The fixed capital requires special expenditures for its conservation. A part of this conservation is provided by the labor-process itself; the fixed capital spoils, if it is not employed in production. (See vol. I, chap. VIII; and chap. XV, on wear and tear of machinery when not in use.) The English law therefore explicitly regards, it as a waste, if rented land is not used according to the custom of the coun- try. (W. A. Holdsworth, barrister at law. "The Law of Fixed Capital and Circulating Capital. 197 Landlord and Tenant." London, 1857, p. 96.) The con- servation due to use in the labor-process is a natural and free gift of living labor. And the conservating power of labor is of a twofold character. On the one hand, it preserves the value of the materials of labor, by transfer- ing it to the product, on the other hand it preserves the value of the instruments of labor, provided it does not trans- fer this value in part to the product, by preserving their use- value by means of their activity in the process of production.
The fixed capital requires also a positive expenditure of labor for its conservation. The machinery must be cleaned from time to time. This is additional labor, without which the machinery would become useless; it is labor required to ward off the injurious influences of the elements, which are inseparable from the process of production; it is expended for the purpose of keeping the machinery in perfect' work- ing order. The normal life-time of fixed capital is, of course, so calculated that all the conditions are fulfilled under which it can perform its functions normally during that time, just as we assume in placing a man's average life at 30 years that he will wash himself. Nor is it here a question of reproduc- ing the labor contained in the machine, but of labor which must be constantly added in order to keep it in working order. It is not a question of the labor performed by the machine itself, but of labor spent on it in its capacity of raw material, not of an instrument of production. The capital expended for this labor belongs to the circulating capital, although it does not enter into the actual labor-process to which the product owes its existence. This labor must be continually expended in production, hence its value must be continually replaced by that of the product. The capital invested in it belongs to that part of circulating capital, which has to cover the general expenses and is distributed over the produced values according to an annual average. We have seen that in industry, properly so-called, this labor of cleaning is performed gratis by the working men during pauses, and thus frequently during the process of production itself, and many accidents are due to this custom. This labor is not counted in the price of the product. The con- 198 Capital.
sumer receives it free of charge to this extent. On the othei hand, the capitalist thus receives the conservation of his machinery for nothing. The laborer pays this expense in his own person, and this is one of the mysteries of the self- preservation of capital, which constitute in point of fact a legal claim of the laborer on the machinery, on the strength of which he is a part-owner of the machine even from the legal standpoint of the bourgeoisie. However, in various branches of production, in which the machinery must be taken out of the process of production for the purpose of cleaning, and where this labor of cleaning cannot be per- formed between pauses, for instance in the case of locomo- tives, this labor of conservation counts with the running ex- penses and is therefore an element of circulating capital. A locomotive must be taken to the shop after a maximum of three days' work in order to be cleaned; the boiler must cool off before it can be washed out without injury. (R. C, The actual repairs, the small jobs, require expenditures of capital and labor, which are not contained in the origi- nally advanced capital and cannot therefore be reproduced and covered, in the majority of cases, by the gradual replace- ment of the value of fixed capital. For instance, if the value of the fixed capital is 10,000 pounds sterling, and its total life-time 10 years, then these 10,000 pounds, having been entirely converted into money after the lapse of ten years, will replace only the value of the capital originally invested, but they do not replace the value of the capital, or labor, added in the meantime for repairs. This is an element of additional value which is not advanced all at one time, but rather whenever occasion arises for it, so that the terms of its various advances are accidental from the very nature of the conditions. All fixed capital demands such additional and occasional expenditures of capital for materials of labor and labor-power.
The injuries to which individual parts of the machinery are exposed are naturally accidental, and so are therefore the necessary repairs. Nevertheless two kinds of repairs are to be distinguished in the general mass, which have a more oi Fixed Capital and Circulating Capital. 199 less fixed character and fall within various periods of life of the fixed capital. These are the diseases of childhood and the far more numerous diseases in the period following the prime of life. A machine, for instance, may be placed in the process of production in ever so perfect a condition, still the actual work will always reveal shortcomings which must be remedied by additional labor. On the other hand, the more a machine passes beyond the prime of life, when, there- fore, the normal wear and tear has accumulated and has ren- dered its material worn and weak, the more numerous and considerable will be the repairs required to keep it in order for the remainder of its average life-time; it is the same with an old man, who needs more medical care to keep from dying than a young and strong man. In spite of its accidental character, the labor of repairing is therefore unequally dis- tributed over the various periods of life of fixed capital.
From the foregoing, and from the otherwise accidental character of the labor of repairing, we make the following deductions.
In one respect, the actual expenditure of labor-power and labor-material for repairs is as accidental as the conditions which cause these repairs; the amount of the necessary re- pairs is differently distributed over the various life-periods of fixed capital. In other respects, it is taken for granted in the calculation of the average life of fixed capital that it is constantly kept in good working order, partly by cleaning (including the cleaning of the rooms), partly by repairs such as the occasion may require. The transfer of value through wear and tear of fixed capital is calculated on its average life, but this average life itself is based on the assumption that the additional capital required for keeping machine in order is continually advanced.
On the other hand it is also evident that the value added by this extra expenditure of capital and labor cannot be transferred to the price of the products simultaneously as it is made. For instance, a manufacturer of yarn cannot sell his yarn dearer this week than last, merely because one of his machines broke a wheel or tore a belt this week. The general expenses of the spinning industry have not been 200 Capital.
changed by this accident in some individual factory. Here as in all determinations of value, the average decides. Ex- perience teaches the average extent of such accidents and of the necessary labors of conservation and repair during the average life-time of the fixed capital invested in a given branch of industry. This average expense is distributed over the average life-time. It is added to the price of the product in corresponding aliquot parts and hence also repro- duced by means of its sale.
The extra capital which is thus reproduced belongs to the circulating capital, although the manner of its expenditure is irregular. As it is highly important to remedy every in- jury to a machine immediately, every large factory employs in addition to the regular factory hands a number of other employees, such as engineers, wood-workers, mechanics, smiths, etc. The wages of these special employees are a part of the variable capital, and the value of their labor is dis- tributed over their product. On the other hand, the ex- penses for means of production are calculated on the basis of the above-mentioned average, according to which they form continually a part of the value of the product, although they are actually advanced in irregular periods and therefore transferred in irregular periods to the product or the fixed capital. This capital, invested in regular repairs, is in many respects a peculiar capital, which can be classed neither with the circulating nor the fixed capital, but still belongs with more justification to the former, since it is a part of the running expenses.
The manner of bookkeeping does not, of course, change in any way the actual condition of the things of which an account is kept. But it is important to note that it is the custom of many businesses to class the expenses of repairing with the actual wear and tear of the fixed capital, in the fol- lowing manner: Take it that the advanced fixed capital is 10,000 pounds sterling, its life-time 15 years; the annual wear and tear 666 and 2/3 pounds sterling. But the wear and tear is calculated at only ten years, in other words, 1,000 pounds sterling are added annually for wear and tear of the fixed capital to the prices of the produced commodities, Fixed Capital and Circulating Capital. 201 instead of 60G and 2/3 pounds sterling. Thus 333 and 1/3 pounds sterling are reserved for repairs, etc. (The figures 10 and 15 are chosen at random.) This amount is spent on an average for repairs, in order that the fixed capital may last 15 years. This calculation does not alter the fact that the fixed capital and the additional capital invested in repairs belong to different categories. On the strength of this mode of calculation it was, for instance, assumed that the lowest estimate for the consefvation and reproduction of steamships was 15 per cent, the time of reproduction therefore equal to 6 2/3 years. In the sixties, the English government in- demnified the Peninsular and Oriental Co. for it at the rate of 16 per cent, making the time of reproduction equal to G 1/3 years. On railroads, the average life-time of a locomo- tive is 10 years, but the wear and tear including repairs is assumed to be 12 1/2 per cent, reducing the life-time down to 8 years. In the case of passenger and freight cars, 9 per cent are estimated, or a life-time of 11 1/9 years.
Legislation has everywhere made a distinction, in the leases of houses and other things, which represent fixed capi- tal for their owners, between the normal wear and tear which is the result of time, the influence of the elements, and normal use and between those occasional repairs which are required for keeping up the normal life-time of the house during its normal use. As a rule, the former expenses are borne by the owner, the latter by the tenant. The re- pairs are further distinguished as ordinary and substantial. The last-named are partly a renewal of the fixed capital in its natural form, and they fall likewise on the shoulders of the owner, unless the lease explicitly states the contrary. For instance, the English law, according to Hodsworth (Law of Landlord and Tenant, pages 90 and 91), prescribes that a tenant from year to year is merely obliged to keep the buildings water-and-wind proof, so long as this is pos- sible without substantial repairs, and to attend only to such repairs as are known as ordinary. And even in this respect the age and the general condition of the building at the time when the tenant took possession must be considered, for he is not obliged to replace either old or worn-out ma- 202 Capital 202 Capital terial by new, or to make up for the inevitable deprecia* tion incidental to the lapse of time and normal usage.
Entirely different from the reproduction of wear and tear and from the work of preserving and repairing is the insur- ance, which relates to destruction caused by extraordinary phenomena of nature, fire, flood, etc. This must be made good out of the surplus-value and is a deduction from it. Or, considered from the point of view of the entire society, there must be a continuous overproduction, that is to say, a production on a larger scale than is necessary for the sim- ple replacement and reproduction of the existing wealth, quite apart from an increase of the population, in order to be able to dispose of the means of production required for making good the extraordinary destruction caused by acci- dents and natural forces.
In point of fact, only the smallest part of the capital needed for making good such destruction consists of the mon- ey-reserve fund. The most important part consists in the ex- tension of the scale of production itself, which is either actual expansion, or a part of the normal scope of the branches of production which manufacture the fixed capi- tal. For instance, a machine factory is managed with a view to the fact that on the one side the factories of its customers are annually extended, and that on the other hand a number of them will always stand in need of total or partial reproduction.
In the determination of the wear and tear and of the cost of repairing, according to the social average, there are nec- essarily great discrepancies, even for investments of capi- tal of equal size and in equal conditions, in the same branch of production. In practice, a machine lasts in the case of one capitalist longer than its average time, while in the case of another it does not last so long. The expenses of the one for repairs are above, of the other below the average, etc. But the addition to the price of the commodities result- ing from wear and tear and from repairs is the same and is determined by the average. The one therefore gets more out of this additional price than he really spent, the other less. This as well as other circumstances which produce dif- Fixed Capital and Circulating Capital. 203 ferent gains for different capitalists in the same branch of industry with the same degree of the exploitation of labor- power renders an understanding of the true nature of sur- plus-value difficult.
The boundary between regular repairs and replacement, between expenses of repairing and expenses of renewal, is more or less shifting. Hence we see the continual dispute, for instance in railroading, whether certain expenses are for repairs or for reproduction, whether they must be paid from running expenses or from the capital itself. A transfer of expenses for repairs to capital-account instead of revenue- account is the familiar method by which railway manage- ments artificially inflate their dividends. However, exper- ience has already furnished the most important clues for this. According to Lardner, page 49 of the previously quoted work, the additional labor required during the first peri- od of life of a railroad is not counted under the head of repairs, but must be regarded as an essential factor of rail- way construction, and is to be charged, therefore, to the account of capital, since it is not due to wear and tear or • to the normal effect of the traffic, but to the original and inevitable imperfection of railway construction. On the other hand, it is the only correct method, according to Cap- tain Fitzmaurice (Committee of Inquiry of Caledonian Rail- way, published in Money Market Review, 1867), to charge the revenue of each year with the depreciation, which is the necessary concomitant of the transactions by which this revenue has been earned, regardless of whether this sum has been spent or not.
The separation of the reproduction and conservation of fixed capital becomes practically impossible and useless in agriculture, at least in so far as it does not operate with steam. According to Kirchhoff (Handbuch der landwirth- schaftlichen Betriebslehre, Berlin, 1862, page 137), "it is the custom to estimate on a general average the annual wear and tear and conservation of the implements, according to the differences of existing conditions, at from 15 to 20 per cent of the purchasing capital, wherever there is a com- plete, though not excessive, supply of implements on the farm."
204 Capital.
In the case of the rolling stock of a railroad, repairs and reproduction cannot be separated. According to T. Gooch, Chairman of the Great Western Railway Co. (R. C. No. 17,- 327-29), his company maintained its rolling stock numeri- cally. Whatever number of locomotives they might have, would be maintained. If one of them became worn out in the course of time, so that it was more profitable to build a new one, it was built at the expense of the revenue, in which case the value of the material remaining from the old locomotive was credited to the revenue. There always was a good deal of material left. The wheels, the axles, the boilers, in short, a good part of the old locomotive remained.
"To repair means to renew; for me there is no such word as 'replacement';...once that a railway company has bought a car or a locomotive, they ought to keep them in such repair that they will run for all eternity (17,784). We calculate 8 1/2 d. per English freight mile for locomotive ex- penses. Out of this 8 1/2 d. we maintain the locomotives for- ever. We renew our machines. If you want to buy a ma- chine new, you spend more money than is necessary...You can always find a few wheels, an axle, or some other part of an old machine in condition to be used, and that helps to construct cheaply a machine which is just as good as an entirely new one (17,790). I now produce every week one new locomotive, that is to say, one that is as good as new, for its boiler, cylinder, and frame are new." (17,843.) Archibald Sturrock, locomotive superintendent of Great Northern Railway, in R. C, 1867.
Lardner says likewise about cars, on page 116 of his work, that in the course of time, the supply of locomotives and cars is continually renewed; at one time new wheels are put on, at another a new frame is constructed. Those parts on which the motion is conditioned and which are most ex- posed to wear and tear are gradually renewed; the machines and cars may then undergo so many repairs that not a trace of the old material remains in them...Even if the old cars and locomotives get so that they cannot be repaired any more, pieces of them are still worked in to others, so that they never disappear wholly from the track. The rolling stock is therefore in process of continuous re- Fixed Capital and Circulating Capital. 205 production; that which must be done at one time for the track, takes place for the rolling stock gradually, from year to year. Its existence is perennial, it is in process of contin- uous rejuvenation.
This process, which Lardner here describes relative to a railroad, is not typical for an individual factory, but may serve as an illustration of continuous and partial repro- duction of fixed capital intermingled with repairs, within an entire branch of production, or even within the aggregate pro- duction considered on a social scale.
Here is a proof to what extent clever managers may manipulate the terms repairs and replacement for the pur- pose of making dividends. According to the above quoted lecture of R. B. Williams, various English railway com- panies deducted the following sums from the revenue-ac- count, as averages of a period of years, for repairs and main- tenance of the track and buildings, per English mile of track per year: London & North Western £370 Midland £225 London & South Western £257 Great Northern £360 Lancashire & Yorkshire £377 South Eastern £263 Brighton £266 Manchester & Sheffield £200 These differences arise only to a minor degree from dif- ferences in the actual expenses; they are due almost ex- clusively to different modes of calculation, according to whether expenses are charged to the account of capital or revenue. Williams says in so many words that the lesser charge is made, because this is necessary for a good dividend, and a high charge is made, because there is a greater reve- nue which can bear it.
In certain cases, the wear and tear, and therefore its re- placement, is practically infinitesimal so that nothing but expenses for repairs have to be charged. The statements of Lardner relative to works of art, which are given in sub- stance below, also apply in general to all solid works, docks, canals, iron and stone bridges, etc. According to him, pages 206 Capital.
38 and 39 of his work, the wear and tear which is the re- sult of the influence of long periods of time on solid works, is almost imperceptible in short spaces of time; after the lapse of a long period, for instance of centuries, such influ- ences will nevertheless require the partial or total renewal of even the most solid structures. This imperceptible wear and tear, compared to the more perceptible in other parts of the railroad, may be likened to the secular and periodical inequalities in the motions of world-bodies. The influence of time on the more massive structures of a railroad, such as bridges, tunnels, viaducts, etc., furnishes illustrations of that which might be called secular wear and tear. The more rapid and perceptible depreciation, which is compensated by repairs in shorter periods, is analogous to the periodical in- equalities. The compensation of the accidental damages, such as the outer surface of even the most solid structures will suffer from time to time, is likewise included in the annual expenses for repairs; but apart from these repairs, age does not pass by such structures without leaving its marks, and the time must inevitably come, when their con- dition will require a new structure. From a financial and economic point of view, this time may indeed be too far off to be taken into practical consideration.
These statements of Lardner apply to all similar structures of a secular duration, in the case of which the capital ad- vanced for them need not be reproduced according to their gradual wear and tear, but only the annual average expenses of conservation and repairs are to be transferred to the prices of the products.
Although, as we have seen, a greater part of the money returning for the compensation of the wear and tear of the fixed capital is annually, or even in shorter periods, recon- verted into its natural form, nevertheless every capitalist re- quires a sinking fund for that part of his fixed capital, which becomes mature for complete reproduction only after the lapse of years and must then be entirely replaced. A con- siderable part of the fixed capital precludes gradual repro- duction by its composition. Besides, in cases where the re- production takes place piecemeal in such a way that every now and then new pieces are added in compensation for Fixed Capital and Circulating Capital. 20?
worn-out ones, a previous accumulation of money is neces- sary to a greater or smaller degree, according to the specific character of the branch of production, before replacement can proceed. It is not any arbitrary sum of money which suffices for this purpose; a sum of a definite size is required for it.
If we study this question merely on the assumption that we have to deal with the simple circulation of commodities, without regard to the credit system, which we shall treat later, then the mechanism of this movement has the follow- ing aspect: We showed in Volume I, chapter III, 3a, that the proportion in which the total mass of money is dis- tributed over a hoard and means of production varies con- tinually, if one part of the money available in society lies fallow as a hoard, while another performs the functions of a medium of circulation or of an immediate reserve-fund of the directly circulating money. Now, in the present case, the money accumulated in the hands of a great capitalist in the form of a large-sized hoard is set free all at once in circulation for the purchase of mixed capital. It is on its oart again distributed over the society as medium of circu- lation and hoard. By means of the sinking fund, through which the value of the fixed capital flows back to its start- ing point in proportion to its wear and tear, a part of the circulating money forms again a hoard, for a longer or shorter period, in the hands of the same capitalist whose hoard had been transformed into a medium of circulation and passed away from him by the purchase of fixed capital. It is a continually changing distribution of the hoard existing in society, which performs alternately the function of a medium of exchange and is again separated as a hoard from the mass of the circulating money. With the develop- ment of the credit-system, which necessarily runs parallel with the development of great industries and capitalist pro- duction, this money no longer serves as a hoard, but as capital, not in the hands of its owner, but of other capitalists who have borrowed it.
208 Capital.
CHAPTER IX.
THE TOTAL TURN-OVER OF ADVANCED CAPITAL. CYCLES OF TURN-OVER.
We have seen that the fixed and circulating parts of pro ductive capital turn over in different ways and at difn rent periods, also that the different constitutents of the fixed capi- tal of the same business have different periods of turn-over according to their different durations of life and, therefore, of their different periods of reproduction. (As concerns the actual or apparent difference in the turn-over of different constituents of circulating capital in the same business, see the close of this chapter, under No. 6.)
1. The total turn-over of advanced capital is the average turn-over of its constituent parts; the mode of its calcula- tion is given later. Inasmuch as it is merely a question of different periods of time, nothing is easier than to compute their average. But 2. It is a question, not alone of a quantitive, but also of a qualitative difference.
The circulating capital entering into the process of pro- duction transfers its entire value to the product and must, therefore, be continually reproduced in its natural form by the sale of the product, if the process of production is to proceed without interruption. The fixed capital entering into the process of production transfers only a part of its value (the wear and tear) to the product and continues de- spite this wear and tear, to perform its function in the proc- ess of production. Therefore it need not be reproduced until after the lapse of intervals of various duration, at any rate not as frequently as the circulating capital. This necessity of reproduction, this term of reproduction, is not only quantita- tively different for the various constituent parts of fixed capi- tal, but, as we have seen, a part of the perennial fixed capi- Total Turn-Over of Advanced Capital. 209 tal may be replaced annually or at shorter intervals and added in natural form to the old fixed capital. In the case of fixed capital of a different composition, the reproduction can take place only all at once at the end of its life-time.