The same things form constituent parts of the circulating or fixed capital, according to whether they perform this or that function in the labor-process. A domestic animal, for instance, as a laboring animal (instrument of labor), rep- resents the material mode of existence of fixed capital, while as stock for fattening (raw material) it is a constituent part of the circulating capital of the farmer. On the other hand, the same things serve either as constituent parts of produc- tive capital, or belong to the fund for direct consumption. A house, for instance, when performing the function of a workshop, is a fixed part of productive capital; when serving as a residence, it is not at all a form of productive capital. The same instruments of labor may in many cases serve now as means of reproduction, now as means of con- sumption.
It was one of the errors following from the conception of Smith that the capacity of fixed and circulating capital was regarded as vested in the things themselves. The mere an- alysis of the labor-process on his part, in book I, chapter V, shows that the capacity of instruments of labor, materials of labor, and products changes according to the different 232 Capital.
232 Capital.
role played by one and the same thing in the process. The determination of what is fixed or circulating capital, in its turn, is based on the definite roles played by these elements in the labor-process, and therefore also in the process of the formation of value.
In the second place, in enumerating the things of which fixed and circulating capital may consist, Smith plainly dis- closes the fact that he jumbles together the distinction be- tween fixed and circulating capital, applicable and justified only with reference to productive capital (capital in its pro- ductive form), with the distinction between productive capi- tal and those of its forms which belong to the process of cir- culation, viz., commodity-capital and money-capital. He says in the same place (pages 187, 188): "The circulating cap- ital consists...of the provisions, materials, and fin- ished work of all kinds that are in the hands of their respec- tive dealers, and of the money that is necessary for circula- ting and distributing them, etc." Indeed, if we look closer, we observe that he has here, contrary to previous statements, used circulating capital as being equivalent to commodity- capital and money-capital, that is to say to two forms of cap- ital which do not belong to the process of production at all, which are not circulating capital as opposed to fixed, but cap- ital of circulation as opposed to productive capital. It is only in co-ordination with these that those constituents of productive capital, which are advanced in materials (raw materials or partly finished products) are actually embodied in the process of production, play a role. He says: "...The third and last of the three portions into which the general stock of society naturally divides itself, is the circulating capital, of which the characteristic is, that it affords a revenue only by circulating or changing masters. This is composed likewise of four parts: first, of the money..." (but money is never a form of productive capi- tal, of capital performing its function in the productive pro- cess; it is always merely one of the forms assumed by cap- ital within its process of circulation.)..."secondly, of the stock of provisions which are in the possession of the butcher, the grazier, the farmer...and from the sale of which they expect to derive a profit Theories of Fixed and Circulating Capital. 233 Fourthly and lastly, of the work which is made up and com- pleted, but which is still in the hands of the merchant and manufacturer. And, thirdly, of the materials, whether altogether rude or more or less manufactured, of clothes, furniture, and buildings, which are not yet made up into any of those three shapes but which remain in the hands of the growers, the manufacturers, the mercers and drapers, the timber-merchants, the carpenters and joiners, the brick- makers, etc."
His second and fourth count contain nothing but prod- ucts, which have been released by the process of production and must be sold; in short, they are products which now per- form the function of commodities, or commodity-capital, and which, therefore, have a form and occupy a place in the process, in which they are not elements of productive cap- ital, no matter what may be their destination, whether they answer their final purpose as use-values in individual or pro- ductive consumption. The products mentioned under sec- ondly are foodstuffs, those under fourthly all other finished products, which in their turn consist only of finished instru- ments of labor or finished articles of consumption not in- cluded in the foodstuffs under count two.
The fact that Smith at the same time speaks of the mer- chant, shows his confusion. To the extent that the producer transfers his product to the merchant, it does no longer form any part of his capital. From the social point of view, it is indeed still a commodity-capital, although in other hands than those of its producer; but for the very reason that it is a commodity-capital, it is neither a circulating nor a fixed capital.
Under every mode of production not carried on for direct home-consumption the product must circulate as a commod- ity, that is to say, it must be sold, not in order to make a profit out of it, but that the producer may be able to live at all. Under the capitalist mode of production we have the further fact that the surplus-value embodied in a certain commodity is realized by its sale. In its capacity as a com- modity, the product leaves the process of production and is, therefore, neither a fixed nor a circulating element of this process.
234 Capital.
234 Capital.
By the way, Smith here testifies against himself. The finished products, whatever may be their material form, their use-value, their utility, are all commodity-capital, that is to say capital in a form typical of the process of circula- tion. Being in this form, they are not constituent parts of any productive capital which their owner may have. Of course, this does not argue against the fact that, after their sale, they may become constituent parts of productive capi- tal in the hands of their purchaser, and then represent either fixed or circulating capital. This shows that the same things, which at a certain time appear on the market as com- modity-capital distinct from productive capital, may or may not perform the function of productive capital after they have been removed from the market.
The product of the cotton spinner, yarn, is the commodity- form of his capital, is a commodity-capital from his point of view. It cannot again perform the function of some con- stituent part of his productive capital, neither as raw mater- ial nor as an instrument of labor. But in the hands of the weaver who buys it, it is embodied in his productive capital as one of its circulating parts. For the spinner, on the other hand, the yarn is the bearer of the value of his fixed and cir- culating capital (not considering the surplus-value). So is a machine, the product of a machine maker, the commod- ity-form of his capital, commodity-capital from his point of view. And so long as it persists in this form, it is neither fixed nor circulating capital. But if it is sold to a manufac- turer for use in his production, it becomes a fixed part of his productive capital. Even if a certain product re-enters as a use-value for the purpose of production into the same process from which it emanated, for instance coal in the production of coal, even then that part of the output of coal which is intended for sale represents neither fixed nor circulating cap- ital, but commodity-capital.
On the other hand, the utility-form of a certain product may be such that it is incapacitated for service as an element of productive capital, either as raw material or an instru- ment of labor. This is the case, for instance, with articles of food. Nevertheless it is a commodity-capital for its pro- ducer, in which the value of his fixed as well as his circulate Theories of Fixed and Circulating Capital. 235 ing capital is incorporated; and it is the representative of the value of either the one or the other of these two forms according to whether the capital employed in its production has to be reproduced in full or partially, in other words, ac- cording to whether this capital transfers its full or its par- tial value to the product.
With Smith, in his count No. 3, the raw material (raw material, partly finished product, auxiliary material), does not figure as a part embodied in the productive capital, but merely as a special kind of use-values of which the social product generally consists, a mass of commodities existing apart from the other material elements, foodstuffs, etc., enumerated under Nos. 2 and 4. On the other hand, these materials are indeed incorporated in the productive capital and therefore also classed as its elements in the hands of the producer. The confusion arises from the fact that they are partly regarded as performing a function in the hands of the producer (in the hands of the growers, the manufacturers, etc.), and partly in the hands of merchants (mercers, drap- ers, timber-merchants), where they are merely commodity- capital, not elements of productive capital.
Indeed, Adam Smith forgets here, in the enumeration of the elements of circulating capital, all about the fact that the distinction of fixed and circulating capital applies only to the productive capital. He rather places commodity-capital and money-capital, the two forms of capital typical of the pro- cess of circulation, opposite of the productive capital, but quite unconsciously.
Finally, it is worthy of note that Adam Smith forgets to mention labor-power as one of the elements of productive capital. And there are two reasons for this.
We have just seen that, apart from money-capital, circu- lating capital is only another name for commodity-capital. But to the extent that labor-power circulates on the market, it is not capital, not a form of commodity-capital. It is not capital at all; the laborer is not a capitalist, although he brings his commodity to market, namely his own skin. Not until labor-power has been sold and incorporated in the pro- cess of production, in other words, until it has ceased to cir- culate as a commodity, does it became an element of produc- 236 Capital.
. tive capital, variable capital and the source of surplus-value, a circulating part of productive capital so far as the turn- over of the capital-value invested in it is concerned. Since Smith here confounds the circulating capital with commod- ity-capital, he cannot place labor-power under his category of circulating capital. Hence the commodity-capital here appears in the form of commodities which the laborer buys with his wages, that is to say, means of subsistence. In this form, the capital-value invested in wages is supposed to belong to the circulating capital. That which is incorpo- rated in the process of production is labor-power, the laborer himself, not the means of subsistence by which the laborer maintains himself. True, we have seen in volume I, chap- ter XXIII, that, from the point of view of society, the repro- duction of the laborer himself by means of his individual consumption belongs to the process of reproduction of social capital. But this does not apply to the individual and iso- lated process of production which we are studying here. The "acquired and useful abilities" which Smith mentions under the head of fixed capital, are on the contrary ele- ments of circulating capital, when they are abilities of the wage-worker and have been sold by him with his labor.
It is a great mistake on the part of Smith to divide the entire social wealth into (1) a fund for immediate consump- tion, (2) fixed capital, and (3) circulating capital. Accord- ing to this, wealth would have to be classified as (1) a fund for consumption, which would not represent a part of social capital engaged in the performance of its functions, although some parts of it may continually assist in this performance; and (2) as capital. In other words, a part of the wealth would be performing the functions of capital, another those of non-capital or a fund for consumption. And it seems that it is here an indispensable requirement for all capital to be either fixed or circulating, about in the same way that it is a natural necessity for a mammal to be either male or female. But we have seen that the distinction of being fixed or circulating applies solely to the elements of productive capital, that, therefore, there is also a considerable quantity of capital — commodity-capital and money-capital — existing in a form which does not permit of its being either fixed or circulating.
Theories of Fixed and Circulating Capital. 237 Seeing that the entire mass of social products, under capitalist production, circulates on the market as commodity- capital, with the exception of that part of the product which is directly consumed by the individual capitalist producers in its natural form as means of production without being sold or bought, it is evident that not only the fixed and circu- lating elements of productive capital, but also all the ele- ments of the fund for consumption are derived from the commodity-capital. This is equivalent to saying that, on the basis of capitalist production, both means of production and of consumption first appear as commodity-capital, even though they are intended for later use as means of produc- tion or consumption. Labor-power itself is likewise found on the market as a commodity, if not as commodity-capital.
This accounts for the following confusion in Adam Smith: "Of these four parts" (meaning circulating capital, that is to say capital in its forms of commodity-capital and money- capital typical of the process of circulation, which Adam Smith transforms into four parts by making distinctions between the substantial parts of commodity-capital) "three — provisions, materials, and finished work, are either annu- ally or in a longer or shorter period, regularly withdrawn from it, and placed either in the fixed capital, or in the stock reserved for immediate consumption. Every fixed capital is both originally derived from, and requires to be continu- ally supported by, a circulating capital. All useful ma- chines and instruments of trade are originally derived from a circulating capital, which furnishes the materials of which they are made and the maintenance of the workmen who make them. They require, too, a capital of the same kind to keep them in constant repair." (Page 188.)
With the exception of that part of the product which is immediately consumed as means of production, the follow- ing general rule applies to capitalist production: All prod- ucts are taken to market as commodities and, therefore, cir- culate as capital in the form of commodities, as the commo- dity-capital of the capitalist, regardless of whether these products must or may serve in their natural form, as use- values, in the performance of their function as elements of productive capital in the process of production, in other 238 Capital.
words, as means of production and, therefore, as fixed or circulating parts of productive capital, or whether they can serve only as means of individual, not of productive, con- sumption. All products are thrown upon the market as commodities; all means of production or consumption, all elements of productive and individual consumption, must therefore be released from the market by purchasing them as commodities.
Of course, this truism is correct. It applies for this rea- son to the fixed as well as the circulating elements of pro- ductive capital, for instruments of labor as well as raw material in all its forms. (This, moreover, is leaving aside the fact that there are certain elements of productive cap- ital which are furnished ready by nature and are not prod- ucts.) A machine is bought on the market as well as cot- ton. But this implies by no means that every fixed capital comes originally from some circulating capital; it is only through the confusion, on the part of Smith, of capital of circulation with circulating capital, with capital that is not fixed, that this erroneous conclusion is reached. And to cap the climax, Smith refutes himself. According to him, machines, as commodities, form a part of No. 4, the circu- lating capital. To say that they come from the circulating capital means that they were performing the function of commodity-capital before they performed the func- tion of machines, but that substantially they are derived from themselves; so is cotton, as the circulating element of some spinner's capital, derived from the cotton on the mar- ket. But as for deriving fixed capital from circulating capi- tal for the reason that labor and raw material are required for the making of machines, as Adam Smith is doing in his further arguments, we say that in the first place, fixed capi- tal is also required for the making of machines, and in the second place, fixed capital, such as machinery, is likewise required for the making of raw materials, since the produc- tive capital always includes instruments of labor, but not always raw materials. He says himself immediately after- wards: "Lands, mines, and fisheries, require all both a fixed and circulating capital to cultivate them;" — thus he admits that not only circulating, but also fixed capital is required Theories of Fixed and Circulating Capital. 239 for the production of raw materials — "and" — renewed con- fusion at this point — "their produce replaces with a profit, not only those capitals, but all the others in society." (Page 188.) This is entirely wrong. Their produce furnishes the raw materials, auxiliary substances, etc., for all other branches of industry. But their value does not reproduce the value of all other social capitals; it reproduces merely the value of their own capital (plus the surplus-value). Adam Smith is here stampeded by his recollection of the physio- crats.
Socially speaking, it is true that that part of the commod- ity capital which consists of products available for imme- diate or later service as instruments of labor — unless they are produced uselessly and cannot be sold — must in fact perform this service whenever they cease to be commodities and become actual elements of the productive capital, in stead of being merely its prospective ones.
But there is a distinction arising from the natural form of the product.
A spinning machine, for instance, has no use-value, unless it is consumed in spinning, so that it performs its function as an element of production and, from the point of view of the capitalist, constitutes a fixed part of his capital. But a spinning machine is movable. It may be exported from the country in which it was produced and sold in a foreign coun- try directly or indirectly, for raw materials, etc., or even for champagne. In that case it has served only as commodity- capital in the country in which it was produced, but never as fixed capital, not even after its sale.
But products which are localized by being imbedded in the soil, and therefore can be consumed only locally, such as factory buildings, railroads, bridges, tunnels, wharves, etc., improvements of the soil, etc., cannot be bodily exported. They are not movable. They are either useless, or they must serve as fixed capital, in the country that produced them, as soon as they have been sold. From the point of view of their capitalist producer, who builds factories or improves land for speculation and sale, these things are forms of his commodity-capital, or, according to Adam Smith, a form of circulating capital. But from the 240 Capital.
240 Capital.
point of view of society, these things must finally serve in the same country as fixed capital in some process of production fixed by their own locality, unless they are to be useless. This does not imply by any means that immovable things are fixed capital of themselves. They may belong to the fund for consumption, for instance residence houses, and in that case they do not belong to the social capital at all, although they are an element of the social wealth, of which capital is only a part. The producer of these things, to use the language of Smith, makes a profit by their sale. In other words, circulating capital! Their user, their final purchaser, can use them only by utilizing them in the pro- cess of production. Therefore, fixed capital!
Titles to property, for instance railroad shares, may change hands every day, and their owner may even make a profit by their sale to foreign countries, so that the title may be exported, if not the railroad. But nevertheless these things themselves must either lie fallow in the country that pro- duced them, or serve as a fixed part of some productive cap- ital. In the same way the manufacturer A may make a profit by the sale of his factory to the manufacturer B, but this does not prevent the factory from serving as fixed capi- tal, the same as before.
However, it does not follow that fixed capital necessarily consists of immovable things, because the locally fixed in- struments of labor, which cannot be detached from the soil, must to all intents and purposes serve at some time as fixed capital in the same country, even though they may serve as commodity-capital for their producer and do not consti- tute any elements of his fixed capital, which is made up of the instruments of labor required by him for the building of factories, railroads, etc. A ship and a locomotive produce their effects only by motion; yet they serve as fixed capital for the owner who uses them, although not for him who produced them. On the other hand, some things which are very decidedly fixed in the process of production, which live and die in it and never leave it any more after they have entered it, are circulating parts of the productive capi- tal. Such are, for instance, the coal consumed by the ma- chine in the process of production, the gas used for light- Theories of Fixed and Circulating Capital. 241 ing the factory, etc. They are circulating capital not because they bodily leave the process of production together with the product and circulate as commodities, but because their entire value is transferred to that of the product in whose production they assisted, so that their value must be entirely reproduced by the sale of the product.
In the last quotation from Adam Smith, notice must fur- thermore be taken of the following phrase: "A circulating capital which furnishes...the maintenance of the workmen who make them" (meaning machines, etc.).
In the works of the physiocrats, that part of capital which is advanced for wages figures correctly under the Avarices annuelles as distinguished from the Avarices prim- itives. On the other hand it is not the labor-power used as a part of the productive capital of the farmer which figures in their accounts, but the foodstuffs given to the farm laborers (the maintenance of workmen, as Smith calls it). This corresponds exactly to their specific doctrine. For according to them the value added to the product by labor (like the value added to the product by raw material, instru- ments of labor, etc., in short by all the substantial parts of constant capital) is equal only to the value of the articles of consumption paid to the laborers and necessary for the maintenance of their labor functions. Their doctrine stands in the way of their discovering the distinction between con- stant and variable capital. If it is labor that produces sur- plus-value in addition to the reproduction of its own price, then it does so in industry as well as in agriculture. But since, according to their system, surplus-value arises only in one branch of production, namely, agriculture, it does not come out of labor, but out of the special activity (assistance) of nature in this branch. And only for this reason agri- cultural labor is for them productive labor, as distinguished from other kinds of labor.
Adam Smith classes the maintenance of laborers among the circulating capital as distinguished from fixed.
1. Because he confounds circulating capital as distinguished from fixed with forms of capital belonging to the sphere of circulation, with capital of circulation; this mistake per- sisted after him without being criticized. He therefore con- 242 Capital.
founds the commodity-capital with the circulating part of the productive capital, and in that case it is a matter of course that, whenever the social product assumes the form of commodities, the maintenance of the laborers as well as that of the non-laborers, the materials as well as the instru- ments of labor, must be taken out of the commodity-capital.
2. But the physiocratic conception likewise intermin- gles with the analysis of Smith, although it contradicts the esoteric — really scientific — part of his own deductions.
The advanced capital is universally converted into pro- ductive capital, that is to say it assumes the form of ele- ments of production which are themselves the products of past labor. Labor-power is included in them. Capital can serve in the process of production only in this form. Now, if instead of labor-power itself we take the laborer's necessi- ties of life into which the variable part of capital has been converted, it is evident that these necessities of life are not essentially different, so far as the formation of values is concerned, from the other elements of productive capital, from the raw materials and the food of the laboring cattle, with whom Smith, after the manner of the physiocrats, places the laborers on the same level, in one of the passages quoted above. The necessities of life cannot expand their own value or add any surplus-value to it. Their value, like that of the other elements, can re-appear only in that of the product. They cannot add any more to their value than they have themselves. They, like raw materials, partly finished articles, etc., differ from fixed capital composed of instruments of labor only in that they are entirely con- sumed in the product of the capitalist who pays for them and uses them in the manufacture of this product, so that