neither products nor values. He belongs himself to the un- productive expenses of production. His services do not trans- form an unproductive function into a productive one, nor unproductive into productive labor. It would be a miracle, if such a transformation could be accomplished by a mere transfer of a function. His usefulness consists rather in the fact that a small part of the labor-power and labor-time of society is tied up in this unproductive function. We shall as- sume that he is a wage-worker, even though better paid than others. Whatever may be his wages, in the role of a wage- worker he always works a part of his time for nothing. He may receive in wages the value of the product of eight work- ing hours, when he performs his functions for ten hours. But his two hours of surplus-labor do not produce any sur- plus-values any more than his eight hours of necessary labor, although by means of these eight hours of necessary labor a part of the social product is transferred to him. In the first place, looking at it from the standpoint of society, his labor- power is used up for ten hours in a mere function of circula- tion. It cannot be used otherwise, for productive labor. In the second place, society does not pay for those two hours of surplus-labor, although they are expended by the man who worked during that time. Society does not appropriate any surplus-product or value through them. But the expenses of circulation, which he represents, are thereby reduced by one- fifth, from ten hours to eight. Society does not pay any equivalent for this fifth of this actual time of circulation, of which he is the agent. But if this man is employed by a capitalist, then the non-payment of these two hours re- duces the expenses of circulation of his capital, which rep- resent a deduction from his income. For the capitalist this is a positive gain, because the negative limit for the utiliza- tion of his capital is thereby reduced. So long as small inde- pendent producers of commodities spend a part of their own time in selling and buying, this shows itself either as time spent during the intervals of their productive function, or as a reduction of their time of production.
At all events, the time required for this purpose is an expense of circulation, which does not add any increment to the converted values. It is the expense which is required in The Expenses of Circulation. 151 order to convert them from commodities into money. Inas- much as the capitalist producer of commodities appears as an agent of circulation, he differs from the direct producers of commodities only by the fact that he buys and sells on a larger scale and therefore is a greater factor in circula- tion. And if the expansion of his business compels or en- ables him to hire his own wage-laborers as agents of circu- lation, the nature of this phenomenon is not changed in any way. A certain amount of labor-power and labor-time must be expended in the process of circulation, so far as it is merely a change of form. But this now appears as an addi- tional expenditure of capital. A part of the variable capi- tal must be expended in the purchase of these labor-powers active only in circulation. This advance of capital creates neither products nor values. It reduces to that extent the volume of the productive function of capital. It is as though one part of the product were transformed into a machine, which buys or sells the rest of the product. This machine deducts so much from the product. It does not participate in the productive process, although it can reduce the labor- power required for the circulation. It constitutes simply a part of the expenses of circulation.
2. Bookkeeping.
2. Bookkeeping.
Apart from the actual selling and buying, labor-time is expended in bookkeeping, which assimilates more mate- rialized labor, such as pens, ink, paper, desks, office-expenses. This function, therefore, requires labor-power and materials. It is the same condition of 'things which we observed in the case of the time of sale and purchase.
As a principle of unity within its cycles, as a value in process of rotation, whether it be in the sphere of production or in both phases of the sphere of circulation, capital exists ideally only in the form of accounting money, principally in the mind of the producer of commodities, more espe- cially the capitalist producer of commodities. This move- ment is fixed and controlled by bookkeeping, which includes also the determination of prices, or the calculation of the prices of commodities. The movement of production, espe- 152 Capital.
cially of the productian of values — in which the commodities figure as bearers of value, as mere names of things, the ideal existence of which as values is crystallized in accounting money — thus is symbolically reflected in imagination. So long as the individual producer of commodities keeps ac- count only in his head (for instance a farmer; a bookkeep- ing tenant is not known until capitalist production intro- duces him), or incidentally, outside of his time of produc- tion, makes a note of his expenses, receipts, instalment days, etc., just so long does it appear intelligible that this func- tion, and the materials consumed by it, such as paper, etc., require an additional expenditure of labor-time and mate- rials, which is necessary, but constitutes a deduction from the time available for productive consumption and from the materials which are used in the actual process of production and are embodied in the creation of products and values.12 The nature of the function itself is not changed. The vol- ume which it assumes by its concentration in the hands of the capitalist producer of commodities, who transforms it from a function of many small producers into that of one single capi- talist within a process of large scale production does not alter the case, neither is its nature affected by its separation from those productive functions, which it accompanied inci- dentally, nor by its modification into an independent func- tion of agents exclusively entrusted with it.
The division of labor, the assuming of independence, does not make a function productive, if it was not so before it became independent. If a capitalist invests his capital anew, then he must invest a part of it in hiring a bookkeeper, etc., and materials for bookkeeping. If his capital is already in active operation, in the process of continual reproduction, 12 In. the middle ages, we find bookkeeping for agriculture only in the convents. But we have seen in Vol. I, that a bookkeeper was in- stalled tor agriculture as early as the primitive Indian, communes. Book- keeping is then made an independent function of a communal officer. This division of labor saves time, pains, and expenses, but production and bookkeeping for production remain as much two different things as a cargo of a ship and the way-bill. In the person of the bookkeeper, a part of the labor-power of the commune is withdrawn from production, and the cost of his function is not reproduced by his own labor, but by a deduotion from the communal product. What is true of the book- keeper of an Indian commune, is true under changed circumstances of the bookkeeper of the capitalists. (From Manuscript II.)
The Expenses of Circulation. 153 then he must continually reconvert a part of his commodity- product by means of its transformation into money, into a bookkeeper, salesman, etc. This part of his capital is with- drawn from production and belongs to the expenses of cir- culation, deductions from the total product (including the labor-power itself, which is expended wholly for this func- tion).
But there is a certain difference between the expenses incidental to bookkeeping, or the unproductive expenditure of labor-time on one side, and that of mere sellingand buying time on the other. The latter arise only from the definite social form of the process of production, they are due to the fact that it is a production of commodities. Bookkeep- ing, for the control and ideal survey of the process, becomes necessary to the extent that the process assumes a social scak and loses its purely individual character. It is, therefore, more necessary in capitalist production than in scattered handicraft and agricultural production, and still more nec- essary in co-operative than in capitalist production. But the expenses of bookkeeping are reduced to the extent that production is concentrated and becomes social bookkeeping.
We are here concerned only about the general character of the expenses of circulation, which arise out of the general metamorphoses. It is superfluous to discuss all its details. To what extent phenomena, which are mere incidents in changes of form due to the social character of the process of production, may deceive the eyes when they cease to be im- perceptible and incidental accompaniments of individual pro- duction, we may observe in the case of the mere handling of money, when it is concentrated into an exclusive function of banks on a large scale, or of a cashier in individual busi- nesses. But it must be remembered, that these expenses of circulation do not change their character by changing their form.
Whether a product is intended for a commodity or not, it is always a materialized form of wealth, a use-value to be pro- ductively or individually consumed. If it is a commodity, 154 Capital.
its value is ideally expressed in its price, which does not change its actual use-value. But the fact that certain com- modities, such as gold and silver, may perform the function of money and as such reside exclusively in the process of circulation (even in the form of a hoard, a reserve fund, etc., they remain in the sphere of circulation, although latent), is due to the definite social form of the process of production, which is a production of commodities. Since capitalist pro- duction gives to all its products the general form of com- modities, and since the overwhelming mass of products are produced for sale and must therefore assume the form of money, and since the commodity-part of the social wealth grows continually in proportion, it follows that the quantity of gold and silver employed as means of circulation, paying medium, reserve fund, etc., must likewise increase. These commodities performing the function of money do not enter either into productive or into individual consumption. They represent social labor fixed in a form in which it may serve as a mere machine in circulation. Apart from the fact that a part of the social wealth is tied up in this unproductive form, the wearing out of the money constantly requires its reproduction, or the conversion of more social labor, in the form of products, into more gold and silver. These expenses of reproduction are considerable in capitalistically developed nations, because there is a large part of the wealth tied up in the form of money. Gold and silver as money-commodi- ties represent social expenses of circulation, due to the social form of production. They are dead expenses of commodity- production in general, and they increase with the develop- ment of this production, especially when capitalized. They represent a part of the social wealth, which must be sacrificed in the process of circulation."
II. EXPENSES OF STORAGE.
Expenses of circulation, which are due to a mere change 13 "The money circulating in a country is a certain portion of the capital of the country, absolutely withdrawn from productive purposes, in order to facilitate or increase the productiveness of the remainder; a certain amount of wealth is, therefore, as necessary in order to adopt gold as a circulating medium, as it is to make a machine, in order to facilitate any other production." (Economist, Vol. V, Page 519.)
The Expenses of Circulation. 155 of form in circulation, ideally speaking, do not enter into the value of the commodities. The capital parts expended for them are deductions from the productively expended capital, so far as the capitalist is concerned. Not so the ex- penses of circulation which we shall consider now. They may arise from processes of production, which are continued only in circulation, the productive character of which is merely concealed by the form of the circulation. Or, on the other hand, they may represent from the standpoint of society mere unproductive expenses of subjective or mate- rialized labor, while for this very reason they may become productive of value for the individual capitalist, by making an addition to the price of his commodities. This follows from the simple fact that these expenses are different in different spheres of production, or even for different indi- vidual capitalists in the same sphere of production. When added to the prices of commodities, they are divided in pro- portion as they fall upon the shoulders of the various in- dividual capitalists. But all labor which adds value can also add surplus-value, and will always do so under capitalist production, the value created by it depending on the amount of the labor, the surplus-value added depending on the amount which the capitalist pays for it. In other words, expenses which increase the price of a commodity without adding anything to its value, which therefore are dead ex- penses so far as society is concerned, may be a source of profit for the individual capitalist. On the other hand, in so far as the addition to the price of commodities merely distributes these expenses of circulation equally, the unpro- ductive character of this expenditure is not changed. For instance, insurance companies divide the losses of individual capitalists among the capitalist class. But this does not alter the fact that these equalized losses are losses so far as the aggregate social capital is concerned.
1. General Formation of Supply.
During its existence as commodity-capital, or its stay on the market, in other words, in the interval between the proc- ess of production from which it originates and the process 156 Capital.
156 Capital.
of consumption into which it enters, the product forms a supply of commodities. As a commodity on the market, and therefore in the form of a supply, the commodity-prod- uct figures twice in each cycle: The first time as the com- modity-product of that rotating capital whose cycle is being considered; the second time as the commodity-product of another capital, which must be found ready on the market, in order to be bought and converted into productive capi- tal. It is, indeed, possible that this last-named commodity- capital is not produced until ordered. In that case, an in- terruption occurs until it has been produced. But the flow of the process of production and reproduction requires that a certain mass of commodities (means of production) should be always on the market, that there should be a supply of them. In the same way, productive capital comprises the purchase of labor-power, and the money-form is here only that form of the value of means of existence which the laborer must find at hand on the market, for the greater part. We shall discuss this more in detail in a short while; suffice it to make this point at present.
From the standpoint of the rotating capital-value, which has been transformed into a commodity-product and must now be sold or reconverted into money, which, therefore, has for the moment the function of commodity-capital on the market, the condition in which it forms a supply is contrary to its intentions and its stay on the market is in- voluntary. The sooner the sale is effected, the smoother runs the process of reproduction. The delay in the phase C — M' prevents the actual change of substance which must take place in the rotation of capital and obstructs its further func- tion as productive capital. On the other hand, so far as M — C is concerned, the constant presence of a supply of commodities on the market is a requirement for the flow of the process of reproduction and of the investment of new or additional capital.
The demurrage of the commodity-capital as a supply on the market requires buildings, stores, storage places, ware- houses, in other words, an expenditure of constant capital; furthermore the payment of labor-power for storing the com- The Expenses of Circulation. 157 modities. Finally, the commodities spoil and are exposed to injurious elementary influences. Additional capital is required to protect them, and this capital must be invested in materialized labor as well as in labor-power."
We see, then, that the sojourn of commodity-capital as a supply on the market causes expenses, which belong to the expenses of circulation, since they do not fall within the sphere of production. These expenses of circulation differ from those mentioned under I, by the fact that they enter in part into the value of the commodities, in other words, that they increase the price of commodities. Under all circum- stances the capital and labor-power required for the con- servation and storage of the commodity-supply, are with- drawn from the direct process of production. On the other hand, the capitals thus employed, including their labor- power, must be reproduced by the social product. Their ex- penditure, therefore, reduces the productivity of labor-power to that extent, so that a greater amount of capital and labor is needed to obtain a certain intended effect. They are dead expenses.
Inasmuch as the expenses of circulation arising out of the formation of a supply of commodities are due merely to the time required for the transformation of existing com- modity-values into money, in other words, inasmuch as they are due to the prevailing social form of production, which makes the production of commodities and their transforma- tion into money imperative, they share the character of the expenses of circulation enumerated under I. On the other hand, the value of the commodities is here preserved or in- creased, because the use-value, the product itself, is placed in conditions which require an outlay of capital. The com- 14 Corbet calculates, in 1841, that the cost of storing wheat for a season of nine months amounts to a loss of lx/<> per cent in quantity, 3 per cent for interest on the price of wheat, 2 per cent for warehouse rental, 1 per cent for sifting and drayage, % per cent for delivery, together 7 per cent, or 3 sh. 6 d. on a price of 50 sh. per quarter. (Th. Corbet, An Inquiry Into the Causes and Modes of the Wealth of Individuals, etc., London, 1841.) According to the testimony of Liverpool merchants before the railroad commission, the net expenses of grain storage in 1865 amounted to 2 d. per month per quarter, or 9 to 10 d. per ton. (Royal Commission on Railways, 1867. Evidence, page 19; Nr. 331.)
158 Capital.
158 Capital.
modities are -submitted to operations, which expend addi- tional labor on the use-values. But the computation of the values of commodities, the bookkeeping incidental to this process, the transactions of sale and purchase, do not influ- ence the use-values in which the exchange-values of the com- modities are embodied. These transactions concern merely the form of the values. Although, in the present case, the expenses of keeping a supply (which is done involuntarily) arise only from a delay of the metamorphosis and from its necessity, these expenses differ from those mentioned under I, in that they are not made for the purpose of effecting a change of form, but for the purpose of preserving the value embodied in the commodity as a use-value, which can- not be preserved in any other way than by preserving the use-value, the product, itself. The use-value is neither in- creased nor raised in value, on the contrary, it diminishes. But its diminution is restricted and it is preserved. Neither is the advanced value contained in the commodity increased, although new materialized and subjective labor is added.
We have now to investigate furthermore, to what extent these expenses arise from the peculiar nature of the produc- tion of commodities in general and from the prevailing abso- lute form of this mode of production, its capitalistic form; and to what extent they are common to all social production and merely assume a peculiar form and mode of expression in capitalist production.
Adam Smith has expressed the strange opinion, that the formation of a supply is a phenomenon peculiar to capital- ist production alone.15 More recent economists, for instance Lalor, insist on the other hand, that it declines with the development of capitalist production. Sismondi even re- gards this as one of the drawbacks of this mode of produc- tion.
As a matter of fact, the supply exists in three forms: In the form of productive capital, in the form of a fund for individual consumption, and in the form of a commodity- supply or commodity-capital. The supply in one form de- 15 Wealth of Nations, Book II, Introduction.
The Expenses of Circulation. 159 creases relatively, when it increases in another, although it may increase absolutely in all three forms simultaneously.
It is plain from the outset, that wherever production is carried on for direct consumption on the part of the pro- ducer, and only to a minor extent for exchange or sale, where the social product does not assume the character of commodities at all, or only to a small degree, there the sup- ply in the form of commodities can be only a small and insignificant part of the social wealth. On the other hand, the supply for consumption is relatively large, especially that of the means of existence. We have but to take a look at ancient agriculture, in order to understand this. The overwhelming part of the product there constitutes directly a supply of means of production and means of existence, without becoming a supply of commodities, because it re- mains in the hands of its producers and owners. It does not assume the form of a supply of commodities, and for this reason Adam Smith declares that there is no supply at all in societies based on this form of production. He confounds the form of the supply with the supply itself and believes that society -hitherto lived from hand to mouth or trusted to the luck of the next day.16 This is a naive misunderstanding.
A supply in the form of productive capital exists in the shape of means of production, which are either in operation in the process of production, or at least in the hands of the producer, so that they are latent in the process of produc- 16 Instead of a supply arising from the conversion of the product into a commodity, and of the supply of articles of consumption into commodi- ties, as Adam Smith thinks, this transformation, on the contrary, causes violent crises in the economy of the producer during the transition from production for use to production for sale. In India, for instance, the custom of storing up large quantities of grain in years of superfluity, when little could be gotten for it, was observed until very recent times. (Return. Bengal and Orissa Famine. H. of C, 1807, I, page 230, Nr. 74.) The sudden increase in the demand for cotton, jute, etc., led in many parts of India to a restriction of rice culture, a rise in the price of rice, and a sale of old supplies of the producers. Then followed the unexampled export of rice to Australia, Madagascar, etc., in 1864-66. This accounts for the acute character of the famine of 1866, which cost the lives of more than a million inhabitants in the district of Orissa alone (1. c. 174, 175, 213, 214, and III. Papers relating to the Famine in Behar, pages 32, 33, where the "drain of the old stork" is emphasized as one of the causes of the famine). — From Manuscript II.
160 Capital.
tion. We have seen previously, that with the develt pment of the productivity of labor, and therefore with the d evelop- ment of the capitalist mode of production, which develops the socially productive power of labor more than all previ- ous modes of production, there is a steady increase of the mass of means of production, which are permanently em- bodied in the productive process as instruments oi labor and perform their function in it for a longer or shorter time at repeated intervals (buildings, machinery, etc.); also, that this increase is at the same time the premise and result of the development of the productivity of social labor. It is especially capitalist production, which is characterized by relative as well as absolute growth of this sort of wealth. The material forms of existence of constant capital, the means of production, do not consist merely of such instru- ments of labor, but also of raw material in various stages of finish and of auxiliary substances, with the enlargement of the scale of production and the increase in the productivity of labor by co-operation, division, machinery, etc., the mass of raw materials and auxiliary substances used in the daily process of reproduction, grows likewise. These elements must be ready at hand in the shop. The volume of this form of productive capital increases absolutely. In order that the process may flow along smoothly — apart from the fact whether this supply may be renewed daily or only at fixed intervals — there must always be more raw material, etc., accumulated at the place of production than is used up, say, daily or weekly. The continuity of the process re- quires that the fulfillment of its conditions should neither depend on its possible interruption by daily purchases, nor on the daily or weekly sale of the product, so that the regu- larity of its reconversion into its elements of production may not be broken. But it is evident, that the productive capital may be latent, or form a supply, in different propor- tions. There is, for instance, quite a difference, whether a spinner must have on hand a supply of cotton or coal for three months or for one. Plainly this supply may decrease relatively, while it may at the same time increase absolutely.
The Expenses of Circulation. 161 This depends on various conditions, all of which practi- cally amount to the requirement that there shall be a great- er rapidity, regularity, and security in furnishing the neces- sary amount of raw material always in such a way, that there may be no interruption. To the extent that these conditions are not fulfilled, to the extent that there is no rapid- ity, regularity, and security of supply, the latent part of the productive capital in the hands of the producer, that is to say the supply of raw materials waiting to be used, must increase in size. These conditions are inversely propor- tional to the degree of development of capitalist production, and thus to the productive power of social labor. The same applies to the supply in this form.
However, that wnich appears as a decrease of the supply, for instance, to Lalor, is in part merely a decrease of the supply in the form of commodity-capital, or of the actual commodity-supply; it is only a change of form of the same supply. If, for instance, the mass of coal daily produced in a certain country, and therefore the scale and energy of the coal-industry, are great, the spinner does not need a large store of coal in order to insure the continuity of his produc- tion. The security of the continuous reproduction of the coal supply makes this unnecessary. In the second place, the rapidity with which the product of one process may be transferred as means of production to another process depends on the development of the means of transportation and communication. The cheapness of transportation plays a great role in this question. The continually renewed transport, for instance, of coal from the mine to the spin- nery, would be more expensive than the storing up of a large supply for a long time when the price of transporta- tion is relatively cheap. These two circumstances are due to the process of production itself. In the third place, the development of the credit-system exerts an influence on this question. The less the spinner is dependent on the immedi-