in this form of the circulation process. But it is not for- mally expressed, since the term M' concludes the formula and indicates that it may at once re-enter on its function of in- creased money-capital.
In the formula C'-M', the sale of C is directly indicated; but this sale C'-M' on the part of one is M-C, or the purchase of commodities, on the part of another, and in the last analy- sis a commodity is bought only for its use-value, in order to enter (leaving intermediate sales out of consideration) into the process of consumption, and this may be either produc- tive or individual consumption, according to the nature of the commodity. But this consumption does not enter into the circulation of individual capital, the product of which is C. This product is eliminated from this circulation from the moment that it is sold. C is explicitly produced for con- sumption by others. For this reason we note that certain spokesmen of the mercantile system (which is based on the formula M-C..P...C'-M') deliver lengthy sermons to the effect that the individual capitalist should consume only in his The Circulation of Money-Capital. 67 capacity as a worker, that capitalist nations should let other and less intelligent nations consume their own and other commodities, and that a capitalist nation should devote itself for life to the productive consumption of commodities. These sermons frequently remind us in form and content of analogous ascetic exhortations of the fathers of the church.
The rotation process of capital is therefore a combination of circulation and production, it includes both. In so far as the two phases M-C and C'-M' are processes of circulation, the rotation of capital is a part of the general circulation of com- modities. But in so far as they are definite sections perform- ing a peculiar function in the rotation of capital, which com- bines the spheres of circulation and production, capital goes through its own circulation in the general circulation of com- modities. The general circulation of commodities serves capital in its first stage as a means of assuming that form in which it can perform the function of productive capital; in its second stage, it serves to eliminate the commodity func- tion in which capital cannot renew its circulation; at the same time it enables capital to separate its own circulation from that of the surplus-value created by it.
The circulation of money-capital is therefore the most one- sided, and thus the most convincing and typical form of the circulation of industrial capital. Its aim and compelling motive, the utilization of value, the making and accumula- tion of money, is thus most clearly revealed. Buying in order to sell dearer is its slogan. The first phase M-C also indicates the origin of the elements of productive capital in the commodity market, or more generally, the dependence of the capitalist mode of production on circulation, on com- merce. The circulation of money-capital is not merely the production of commodities; it is itself possible only through circulation of commodities and based on it. This is plain from the fact that the term M belongs to circulation and represents the first and most typical form of advanced capi- tal-value. This is not the case in the other two forms of cir- culation.
68 Capital.
The circulation of money-capital always remains the gen- eral expression of industrial capital, because it always implies the utilization of the advanced value. In P...P, the money- character of capital is shown only in the price of the ele- ments of production as a value expressed in money-terms for the purpose of calculation and book-keeping.
M...M' becomes a special form of the circulation of indus- trial capital when new capital is first advanced in the form of money and then returned in the same form, either in pass- ing from one branch of industry to another, or in the case that industrial capital retires from business. This includes the capital function of the surplus-value first advanced in the form of money, and becomes most evident when surplus- value performs a function in some other business than the one in which it originated. M...M' may be the first circula- tion of a certain capital; it may be the last; it may be re- garded as the form of the total social capital; it is that form of capital which is newly invested, either as a recently accu- mulated capital in the form of money, or as some old capi- tal which is entirely transformed into money for the purpose of transfer from one branch of industry to another.
Being a form always contained in all circulations, money- capital performs this circulation precisely for that part of capital which produces surplus-value, viz., variable capital. The normal form of an advance in wages is payment in money; this process must be renewed in short intervals, be- cause the laborer lives from hand to mouth. In his relation to the laborer, the capitalist must therefore always be a money-capitalist, and his capital must be money-capital. There can be no direct or indirect balancing of accounts in this case, such as we find in the purchase of means of produc- tion or in the sale of productive commodities, where the greater part of the money capital really exists in the form of commodities, while the money is mainly used for purposes of calculation and figures in cash only in the balancing of accounts. On the other hand, a part of the surplus-value arising out of variable capital is spent by the capitalist for his individual consumption, which is a part of the retail trade, and this surplus-value is in the last analysis always The Circulation of Money-Capital. 69 expended in the form of money. It does not matter how large or small may be this part of surplus- value. Variable capital always appears anew as money-capital invested in wages (M-L) and m as surplus-value which may be expended for the individual consumption of the capitalist. So that M, capital advanced for wages, and m, its increment, are necessarily held and spent in the form of money.
The formula M-C...P...C-M', with its result M' equal to M plus m, is, in a certain sense, deceptive, owing to the exist- ence of the advanced and surplus-value in the form of the general equivalent, money. The emphasis in this formula is not on the utilization of value, but on the money-form of this process, on the fact that more money-value is finally drawn out of 'the circulation than had originally been advanced; in other words, the emphasis is on the multiplica- tion of the amount of gold and silver belonging to the capi- talist. The so-called monetary system is merely the expres- sion of the abstract formula M-C-M', a movement which takes place exclusively in the circulation. And this system can- not explain the two phases M-C and C-M' in any other way than by declaring that C is sold above its value in the second phase and thus draws more money out of the circulation than was put into it in its purchase. But if M-C...P...C'-M, becomes the exclusive form of circulation, it is the basis of a more highly developed mercantile system, in which not only the circulation of commodities, but also their produc- tion, is recognized as a necessary element.
The illusive character of M-C...P...C,-M' and the resulting illusive interpretation always appear, whenever this form is considered as rigid, not as a flowing and ever renewed move- ment; in other words, they appear whenever this formula is considered not as one section of circulation, but as the exclu- sive form of circulation. But it itself points toward other forms.
In the first place, this entire circulation is conditioned on the capitalist character of the process of production, and con- siders it and the specific social conditions created by it as the basis. M-C is equal to M-C{£m. but M-L assumes the exist- ence of the wage laborer, and regards the means of produc- *70 Capital.
tion as parts of productive capital. It assumes, therefore, that the process of labor and of utilization, the process of pro- duction, is a function of capital.
In the second place, if M...M' is repeated, the return to the money-form is just as transient as the money-form in the first phase. M-C disappears and makes room for P. The re- current advance of money-capital and its equally persistent return in the form of money appear merely as passing moments in the general circulation.
In the third place; the repeated formula has this form: M-C...P...C-M'. M-C...P...C-M'. M-C...P...etc.
Beginning with the second repetition of the circulation, the cycle P...C'-M'.M-C...P appears, before the second circulation of M is completed, and all other cycles may be considered under the form of P...C-M-C...P, so that the first phase of the first circulation is merely the passing introduction for the constantly repeated circulation of the productive capital. And this is indeed the case for the first time in the investment of industrial capital in the form of money.
On the other hand, before the second circulation of P is completed, the first circulation, that of the commodity-capi- tal, as shown in the formula C'-M'. M-C...P...C (or abridged C...C) has preceded. Thus the first form already con- tains the other two, and the money-form disappears, so far as it is a general equivalent and not merely an expression of value used for calculation.
Finally, if we consider some newly invested capital going for the first time through the circulation M-C..P...C'-M', then M-C is the introductory phase, the preparation for the first process of production undertaken by this capital. This phase M-C is not considered as existing, but is caused by the requirements of the process of production. But this applies only to this individual capital. The general form of the circulation of industrial capital is the circulation of money- capital, whenever the capitalist mode of production exists and with it the social conditions corresponding to it. It is there- fore the capitalist mode of production which is the first con- dition for the circulation of money-capital, and if it is not assumed for the first phase of a newly invested industrial The Circulation of Money Capital. 71 capital, it is certainly assumed for all others. The continu- ous movement of this process of production requires the per- sistent renewal of the cycle P...P. Even the first stage, M-C {pmt reveals this basic condition. For it requires on one side the existence of the wage-working class. On the other side, that which is M-C for the buyer of means of pro- duction, is C'-M' for their seller. Hence C presupposes the existence of commodity-capital, and thus of commodities as the result of capitalist production, and this implies the func- tion of productive capital.
72 Capital.
CHAPTER II.
THE ROTATION OF PRODUCTIVE CAPITAL.
The rotation of productive capital has the general formula P...C'-M'-C...P. It signifies the periodical renewal of the function of productive capital, in other words its reproduc- tion, or its process of production as a reproductive process generating surplus-value. It is not only production, but a periodical reproduction of surplus-value; it is the function of industrial capital in its productive form, and this function is not performed merely once, but periodically so that the terminal point of one cycle is the starting point of another. A portion of C may re-enter directly into the same labor pro- cess as means of production out of which it came in the form of commodities (for instance, in various branches of investment of industrial capital). This merely does away with the transformation of its value into money proper, or token-money, or else it finds an independent expression merely in calculation. This part of value does not enter into the circulation. Thus it is that values enter into the process of production wThich do not enter into circulation. The same is also true of that part of C which is consumed by the capitalist, and which represents surplus-value in the form of means of consumption, in their natural state. But this is inconsiderable for capitalist production. It deserves con- sideration, if at all, only in agriculture.
Two things are at once apparent in this form.
In the first place, while in the first form, M...M', the pro* cess of production, a function of P, interrupts the circulation of money-capital and acts only as a mediator between its two phase MjC and C'-M', it is the entire circulation process of industrial capital, its entire movement within the sphere of circulation, which intervenes here and forms the connecting link between productive capitals, which begin the circulation at one extreme and close it at another, only to make this last extreme the starting point of a new cycle. Circulation The Rotation of Productive Capital. 73 proper appears but as an instrument promoting the periodic renewal, and thus the continuous reproduction, of productive capital.
In the second place, the entire circulation assumes a form which is the reverse of that which it has in the circulation of money-capital. While the circulation of money-capital pro- ceeds after the formula M — C — M (M — C. C — M), making- exception of the determination of value, it proceeds in the case of productive capital, making the same exception, after the formula C— M— C (C— M. M— C). which is the form of the simple circulation of commodities.
I. Simple Reproduction.
Let us first consider the process C'-M'-C, which takes place between the two extremes P...P.
The starting point of this circulation is the commodity- capital C, equal to C plus c, or equal to P plus c. The func- tion of commodity-capital C — M' has been considered in the first form of the circulation. It consisted in the realization of the capital-value P, contained in it, which now exists as a part of the commodity C, and likewise in the realization of the surplus-value contained in it, which now exists as a part of the same mass of commodities C and has the value of c. But in the former case, this function formed the second phase of the interrupted circulation and the concluding phase of the entire cycle. In the present case, it forms the second phase of the cycle, but the first phase of the circula- tion. The first cycle ends with M', and since M' as well as the original M may again open the second cycle as money- capital, it was not necessary for the moment to analyze whether the parts of M', viz., M and m (surplus-value) con- tinue in their course together, or whether each one of them pursues its own course. This would only have been neces- sary, if we had followed up the first cycle in its renewed course. But in studying the cycles of productive capital, this point must be decided, because the determination of its very first cycle depends on it, and because C — M' appears in it as the first phase of circulation which has to be supple- 74 Capital.
mented by M — C. It depends on the outcome of this deci- sion, whether our formula represents the simple reproduc- tion, or reproduction on an enlarged scale. The character of the cycle changes according to this decision.
Let us, then, take first the simple reproduction of produc- tive capital, assuming that the conditions are the same as those taken for a basis in the first chapter, end that the com- modities are bought and sold at their value. Under these conditions, the entire surplus-value enters into the individual consumption of the capitalist. As soon as the transforma- tion of the commodity-capital C into money has taken place, that part of the money which represents the capital-value continues in the cycle of industrial capital; the other part, which represents surplus-value in the form of gold, enters into the general circulation of commodities as a circulation of money emanating from the capitalist but taking place outside of the circulation of his individual capital.
In our illustration, we had a commodity-capital C of 10,000 pounds of yarn, valued at 500 pounds sterling; 422 pounds sterling of this represent the value of productive capital and continue, as the money-form of 8,440 pounds of yarn, the capital circulation begun by C, while the surplus- value of 78 pounds sterling, as the money-form of 1,560 pounds of yarn, the surplus-product, leaves this circulation and describes its own separate course within the general cir- culation of commodities.
Pm The formula m — c represents a series of purchases by means of money which the capitalist spends either in com- modities proper or for personal services to his cherished self or family. These purchases are made piece-meal at various times. Money, therefore, exists temporarily in the form of a supply, or hoard, of money destined for gradual consump- tion, for money interrupted in its circulation partakes of the nature of a hoard. Its function as a circulating medium, including that of a temporary hoard, does not share in the The Rotation of Productive Capital. 75 circulation of capital having the form of money M. This money is not advanced, but spent.
We have assumed that the advanced total capital always passed entirely from one of its phases into the other. In this case, we, therefore, assume that the mass of commodities produced by P represents the total value of the productive capital P, or 422 pounds sterling plus 78 pounds sterling of surplus-value created in the process of production. In our illustration, which deals with an easily analyzed commodity, the surplus-value exists in the form of 1,560 pounds of yarn; if computed on the basis of one pound of yarn, it would exist in the form of 2.496 ounces. But if the com- modity were, for instance, a machine valued at 500 pounds sterling and representing the same division of values, one part of the value of this machine would indeed be repre- sented by 78 pounds sterling of surplus-value, but these 78 pounds sterling would exist only in the machine as a whole. This machine cannot be divided into capital-value and sur- plus-value without breaking it to pieces and thus destroy- ing, with its use-value, also its exchange-value. For this reason the two parts of value can be represented only ideally as portions of a mass of commodities, not as independent elements of the commodity C, such as we are able to dis- tinguish in each pound of yarn in the 10,000 pounds of our illustration. In the case of the machine, the total com- modity representing the commodity-capital must be sold before m can enter into its independent circulation. On the other hand, when the capitalist has sold 8,440 pounds of yarn, the sale of the remaining 1,560 pounds of yarn would represent an entirely separate circulation of the surplus-value in the form of c (1,560 pounds of yarn) — m (78 pounds sterling) equal to c (articles of consumption). But the ele- ments of value of each individual portion of yarn in the 10,000 pounds may be individually separated and valuated the same as the total quantity of yarn. Just as the entire 10,000 pounds of yarn may be divided into the value of the constant capital c (7,440 pounds of yarn worth 372 pounds sterling), variable capital v (1,000 pounds of yarn worth 50 pounds sterling, and surplus- value s (1,560 pounds of yarn worth 78 pounds sterling), so every pound of yarn 76 Capital.
may be divided into c (11.904 ounces of yarn worth 8.929 d.)', v (1.640 ounces of yarn worth 1.200 d.), and s (2.496 ounces of yarn worth 1.872 d.). The 'capitalist might also sell various portions of the 10,000 pounds of yarn succes- sively and consume the different portions of surplus-value contained in them in the same way, thus realizing gradu- ally the sum of c plus v. But this operation likewise re- quires the final sale of the entire lot, so that the value of c plus v would be made good by the sale of 8,440 pounds of yarn (vol. I, chap IX, 2).
However that may be, by the movement C — M', both the capital-value and surplus-value contained in C secure a separate existence in separate sums of money. In both cases, M and m are actually transformed values, which had orig- inally only an ideal existence in C as prices of commodities.
The formula c — m — c represents the simple circulation of commodities, the first phase of which, c — m, is included in the circulation of the commodity-capital C — M', in short, included in the cycle of capital; while its supplementary phase m — c falls outside of this cycle and is a separate proc- ess in the general circulation of commodities. The circula- tion of 'C and c, of capital-value and surplus-value, is dif- ferentiated after the transformation of C into M'. Hence it follows: First, by the realization on the commodity-capital in the process C — M', or C — (M+m), the courses of capital-value and surplus-value, which are united so long as they are both embodied in the same mass of commodities in C — M', are separated, for both of them henceforth appear in two inde- pendent sums of money.
Second, after this separation has taken place, m being spent as the income of the capitalist, while M continues its way as a functional form of capital-value in a course deter- mined by this cycle, the movement C — M' in connection with the subsequent movements M — C and m — c, may be represented in the form of two different circulations, viz.: C__M — C and c — m — c, and both of these, so far as their general form is concerned, belong to the general circulation of commodities.
The Rotation of Productive Capital. 77 By the way, in the case of commodities which cannot be cut up into their constituent parts, it is a matter of practice to isolate their different portions of value and surplus-value ideally. In the building-business of London, for instance, which is carried on mainly on credit, the contractor re- ceives advances in proportion to the different stages in which the construction of a house proceeds. None of these stages is a house, but only an actually existing fraction of the growing house; in spite of its actuality, each stage is but an ideal portion of the entire house, but it is real enough to serve as security for an additional advance. (See on this point chapter XII, vol. II.)
Third, if the movement of capital-value and surplus-value, which proceeds unitedly so long as they are in the form of C and M, is separated only in part (so that a portion of the surplus-value is not spent as income), or is not separated at all, a change takes place in the capital-value itself within its own cycle, before it is completed. In our illustration the value of the productive capital was equal to 422 pounds sterling. If it continues its cycle M-C, for instance as 480 pounds sterling or 500 pounds sterling, then it goes through the further stages of its cycle with an increase of 58 pounds sterling or 78 pounds sterling over its original value. This change may also go hand in hand with a change in the proportion of its component parts.
C — M', the second stage of the circulation and the final stage of cycle I (M...M'), is the second stage in our cycle and the first in the circulation of commodities. So far as the circulation is concerned, this stage must be supplemented by M' — C\ But C — M' has not only passed the process of utilization (in this case the function of P, the first stage), but has also realized as its result the commodity C\ The process of utilization of capital, and the realization on the commodities which are its product, are therefore completed in C'—W.
"We have started out with simple reproduction and assumed that m — e separates entirely from M — C. Since both cir- culations, c — m — c as well as C — M — C, belong to the cir- culation of commodities, so far as their general form is con- cerned (and do not show, for this reason, any difference 78 Capital.
in the value of their extremes), it is easy to conceive of the process of capitalist production, after the manner of vulgar economy, as a mere production of commodities, of use-value destined for consumption of some sort, which the capitalist produces for no other purpose than that of get- ting in their place commodities with different use-values, or exchanging them, as vulgar economy erroneously states.
C appears from the very outset as commodity-capital, and the purpose of the entire process, the accumulation of wealth, does not exclude an increasing consumption on the part of the capitalist in proportion as his surplus- value (and thus his capital) increases; on the contrary, it promotes such an increasing consumption.
Indeed, in the circulation of the income of the capitalist, the produced commodity c, or the ideal fraction of the com- modity C corresponding to it, serves merely for its transfor- mation, first into money, and from money into a number of other commodities required for individual consumption. But we must not, at this point, overlook the trifling circumstance that c is that part of the commodity-value which did not cost the capitalist anything, since it is the embodiment of surplus-labor and steps originally on the stage as a part of the commodity-capital C. This c is, by the varying nature of its existence, bound to the cycle of circulating capital- value, and if this cycle is clogged, or otherwise disturbed, not only the consumption of c is restricted or entirely ar- rested, but also the disposal of that series of commodities which are to take the place of c. The same is true in the case that the movement C — M' is a failure, or that only a part of C is sold.
We have seen that c — m — c, as representing the circula- tion of the revenue of the capitalist, enters into the circula- tion of capital only so long as c is a part of the value of C, of the commodity-capital; but that, as soon as it materializes in the form of m — c, that is to say, as soon as it completes the entire cycle c — m — c, it does not enter into the movements of the capital advanced by the capitalist, although this ad- vance is its cause. It is connected with the movements of capital only in so far as the existence of capital presupposes The Rotation of Productive Capital. 79 the existence of the capitalist, and this is conditioned on the consumption of surplus-value by the capitalist. ■ Within the general circulation, C, for instance yarn, passes only as a commodity; but as an element in the cir- culation of capital it performs the function of commodity- capital, and capital-value alternately assumes and discards this form. After the sale of the yarn to a merchant, it has passed out of the circulation of the capital which produced it, but nevertheless, as a commodity, it moves always in the cycle of the general circulation. The circulation of one and the same mass of commodities continues, although it may have ceased to be an element in the independent cycle of the capital of the manufacturer. Hence the actual and final metamorphosis of the mass of commodities thrown into cir- culation by the capitalist by means of C — M, their final elimination in consumption, may be separated in space and time from that metamorphosis in which this same mass of commodities performs the function of commodity-capi- tal. The same metamorphosis which has been completed in the circulation of capital still remains to be accomplished in the sphere of the general circulation.