The Turn-Over of the Variable Capital. 3(58 of business. In general, such enterprises on a large scale as railroad building withdraw a certain quantity of labor- powers from the labor-market, which can come only from such lines of business as agriculture, etc., where strong men are needed. This still continues even after the new enter- prises have become established lines of business and the wandering class of laborers needed for them has already been formed. A case in point is the temporary increase in the scale of business of railroads beyond the normal. A portion of the reserve army of laborers who kept wages down is absorbed. Wages rise everywhere, even in the hitherto engaged parts of the labor-market. This lasts until the in- evitable crash throws the reserve army of labor out of work, and wages are once more depressed to their minimum or be- To the extent that the greater or smaller length of the period of turn-over depends on the working period, strictly so called, that is to say on the period which is required to get the product ready for the market, it rests on the exist- ing material conditions of production of the various in- vestments of capital. In agriculture, they partake more of the character of natural conditions of production, in manu- facture and the greater part of the extractive industry they vary with the social development of the process of production itself.
Furthermore, to the extent that the length of the working period is conditioned on the size of the orders (the quanti- tative volume in which the product is generally thrown upon the market), this point depends on conventions. But con- 27 In the manuscript, the following note is here inserted for future elaboration: "Contradiction in the capitalist mode of production; the laborers as buyers of commodities are important for the market. But as sellers of their own commodity — labor-power — capitalist society tends to depress them to the lowest price. Further contradiction: The epochs in which capitalist production exerts all its forces are always periods of overproduction, because the forces of production can never be utilized to such a degree that more value is not only produced but also realized; but the sale of commodities, the realization on the commodity-capital, and thus on surplus-value, is limited, not by the consumptive demand of society in general, but by the consumptive demand of a society in which the majority are poor and must always remain poor. However, this belongs into the next part."
864 Capital.
vention itself depends for its material basis on the scale of production, and it is accidental only when considered in- dividually.
Finally, so far as the length of the period of turn-over depends on that of the period of circulation, the latter is, indeed, conditioned on the incessant change of market com- binations, the greater or smaller ease of selling, and the resulting necessity to throw a part of the product to more or less remote markets. Apart from the volume of the gen- eral demand, the movement of prices plays here one of the main roles, since sales are intentionally restricted when prices are falling, while production proceeds; vice versa, production and sale keep step, when prices are rising, and sales may even be made in advance. But we must consider the actual distance of the place of production from the market as the real material basis.
For instance, English cotton goods or yarn are sold to India. The export merchant may pay the English cotton manufacturer. (The export merchant does so willingly only when the money-market stands well. If the manufacturer replaces his money-capital by operating credit on his own part, matters are already in a bad state). The exporter sells his cotton goods later in the Indian market, whence his advanced capital is returned to him. Until the time of this return the case is identical with the one in which the length of the working period necessitates the advance of new money-capital, in order to maintain the process of produc- tion on a certain scale. The money-capital with which the manufacturer pays his laborers and renews the other ele- ments of his circulating capital, is not the money-form of the yarn produced by him. This cannot be the case until the value of this yarn has returned to England in the form of money or products. It is additional capital as before. The difference is only that it is advanced by the merchant instead of the manufacturer, and that it reaches the merchant oy means of manipulations of credit. Further- more, before this money is thrown on the market, or simul- taneously with it, no additional product has been thrown on the English market, to be bought with this money and The Turn-Over of the Variable Capital. 365 to be consumed productively or individually. If this con- dition occurs for a long period on a large scale, it must cause the same effects as a prolongation of the working period, previously mentioned.
Now it may be that the yarn is sold even in India on credit. With this credit, products are bought in India and sent back to England, or drafts are remitted to this amount. If this condition is prolonged, there is a pressure on the Indian money-market, and its reaction may cause a crisis in England. This crisis, even if combined with an export of precious metals to India, causes a new crisis in that country on account of the bankruptcy of English busi- ness houses and their Indian branch houses, who had re- ceived credit from the Indian banks. Thus a crisis occurs simultaneously on the market which is credited with the balance of trade and on the one which is charged with it. This phenomenon may be still more complicated. Take it, for instance that England has sent silver ingots to India, but the English creditors of India now collect their debts in that country, and India will soon after have reshipped its silver ingots to England.
It is possible that the export trade to India and the im- port trade from India might approximately balance one another, although the imports (with the exception of pe- culiar circumstances, such as arise in the price of cotton), will be determined as to their volume and stimulated by the export trade. The balance of trade between England and India may seem to be squared, or may show but slight fluctuations on either side. But as soon as the crisis appears in England it is seen that unsold cotton goods are stored in India (and have not been transformed from commodity- capital into money-capital — an overproduction to this ex- tent), and that, on the other hand, there are in England not only unsold supplies of Indian goods, but that a con- siderable portion of the sold and consumed goods is not yet paid for. Hence, that which appears as a crisis on the money-market, is in reality an expression of abnormal con- ditions in the process of production and reproduction.
Third. So far as the employed circulating capital (con- stant and variable) is concerned, the length of the period 366 Capital.
of turn-over, to the extent that it is due to the working pe- riod, makes this difference: In the case of several turn- overs during one year, an element of the variable or constant circulating capital may be supplied by its own product, for instance in the production of coal, the tailoring business, etc. Otherwise, this cannot take place, at least not within the same year.
The Circulation of Surplus-Value. 367 CHAPTER XVII.
THE CIRCULATION OF SURPLUS-VALUE.
We have just seen that a difference in the period of turn- over causes a difference in the annual rate of surplus-value, even if the quantity of the annually produced surplus- value is the same.
But there is furthermore necessarily a difference in the capitalization of surplus-value, the accumulation, and to that extent also in the quantity of surplus-value produced during the year, while the rate of surplus-value remains the same.
To begin with, we remark that capital A (in the illustra- tion of the preceding chapter) has a current periodical rev- enue, so that with the exception of the period of turn-over beginning the business, it pays for its own consumption within the year out of its production of surplus-value, and need not cover it by advances out of its own funds. But B has to do this. While he produces as much surplus-value in the same time as A, he does not realize on it and cannot consume it either productively or individually. So far as individual consumption is concerned, the surplus-value is discounted in advance. Funds for that purpose must be advanced.
One portion of the productive capital, which is difficult to classify, namely the additional capital required for the re- pair and maintenance of the fixed capital, is now likewise seen in a new light.
In the case of A, this portion of capital — in full or for the greater part — is not advanced at the beginning of pro- duction. It need not be available, or even in existence. It comes out of the business itself by a direct transformation of surplus-value into capital by its direct employment as capital. One portion of the surplus-value which is not only periodically produced but also realized may cover the ex- penditures required for repairs, etc. A portion of the capi- tal needed for carrying on the business on its original scale 368 Capital.
368 Capital.
is thus produced in the course of business by the business itself by means of capitalization of a portion of surplus- value. This is impossible for the capitalist B. This portion of capital must in his case form a part of the capital origin- ally advanced. In both cases this portion will figure in the books of the capitalists as an advanced capital, which it really is, since according to our assumption it is a part of the productive capital required for maintaining the busi- ness on a certain scale. But it makes a great difference out of which funds it is advanced. In the case of B, it is actually a part of the capital to be originally advanced or held available. On the other hand, in the case of A, it is a part of the surplus-value, if used as capital. This last case shows that not only the accumulated capital, but also a portion of the orginally advanced capital, may be capital- ized surplus-value.
As soon as the development of credit interferes, the rela- tion between originally advanced capital and capitalized surplus-value is still more complicated. For instance, A bor- rows a portion of the productive capital, with which he starts his business and continues it during the year, from banker C, not having sufficient capital of his own for this purpose. Banker C lends him the required sum, which consists only of surplus-value deposited with the banker by capitalists D, E, F, etc. From the standpoint of A, there is as yet no question of any accumulated surplus- value. But from the point of view of D, E, F, etc., A is merely their agent capi- talizing surplus-value appropriated by them.
We have seen in volume I, chapter XXIV, that accumu- lation, the conversion of surplus-value into capital, is sub- stantially a process of reproduction on an enlarged scale, no matter whether this expansion is expressed extensively in the form of an addition of new factories to the old ones, or intensively by the expansion of the existing scale of production.
The expansion of the scale of production may proceed in small portions, a part of the surplus-value being used for improvements which either increase simply the pro- ductive power of the labor employed, or permit at the same time of its more intensive exploitation. Or, in places where The Circulation of Surplus-Value. 369 the working day is not legally restricted, an additional ex- penditure of circulating capital (in materials of production and wages) suffices to expand production without an ex- tension of the fixed capital, whose daily time of employment is thus merely lengthened, while its period of turn-over is correspondingly abbreviated. Or, capitalized surplus-value may, under favorable market combinations, permit of spec- ulation in raw materials, an operation for which the capital originally advanced would not have been sufficient, etc.
However, it is evident that in cases, where the greater number of the periods of turn-over carries with it a more frequent realization of surplus-value within the year, there will be periods, in which there can be neither a prolonga- tion of the working day, nor an introduction of improve- ments in details, while, on the other hand, there is only a limited scope in which it is possible to expand the entire business on a proportional scale, partly, by a reorganization of the entire plan of business, buildings, etc., partly by an expansion of the funds for labor, as in agriculture, and a volume of additional capital is required, such as can be sup- plied only by several years of accumulation of surplus-value.
Along with the actual accumulation, or conversion of sur- plus-value into productive capital, (and a corresponding reproduction on an enlarged scale), there is, then, an accum- ulation of money, a hoarding of a portion of the surplus- value in the form of latent money-capital, which is not in- tended for service as additional productive capital until later.
This is the aspect of the matter from the point of view of the individual capitalist. But simultaneously with the development of capitalist production, the credit system also develops. The money-capital, which the capitalist cannot as yet employ in his own business, is employed by others, who pay him an interest for its use. It serves for him as money-capital in its specific meaning, that is to say as a kind of capital distinguished from productive. But it serves as capital in another's hands. It is plain, that, with the more frequent realization of surplus-value and the rising scale on which it is produced, there must also be an increase in the proportion of new money-capital, or money in the 370 Capital.
form of capital, thrown upon the money-market and with- drawn from it for the purpose of expanding production.
The simplest form, in which the additional latent money- capital may be represented, is that of a hoard. It may be that this hoard is additional money or silver, secured di- rectly or indirectly in exchange with countries producing precious metals. And only in this manner does the hoarded money in a country grow absolutely. On the other hand, it may be — and is so in the majority of cases — that this hoard is nothing but money withdrawn from inland cir- culation and has assumed the form of a hoard in the hands of individual capitalists. It is furthermore possible that this latent money-capital consists only of tokens of value — we ignore credit money at this point — or of mere claims (titles) on third persons conferred by legal documents. In all such cases, whatever may be the form of this additional money-capital, it represents, so far as it is prospective capi- tal, nothing but additional and reserved legal titles of capi- talists on future additional products of society.
"The mass of the actually accumulated wealth, con- sidered as to magnitude,...is absolutely insignificant com- pared to the productive forces of society to which it belongs, whatever may be its stage of civilization; or even compared to the actual consumption of this same society in the course of but a few years; so insignificant, that the attention of the legislators and political economists should be mainly di- rected to the forces of production and their free develop- ment in the future, not, as heretofore, to the mere accumu- lated wealth which strikes the eye. By far the greater part of the so-called accumulated wealth is only nominal and does not consist of actual objects, such as ships, houses, cotton goods, real estate improvements, but of mere legal titles, claims on the future annual productive forces of so- ciety titles generated and perpetuated by the devices or in- stitutions of insecurity...The use of such articles (accumu- lations of physical things, or actual wealth) as a mere means of appropriating for their owners a wealth which the future productive forces of society are as yet to create, this use would be gradually withdrawn from them without any force The Circulation of Surplus-Value. 371 by the natural laws of distribution; with the assistance of co-operative labor, it would be withdrawn from them within a few years." (William Thompson, Inquiry into the Prin- ciples of the Distribution of Wealth, London, 1850, page 453. This book appeared for the first time in 1827.)
"It is little understood, nor even suspected by most people, what an utterly insignificant portion, whether it be in quantity or effectiveness, the actual accumulations of society constitute of the human productive forces, yea, even of the ordinary consumption of a single generation of men during a few years. The reason for this is obvious, but the effect is very injurious. The wealth which is consumed annually, disappears as it is being used; it stands before the eye only for a moment, and makes an impression only while it is en- joyed or consumed. But the slowly consumable portion of wealth, furniture, machines, buildings, from our childhood to our age they are standing before our eyes, lasting monu- ments of human exertion. By virtue of the ownership of this fixed, lasting, slowly consumed portion of public wealth — of the soil and the raw materials on which, the instruments with which, work is done, the houses which give shelter while the work is being done — by virtue of this ownership the owners of these objects control for their own advantage the annual productive forces of all really productive laborers of society, insignificant as those objects may be in propor- tion to the ever recurring products of this labor. The population of Great Britain and Ireland is 20 millions; the average consumption of every man, woman, and child is about 20 p. st., making a total wealth of 400 million p. st., the product of labor annually consumed. The total amount of the accumulated capital of those countries does not exceed, according to estimates, 1,200 million p. st., or thrice the an- nual product of labor; if equally divided, 60 p. st. of capi- tal per capita. We have here to deal more with the propor- tion than with the more or less inaccurate absolute amounts of these estimated sums. The interest on this total capital would suffice to maintain the total population in its present •style of living for about two months of one year, and the en- tire accumulated capital (if buyers could be found for it) 372 Capital.
would maintain them without labor for a whole three years! At the end of which time, without houses, clothing, and food, they would have to starve, or become the slaves of those who have maintained them during these three years. As three years are to the life time of one healthy generation, say to 40 years, so the magnitude and importance of the ac- tual wealth, the accumulated capital of even the richest country, is to its productive forces, to the productive forces of a single human generation; not to what they might really produce under intelligent institutions of equal security, and especially with co-operative labor, but to what they are ac- tually producing under the imperfect and discouraging makeshifts of insecurity...And in order to maintain this apparently tremendous mass of existing capital, or rather the control and monopoly of the annual product of labor in its present condition of compulsory division this entire machinery the vices, the crimes, the sufferings of in- security, are to be perpetuated. Nothing can be accumulated, unless the necessary wants are first satisfied, and the great current of human desires flows after enjoyment; hence the comparatively insignificant amount of actual wealth of so- ciety at any given moment. It is an eternal circulation of production and consumption. In this immense mass of an- nual production and consumption, the handful of actual accumulation would hardly be missed, and yet attention has been mainly directed, not to that mass of productive forces, but to this handful of accumulation. But this handful has been appropriated by a few, and transformed into an instru- ment for the appropriation of the ever recurring annual products of the labor of the great masses. Hence the vital importance of such an instrument for these few...About one-third of the annual national product is now taken from the producers under the name of public taxes, and un- productively consumed by people that do not give any equivalent for it, that is to say, none that is accepted as such by the producer...The eye of the crowd looks with astonishment upon the accumulated masses, especially when they are concentrated in the hands of a few. But the an- nually produced masses, like the eternal and innumerable The Circulation of Surplus-Value. 373 waves af a mighty stream, roll by and are lost in the for- gotten ocean of consumption. And yet this eternal con- sumption determines not alone all enjoyments, but the very existence of the human race. The quantity and distribution of this annual product should above all be made the object of study. The actual accumulation is of secondary im- portance, and receives even this importance almost exclu- sively by its influence on the distribution of the annual product...The actual accumulation and distribution is here (in Thompson's work) always considered in reference and subordination to the productive forces. In almost all other systems, the productive forces have been considered with reference and in subordination to accumulation and to the perpetuation of existing mode of distribution. Compared with the conservation of this existing mode of distribution, the ever recurring suffering or welfare of the entire human race is not considered worthy of a glance. To perpetuate the re- sults of force, of fraud, and of accident, this has been called security, and for conservation of this lying security, all the forces of production of the human race have been merci- lessly sacrificed." C Ibidem, pages, 440-443.)
For the reproduction, only two normal cases are possible, apart from disturbances, which interfere with reproduction even on a given scale.
There is either reproduction on a simple scale.
Or, there is a capitalization of a surplus-value, accumu- lation.
I. Simple Reproduction.
In the case of simple reproduction, the surplus-value produced or realized annually, or by several turn-overs dur- ing the year, is consumed individually, that is to say un- productively, by its owner, the capitalist.
The fact that the value of the product consists in part of surplus-value, in part of that portion of value which is formed by the variable capital reproduced through it plus the constant capital consumed by it, does not alter anything, 374 Capital.
either in the quantity, or in the value of the total product, which continually passes into circulation and is just as continually withdrawn from it, in order to pass into produc- tive or individual consumption, that is to say, to serve as means of production or consumption. Making exception of the constant capital, only the distribution of the annual product between the laborers and the capitalists is thereby affected.
Even if simple reproduction is assumed, a portion of the surplus-value must, therefore, always exist in the form of money, not of products, because it could otherwise not be converted for purposes of consumption from money into products. This conversion of the surplus-value from its original commodity-form into money must be further an- alyzed at this place. In order to simplify the matter, we assume the most elementary form of the problem, namely the exclusive circulation of metal coin, of money which is a real equivalent.
According to the laws of the simple circulation of com- modities (developed in volume I, chapter III), the mass of the metal coin existing in a country must not only be sufficient for the circulation of the commodities, but must also suffice for the fluctuations of the circulation of money, which arise partly from fluctuations in the velocity of the circulation, partly from a change in the prices of commodi- ties, partly from the various and varying proportions in which the money serves as a medium of payment or as the typical medium of circulation. The proportion in which the existing quantity of money is divided into a hoard and money in circulation, varies continually, but the quantity of money is always equal to the sum of the money hoarded and the money circulating. This quantity of money (quant- ity of precious metal) is a gradually accumulated hoard of society. To the extent that a portion of this hoard is con- sumed by wear, it must be replaced annually, the same as any other product. This takes place in reality by a direct or indirect exchange of a part of the annual product of a country for the product of countries producing gold and silver. However, this international character of the trans- The Circulation of Surplus-Value. 375 action disguises its simple course. In order to reduce the problem to its simplest and most transparent expression, it must be assumed that the production of gold and silver takes place in the same country in which the other products are created, so that the production of gold and silver con- stitutes a part of the total social production within every country.
Apart from the gold and silver produced for articles of luxury, the medium of their annual production must be equal to the wear of metal coin annually occasioned by the circulation of money. Furthermore, if the value of the annually produced and circulating quantity of commodities increases, the annual production of gold and silver must likewise increase, unless the growth of the value of the cir- culating commodities and the quantity of money required for their circulation (and the corresponding formation of a hoard) is accompanied by a greater velocity in the circu- lation of money and a more extensive function of money as a medium of payment, that is to say, by a greater mutual balancing of purchases and sales without the intervention of actual money.
A portion of the social labor power and a portion of the social means of production must, therefore, be expended annually in the production of gold and silver.
The capitalists, who are engaged in the production of gold and silver, and who, according to our assumption of simple reproduction, carry on their production only within the limits of the annual average wear and the resulting average consumption of gold and silver, throw their surplus- value, which they consume annually, according to our as- sumption, without capitalizing any of it, directly into circu- lation in the form of money, which is the natural form for them, not, as in the case of the other capitalists, the con- verted form of their product.
Furthermore, as concerns wages, the money form in which the variable capital is advanced, it is not replaced in this case by the sale of the product, by a conversion into money, but by a product whose natural form is from the outset that of money.
376 Capital.
Finally, the same applies also to that portion of the product in precious metals which is equal to the value of the periodically consumed constant capital, both the constant circulating and the constant fixed capital consumed during the year.
Let us study the rotation, or the turn-over, of the capital invested in the production of precious metals first in the form of M— C— P— M\ So far as the C in M— C does not only consist of labor-power and materials of production, but also of fixed capital, only a part of whose value is con- sumed by P, it is evident that the product, M', is a sum of money equal to the variable capital invested in wages plus the circulating constant capital invested in materials of production plus a portion of the value of the fixed constant capital plus a surplus-value. If the sum were smaller, the general value of gold remaining the same, then the mine would be unproductive, or, if this is generally the case, the value of gold, compared with the value of commodities that remains unchanged, would rise; that is to say, the prices of commodities would fall, so that henceforth the amount of money invested in M — C would be smaller.