the wants of man, and after their harvest root crops are sown for the subsistence of cattle. This system, which per- mits the keeping of horned cattle in the stables without in- terruption, yields a considerable amount of manure and thus becomes the fulcrum of crop rotation. More than a third of the cultivated area in sandy districts is taken up with cultures derobees; it is as though the cultivated area had been increased by one third." Apart from root crops, clover and other leguminous crops are likewise used for this purpose. "Agriculture, being thus carried to a point where it merges into horticulture, naturally requires a relatively considerable investment of capital. In England, a first in- vestment of 250 francs per hectare is assumed. In Flanders, our farmers will probably consider a first investment of 500 francs far too low." (Emile de Laveleye, Essais sur L'Econo- mie Rurale de la Belgique, Paris, 1863, pages 59, 60, 63.) Take finally timber growing. "The production of timber differs from most of the other branches of production essen- tially by the fact that in it the force of nature is acting in- dependently and does not require the power of man and capital in its natural propagation. Even in places where forests are artificially propagated the expenditure of human and capital power is inconsiderable compared to the action of natural forces. Besides, a forest will still thrive in soils and locations where grain does no longer give any yield or where its production does not pay. Forestry furthermore requires for its regular economy a larger area than grain culture, because small plats do not permit a system of fell- ing trees in plats, prevents the utilization of by-products, complicates the production of the trees, etc. Finally, the productive process extends over such long periods that it exceeds the aims of private management and even surpasses the age limit of human life in certain cases. The capital invested in the purchase of the real estate" (in the case of communal production there is no capital needed for this, the question being simply how much land the community can spare from its cultivated and pasturing area for forestry) "will not yield returns until after a long period and is turned over gradually, but completely, with forests of certain The Time of Production. 279 kinds of wood, only after as much as 150 years. Besides, a consistent production of timber demands itself a supply of living wood which exceeds the annual requirements from ten to forty times. Unless a man has, therefore, still other sources of income and owns vast tracts of forest, he can- not engage in regular forestry." (Kirchhof, page 58.)
The long time of production (which comprises a relatively small amount of working time), and thus the length of the periods of turn-over, makes forestry little adapted for pri- vate, and therefore, capitalist enterprise, which is essentially private even if associated capitalists take the place of the individual capitalist. The development of civilization and of industry in general has ever shown itself so active in the destruction of forests, that everything done by it for their preservation and production, compared to its destructive effect, appears infinitesimal.
The following statement in the above quotation from Kirchhof is particularly worthy of note: "Besides, a consist- ent production of timber demands itself a supply of living wood which exceeds the annual requirements from ten to forty times." In other words, a turn-over occurs once in ten, forty, or more years.
The same applies to stock raising. A part of the herd (supply of cattle) remains in the process of production, while another part of the same is sold annually as a product. In this case, only a part of the capital is turned over every year, just as it is in the case of fixed capital, machinery, laboring cattle, etc. Although this capital is a fixed capital in the process of production for a long time, and thus pro- longs the turn-over of the total capital, it is not a fixed capital in the strict definition of the term.
That which is here called a supply — a certain amount of living timber or cattle — serves in a relative sense in the process of production (being simultaneously instruments of labor and raw materials); on account of the natural condi- tions of its reproduction under normal circumstances of economy, a considerable part of this supply must always be available in this form.
A similar influence on the turn-over is exerted by an- other kind of supply, which is productive capital only po- 280 Capital.
tentially, but which owing to the nature of its economy, must be accumulated in a more or less considerable quantity and advanced for purposes of production for a long term, although it is consumed in the actual process of produc- tion only gradually. To this class belongs, for instance, manure before it is hauled to the field, furthermore grain, hay, etc., and such supplies of means of subsistence as are employed in the production of cattle. "A considerable part of the productive capital is contained in the supplies of cer- tain industries. But -these may lose more or less of their value, if the precautions necessary for their preservation in good condition are not properly observed. Lack of super- vision may even result in the total loss of a part of the sup- plies in -the economy. For this reason, a careful inspection of the barns, feed and grain lofts, and cellars, becomes indis- pensable, the store rooms must always be well closed, kept clean, ventilated, etc. The grain, and other crops held in storage, must be thoroughly iurned over from time to time, potatoes and beets must be protected against frost, rain, and fire." (Kirchhof, page 292.) "In calculating one's own re- quirements, especially for the keeping of cattle, and trying to regulate the distribution according to the nature of the product and its intended use, one must not only take into consideration the covering of one's demand, but also see to it that there is a proportionate reserve for extraordinary cases. If it is then found that the demand cannot be fully covered by one's own production, it becomes necessary to re- flect first whether the missing amount cannot be covered by other products (substitutes), or by the 'cheaper purchase of such in place of the missing ones. For instance, if there should happen to be a lack of hay, this might be covered by root crops and straw. As a general rule, the natural value and market-price of the various crops must be kept in mind in such cases, and dispositions for the consumption must be made accordingly. If, for instance, oats are high, while pease and rye are relatively low, it will pay to substitute pease or rye for a part of the oats fed to horses and to sell the oats thus saved." (Ibidem, page 300.)
It has been previously stated, when discussing the ques- tion of the formation of a supply, that a definite, more or The Time of Production. 281 less considerable, quantity of potential productive capital is required, that is to say, of means of production intended for use in production, which must be available in proportionate quantities for the purpose of being gradually consumed in the productive process. It has been incidentally remarked, that, given a certain business or capitalist enterprise of defi- nite proportions, the magnitude of this productive supply de- pends on the greater or lesser difficulties of its reproduction, the relative distance of the supplying markets, the develop- ment of means of transportation and communication, etc. All these circumstances influence the minimum of capital, which must be available in the form of a productive supply, hence they influence also the length of time for which the investment of capital must be made and the amount of capi- tal to be advanced at one time. This amount, which affects also the turn-over, is determined by the longer or shorter time, during which a circulating capital is tied up in the form of a productive supply, of mere potential capital. On the other hand, in so far as this stagnation depends on the greater or smaller possibility of rapid reproduction, on mar- ket conditions, etc., it arises itself out of the time of circulation, out of circumstances connected with the circulation. "Furthermore, all such parts of the equipment or auxiliary pieces, as hand tools, sieves, baskets, ropes, wagon grease, nails, etc., must be so much the more available for immedi- ate use, the less the opportunity for their rapid purchase is at hand. Finally, the entire supply of implements must be carefully overhauled in winter, and new purchases or re- pairs found to be necessary must be made at once. Whether or not a man is to keep a great or small supply of articles of equipment is mainly determined by local conditions. Wherever there are no artisans and stores in the vicinity, it is necessary to keep larger supplies than in places where these are in the locality or near it. But if the necessary sup- plies are purchased in large quantities at <a time, then, other circumstances being equal, one profits as a rule by cheap purchases, provided the right time has been chosen for them. True, the rotating productive capital is thus curtailed by a so much larger sum, which cannot always be well spared in the business." (Kirchhof, page 301.)
282 Capital.
The difference between the time of production and work- ing time admits of many variations, as we have seen. The circulating capital may be in the period of production, be- fore it enters into the working period proper (production of lasts); or, it is still in the period of production, after it has passed through the working period (wine, seed grain); or, the period of production is occasionally interrupted by the work- ing period (agriculture, timber raising). A large portion of the product, fit for circulation, remains incorporated in the active process of production, while a much smaller part enters into the annual circulation (timber and cattle rais- ing); the longer or shorter time for which a circulating capital must be invested in the form of potential productive capital, hence also the larger or smaller amount of this capi- tal to be advanced at one time, depends partly on the nature of the productive process (agriculture), and partly on the proximity of markets, etc., in short on circumstances con- nected with the sphere of circulation.
We shall see later (Volume III), what senseless theories were advanced by MacCulloch, James Mill, etc., in the at- tempt of identifying the diverging time of production with the working time, an attempt which is due to a misinter- pretation of the theory of value.
The cycle of turn-over, which we considered in the fore- going, is determined by the durability of the fixed capital advanced in the process of production. Since this process extends over a series of years, we have a series of annual, or less than annual, successive turn-overs of fixed capital.
In agriculture, such a cycle of turn-over arises out of the system of crop rotation. "The duration of the lease must certainly not be figured less than the time of rotation of the adopted system of crop succession. For this reason, one always calculates with 3, 6, 9, in the three plat system. In the three plat system with complete fallow, a field is cul- tivated only four times in six years, being planted with both winter and summer grain in the years of cultivation, and, if the condition of the soil permits it, wheat and rye, barley The Time of Production. 283 and oats, are likewise introduced into the rotation. Every species of grain, however, differs in its yields from others on the same soil, every one of them has a different value and is sold at a different price. For this reason, the yield of the same field is different in every year in which it is culti- vated, and different in the first half of the rotation (the first three years ) from that of the second. Even the average yield of one period of rotation is not equal to that of another, for its fertility does not depend merely on the good condition of the soil, but also on the weather of the various seasons, just as prices depend on a multitude of circumstances. Now, if one calculates the income from one field on the average of the crops for the entire rotation of six years and the average prices of those years, one finds the total income of one year in either period of rotation. But this is not so, if the in- come is calculated only for half of the period of rotation that is to say, for three years, for then the total yields would be unequal. It follows from the foregoing that the duration of a lease in a system of three fields must be chosen for at least six years. It would be still more desirable for tenants and owners that the duration of the lease should be a multi- ple of the duration of the lease (!), in other words, that it should be 12, 18, or more years instead of 6 years, in a sys- tem of three fields, and 14, 28 years instead of 7 in a system of seven fields." (Kirchhof, pages 117, 118.)
(The manuscript at this place contains the note: "The English system of crop rotation. Make a note here.")
284 Capital.
CHAPTER XIV.
THE TIME OF CIRCULATION.
All circumstances considered so far, whicK & *stinguish ohe periods of rotation of different capitals invefcW in different branches of industry and the periods for which capital must be advanced, have their source in the process of production itself, such as the difference between fixed and circulating capital, the difference in the working periods, etc. But the period of turn-over of capital is equal to the sum of its time of production plus its time of circulation. It is, therefore, a matter of course that a difference in the time of circula- tion changes the time of turn-over and to that extent the length of the period of turn-over. This becomes most plainly apparent, either in comparing the different investments of capital in which all circumstances modifying the turn-over are equal, except the time of circulation, or in selecting a given capital with a given composition of fixed and circu- lating parts, a given working time, etc., permitting only the time of circulation to vary hypothetically.
One of the sections of the time of circulation — relatively the most decisive — consists of the time of selling, the period during which capital has the form of commodity-capital. Ac- cording to the relative length of this time, the time of circu- lation, and to that extent the period of turn-over, are lengthened or shortened. An additional outlay of capital may become necessary <as a result of expenses of storage. It is evident from the outset that the time required for the sale of finished products may differ considerably for the indi- vidual capitalists in one and the same branch of industry; and this does not refer merely to the grand totals of capital invested in the various departments of industry, but also to the different individual capitals, which are in fact in- dividual parts of the aggregate capital invested in the same department of production. Other circumstances remaining equal, the period of selling for the same individual capital The Time of Circulation. 285 will vary with the general fluctuations of the market condi- tions, or with their fluctuations in that particular business department. We do not tarry over this point any longer. We merely state the simple fact that all circumstances which produce differences in the periods of turn-over of the capitals invested in different business departments, also carry in their train differences in the turn-over of the various indi- vidual capitals existing in the same departments, provided these circumstances have any individual effects (for instance, if one capitalist has an opportunity to sell more rapidly than his competitor, if one employs more methods shortening the working periods than the other, etc. ).
One cause which acts continuously in differentiating the times of selling, and thus the periods of turn-over in gen- eral, is the distance of the market, in which a commodity is finally sold from its regular place of sale. During the entire time of its trip to the market, capital finds itself fettered in the form of commodity-capital. If goods are made to order, this condition lasts up to the time of delivery; if they are not made to order, the time of the trip to the market is fur- ther increased by the time during which the goods are on the market waiting to be sold. The improvement of the means of communication and transportation abbreviates the wandering period of the commodities absolutely, but does not abolish the relative difference in the time of circulation of different commodity-capitals arising from their wander- ings, nor that of different portions of the same commodity- capital which wander to different markets. The improved sailing vessels and steamships, for instance, which shorten the wanderings of commodities, do so equally for near and for distant ports. But the relative differences may be altered by the development of the means of transportation and com- munication in a way that does not correspond to the natural distances. For instance, a railroad, which leads from a place of production to an inland center of population, may relatively or absolutely prolong the distance to a nearer point inland not connected with a railroad, compared to the one which is naturally more distant. In the same way, the same circumstances may alter the relative distance of places of production from the larger markets, which explains the 286 Capital.
running down of old and the rise of new places of production through changes in the means of communication and trans- portation. (In addition to these circumstances, there is the greater relative cheapness of 'transportation for long than for short distances.) Moreover, it is not alone the velocity of the movement through space, and the consequent reduc- tion of distance in space, but also in time, which is brought about by the development of the means of transportation. It is not only the quantity of means of communication which is developed, so that, for instance, many vessels sail simultaneously for the same port, or several trains travel simultaneously on different railways between the same two points, but freight vessels may, for instance, clear on different successive days of the week from Liverpool for New York, or freight trains may start at different times of the day from Manchester to London. It is true, that the absolute velocity, or this part of the time of circulation, is not modified by this latter circumstance, a certain definite capacity of the means of transportation being given. But successive quantities of commodities can start on their passage in shorter succession of time and thus reach the market one after another without accumulating as potential commodity-capital in large quantities before shipping. Hence the return movement likewise is distributed over shorter successions of time, so that a part is continually transformed into money-capital, while another circulates as commodity-capital. By means of this distribution of the return movement over several successive periods the total time of circulation is abbreviated and there- by also the turn-over. On one hand, the greater or lesser frequency of the function of means of transportation, for in- stance the number of railroad trains, develops first to the ex- tent that a place of production produces more and becomes a greater center <of production, and this development tends in the direction of the existing market, that is to say, toward the great centers of production and population, export places, etc. But on the other hand this special facilitation of traffic and the consequent acceleration of the turn-over of capital (to the extent that it is conditioned on the time of circulation) give rise to a hastened concentration of the center of production and of its market. Along with this hastened The Time of Circulation. 287 concentration of masses of men and capital, the concentra- tion of these masses of capital in a few hands likewise pro- gresses. Simultaneously there is a movement, which shifts and displaces the center of commercial gravity as a result of changes in the relative location of centers of production and markets caused by transformations in the means of com- munication. A place of production which once had a special advantage by its favored location on some highway or canal then finds itself set aside on a single side-track, which runs trains only at relatively long intervals, while another place, which formerly lay removed from the main roads of traffic, then finds itself located at the crossing point of several rail- roads. This second point is built up, the former goes down. A transformation in the means of transportation thus causes a local difference in the time of circulation of commodities, the opportunity to buy, to sell, etc., or an already existing local differentiation is distributed differently. The signifi- cance of this circumstance for the turn-over of capital is shown in the disputes of the commercial and industrial rep- resentatives of the various places with the railroad man- agers. (See, for instance, the above quoted bluebook of the Railway Committee.)
All branches of production which are dependent on local consumption by the nature of their product, such as brew- eries, are therefore developed to greatest dimensions in the main centers of population. The more rapid turn-over of capital compensates in this case for the eventual increase in the price of some elements of production, such as building lots, etc.
While on one hand, the development of the means of transportation and communication by the progress of capi- talist production reduces the time of circulation for a given quantity of commodities, the same progress, on the other hand, coupled to the growing possibility of reaching more distant markets to the extent that the means of transpor- tation and communication are improved, leads to the neces- sity of producing for ever more remote markets, in one word, for the world market. The mass of commodities in transit for distant places grows enormously, and with it also grows absolutely and relatively that part of social capital which 288 Capital.
288 Capital.
remains constantly for longer periods in the stage of com- modity-capital, within the time of circulation. Simultan- eously that portion of social wealth increases, which, instead of serving as direct means of production, is invested in the fixed and circulating capital required for operating the means of transportation and communication.
The mere relative length of the transit of the commodi- ties from their place of production to their market causes a difference, not only in the first part of the time of circu- lation, the selling time, but also in its second part, the reconversion of money into the elements of 'productive capi- tal, the buying time. For instance, some commodities are shipped to India. This requires, say, four months. Let us assume that the selling time is equal to zero, that is to say, the commodities are made to order and are paid for on delivery to the agent of the producer. The return of the money (no matter what may be its form) requires again four months. Thus it takes eight months, before the same capital can again serve as productive capital and renew the same op- erations. The differences in the turn-over thus caused are one of the material bases of the various terms of credit. Trans-oceanic commerce in general, for instance in Venice and Genoa, is one of the sources of the credit system — strictly so called. The London Economist of July 16, 1866, wrote that the crisis of 1847 enabled the banking and trading busi- ness of that time to reduce the Indian and Chinese usage (for the running time of checks between those countries and Europe) from ten months after sight to six months, and the lapse of twenty years with its acceleration of the trip and the institution of telegraphs renders necessary a further re- duction from six months after sight to four months after date as a preliminary step toward four months after sight. The trip of a sailing vessel from Calcutta around the cape to London lasts on an average less than 90 days. A usage of four months after sight would be equivalent to a run- ning time of 150 days, approximately. The present usage of six months after sight is equivalent to a running time of 210 days. On the other hand, we read in the issue of June 30, 1866, of the same paper, that the Brazilian usage is still fixed at two and three months after sight, checks of Antwerp The Time of Circulation. 289 on London are drawn for three months after date, and even Manchester and Bradford draw on London for three months and longer dates. By a tacit understanding, the merchant is thus given sufficient opportunity to realize on his goods by the time the checks are due, if not before. For this reason, the usage of Indian checks is not excessive. Indian products, which are sold in London generally on three months' time, cannot be realized upon in much less than five months, if some time for the sale is allowed, while another five months pass on an average between the purchase in India and the delivery to an English ware- house. Here we have a period of ten months, while the checks drawn against the goods do not run above seven months. And again, on July 7, 1866, we read that, on July 2, 1866, five great London banks, dealing especially with India and China, and the Paris Comptoir d'Escompte, gave notice that, beginning with January 1, 1867, their branch banks and agencies in the Orient would buy and sell only such checks as were not drawn for more than four months after sight. However, this reduction miscarried and had to be revoked. (Since then the Suez canal has revolutionized all this.)