BOOK II The Circulation of Capital PART I The Metamorphoses of Capital and Their Cycles CHAPTER I.
THE CIRCULATION OF MONEY-CAPITAL.
The circulation process1 of capital takes place in three stages, which, according to the presentation of the matter m Volume I, form the following series: First stage: The capitalist appears as a buyer on the commodity and labor market; his money is transformed into commodities, or it goes through the circulation pro- cess M-C.
Second stage: Productive consumption of the purchased commodities by the capitalist. He acts in the capacity of a capitalist producer of commodities; his capital passes through the process of production. The result is a com- modity of more value than that of the elements compos- ing it.
Third stage: The capitalist returns to the market as a seller; his commodities are exchanged for money, or they pass through the circulation process C-M.
1 From Manuscript II.
31 32 Capital.
Hence the formula for the circulation process of money capital is: M-C...P...C'-M', the dots indicating the points where the process of circulation was interrupted, and C' and M' designating C and M increased by surplus value.
The first and third stages were discussed in Volume I only in so far as it was required for an understanding of the sec- ond stage, the process of production of capital. For this reason, the various forms which capital assumes in its dif- ferent stages, and which it either retains or discards in the repetition of the circulation process, were not considered. These forms are now the first objects of our study.
In order to conceive of these forms in their purest state, we must first of all abstract from all factors which have nothing to do directly with the discarding or adopting of any of these forms. It is therefore taken for granted at this point that the commodities are sold at their value and that this takes place under the same conditions through- out. Abstraction is likewise made of any changes of value which might occur during the process of circulation. I. First Stage. M-C.2 M-C represents the exchange of a sum of money for a sum of commodities; the purchaser exchanges his money for commodities, the sellers exchange their commodities for money. It is not so much the form of this act of exchange which renders it simultaneously a part of the general circu- lation of commodities and a definite organic section in the independent circulation of some individual capital, as its substance, that is to say the specific use-values of the com- modities which are exchanged for money. These commodi- ties represent on the one hand means of production, on the other labor-power, and these objective and personal factors in the production of commodities must naturally correspond in their peculiarities to the special kind of articles to be manufactured. If we call labor-power L, and the means of production Pm, the sum of commodities to be purchased is C=L+Pm, or more briefly C{£m. M-C, considered as to its substance, is therefore represented by M-C}pm, that is to say M-C is composed of M-L and M-Pm. The sum of 2 Beginning of Manuscript VII, started July 2, 1878.
The Circulation of Money-Capital. 33 money M is separated into two parts, one of which buys labor -power, the other means of production. These two series of purchases belong to entirely different markets, the one to the commodity-market proper, the other to the labor- market.
Aside from this qualitative division of the sum of com- modities into which M is transformed, the formula M-C \ pm also represents a very characteristic quantitative relation.
We know that the value, or price, of labor-power is paid to its owner, who offers it for sale as a commodity, in the form of wages, that is to say it is the price of a sum of labor containing surplus-value. For instance, if the daily value of labor-power is equal to the product of five hours' labor val- ued at three shillings, this sum figures in the contract be- tween the buyer and seller of labor power as the price, or wages, for say, ten hours of labor time. If such a contract is made, for instance, with 50 laborers, they are supposed to work 500 hours per day for their purchaser, and one- half of this time, or 250 hours equal to 25 days of labor of 10 hours each, represent nothing but surplus-value. The quantity and the volume of the commodities to be pur- chased must be sufficient for the utilization of this labor- power.
M-C{pm, then, does not merely express the qualitative relation represented by the exchange of a certain sum of money, say 422 pounds sterling, for a corresponding sum of means of production and labor-power, but also a quanti- tative relation between certain parts of that same money spent for the labor-power L and the means of production Pm. This relation is determined at the outset by the quantity of surplus-labor to be expended by a certain number of la- borers.
If, for instance, a certain manufacturer pays a weekly wage of 50 pounds sterling to 50 laborers, he must spend 372 pounds sterling for means of production, if this is the value of the means of production which a weekly labor of 3,000 hours, 1,500 of which are surplus-labor, transforms into factory products.
It is immaterial for the point under discussion, how much additional value in the form of means of production is re- 84 Capital.
quired in the various lines of industry by the utilization of surplus-labor. We merely emphasize the fact that the amount of money M spent for means of production in the exchange M-Pm must buy a proportional quantity of them. The quantity of means of production must suffice for the absorption of the amount of labor which is to transform them into products. If the means of production were in- sufficient, the surplus-labor available for the purchaser would not be utilized, and he could not dispose of it. On the other hand, if there were more means of production than available labor, they would not be saturated with labor and would not be transformed into products.
As soon as the process M-C{£m has been completed, the purchaser has more than simply the means of production and labor-power required for the manufacture of some use- ful article. He has also at his disposal a greater supply of labor-power, or a greater quantity of labor, than is neces- sary for the reproduction of the value of this labor-power, and he has at the same time the means of production re- quired for the materialization of this quantity of labor. In other words, he has at his disposal the elements required for the production of articles of a greater value than these elements, he has a mass of commodities containing sur- plus-value. The value advanced by him in the form of money has then assumed a natural form in which it can be incarnated as a value generating more value. In brief, value exists then in the form of productive capital which has the faculty of creating value and surplus-value. Let us call capital in this form P.
Now the value of P is equal to that of L-f Pm, it is equal to M exchanged for L and Pm. M is the same capital-value as P, only it has a different form of existence, it is capital value in the form of money — money-capital.
M-C{pm, or the more general formula M-C, a sum of purchases of commodities, a process within the general cir- culation of commodities, is therefore at the same time, seeing that it is <a stage in the independent circulation of capital, a process of transforming capital-value from its money form into its productive form. It is the transforma- tion of money-capital into productive capital. In the diagram The Circulation of Money-Capital. 85 of the circulation which we are here discussing, money ap- pears as the first bearer of capital-value, and money-capital therefore represents the form in which capital is advanced.
Money in the form of money-capital finds itself employed in the functions of a medium of exchange, in the present case it performs the service of a general purchasing medium and general paying medium. The last-named service is re- quired inasmuch as labor-power, though first bought is not paid until it has been utilized. If the means of production are not found ready on the market, but have to be ordered, money in the process M-Pm likewise serves as a paying medium. These functions are not due to the fact that money-'capital is 'capital, but that it is money.
On the other hand, money-capital, or capital- value in the form of money, cannot perform any other service but that of money. This service appears as a function of capital simply because it plays a certain role in the movements of capital. The stage in which this function is performed is interrelated with other stages of the circulation of money- capital. Take, for instance, the case with which we are here dealing. Money is here exchanged for commodities which represent the natural form of productive capital, and this form contains in the germ the phenomena of the process of capitalist production.
A part of the money performing the function of money- capital in the process M-C{pm assumes, in the course of this circulation, a function in which it loses its capital character but preserves its money character. The circula- tion of money-capital M is divided into the stages M-Pm and M-L, into the purchase of means of production and of labor-power.
Let us consider the last-named stage by itself. M-L is the purchase of labor-power by the capitalist. It is also the sale of labor-power, or we may say of labor, since we have assumed the existence of wages, by the laborer who owns it. What is M-C, or in this case M-L, from the standpoint of the buyer, is here, as in every other transaction of this kind, C-M from the standpoint of the seller, L-M from the standpoint of the laborer. It is the sale of labor-power by the laborer. This is the first stage of circulation, or the 36 Capital.
first metamorphosis, of commodities (Vol. I, Chap. Ill, Sect. 2a). It is for the seller of labor-power a 'transforma- tion of his commodity into the money-form. The laborer spends the money so obtained gradually for a number of commodities required for the satisfaction of his needs, for articles of consumption. The complete circulation of his commodity therefore appears as L-M-C, that is to say first as L-M, or C-M, second as M-C, which is the general form of the simple circulation of commodities, C-M-C. Money is in this case merely a passing circulation-medium, a mere mediator in the exchange of one commodity for another.
M-L is the typical stage of the transformation of money- capital into productive capital. It is the essential condition for the transformation of value advanced in the form of money into capital, that is to say into a value producing surplus-value. M-Pm is necessary only for the purpose of realizing the quantity of labor bought in the process M-L. This process was discussed from this point of view in Vol. I, Part II, under the head of "Transformation of Money into Capital." But at this point, we shall have to consider it also from another side, relating especially to money-capi- tal as a form of capital.
M-L is regarded as a general characteristic of the capital ist mode of production. But in this case we are doing so, not so much because the purchase of labor-power repre- sents a contract which stipulates the delivery of a certain quantity of labor-power for the reproduction of the price of labor-power, or of wages, not so much for the reason that it means the delivery of surplus-labor which is the funda- mental condition for the capitalization of the value ad- vanced, or for the production of surplus-value; but we do so rather on account of its money form, because wages in the form of money buy labor-power, and this is the charac- teristic mark of the money system.
Nor is it the irrational feature of the money form which we shall note as the characteristic part. We shall overlook the irrationalities. The irrationality consists in the fact that labor itself as a value-creating element cannot havQ any value which could be expressed in its price, and that, therefore, a certain quantity of labor cannot have any The Circulation of Money-Capital. 37 equivalent in a certain quantity of money. But we know that wages are but a disguised form in which, for instanoe, the price of one day's labor-power is seen to be the price of the quantity of labor materialized by this labor-power in one day. The value produced by this labor-power in six hours of labor is then expressed as the value of twelve hours of its labor.
M-L is regarded as the characteristic signature of the so- called money system, because labor there appears as the com- modity of its owner, and money as the buyer. In other words, it is the money relation in the sale and purchase of human activity which is considered. It is a fact, however, that money appears at an early stage as a buyer of so-called services, without the transformation of M into money- capital, and without any change in the general character of the economic system.
It makes no difference to money into what sort of com- modities it is transformed. It is the general equivalent of all commodities, which show by their prices that they rep- resent in an abstract way a certain sum of money and an- ticipate their exchange for money. They do not assume the form in which they may be translated into use-values for their owners, until they change places with money. Once that labor power has come into the market as the commod- ity of its owner, to be sold for wages in return for labor, its sale and purchase is no more startling than the sale and purchase of any other commodity. The peculiar character- istic is not that the commodity labor-power is salable, but that labor-power appears in the shape of a commodity.
By means of M-C \ pm, that is to say by the transformation of money-capital into productive capital, the capitalist ac- complishes the combination of the objective and personal factors of production so far as they consist of commodities. If money is transformed into productive capital for the first time, or if it performs for the first time the function of money-capital for its owner, he must begin by buying means of production, such as buildings, machinery, etc., be- fore he buys any labor-power. For as soon as labor-power passes into his control, he must have means of production for it, in order to utilize it.
88 Capital.
This is the capitalist's point of view.
The laborer, on the other hand, looks at this question in the following light: The productive application of his la- bor-power is not possible, until he has sold it and brought it into contact with means of production. Before its sale, it exists in a state of separation from the means of produc- tion which it requires for its materialization. So long as it remain's in this state, it cannot be used either for the pro- duction of use-values for its owner, or for the production of commodities, by the sale of which he might live. But from the moment that it is brought into touch with means of production, it forms part of the productive capital of its purchaser, the same as the means of production.
It is true, that in the act M-L the owner of money and the owner of labor-power enter into the relation of buyer and seller, of money-owner and commodity-owner. To this extent they enter into a money relation. But at the same time the buyer also appears in the role of an owner of means of production, which are the material conditions for the productive expenditure of labor-power on the part of its owner. The means of production, then, meet the owner of labor-power in the form of the property of another. On the other hand, the seller of labor meets its buyer in the form of the labor-power of another and it must pass into the buyer's possession, it must become a part of his capital, in order that it may become productive capital. The class relation be- tween the capitalist and the wage laborer is therefore es- tablished from the moment that they meet in the act M-L, which signifies L-M from the standpoint of the laborer. It is indeed a sale and a purchase, a money relation, but it is a sale and a purchase in which the buyer is a capitalist and the seller a wage-laborer. And this relation arises out of the fact that the conditions required for the materializa- tion of labor-power, viz.: means of subsistence and means of production, are separated from the owner of labor-power and are the property of another.
We are not here concerned in the origin of this separa- tion. It is a fact, as soon as the act M-L can be performed. The thing which interests us here is that M-L does not be- come a function of money-capital for the sole reason that The Circulation of Money-Capital. 39 it is a means of paying for a useful human activity or serv- ice. The function of money as a paying medium is not the main object of our attention. Money can be expended in this form only because labor-power finds itself separated from its means of production, including the means of sub- sistence required for its reproduction; because this separa- tion can be overcome only by the sale of the labor-power to the owner of the means of production; because the ma- terialization of labor-power, which is by no means limited to the quantity of labor required for the reproduction of its own price, is likewise in the control of its buyer. The capital relation during the process of production arises only because it is inherent in the process of circulation based on the different economic conditions, the class distinctions be- tween the buyer and the seller of labor-power. It is not money which by its nature creates this relation; it is rather the existence of this relation which permits of the trans- formation of a mere money-function into a capital-func- tion.
In the conception of money-capital, so far as it relates to the special function which we are discussing, two errors run parallel to one another or cross each other. In the first place, the functions performed by capital-value in its ca- pacity of money-capital, which are due to its money form, are erroneously derived from its character as capital. But they are due only to the money form of capital-value. In the second and reverse case, the specific nature of the money-function, which renders it simultaneously a capi- tal-function, is attributed to its money nature. Money is here confounded with capital, while the specific nature of the money-function is conditioned on social relations such as are indicated by the act M-L, and these conditions do not exist in the mere circulation of commodities and money.
The sale and purchase of slaves is formally also a sale and purchase of commodities. But money cannot perform this function without the existence of slavery. If slavery exists, then money can be invested in the purchase of slaves. On the other hand, the mere possession of money cannot make slavery possible.
In order that the sale of his labor-power by the laborer, 40 'Capital.
in the form of the sale of labor for wages, may take place as a result of social conditions which make it the basis of the production of commodities, in order that it may not be an isolated instance, so that money-capital may perform, on a social scale, the function in the process M-C{pm, definite historical processes are required, by which the original con- nection of the means of production with labor-power is dis- solved. These processes must have resulted in opposing the mass of the people, the laborers, as propertiless to the idle owners of the means of production. It makes no dif- ference in this case, whether the connection between the la- bor-power and the means of production before its disso- lution was such that the laborer belonged to the means of production and was a part of them, or whether he was their owner.
The fact which lies back of the process M-C { pm is dis- tribution; not distribution in the ordinary meaning of a distribution of articles of consumption, but the distribu- tion of the elements of production themselves. These con- sist of the objective things which are concentrated on one side, and labor-power which is isolated on the other. . The means of production, the objective things of pro- ductive capital, must therefore stand opposed to the la- borer as capital, before the process M-L can become a uni- versal, social one.
We have seen on previous occasions that capitalist pro- duction, once it is established, does not only reproduce in its further development this separation, but extends its scope more and more, until it becomes the prevailing social con- dition. However, there is still another side to this ques- tion. In order that capital may be able to arise and take control of production, a definite stage in the development of commerce must precede. This includes the circulation of commodities, and therefore also the production of com- modities; for no articles can enter circulation in the form of commodities, unless they are manufactured for sale, and intended for commerce. But the production of com- modities does not become the normal mode of production, until it finds as its basis the capitalist system of production.
The Russian landowners, who are compelled to carry on The Circulation of Money-Capital. 41 agriculture by the help of wage-laborers instead of serfs, since the so-called emancipation of the serfs, complain about two things. They wail in the first place about the lack of money-capital. They say, for instance, that large sums must be paid to wage-laborers, before the crops can be sold, and there is a dearth of ready cash. Capital in the form of money must always be available for the payment of wages, before production on a capitalist scale can be carried on. But the landowners may take hope. In due time the in- dustrial capitalist will have at his disposal, not alone his own money, but also that of others.
The second complaint is more characteristic. It is to the effect that even if money is available, there are not enough laborers at hand at any time. The reason is that the Rus- sian farm laborer, owing to the communal property in land, has not been fully separated from his means of production, and hence is not yet a "free wage-worker" in the full capi- talist meaning of the word. But the existence of "free" wage-workers is the indispensable condition for the reali- zation of the act M-C, the exchange of money for commodi- ties, the transformation of money-capital into productive capital.
As a matter of course, the formula M-C...P...C -M' does not represent the normal form of the circulation of money- capital, until capitalist production is fully developed, be- cause it is conditioned on the existence of a social class of wage-laborers. We have seen that capitalist production does not only create commodities and surplus-values, but also gives rise to an ever growing class of wage-laborers, either by propagation or by the transformation of independ- ent producers into proletarians.
Since the first condition for the realization of the act M-C...P...C -M' is the permanent existence of a class of wage-workers, capital in the form of productive capital and jhe circulation of productive capital must precede it.
II. Second Stage. Functions of Productive Capital.
The circulation of capital which we have here considered begins with the act of circulation represented by the formula M-C, the transformation of money into commodities, or 42 Capital.
purchase. Circulation must therefore be supplemented by the reverse metamorphosis C-M, the transformation of com- modities into money, or sale. But the immediate result of M-C { pm is the interruption of the circulation of the oapital advanced in the form of money. By the transformation of money-capital into productive capital the value of capital has assumed a natural form in which it cannot continue to circulate, but must enter into consumption, more accurately into productive consumption.
The application of labor-power, labor, can not be carried into effect anywhere but in the labor process. The capitalist cannot sell the laborer along with the commodities, because the wage-worker is not a chattel slave and the capitalist does not buy anything from the laborer but the privilege of utilizing the labor-power purchased in the person of ■the laborer for a certain time. On the other hand, the capitalist cannot use this labor-power in any other way than by using it up in transforming, by its help, means of production into commodities. The result of the first stage of the circu- lation of money-capital is therefore its entrance into the second stage, that of productive capital.
This movement is represented by the formula M-C {pm, P, in which the dots indicate the place where the circulation of capital is interrupted, while its rotation continues, since it passes from the sphere of the circulation of commodities into that of production. The first stage, the transformation of money-capital into productive capital, is therefore merely the harbinger of the second, the productive stage of capi- tal.
The act M \$M presupposes that the person performing it not only has at his or her disposal values of some useful form, but also that he or she has them in the form of money. And the act consists precisely in giving away money. A man can, therefore, remain the owner of money only on the condition, that the giving away of money at the same time implies a return of money. But money can return only through the sale of commodities. Hence the above formula assumes the owner of money to be a pro- ducer of commodities.
INow let us look at the formula M-L. The wage worker The Circulation of Money-Capital. 43