According to our assumption, the annual production of gold just covers the annual wear of money, to the amount of 500 p. st. If we keep in mind these 500 p. st., and make abstraction of that portion of the annually produced mass of commodities which is circulated by means of previously accumulated money, then the surplus-value incorporated in the commodities will find money for its monetization in circulation for the simple reason that surplus-value is annually produced in the form of gold on the other side. The same applies to the other parts of the gold product which replace the advanced money-capital.
Now, two things are to be noted here.
In the first place, it follows that the surplus-value spent by the capitalists as money, as well as the variable and other productive capital advanced by them in money is actually a product of the laborers, namely of those engaged in the pro- duction of gold. They produce anew not only that portion of gold which is "advanced" to them as wages, but also that portion of gold in which the surplus-value of the capitalist gold producers is directly embodied. As for that portion of the gold product, which replaces only the constant capital- value advanced for its production, it re-appears in the form of money (or a product in general) only through the annu- 390 Capital.
390 Capital.
al labor of the working men. In the beginning of the busi- ness, it was originally expended in money by the capitalists, and this money was not newly produced, but formed a part of the circulating mass of social money. But to the extent that it is replaced by a new product, by additional money, it is the annual product of the laborer. The advance on the part of the capitalist appears here likewise merely as a form, which owes its existence to the fact that the laborer is neither the owner of his own means of production, nor able to command, during his production, the means of subsistence produced by other laborers.
In the second place, as concerns that mass of money which exists independently of this annual reproduction of 500 p. st., either in the form of a hoard, or of circulating money, things must be, or rather must have been originally just as they still are with reference to these 500 p. st. annually. We shall return to this point at the close of this section. For the present, we wish to make a few other remarks.
"We have seen during our study of the turn-over, that, other circumstances remaining equal, a change in the length of the periods of turn-over requires different amounts of money-capital, in order to carry on production on the same scale. The elasticity of the money-circulation must, there- fore be sufficient to adapt itself to this fluctuation of ex- pansion and contraction.
If we furthermore assume other circumstances as equal — the length, intensity, and productivity of the working day also remaining unchanged — but a different division of the value of the product, between wages and surplus-value, so that either the former rise and the latter fall, or vice versa, the mass of the circulating money is not touched thereby. This change can take place without any expansion or con- traction of the mass of money in circulation. Let us con- sider particularly the case in which there would be a general rise in wages, so that, under the given assumptions, there would be a general fall in the rate of surplus-value, while there would not be any change, also according to our assump- The Circulation of Surplus-Value. 391 tion, in the mass of circulating commodities. In this case, there should be indeed ar increase of the money-capital which must be advanced as variable capital in the quantity of money which serves for this purpose. But to the exact extent that the amount of money required for the function of variable capital grows, does the surplus-value decrease, and thus the amount of money required for its realization. The amount of money required for the realization of the values of the commodities is not affected thereby, any more than this value itself. The cost price of the commodity rises for the individual capitalist, but its social price of pro- duction remains unchanged. That which is changed is the proportion, in which, apart from the constant portion of its value, the price of production stands to wages and profits But, it is argued, a greater outlay of variable capital (the value of the money is, of course, considered the same) means a, larger amount of money in the hands of the labor- er. This causes a greater demand for commodities on the part of the laborer. This, in turn, leads to a rise in the price of commodities. Or, it is said: If wages rise, the capitalists raise the prices of their commodities. In either case, the general rise in wages causes a rise in the prices of commodities. Hence a greater amount of money is needed for the circulation of commodities, no matter whether the rise in prices is explained in this or that way.
Reply to the first argument: In consequence of a rise in wages, especially the demand of the laborers for the neces- sities of life will rise. In a lesser degree their demand for articles of luxury will increase, or the demand will be de- veloped for things which did not generally belong to the scope of their consumption. The sudden and increased demand for the necessities of life will doubtless raise their prices momentarily. As a result, a greater portion of the social capital will be invested in the production of the neces- sities of life, and a smaller portion in the production of articles of luxury, since these fall in price on account of the decrease in surplus-value and the consequent decrease in the demand of the capitalists for these articles. And to the extent that the laborers themselver buy articles of luxury, 392 Capital.
392 Capital.
the rise in their wages — to this degree — does not promote an increase in the prices of necessities of life, but simply fills the place of the buyers of luxuries. More luxuries than before are consumed by laborers, and relatively fewer by capitalists. That is all. After some fluctuations, the value of the circulating commodities is the same as before. As for the momentary fluctuations, they will not have any other effect than to throw unemployed money-capital into the in- land circulation, capital which so far had sought employ- ment in speculative enterprises at the stock exchange or in foreign countries.
Reply to the second argument: If it were in the power of the capitalist producers to raise the prices of their com- modities at will, they could and would do so without wait- ing for a rise in wages. Wages would never rise while the prices of commodities were going down. The capitalist class would never resist the trades unions, since the capitalists could always and under all circumstances do what they are now doing exceptionally under definite peculiar, one might say local, circumstances, to wit, to avail themselves of every rise in wages to raise prices much higher and thus pocket greater profits.
The claim that the capitalists can raise the prices of ar- ticles of luxury, because the demand for them decreases (in consequence of the reduced demand of the capitalists whose spending money has decreased) would be a very unique application of the law of supply and demand. The prices of articles of luxury fall in consequence of reduced demand to the extent that capitalist buyers are not replaced by la- boring buyers, and so far as this replacement takes effect, the demand of the laborers does not result in a rise of the prices of necessities, for the laborers cannot spend that por- tion of their increased wages for necessities which they spend for luxuries. Consequently capital is withdrawn from the production of luxuries, until their supply in the market is reduced to the measure which corresponds to their altered role in the process of social production. With their pro- duction thus reduced, they rise in price, provided their value is otherwise unchanged, to their normal level. So long as this contraction, or this process of compensation, takes place, The Circulation of Surplus-Value. 393 there is just as constantly, with rising prices of necessities, a migration of capital into the production of these to the degree that it is withdrawn from the other line of business, until the demand is satisfied. Then the balance is restored, and the end of the whole process is that the social capital, including the money-capital, is divided in a different propor- tion between the production of necessary means of subsis- tence and that of luxuries.
The entire objection is a scarecrow set up by the capi- talists and their apologists in economics.
The facts, which furnish the material for this scarecrow, are of three kinds: (1). It is the general law of the circulation of money that the quantity of circulating money increases if the total price of the circulating commodities increases, other circumstances remaining the same, regardless of whether this increase of the totality of prices applies to the same quantity of commodities, or to a greater quantity. The ef- fect is then taken for the cause. Wages rise (although rarely and only exceptionally in proportion) with the in- creasing price of the necessities of life. This rise in wages is a result, not a cause, of the rise in the prices of commodi- ties.
(2). In the case of a partial, or local, rise of wages — that is to say, a rise only in some lines of production — a local rise in the prices of the products of this line may follow. But even this depends on many circumstances, for instance, that wages had not been abnormally depressed previously, so that the rate of profits was abnormally high, that the mar- ket is not narrowed by a rise in prices (so that a contraction of its supply previous to the raising of its prices will not be necessary), etc.
(3) In the case of a general rise of wages, the price of 'the produced commodities rises in lines of business where the variable capital preponderates, but falls, on the other hand, in lines where the constant, or eventually the fixed, capital preponderates.
We found in our study of the simple circulation of com- modities (volume I, chapter III, 2), that, even though the 394 Capital money-form of any definite quantity of commodities is in- finitesimal within its circulation, still the money in the hand of one man disappears during the transformation of a cer- tain commodity and takes its place in the hands of an- other, so that commodities are not only exchanged, or replaced by one another, but this mutual exchange of places is also promoted and accompanied by a universal precipitation of money. "When one commodity replaces another, the money commodity sticks to the hands of some third person. Cir- culation sweats money from every pore." (Vol. I, page 127.) The same fact is expressed, on the basis of capitalist production, of commodities, by the continual existence of a portion of capital in the form of money-capital, and by the retention of a portion of surplus-value in the hands of its owners, likewise in the form of money.
Aside from this, the rotation of money — that is to say, the return of money to its point of departure — so far as it is an element in the turn-over of capital, is a phenomenon entirely different from, or even the reverse of, the circulation of money, 28 which expresses its removal from the point of departure through a number of hands. (Vol. I. page 129.) Nevertheless an accelerated turn-over implies naturally an acceleration of the circulation.
As for the variable capital, if a certain money-capital, say 500 p. st., is turned over ten times in a year, in the form of a variable capital, it is evident that this aliquot part of the 28 Although the physiocrats still intermingle these two phenomena in- discriminately, they are nevertheless the first who emphasize the reflux of money to its starting point as the essential form of circulation of capital, as that form of circulation which promotes reproduction. "Throw a glance at the Tableau Economique, and you will see that the pro- ductive class gives the money with which the other classes buy products from it, and that they return this money to it when they come back next year to make the same purchases...You see, then, that there is in this instance no other cycle but that of expenditure followed by reproduction, and of reproduction followed by expenditure. And this cycle is described by the circulation of money, which is the measure of expenditure and reproduction." — Quesnay, Problemes Economiques, Daire edition, Physiocrats, I, pages 208, 209.) "It is this continual advance and return of capitals which must be called the circulation of money, this useful and fertile circulation, which gives life to all the labors of society, which maintains the activity and life of the social body, and which is with good justification compared to the circulation of blood in the animal body." (Turgot, Reflexions, etc., Daire '•edition, I, page 45.)
The Circulation of Surplus-Value. 395 quantity of money in circulation circulates ten times its value, or 5,000 p. st. It circulates ten times per year be- tween the capitalist and the laborer. The laborer is paid, and pays, ten times per year with the same aliquot amount of money. If the same variable capital were turned over only once a year, the scale of production remaining the same, there would be only one turn-over of capital per year.
Furthermore: The constant portion of the circulating capital may be, say, 1,000 p. st. If the capital is turned over ten times, the capitalist sells his commodity, and there- fore also the constant circulating portion of its value, ten times per year. The same aliquot part of the circulating quantity of money (1,000 p. st.) passes ten times from the hands of its owners into those of the capitalist. This means ten changes of place on the part of this money from one hand into another. In the second place, the capitalist buys means of production ten times per year. This again implies ten turn-overs of the money from one hand into another. With regard to the amount of 1,000 p. st., commodities val- ued at 10,000 p. st. have been sold by the industrial capi- talist, and then commodities valued at 10,000 p. st. pur- chased. By means of 20 circulations of 1,000 p. st. in money a commodity supply of 20,000 p. st. has been circulated.
Finally, with an acceleration of the turn-over, also that portion of money circulates faster, which realizes the sur- plus-value.
But, on the other hand, an acceleration in the circulation of money does not necessarily imply a more rapid turn- over of capital, and thus of money, that is to say, it does not necessarily imply a contraction and more rapid renewal of the process of reproduction.
A more rapid circulation of money takes place whenever a larger number of transactions are carried on with the same amount of money. This may take place also with the same periods of reproduction of capital, as a result of changes in the technical appliances of the circulation of money. Fur- thermore, there may be an increase in the number of trans- actions in which money circulates without expressing actual exchanges, of commodities (marginal business at the stock- 396 Capital.
exchange, etc.). On the other hand, some circulations of money may be entirely dispensed with. For instance, where the farmer is himself a real estate owner, there is no circu- lation of money between the capitalist farmer and the real es- tate owner; where the industrial capitalist is himself the owner of the capital, there is no circulation of money be- tween him and the creditor.
As for the primitive formation of a hoard of money in a certain country, and its appropriation by a few, it is un- necessary to discuss it at this point.
The capitalist mode of production — its basis being wage- labor as well as the payment of the laborer in money and in general the transformation of services for natural products into services for money — cannot develop a larger extension and a greater systematization, unless there is available in this country a quantity of money sufficient for the circulation and the corresponding formation of a hoard (reserve fund, etc.). This is the historical pre- mise. However, this must not be interpreted in the sense that a sufficient hoard must first be formed, before capitalist production can begin. It rather develops simultaneously with the evolution of its foundations and one of these foun- dations is a sufficient supply of precious metals. Hence the increased supply of precious metals since the 16th century is an essential factor in the history of the development of capitalist production. But so far as the necessary further supply of money material on the basis of capitalist produc- tion is concerned, surplus-value incorporated in products is on the one hand thrown into circulation without the money required for its monetization, and on the other hand surplus- value in the form of gold without the previous transforma- tion of products into gold.
The additional commodities which are to be converted into money find the necessary amount of money at hand, because on the other side additional gold (and silver) in- tended for conversion into commodities is thrown into cir- culation, not by means of exchange, but by production it- self..
The Circulation of Surplus-Value. 397 II. Accumulation and Reproduction on an Enlarged Scale.
To the extent that accumulation takes place in the form of reproduction on an enlarged scale, it is evident that it does not offer any new problem in matters of the circulation of money.
In the first place, the additional money-capital required for the function of the increasing productive capital is sup- plied by that portion of the realized surplus-value, which is thrown into circulation by the capitalists as money-capi- tal, not as the money-form of their revenue. The money is already present in the hands of the capitalists. Only its employment is different.
Now, by means of the additional productive capital, its product, an additional quantity of commodities, is thrown into circulation. Together with this additional quantity of commodities, a portion of the additional money required for its circulation is thrown into circulation, so far as the value of this mass of commodities is equal to that of the productive capital consumed in their production. This additional quantity of money has precisely been advanced as an addi- tional money-capital, and therefore it flows back to the capi- talist through the turn-over of his capital. Here the same question reappears, which we met previously. Where does the additional money come from, by which the additional surplus-value now contained in the form of commodities is to be realized?
The general reply is again the same. The sum total of the prices of the commodities has been increased, not be- cause the prices of a given quantity of commodities have risen, but because the mass of the commodities now cir- culating is greater than that of the previously circulating commodities, and because this increase has not been offset by a fall in prices. The additional money required for the circulation of this greater quantity of commodities of great- er value must be secured, either by greater economy in the circulating quantity of money — whether by means of bal- ancing payments, etc., or by some measure which accelerates the circulation of the same coins — or, by the transformation 398 Capital.
of money from the form of a hoard into that of a circu- lating medium. This does not merely imply that barren money-capital becomes active as a means of purchase or payment, or that money-capital which is already actually circulating for the benefit of the society while representing a reserve fund for its owner is thus performing a double service (such as deposits in banks which are continually balanced). It also implies that the stagnating reserve funds of money are economized.
"In order that money should flow continuously as coin, coin must constantly coagulate as money. The continuous flow of coin depends on its constant accumulation in the form of reserve funds of coin which spring up throughout the sphere of circulation and form sources of supply; the formation, distribution, disappearance, and reformation of these reserve funds is constantly changing, their existence constantly disappears, their disappearance constantly exists. Adam Smith expressed this never-ceasing transformation of coin into money and of money into coin by saying that every owner of commodities must always keep in supply, aside from the particular commodity which he sells, a certain quantity of the universal commodity with which he buys. We saw, that in the process C — M — C the second member M — C splits up into a series of purchases which do not take place at once, but at intervals of time, so that one part of M circulates as coin while the other rests as money. Money is in that case only suspended coin and the separate parts of the circulating mass of coins appear now in one form, now in another, constantly changing. This first transformation of the medium of circulation into money represents, there- fore, but a technical aspect of money-circulation." (Karl Marx, "A Contribution to the Critique of Political Economy,7' 1859, page 167-168.) — ("Coin" as distinguished from money is here employed to indicate the function of money as a mere medium of circulation as compared to its other func- tions.)
When all these measures do not suffice, an additional production of gold must take place, or, what amounts to the same, one portion of the additional product is directly or The Circulation of Surplus-Value. 399 indirectly exchanged for gold — the product of countries in which precious metals are mined.
The entire amount of labor-power and social means of production expended in the annual production of gold and silver, so far as they serve as instru- ments of circulation, constitutes a bulky item of the dead expense of the capitalist mode of production, or of the production of commodities in general. It deprives social economy of a corresponding amount of potential additional means of production and consumption, that is to say, of actual wealth. To the extent that the cost of this expensive machinery of circulation is decreased at a given scale of circulation or a given scale of its extension, the productive power of society is increased. Hence, so far as the auxiliary means developed with the credit system have any influence in that direction, they increase the social wealth directly, either by running a large portion of the social labor-process without intervention of actual money, or by raising the capacities of the money already in circulation.
This disposes also of the absurd question, whether capital- ist production in its present volume would be possible with- out the credit system (even if analyzed only from this point of view), that is to say, if it were possible with the circula- tion of metallic coin alone. Evidently this is not the case. It would have found the barriers of the limited production of precious metals in its way. On the other hand, one must not entertain any myths as to the productive power of the credit system, so far as it supplies or releases money-capital. The further analysis of this question is out of place here.
We have now to study the case, in which no actual ac- cumulation, that is to say, no immediate expansion of the scale of production, takes place, but a portion of the rea- lized surplus-value is accumulated for a longer or shorter time as a money reserve, in order to be employed later on as productive capital.
To the extent that money so accumulating is additional money, the matter needs no explanation. It can only be a portion of the surplus-gold imported from gold producing 400 • Capital.
countries. In this connection it must be remembered that the national product, in exchange for which this gold is imported, is no longer in this country. It has been exported to foreign countries in exchange for gold.
But if we assume that the same amount of money is still in the country the same as before, then the accumulated and accumulating money has accrued from the circulation. Only its function is changed. It is converted from circulating money into a gradually accruing latent money capital.
The money which is accumulated in this case is the money- form of sold commodities, and represents that portion of its value which constitutes surplus-value for its owner. (The credit system is not supposed to exist in this case.) The capitalist who accumulates this money has sold to that ex- tent without buying.
If we look upon this transaction merely as a limited phenomenon, there is nothing to explain. A part of the capitalists keep the money realized by the sale of their prod- ucts without drawing products out of the market in return for it. Another part of them, on the other hand, transform all their money into products, with the exception of the con- stantly recurring money-capital required for the promotion of production. One portion of the products thrown upon the market as bearers of surplus-value consists of means of production, or of the actual elements of variable capital, the necessary means of subsistence. It can serve immediate- ly for the expansion of production. For it has not been assumed that one part of the capitalists accumulates capi- tal, while the other consumes its surplus-value entirely, but only that one part is engaged in the accumulation of money, in the formation of latent money-capital, while the other part accumulates actually, that is to say, expands the scale of production, really adds to its productive capital. The available quantity of money remains sufficient for the re- quirements of circulation, even if one part of the capitalists accumulates money, while another expands production, and vice versa. Moreover, the accumulation of money on one side may proceed without cash money by the mere* accumu- lation of outstanding claims.
But the difficulty arises when we assume, not a partial, The Circulation of Surplus-Value. 401