double measure of value holds sway, gold and silver.^ 1 To the question, "If there were occasion to raise 40 millions p. a., whether the same 6 millions (gold)...would suffice for such revolutions and circulations thereof, as trade requires," Petty replies in his usual masterly manner, " I answer yes: for the expense being 40 millions, if the revolutions were in such short circles, viz., weekly, as happens among poor artizans and labourers, who receive and pay every Satui'day, then \% parts of 1 million of money would answer these ends; but if the circles be quarterly, according to our custom of paying rent, and gathering taxes, then 10 millions were requisite. Wherefore, supposing payments in general to be of a mixed circle between one week and 13, then add 10 millions to |§, the half of which will be 5.3, so as if we have 5| millions we have enough." (William Petty: " Political Anatomy of Ireland." 1672. Edit.: Lond. 1691, pp. 13. 14.)
2 Hence the absurdity of every law prescribing that the banks of a country shall form reserves of that precious metal alone which circulates at home. The " pleasant I20 Capitalist Production.
Money of the world serves as the universal medium of payment, as the universal means of purchasing, and as the universally recognised embodiment of all wealth. Its function as a means of payment in the settling of international balances is its chief one. Hence the watchword of the mercantilists, balance of trade.^ Gold and silver serve as international means of purchasing chiefly and necessarily in those periods when the customary equilibrium in the interchange of products between different nations is suddenly disturbed. And lastly, it serves as the universally recognised embodiment of social wealth, whenever the question is not of buying or paying, but of transferring wealth from one country to another, and when- ever this transference in the form of commodities is rendered impossible, either by special conjunctures in the markets, or by the purpose itself that is intended.^ Just as every country needs a reserve of money for its home circulation, so, too, it requires one for external circulation in difficulties " thus self -created by the Bank of England, are well known. On the subject of the great epochs in the history of the changes in the relative value of gold and silver, see Karl Marx, 1. c. p. 136 sq. Sir Eobert Peel, by his Bank Act of 1844, sought to tide over the difficulty, by allowing the Bank of England to issue notes against silver bullion, on condition that the reserve of silver should never exceed more than one-fourth of the reserve of gold. The value of silver being for that purpose estimated at its price in the London market.
1 The opponents, themselves, of the mercantile system, a system which considered the settlement of surplus trade balances in gold and silver as the aim of international trade, entirely misconceived the functions of money of the world. I have shown by the example of Ricardo in what way their false conception of the laws that regulate the quantity of the circulating medium, is reflected in their equally false conception of the international movement of the precious metals (1. c. pp. 150 sq.) His erroneous dogma: "An unfavourable balance of trade never arises but from a re- dundant currency...The exportation of the coin is caused by its cheapness, and is not the effect, but the cause of an unfavourable balance," already occurs inBarbon: " The Balance of Trade, if there be one, is not the cause of sending away the money out of a nation; but that proceeds from the difference of the value of bullion in every country." (N. Barbon; 1. c. pp. 59, 60.) MacCulloch in "the Literature of Political Economy, a classified catalogue, Lond. 1845," praises Barbon for this anti- cipation, but prudently passes over the naive forms, in which Barbon clothes the absurd supposition on which the "currency principle " is based. The absence of real criticism and even of honesty, in that catalogue, culminates in the sections devoted to the history of the theory of money; the reason is that MacCulloch in this part of the work is flattering Lord Overstone whom he calls "facile princeps argentariorum."
1 For instance, in subsidies, money loans for carrying on wars or for enabling banks to resume cash payments, &c., it is the money form, and no other, of value that may be wanted.
Money ^ or the Circulation of Commodities. 121 the markets of the world. The functions of hoards, therefore, arise in part out of the function of money, as the medium of the home circulation and home payments, and in part out of its function of money of the world.^ For this latter func- tion, the genuine money-commodity, actual gold and silver, is necessary. On that account, Sir James Steuart, in order to distinguish them from their purely local substitutes, calls gold and silver "money of the world."
The current of the stream of gold and silver is a double one. On the one hand, it spreads itself from its sources over all the markets of the world, in order to become absorbed, to various extents, into the different national spheres of circulation, to till the conduits of currency, to replace abraded gold and silver coins, to supply the material of articles of luxury, and to petrify into hoards.^ This first current is started by the countries that exchange their labour, realised in commodities, for the labour embodied in the precious metals by gold and silver-producing countries. On the other hand, there is a con- tinual flowing backwards and forwards of gold and silver be- tween the different national spheres of circulation, a current whose motion depends on the ceaseless fluctuations in the course of exchano^e.^ Countries in which the bourgeois form of production is de- veloped to a certain extent, limit the hoards concentrated in the strong rooms of the banks to the minimum required for 1 " I would desire, indeed, no more convincing evidence of the competency of bhe machinery of the hoards in specie-paying countries to perform every necessary oflSce of international adjustment, without any sensible aid from the general circulation, than the facility with which France, when but just recovering from the shock of a destructive foreign invasion, completed within the space of 27 months the payment of her forced contribution of nearly 20 millions to the allied powers, and a consider- able proportion of the sum in specie, without any perceptible contraction or derange- ment of her domestic currency, or even any alarming fluctuation of her exchanges.'* 2 " L'argent se partage entre les nations relativement au besoin qu'elles en ont...ctant tou jours attir6 par les productions." (Le Trosne 1. c, p. 916.) " The mines which are continually giving gold and silver, do give suflBcient to supply such a need- ful balance to every nation." (J. Yanderlint, 1. c, p. 40.)
3 " Exchanges rise and fall every week, and at some particular times in the year run high against a nation, and at other times run as high on the contrary." (N.
122 Capitalist Production.
the proper performance of their peculiar functions.^ When- ever these hoards are strikingly above their average level, it is, with some exceptions, an indication of stagnation in the circulation of commodities, of an interruption in the even flow of their metamorphoses.^ 1 These various functions are liable to come into flangerous conflict with one an- other whenever gold and silver have also to serve as a fund for the conversion of bank- notes.
2 " What money is more than of absolute necessity for a Home Trade, is dead stock...and brings no profit to that country it's kept in, but as it is transported in trade, as well as imported." (John Bellers, Essays, p. 12.) "What if we have too much coin? We may melt down the heaviest and turn it into the splendour of plate, vessels or utensils of gold or silver; or send it out as a commodity, where the same is wanted or desired; or let it out at interest, where interest is high. " (W. Petty: " Quail tulumcunque," p. 39.) " Money is but the fat of the Body Politick, whereof too much doth as often hinder its agility, as too little makes it sick...as fat lubricates the motion of the muscles, feeds in want of victuals, fills up the uneven cavities, and beautifies the body; so doth money in the state quicken its action, feeds from abroad in time of dearth at home; evens accounts.. and beautifies the whole; altho more especially the particular persons that have it in plenty." (W. Petty, " Political Anatomy of Ireland," p. 14.)
^ PART II.
^ PART II.
THE TRANSFORMATION OF MONEY INTO CAPITAL.
CHAPTER IV.
THE GENERAL FORMULA FOR CAPITAL.
The circulation of commodities is the starting point of capital. The production of commodities, their circulation, and that more developed form of their circulation called commerce, these form the historical groundwork from which it rises. The modern history of capital dates from the creation in the 16th century of a world-embracing commerce and a world-embracing market.
If we abstract from the material substance of the circulation of commodities, that is, from the exchange of the various use- values, and consider only the economic forms produced by this process of circulation, we find its final result to be money: this final product of the circulation of commodities is the first form in which capital appears.
As a matter of history, capital, as opposed to landed property, invariably takes the form at first of money; it appears as moneyed wealth, as the capital of the merchant and of the usurer.^ But we have no need to refer to the origin of capital in order to discover that the first form of appearance of capital is money. We can see it daily under our very eyes. All new capital, to commence with, comes on the stage, that is, on the market, whether of commodities, labour, or money, even in our 1 The contrast between the power, based on the personal relations of dominion and servitude, that is conferred by landed property, and the impersonal power that is given by money, is well expressed by the two French proverbs, " NuUe terre sans seigneur," and " L'argent n'a pas de maitre."
124 Capitalist Production.
days, in the shape of money that by a definite process has to be transformed into capital.
The first distinction we notice between money that is money only, and money that is capital, is nothing more than a diflfer- ence in their form of circulation.
The simplest form of the circulation of commodities is C — M — C, the transformation of commodities into money, and the change of the money back again into commodities; or selling in order to buy. But alongside of this form we find another specifically diflferent form: M — C — M, the transformation of money into commodities, and the change of commodities back again into money; or buying in order to sell. Money that circulates in the latter manner is thereby transformed into, be- comes capital, and is already potentially capital.
Now let us examine the circuit M — C — M a little closer. It consists, like the other, of two antithetical phases. In the first phase, M — C, or the purchase, the money is changed into a com- modity. In the second phase, C — M, or the sale, the commodity is changed back again into money. The combination of these two phases constitutes the single movement whereby money is exchanged for a commodity, and the same commodity is again exchanged for money; whereby a commodity is bought in order to be sold, or, neglecting the distinction in form between buying and selling, whereby a commodity is bought with money, and then money is bought with a commodit}^^ The result, in which the phases of the process vanish, is the exchange of money for money, M— M. If I purchase 2000 lbs. of cotton for £100, and resell the 2000 lbs. of cotton for £110, 1 have, in fact, exchanged £100 for £110, money for money.
Now it is evident that the circuit M — C — M would be absurd and without meaning if the intention were to exchange by this means two equal sums of money, £100 for £100. The miser's plan would be far simpler and surer; he sticks to his £100 instead of exposing it to the dangers of circulation. And yet, whether the merchant who has paid £100 for his cotton 1 "Avec de I'argent on achete des marchandises, et avec des marchandises on acliete de I'argent." (Mercier de la Eiviere: *' L'ordre natural et essentiel des societ^s politiques," j), 543.)
The General Foi'imda for Capital. 125 sells it for £110, or lets it go for £100, or even £50, his money has, at all events, gone through a characteristic and original movement, quite different in kind from that which it goes through in the hands of the peasant who sells corn, and with the money thus set free buys clothes. We have therefore to examine first the distinguishing characteristics of the forms of the circuits M — C — M and C — M — C, and in doing this the real difference that underlies the mere difference of form will reveal itself.
Let us see, in the first place, what the two forms have in common.
Both circuits are resolvable into the same two antithetical phases, C — M, a sale, and M — C, a purchase. In each of these phases the same material elements — a commodity, and money, and the same economical dramatis personse, a buyer and a seller — confront one another. Each circuit is the unity of the same two antithetical phases, and in each case this unity is brought about by the intervention of three contracting parties, of whom one only sells, another only buys, while the third both buys and sells.
What, however, first and foremost distinguishes the circuit C — M — C from the circuit M — C — M, is the inverted order of succession of the two phases. The simple circulation of com- modities begins with a sale and ends with a purchase, while the circulation of money as capital begins with a purchase and ends with a sale. In the one case both the starting- point and the goal are commodities, in the other they are money. In the first form the movement is brought about by the intervention of money, in the second by that of a commodity.
In the circulation C — M — C, the money is in the end con- verted into a commodity, that serves as a use- value; it is spent once for all. In the inverted form, M — C — M, on the contrary, the buyer lays out money in order that, as a seller, he may recover money. By the purchase of his commodity he throws money into circulation, in order to withdraw it again by the sale of the same commodity. He lets the money go, but only with the sly intention of getting it 126 Capitalist Production.
back again. The money, therefore, is not spent, it is merely advanced/ In the circuit C — M — C, the same piece of money changes its place twice. The seller gets it from the buyer and pays it away to another seller. The complete circulation, which begins with the receipt, concludes with the payment, of money for commodities. It is the very contrary in the circuit M — C — M. Here it is not the piece of money that changes its place twice, but the commodity. The buyer takes it from the hands of the seller and passes it into the hands of another buyer. Just as in the simple circulation of commodities the double change of place of the same piece of money effects its passage from one hand into another, so here the double change of place of the same commodity brings about the reflux of the money to its point of departure.
Such reflux is not dependent on the commodity being sold for more than was paid for it. This circumstance influences only the amount of the money that comes back.. The reflux itself takes place, so soon as the purchased commodity is re- sold, in other words, so soon as the circuit M — C — M is com- pleted. We have here, therefore, a palpable difference between the circulation of money as capital, and its circulation as mere money.
The circuit C — M — C comes completely to an end, so soon as the money bi ought in by the sale of one commodity is abstracted again by the purchase of another.
If, nevertheless, there follows a reflux of money to its start- ing point, this can only happen through a renewal or repeti- tion of the operation. If I sell a quarter of corn for £3, and with this £3 buy clothes, the money, so far as I am concerned, is spent and done with. It belongs to the clothes merchant. If I now sell a second quarter of corn, money indeed flows back to me, not however as a sequel to the first transaction, but in consequence of its repetition. The money again leaves me, so soon as I complete this second transaction by a fresh 1 ' ' When a thing is bought in order to be sold again, the sum employed is called money advanced; when it is bought not to be sold, it may be said to be expended." — (James Steuart: " AVorks," &c. Edited by Gen. Sir James Steuart, his son. Lond., The General Formula for Capital, 127 purchase. Therefore, in the circuit C — M — C, the expenditure of money has nothing to do with its reflux. On the other hand, in M — C — M, the reflux of the money is conditioned by the very mode of its expenditure. Without this reflux, the operation fails, or the process is interrupted and incomplete, owing to the absence of its complementary and final phase, the sale.
The circuit C — M — C starts with one commodity, and finishes with another, which falls out of circulation and into consumption. Consumption, the satisfaction of wants, in one word, use-value, is its end and aim. The circuit M — C — M, on the contrary, commences with money and ends with money. Its leading motive, and the goal that attracts it, is therefore mere exchange value.
In the simple circulation of commodities, the two extremes of the circuit have the same economic form. They are both com- modities, and commodities of equal value. But they are also use- values differing in their qualities, as, for example, corn and clothes. The exchange of products, of the different materials in which the labour of society is embodied, forms here the basis of the movement. It is otherwise in the circulation M — C — M, which at first sight appears purposeless, because tautological. Both extremes have the same economic form. They are both money, and therefore are not qualitatively different use-values; for money is but the converted form of commodities, in which their particular use-values vanish. To exchange £100 for cotton, and then this same cotton again for £100, is merely a roundabout way of exchanging money for money, the same for the same, and appears to be an operation just as purposeless as it is absurd.^ One sum of money is distinguishable from another 1 **0n n'echange pas de Vargent centre de I'argent," says Mercier de la Riviere to the Mercantilists (1. c, p. 486.) In a work, which, ex professo, treats of " trade " and "speculation,'- occurs the following: " All trade consists in the exchange of things of different kinds; and the advantage" (to the merchant?) "arises out of this difference. To exchange a pound of bread against a pound of bread...would be attended with no advantage;...Hence trade is advantageously- contrasted with gambling, which consists in a mere exchange of money for money." (Th. Corbet, " An Inquiry into the Causes and Modes of the Wealth of Individuals; or the Principles of Trade and Speculation explained." London, 1841, p. 5.) Although Corbet does not see that M — M, the exchange of money for money, is the characteristic 128 Capitalist Production, only by its amount. The character and tendency of the pro- cess M — C — M, is therefore not due to any qualitative difference between its extremes, both being money, but solely to their quantitative difference. More money is withdrawn from circula- tion at the finish than was thrown into it at the start. The cotton that was bought for £100 is perhaps resold for £100 + £10 or £110. The exact form of this process is therefore M — G — M', where M' = M + A M = the original sum advanced, plus an increment. This increment or excess over the original value I call " surplus-value." The value originally advanced, therefore, not only remains intact while in circulation, but adds to itself a surplus-value or expands itself It is this movement that converts it into capital.
Of course, it is also possible, that in C — M — C, the two extremes C — C, say corn and clothes, may represent different quantities of value. The farmer may sell his corn above its value, or may buy the clothes at less than their value. He may, on the other hand, " be done " by the clothes merchant. Yet, in the form of circulation now under consideration, such differences in value are purely accidental. The fact that the corn and the clothes are equivalents, does not deprive the pro- cess of all meaning, as it does in M — C — M. The equivalence of their values is rather a necessary condition to its normal course.
The repetition or renewal of the act of selling in order to buy, is kept within bounds by the very object it aims at, namely, consumption or the satisfaction of definite wants, an aim that lies altogether outside the sphere of circulation. But when we buy in order to sell, we, on the contrary, begin and form of circulation, not only of merchants' capital but of all capital, yet at least he acknowledges that this form is common to gambling and to one species of trade, viz., speculation: but then comes MacCulloch and makes out, that to buy in order to sell, is to speculate, and thus the difference between Speculation and Trade vanishes. "Every transaction in which an individual buys produce in order to sell it again, is, in fact, a speculation." (MacCulloch: " A Dictionary Practical, &c., of Commerce." Lond., 1847, p. 1058.) With much more naivete, Pinto, the Pindar of the Amster- dam Stock Exchange, remarks, " Le commerce est un jeu: (taken from Locke) et ce u'est pas avec des gueux qu'on peut gagner. Si Ton gagnait long-temps en tout avec fcous, il faudrait rendre de bon accord les plus grandes i)arties du profit pour recom- mencer le jeu." (Pinto: " Traite de la Circulation et du Credit." Amsterdam, 1771, The General For mtda for Capital, 129 end with the same thing, money, exchange- value; and thereby the movement becomes interminable. No doubt, M becomes M -f ^ M, £100 become £110. But when viewed in their qualitative aspect alone, £110 are the same as £100, namely money; and considered quantitatively, £110 is, like £100, a sum of definite and limited value. If now, the £110 be spent as money, they cease to play their part. They are no longer capital. Withdrawn from circulation, they become petrified into a hoard, and though they remained in that state till doomsday, not a single farthing would accrue to them. If, then, the expansion of value is once aimed at, there is just the same inducement to augment the value of the £110 as that of the £100; for both are but limited expressions for exchange- value, and therefore both have the same vocation to approach, by quantitative increase, as near as possible to absolute wealth. Momentarily, indeed, the value originally advanced, the £100 is distinguishable from the surplus value of £10 that is an- nexed to it during circulation; but the distinction vanishes immediately. At the end of the process, we do not receive with one hand the original £100, and with the other, the surplus- value of £10. We simply get a value of £110, which is in exactly the same condition and fitness for commencing the expanding process, as the original £100 was. Money ends the movement only to begin it again.^ Therefore, the final result of every separate circuit, in which a purchase and con- sequent sale are completed, forms of itself the starting point of a new circuit. The simple circulation of commodities — selling in order to buy — is a means of carrying out a purpose unconnected with circulation, namely, the appropriation of use-values, the satisfaction of wants. The circulation of money as capital is, on the contrary, an end in itself, for the expansion of value takes place only within this constantly renewed movement. The circulation of capital has therefore no limits.^ 1 " Capital is divisible...into the original capital and the profit, the increment to the capital...although in j)ractice this profit is immediately turned into capital, and set in motion with the original." (F. Engels, "Umrisse zu einer Kritik der Nationalokonomie, in: Deutsch-Franzosische Juhrbiicher, herausgegeben von Arnold Ruge und Karl Marx." Paris, 1844, p. 99.)
2 Aristotle opposes CEconomic to Chrematistic. He starts from the former. So far as it is the art of gaining a livelihood, it is limited to procuring those articles.
130 Capitalist Production.
As the conscious representative of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts and to which it returns. The expansion of value, which is the objective basis or main-spring of the circulation M — C — M, becomes his subjective aim, and it is only in so far as the appropriation of ever more and more wealth in the abstract becomes the sole motive of his operations, that he functions as a capitalist, that is, as capital personified and endowed with consciousness and a will. Use-values must therefore never be looked upon as the real aim of the capitalist;^ neither must the profit on any single transaction. The restless never- ending process of profit-making alone is what he aims at.^