The second period of turn-over, from the 8th to the 16th week, contains the second working period of the 8th to 14th week. The requirements of the 8th and 9th week of this period are covered by capital II. After the close of the 9th week, the above 700 p. st. flow back. Up to the close of this working period (10—14.), 500 p. st. of this sum are used up. 200 p. st. remain free for the next working period. The second circulation period lasts from the 15th to the 16th week. After the close of the 16th week, 700 p. st. flow back once more. From now on, the same phenomenon is Influence of the Time of Circulation.
repeated in every working period. The demand in capital of the first two weeks is covered by the 200 p. st. set free at the close of the preceding working period; after the close of the second week, 700 p. st. flow back in money; but the working period lasts only 5 weeks longer, so that only 500 p. st. can be consumed; therefore, 200 p. st. always remain free for the next working period.
We find, then, that in this case, where the working period has been assumed greater than the circulation period, there is under all circumstances a money-capital set free at the close of each working period, and this money-capital is of the same magnitude as capital II, which is advanced for the circulation time. In our three illustrations, capital II was 300 p. st., in the first, 400 p. st., in the second, 200 p. st. in the third example. Corresponding thereto, the capital set free at the close of each working period was 300, 400, and HI. The Working Period Smaller Than The Circulation Period.
We begin by assuming once more a period of turn-over of 9 weeks. Let the working period be 3 weeks, with an available capital I of 300 p. st. Let the circulation period be 6 weeks. For these 6 weeks, an additional capital of 600 p. st. is required. We may divide this in turn into two por- tions of 300 p. st. each, so that each portion meets the re- quirements of one working period. We have, then, three capitals of 300 p. st. each, 300 of which are always busy in production, while 600 are circulating.
Table III.
CAPITAL I. Periods of Turn-Over. Working Periods. Periods of Circulation.
Capital.
Table III. CAPITAL II. Periods of Turn-Over. Working Periods. Periods of Circulation.
CAPITAL III.
We have, here, the exact opposite of case I, only with the difference that now three capitals relieve one another in- stead of two. There is no intersection or intermingling of capitals. Each one of them can be traced separately to the end of the year. Capital is no more set free in this instance than in case one, at the close of a working period. Capital I is entirely consumed at the end of the 3rd week, flows back entirely at the end of 9th, and resumes its functions in the beginning of the 10th week. Similarly in the case of capitals II and III. The regular and complete relief ex- cludes any release of capital.
The total turn-over is calculated as follows: Capital I, 300 times 5 2-3, or 1,700 p. st. Capital II, 300 times 51-2, or 1,600 p. st. Capital III, 300 times 5, or 1,500 p. st.
Total capital 900 times 5 1-3, or 4,800 p. st.
Let us now choose also an illustration, in which the cir- culation period is not an exact multiple of the working period. For instance, let the working period be 4 weeks, the circulation period 5 weeks. The corresponding amounts of capital would then be: Capital I, 400 p. st.; capital II, 400 p. st.; capital III, 100 p. st. We present only the first three turn -overs.
Influence of the Time of Circulation.
Table IV.
CAPITAL I.
Periods of Turn-Over.
Working Periods.
Periods of Circulation- CAPITAL II.
CAPITAL III.
9. week.
There is in this case an intermingling of capitals to the extent that the working period of capital III, which has no independent working period, because it lasts only for one week, coincides with the first working period of capital I. On the other hand, an amount of 100 p. st., equal to capi- tal III, is set free by capital I and II at the close of the work- ing period. For when capital III fills out the first week of the second, and of all following working periods of capi- tal I, and the entire capital I of 400 p. st. flows back at the close of this first week, then only 3 weeks and a correspond- ing capital of 300 p. st. remain for the rest of the working period of capital I. The 100 p. st. thus set free suffice for the first week of the immediately following working period of capital II; at the close of this week, the entire capital of 400 p. st. then flows back (capital II). But since the new working period can absorb only 300 p. st. more, there are once more 100 p. st. disengaged at its close. And so forth. There is, then, a setting free of capital at the close of a work- ing period, as soon as the circulation period is not a simple multiple of the working period. And this released capital is equal to that portion of capital which has to fill out the excess of the circulating period over the working period, or over a multiple of working periods.
In all cases investigated by us it was assumed that both the working period and the circulation period remain the same throughout the year in any of the businesses selected. This assumption was necessary, if we wished to ascertain the 318 Capital.
influence of the time of circulation on the turn-over and advance of capital. It does not alter the matter, that this assumption is not borne out unconditionally in reality, and that it frequently does not apply at all.
In this entire section, we have discussed only the turn- overs of the circulating capital, not those of the fixed. The reason is that this question has nothing to do with the fixed capital. The means of production employed in the process of production form fixed capital only to the extent that their time of employment exceeds the period of turn-over of circulating capital, so long as the time during which these instruments of labor continue to serve in continually repeated labor processes, is greater than the period of turn- over of circulating capital, in other words, comprises n periods of turn-over of circulating capital. Whether the total time represented by these n periods of turn-over of circulating capital, is long or short, that portion of produc- tive capital which was advanced for this time in fixed capi- tal is not advanced anew during its course. It continues its functions in its old use-form. The difference is merely this: According to the different lengths of the individual working periods of each period of turn-over of circulating capital, the fixed capital yields a greater or smaller portion of its original value to the product of this working period, and according to the duration of the time of circulation of each period of turn-over, this value yielded by the fixed capital to the product flows back in money rapidly or slowly. The nature of the topic which we discuss in this section — the turn-over of the circulating portion of productive capi- tal— is determined by the nature of this portion itself. The circulating capital employed in a working period cannot be invested in a new working period, until it has completed its turn-over, until it has been converted into commodity- capital, then into money-capital, and then back into produc- tive capital. In order that the first working period may be immediately followed by a second, additional capital must be advanced and converted into the circulating elements of productive capital, and its quantity must be sufficient to fill out the void left by the circulation of the capital advanced Influence of the Time of Circulation. 319 for the first working period. This is the source of the in- fluence exerted by the duration of the working period of the circulating capital over the scale of the process of pro- duction and the division of the advanced capital, or event- ually the advance of new portions of capital. It is precisely this which we had to examine in this section.
IV. Conclusions.
From the preceding analyses, it follows that, A. The different portions, into which capital must be divided in order that one part of it may be continually in the working period Avhile others are in the period of circu- lation, relieve one another like different independent private capitals, in two cases: First, when the working period is equal to the period of circulation, so that the period of turn- over is divided into two equal sections; secondly, when the period of circulation is longer than the working period, but at the same time represents a simple multiple of the working period, so that one period of circulation is equal to n working periods, in which case n must be a whole num- ber. In these cases, no portion of the successively advanced capital is set free.
B. On the other hand, in all cases in which, (1) the period of circulation is longer than the working period without being a simple multiple of it, and (2) in which the working period is longer than the circulation period, a portion of the circulating total capital is continually set free periodically at the close of each working period, be- ginning with the second turn-over. This free capital is equal to that portion of the total capital which has been advanced to fill out the time of circulation, provided the working period is longer than the period of circulation, and equal to that portion of capital which has to fill out the ex- cess of the time of circulation over one working period, or over a multiple of one working period, provided the time of circulation is longer than the working time.
C. It follows that for the aggregate social capital, so far as its circulating capital is concerned, the setting free of 320 Capital.
capital must be the rule, while the mere relieving of portions of capital following successively in the process of produc- tion must be the exception. For the equality of the period of work and circulation, or the equality of the period of cir- culation with a simple multiple of the working period, in other words, a similar proportion of the two portions of the period of turn-over has nothing to do with the nature of the case, and for this reason it cannot be found in general, but only in rare instances.
A very considerable portion of the social circulating capi- tal, which is turned over several times per year, will there- fore exist periodically in the form of released capital during the annual cycle of turn-over.
It is furthermore evident that, all other circumstances being equal, the magnitude of the released capital grows with the volume of the labor-process, or with the scale of production, or with the development of capitalist production in general. In the case cited under B (2), this will be so, because the advanced total capital increases, in B (1), because the length of the period of circulation grows with the development of capitalist production, hence the period of turn-over is lengthened in cases where the working period is extended, without a regular proportion between the two periods.
In the first case, for instance, we ha,d to invest 100 p. st. per week. This required 600 p. st. for a working period of 6 weeks, 300 p. st. for a circulation period of 3 weeks, together 900 p. st. In that case, 300 p. st. are released con- tinually. On the other hand, if 300 p. st. are invested week- ly, we have 1,800 p. st. for the working period and 900 p. st. for the circulation period. Hence 900 instead of 300 p. st. are periodically released.
D. The total capital, for instance 900 p. st., must be di* vided into two portions, for instance, 600 p. st. for the work- ing period and 300 p. st. for the period of circulation. That portion, which is really invested in the labor-process, is thus reduced by one third, or from 900 to 600 p. st. The scale of production is thus reduced by one third. On the other hand, the 300 p. st. perform their function only to make Influence of the Time of Circulation. 321 the working period continuous, in order that 100 p. st. may be invested every week of the year in the labor-process.
Abstractly speaking, it is the same, whether 600 p. st. work during 6 times 8, or 48 weeks (product 4,800 p. st.), or whether the total capital of 900 p. st. is expended during 6 weeks in the labor-process and then kept fallow during the period of circulation of 3 weeks. In the latter case, it would be working, in the course of the 48 weeks, 5 1-3 times 6, or 32 weeks (product 5 1-3 times 900, or 4,800 p. st.), and be fallow for 16 weeks. But, apart from the greater decay of the fixed capital during the fallow of 16 weeks, and apart from the appreciation of labor, which must be rapid during the entire year, although it is employed only during a part of it, such u regular interruption of the pro- cess of production is irreconcilable with the operations of modern great industry. This continuity is itself a produc- tive power of labor.
Now, if we take a closer look at the released, or rather suspended, capital, we find that a considerable part of it must always be in the form of money-capital. Let us ad- here to our illustration: Working period 6 weeks, period of circulation 3 weeks, expenditure per week 100 p. st. In the middle of the second working period, after the close of the 9th week, 600 p. st. flow back, and 300 of them must be invested for the remainder of the working period. After the close of the second working period, 300 p. st. are then released. In what condition are these 300 p. st.? We will assume that 1-3 is invested for wages, 2-3 for raw ma- terials and auxiliary substances. Then 200 of the returned 600 p. st. exist in the form of money for wages, and 400 p. st. in the form of a productive supply, in the form of elements of the constant circulating productive capital. But since only one half of this productive supply is required for the second half of the second working period, the other half is for 3 weeks in the form of a surplus, that is to say, of a productive supply exceeding the requirements of one work- ing period. The capitalist, on the other hand, knows that he needs only one-half (200 p. st.) of this portion (400 p.
st.) of the returned capital for the current working period.
322 Capital.
It will, therefore, depend on market conditions, whether he will immediately reconvert these 200 p. st. entirely or par- tially into a surplus productive supply, or reserve them entirely or partially in the form of money in the expectation that the conditions of the market will improve. It goes without saying, that the portion of capital to be used for the payment of wages (200 p. st.) is reserved in the form of money. The capitalist cannot store labor-power in ware- houses after he has bought it, as he may do with the raw material. He must incorporate it in the process of production and he pays for it at the end of the week. At least these 100 p. st. of the released capital of 300 p. st. will, therefore, have the form of money not required for the working period. The capital released in the form of money-capital must therefore be at least equal to the variable portion of capital invested in wages. At a maximum, it may com- prise the entire released capital. In reality it fluctuates continually between this minimum and maximum.
The money-capital released by the mere mechanism of the movement of turn-over (together with the successive reflux of fixed capital and the money-capital required in every labor-process for variable capital) must play an im- portant role, as soon as the credit system develops, and must at the same time be one of its foundations.
Let us assume that the time of circulation in our illus- tration is contracted from 3 weeks to 2. This is not to be a normal change, but due, say, to prosperous times, shortened terms of payment, etc. The capital of 600 p. st., which is expended during the working period, flows back one week earlier than needed, it is therefore released for this week. Furthermore, in tbe middle of the working period, as be- fore, 300 p. st. are released (a portion of those 600 p. st.), but in this case for 4 weeks instead of 3. There are then on the money market 600 p. st. for one week, and 300 p. st. for 4 weeks instead of 3. As this concerns not one capitalist alone, but many, and occurs at various periods in different businesses, it brings more available money-capital on the market. If this condition last for a long time, production will be expanded, wherever feasible. Capitalists working with borrowed money will bring less demand to bear on the Influence of the Time of Circulation. 323 money-market, whereby it is relieved as much as it is by an increased supply. Or, finally, the sums made superfluous by the mechanism are thrown definitely on the money- market.
In consequence of the contraction of the period of turn- over from 3 weeks to 2, and thus of the period of turn-over from 9 weeks to 8, one ninth of the advanced total capital becomes superfluous. The working period of 6 weeks can now be kept going as continuously with 8G0 p. st. as former- ly with 900. One portion of the value of the commodity- capital, equal to 100 p. st., therefore persists in the form of money-capital without performing any more functions as a part of the capital advanced for the process of production. While production is continued on the same scale and with other conditions, such as prices, etc., remaining equal, the value of the advanced capital is reduced from 900 to 800 p. st. The remainder of the originally advanced value, to the amount of 100 p. st., is released in the form of money- capital. As such it passes over into the money-market and forms an additional portion of the capitals serving in that capacity.
This shows the way in which a plethora of money may arise — quite apart from the reason that the supply of money may be greater than the demand for it; this eventuality causes always but a relative plethora, which occurs, for in- stance, in the "melancholy period" opening a new cycle after a commercial crisis. In our case we speak of a plethora in the sense that a definite portion of the capital advanced for the promotion of the entire process of social reproduc- tion, including the process of circulation, becomes super- fluous and is, therefore, released in the form of money- capital. This plethora comes about by the mere contraction of the period of turn-over, while the scale of production and prices remain the same. The amount of money in the circulation, whether great or small, did not exert the least influence on this.
Let us assume, on the other hand, that the period of cir- culation is prolonged from 3 weeks to 5. In that case, the reflux of the advanced capital takes place 2 weeks too late at the very next turn-over. The last part of the process 324 Capital.
of production of this working period cannot be carried on, the mechanism of the turn-over of the advanced capital itself interfering. In case of a longer duration of this con- dition, a contraction of the process of production, a reduc- tion of its volume, might take place, just as an extension did in the previous case. But in order to continue the proc- ess on the same scale, the advanced capital would have to be increased by 2-9, or 200 p. st., for the entire duration of the prolongation of the circulation period. This additional capital can be obtained only from the money-market. If, then, the prolongation of the period of circulation applies to one or more great lines of business, it may cause a pres- sure on the money-market, unless this effect is compensated by some counter-effect from some other direction. In this case likewise it is evident and obvious that such a pressure is not in the least due to a change in the prices of the com- modities nor to the quantity of the existing means of cir- culation.
(The preparation of this chapter for publication has given me no small amount of difficulties. Expert as Marx was in algebra, the handling of figures in arithmetic nevertheless gave him a great deal of trouble and he lacked especially the practice of commercial calculation, although he left behind a ponderous volume of computations in which he had practiced by many examples the entire variety of com- mercial reckoning. But a knowledge of the various modes of calculation and a practice in the daily practical calcula- tions of the merchant are by no means the same. Conse- quently Marx entangled himself to such an extent in his computation of turn-overs, that the result, so far as he com- pleted his work, contained various errors and contradic- tions. In the diagrams given above, I have preserved only the simplest and arithmetically correct data, and my rea- son for so doing was mainly the following: The indefinite results of this tedious calculation have led Marx to attribute an undeserved importance to a circum- stance, which, in my opinion, has actually little signifi- cance. I refer to that which he calls the "release" of money- capital. The actual state of affairs, based on the above premises, is this: Influence of the Time of Circulation. 325 No matter what may be the proportion in the magnitude of the working and circulation periods, or of capital I and II, there is returned to the capitalist, in the form of money, at the end of the first turn-over, in regular intervals of the duration of one working period, the capital required for each working period, a sum equal to capital I.
If the working period is 5 weeks, the circulation period 4 weeks, and capital I 500 p. st., then a sum of money equal to 500 p. st. flows back periodically at the end of the 9th, 14th, 19th, 24th, 29th, etc., week.
If the working period is 6 weeks, the circulation period 3 weeks, and capital I 600 p. st., then 600 p. st. flow back peri- odically at the end of the 9th, 15th, 21st, 27th, 33rd, etc., week.
Finally, if the working period is 4 weeks, the circula- tion period 5 weeks, and capital I 400 p. st., then 400 p. st. are periodically returned at the end of the 9th, 13tb, 17th, 21st, 25th, etc., week.
Whether any of this returned money is superfluous, and thus released, for the current working period, and how much of it, makes no difference. It is assumed that production continues uninterruptedly on the same scale, and in order that this may be possible, money must be available and must, therefore, flow back, whether "released" or not. If produc- tion is interrupted, release stops likewise.
In other words: There is indeed a release of money, a formation of latent, or merely potential, capital in the form of money. But it takes place under all circumstances, and not only under the conditions enumerated especially in the above analysis; and it takes place on a larger scale than that assumed there. So far as circulating capital I is concerned, the industrial capitalist, at the end of each turn-over, is in the same situation as at the establishment of his business: he has all of it in his hands in one bulk, while he can con- vert it only gradually back into productive capital.
The essential point in the above analysis is the demon- stration that, on one hand, a considerable portion of the industrial capital must always be available in the form of money, and, on the other hand, a still more considerable 826 Capital.
portion must temporarily assume the form of money. This proof is, if anything, still more emphasized by these addi- tional remarks of mine. — F. E.)
V. The Effect of a Change of Prices We had assumed that prices remained the same and the scale of production remained unaltered, while, on the other hand, the time of circulation was either contracted or ex- panded. Now let us assume, on the contrary, that the period of turn-over remains the same, likewise the scale of produc- tion, while prices change, that is to say, either the prices of the raw materials, auxiliaries, and labor-power rise or fall, or those of the two first-named elements alone. Take it, that the price of raw materials, auxiliaries, and labor- power falls by one half. In that case, the capital to be ad- vanced in our above examples would be 50 instead of 100 p. st. per week, and that for the period of turn-over of 9 weeks, 450 p. st., instead of 900. A sum of 450 p. st. of the advanced capital is released in the form of money-capital, but the process of production continues on the same scale and with the same period of turn-over, and with the same sub-division as before. The quantity of the annual product likewise remains the same, but its value has fallen by one half. This change, which is at the same time accompanied by a change in the demand and supply of money-capital, is due neither to an acceleration of the turn-over, nor to a change in the quantity of money in circulation. On the contrary. A fall in the value, or price, of the elements of productive capital by one half would first have the effect of reducing by one half the capital-value to be advanced for the continuation of the business of X in the same scale, so that only one half of the money would have to be thrown on the market by the business of X, since the business of X advances this capital-value first in the form of money, of money-capital. The amount of money thrown into circu- lation would have decreased, because the prices of the ele- ments of production had fallen. This would be the first effect.
In the second place, one half of the originally advanced Influence of the Time of Circulation. 327 capital of 900 p. st. or 450 p. st., which (a) passed alter- nately through the forms of money-capital, productive capi- tal, and commodity-capital, and (b) existed simultaneously and continuously side by side partly in the form of money- capital, partly, in the form of productive capital, partly in the form of commodity-capital, would be eliminated from the rotation of the business of X, and thus come into the money market as an additional capital, affecting it as such. These released 450 p. st. serve as money-capital, not because they have become superfluous for the operation of the busi- ness of X, but because they were a constituent portion of the original capital-value, so that they are intended for further service as capital, not as mere means of circulation. The next form in which they may serve as capital is that of money on the money-market. Or, the scale of production (apart from fixed capital) might be doubled. In that case a productive process of double the previous volume would be carried on with a capital of 900 p. st.
If, on the other hand, the prices of the circulating ele- ments of productive capital were to increase by one half, it would require 150 p. st. per week instead of 100 p. st., or 1,350 instead of 900 p. st. An additional capital of 450 p. st. would be needed to carry on production on the same scale, and this would exert a pressure to that extent, accord- ing to the condition of the money-market, on the quotations of money. If all the capital available on this market were then engaged, there would be an increased competition for available capital. If a portion of it were unemployed, it would to that extent be called into action.
But, in the third place, given a certain scale of production, the velocity of the turn-over and the prices for the circu- lating elements of productive capital remaining the same, the price of the product of the business of X may rise or fall. If the price of the commodities supplied by the busi- ness of X falls, the price of his commodity-capital of 600 p. st., which it threw continually into circulation, sinks, for instance, to 500 p. st. In that case, one sixth of the value of the advanced capital does not flow back from the process of circulation, (the surplus-value contained in the commod- 328 Capital.