the capital to the point of replacing its various elements, such as constant, variable, fixed, circulating, money and commodity-capital, is not conditioned on the mere purchase of commodities followed by a corresponding sale, or a mere sale followed by a corresponding purchase, so that there would actually be a bare exchange of commodity for com- modity, as the political economists assume, especially the free trade school from the time of the physiocrats and Adam Smith. We know that the fixed capital, once that its in- vestment is made, is not replaced during the entire period of its function, but serves in its old form, until its value is gradually precipitated in the form of money. Now we have seen that the periodical renewal of the fixed capital of lie [the entire value of the capital of lie being converted into elements of I valued at (v + s)] pre-supposes on the one hand the mere purchase of the fixed portion of lie, which is reconverted from the form of money into its natural form, and to which corresponds the mere sale of Is; and presupposes on the other hand the mere sale on the part of lie, the sale of its fixed (depreciating) value, which is pre- cipitated in money and to which corresponds the mere pur- chase of I s. In order that the transaction may take place normally in this case, it must be assumed that the mere purchase on the part of II c is equal in value to the mere sale on the part of II c, and that in the same way the mere sale of I s to lie, section 1, is equal in value to the mere purchase from department lie, section 2. Otherwise simple reproduction is interrupted. The mere sale on one side must be offset by a mere purchase on the other. It must likewise be assumed that the mere sale of that portion of I s, which forms the hoards of A, A', A" is balanced by the mere purchase of that portion of I s, which converts the hoards of B, B', B", into elements of additional productive capital.
So far as the balance is restored by the fact that the buyer acts later on as a seller to the same amount, and vice versa, the money returns to the side that has advanced it in the first place, which sold first before it bought again. But the 578 Capital.
actual balance, so far as the exchange of commodities itself is concerned, that it to say, the disposal of the various por- tions of the annual product, is conditioned on the equal value of the commodities exchanged for one another.
But to the extent that only one-sided exchanges are made, a number of mere purchases on one hand, a number of mere sales on the other — and we have seen that the normal disposal of the annual product on the basis of capitalist production requires such onesided metamorphoses — the balance can be maintained only on the assumption that the value of the onesided purchases and onesided sales is the same. The fact that the production of commodities is the general form of capitalist production implies the role which money is playing not only as a medium of circulation, but also as money-capital, and creates conditions peculiar for the normal transaction of exchange under this mode of production, and therefore peculiar for the normal course of reproduction, whether it be on a simple, or on an ex- panded scale. These conditions become so many causes of abnormal movements, implying the possibility of crises, since a balance is an accident under the crude conditions of this production.
We have also seen that there is indeed, in the exchange of I v for a corresponding value of II c, an ultimate renewal of the value of the commodities of II by an equivalent value of commodities of I, so that the sale of the commodi- ties of the aggregate capitalist of II is balanced subsequently by the purchase of commodities from I to the same amount. This restitution takes place. But it is not an exchange which takes place between the capitalists of I and II in the disposal of their relative commodities. II c sells its com- modities to the working class of I. This class meets it one- sidedly in the role of a buyer of commodities, and it meets that class onesidedly as a seller of commodities. With the money so obtained II c meets the aggregate capitalist of I onesidedly as a buyer of commodities, and the aggregate capitalist of I meets it onesidedly as a seller of commodi- ties to the extent of I v. It is only by means of this sale Accumulation and Reproduction. 579 of commodities that department I finally reproduces its variable capital in the form of money-capital. Just as one- sidedly as the capitalist class of I faces that of II in the role of a seller of commodities to the extent of I v, so does that class face its working class in the role of a buyer of com- modities, a buyer of labor-power. And just as one-sidedly as that working class faces the capitalists of II in the role of a buyer of commodities (namely of articles of consump- tion), so it faces the capitalists of I as a seller of commodi- ties, namely, a seller of its labor-power.
The continual offer of labor-power on the part of the working class of I, the reconversion of a portion of the commodity-capital of I into the money-form of variable capital, the renewal of a portion of the commodity-capital of II by natural elements of the constant capital of II c — all these are necessary premises dovetailing into one an- other, but they are promoted by a very complicated process including three processes of circulation which occur inde- pendently of one another, but intermingle. The complicated- ness of this process presents so many opportunities for ab- normal deviations.
(2). The Additional Constant Capital.
The surplus-product, the bearer of surplus-value, does not cost its appropriators, the capitalists of I, anything. They are in no way obliged to advance any money or com- modities in order to secure it. An advance means even in the writings of the physiocrats the general form of value materialized in elements of productive capital. Hence what they advance is nothing but their constant and variable capital. The laborer preserves by his labor not only their constant capital; he reproduces not only the value of their variable capital by creating corresponding qualities of new values; he supplies them also by his surplus-labor with sur- plus-values in the form of surplus-products. By the suc- cessive sale of this surplus-product, they accumulate a hoard, additional potential money-capital. In the present case, this surplus-product consists at the outset of means of produc- 580 Capital.
tion used in the creation of means of production. It is not until it reaches the hands of B, B', B", etc. (I), that this surplus-product serves as additional constant capital. But it is virtually that even in the hands of the accumulators of hoards, the capitalists A, A', A", (I), before it is sold. If we consider merely the volume of values of the repro- duction on the part of I, then we are still moving within the limits of simple reproduction, for no additional capital has been set in motion for the purpose of creating this vir- tual additional constant capital (the surplus-product), nor has any greater amount of surplus-labor been performed than that done on the basis of simple reproduction. The difference is here only one of the form of the surplus-labor performed, of the concrete nature of its particularly useful service. It is expended in means of production for depart- ment I c instead of II c, in means of production of means of production instead of means of production of articles of consumption. In the case of simple reproduction it had been assumed that the entire surplus-value was spent as reve- nue in commodities of II. Hence it consisted only of such means of production as restore the constant capital of II c in its natural form. In order that the transition from simple to expanded reproduction may take place, the production in department I must be enabled to create fewer elements for the constant capital of II and more for that of I. This transition, which will not always take place without difficul- ties, is facilitated by the fact that some of the products of I may serve as means of production in either department.
Considering the matter merely from the point of view of the volume of values, it follows, then, that the material re- quirements of expanded reproduction are produced within simple reproduction. It is simply a question of the expen- diture of the surplus-labor of the working class of I for the production of means of production, the creation of vir- tual additional capital of I. The virtual additional money- capital, created on the part of A, A', A", by the successive sale of their surplus-product, which was formed without any capitalist expenditure of money, is in this case simply the Accumulation and Reproduction. 581 money-form of the additional means of production made by I.
The production of virtual additional capital expresses in our case (we shall see that it may also be formed in a dif- ferent way) merely the fact that it is a phenomenon of the process of production itself, the production of elements of productive capital in a particular form.
The production of virtual additional money-capital on a large scale, at numerous points of the periphery of circu- lation, is therefore but a result and expression of a multi- farious production of virtual additional productive capi- tal, whose rise does not itself require any additional ex- penditure of money on the part of the industrial capital- ists.
The successive transformation of this virtual additional productive capital into virtual money-capital (hoard) on the part of A, A', A", etc., (I), conditioned on the suc- cessive sale of their surplus-product, which is a repeated onesided sale without a compensating purchase, is accom- plished by a repeated withdrawal of money from circula- tion and a corresponding formation of a hoard. This hoarding, except in the case of buyers who are gold pro- ducers, does not in any way imply an addition to the wealth in precious metals, but only a change of function on the part of money previously circulating. A while ago it served as a medium of circulation, now it serves as a hoard, as a virtual additional money-capital in process of formation. In other words, the formation of additional money-capital and the volume of the precious metals existing in a cer- tain country are not directly connected facts.
Hence it follows furthermore: The greater the product- ive capital already serving in a certain country (including the labor-power incorporated in it as the producer of the surplus-product), the more developed the productive power of labor and at the same time the technical appliances for the rapid extension of the production of means of produc- tion, the greater furthermore the quantity of the surplus- 582 Capital product both as to value and mass, so much greater is (1) The virtual additional productive capital in the form of a surplus-product in the hands of A, A', A", etc., and (2) The mass of this surplus-product transformed into money, in other words, the virtual additional money-capital in the hands of A, A', A". The fact that Fullerton, for in- stance, will have nothing to do with any overproduction in the ordinary meaning of the term, but only with the over- production of capital, meaning money-capital, shows how pitifully little even the best bourgeois economists under- stand of the mechanism of their own system.
While the surplus-product, directly produced and appro- priated by the capitalists A, A', A" (I), is the actual basis of the accumulation of capital, that is to say, of expanded reproduction, although it does not actually serve in this capacity until it reaches the hands of the capitalists B, B', B", etc. (I), it is quite unproductive in its chrysalis stage of money, of a hoard representing virtual money-capital in process of formation. It runs parallel with the process of production, but moves outside of it. It is a dead weight of capitalist production. The desire to utilize this surplus- value, while accumulating as virtual money-capital, for the purpose of deriving profits or revenue from it, finds in the credit system and paper securities its consummation. Mon- ey-capital thereby gains in another form an enormous in- fluence on the course and the stupendous development of the capitalist system of production.
The surplus-product converted into virtual money-cap- ital will grow so much more in volume, the greater the ag- gregate amount of capital actually engaged which produced it by its function. With the absolute increase of the vol- ume of the annually reproduced virtual money-capital its segmentation also becomes easier, so that it is more rapidly invested in a certain business, either in the hands of the same capitalist or in those of others (for instance members of the family, in the case of a division of inheritances, etc.). By segmentation of money-capital I mean in this case that it is wholly detached from the parent capital in order to be Accumulation and Reproduction. 583 invested as a new money capital in a new and independent business.
While the sellers of the surplus-product, A, A', A", etc., (I), have obtained it as a direct outcome of the process of production, which does not require any additional act of circulation aside from the advance of constant and variable capital made even in simple reproduction; and while they thereby construct the real basis for a reproduction on an expanded scale, seeing that they manufacture virtually ad- ditional capital — the attitude of B, B', B" ", etc., (I), is different. (1) The surplus-product of A, A', A", etc., does not actually seive as additional constant capital until it reaches the hands of B, B', B", etc. (We leave out of con- sideration for the present the other elements of productive capital, the additional labor-power, in other words, the ad- ditional variable capital). (2) In order that the surplus- product may reach their hands, they must buy it.
In regard to point 1, it may be noted that a large por- tion of the surplus-product (virtual additional constant cap- ital) is produced by A, A', A", (I), in the course of the current year, but may not serve as industrial capital in the hands of B, B', B", (I), until next year, or still later. With reference to point 2, the question is: Whence comes the money required for the process of circulation?
To the extent that the products created by B, B', B", etc., (I), re-enter in their natural form into their own process, it goes without saying that a corresponding portion of their own surplus-product is transferred directly (without any intervention of circulation) to their productive capital and becomes an element of additional constant capital. To the same extent they do not help to convert any surplus-pro- duct of A, A', A", etc., (I), into money. Aside from this where does the money come from? We know that they have formed their hoard in the same way as A, A', etc., by the sale of their respective surplus-products. Now they have arrived at the point where their accumulated hoard of virtual money-capital is to enter effectually upon its func- tion as additional money-capital. But this is merely turn- 584 Capital.
584 Capital.
ing around in a circle. The question still remains: Where does the money come from, which the various B's (1) with- drew from the circulation and accumulated?
Now we know from the analysis of simple reproduction, that the capitalists of I and II must have a certain amount of ready money in their hands, in order to be able to dis- pose of their surplus-products. In that case, the money which served only for the spending of revenue in articles of consumption returned to the capitalists in the same measure in which they advanced it for the purpose of dis- posing of their commodities. Here the same money re-ap- pears, but in a different function. The A's and B's supply one another alternately with the money for converting their surplus-product into virtual additional capital, and throw the newly formed money-capital alternately into circulation as a medium of purchase.
The only assumption made in this case is that the amount of money existing in a certain country (the velocity of cir- culation, etc., being the same) suffices for both the active circulation and the reserve hoard. It is the same assump- tion which had to be made in the case of the simple cir- culation of commodities, as we have seen. Only the func- tion of the hoards is different in the present case. Further- more, the existing amount of money must be larger, first, because all the products (with the exception of the newly produced precious metals and the few products consumed by the producer himself) are produced as commodities under capitalist production and must, therefore, pass through the stage of money; secondly, because on a capital- ist basis the quantity of the commodity-capital and the volume of its value is not only absolutely greater, but also grows with much greater rapidity; thirdly, an ever more voluminous variable capital must be converted into money- capital; fourthly, with the extension of production, the formation of new money-capital keeps step, so that the ma- terial for it must be available in the form of a hoard.
While this is a common truism for the first phase of capi- talist production, in which even the credit system is ac- companied by a prevalence of metallic circulation, it ap- Accumulation and Reproduction. 585 plies even to the most developed phase of the credit system to the extent that metallic circulation remains its basis. On the one hand, the additional production of precious metals may exert a disturbing influence on the prices of commodities according to whether it is abundant or scarce, not only in long, but also in very short intervals. On the other hand, the entire mechanism of credit is continu- ally occupied in reducing the actual metallic circulation to a relatively more and more decreasing minimum by means of sundry operations, methods, and technical devices. To the same extent are the artificiality of the entire mechanism and the possibility of disturbing its normal flow increased.
It may be that the different B, B', B", etc., (I), whose virtual new capital enters upon its active function, are compelled to buy from one another their product (portions of their surplus-product) or to sell it to one another. In that case the money advanced by them for the circulation of their surplus-product flows back under normal condi- tions to the different B's in the same proportion in which they advanced it for the circulation of their respective commodities. If the money circulates as a medium of pay- ment, then only balances are to be paid so far as the alter- nate purchases and sales do not cover one another. But it is important to assume here, as everywhere, metallic circula- tion in its simplest form, because then the flux and reflux, the balancing of accounts, in short all elements appearing as consciously directed processes under the credit system, appear as forms independent of the credit system, show themselves in their primitive form instead of their later, reflected, one.
(3). The Additional Variable Capital.
Hitherto we have been dealing only with additional con- stant capital. Now we must direct our attention to a consid- eration of the additional variable capital.
We have explained at great length in volume I that labor-power is always held available under the capitalist system of production, and that more labor can be set in 586 Capital.
motion, if necessary, without increasing the number of laborers, or quantity of labor-power, employed. We need not detail this any further for the present, but assume with- out ceremony that the portion of the newly created money- capital which is to be converted into variable capital will always find as much labor-power as it cares to transform. It has also been explained in volume I that a certain capi- tal may expand its volume of production within certain lim- its without any accumulation. But now we are dealing with the accumulation of capital in the strict meaning of the term, so that the expansion of production is conditioned on the conversion of surplus-value into additional capital, and thus on an expansion of the basis of productive capital.
The gold producer can accumulate a portion of his golden surplus-value as a virtual money-capital. As soon as it reaches a sufficient volume, he can transform it directly into new variable capital, without first selling his surplus- product. In the same way he can convert it into the ele- ments of constant capital. But in this last case, he must find the material elements of constant capital at hand. This may be accomplished by having each producer working to stock his supply, as was hitherto assumed, and then bring- ing his finished product on the market, or by having them work to fill orders. The actual expansion of production, that is to say, the surplus-product, is assumed in either case, in the one case as actually on hand, in the other as virtually available, because ordered.
II. ACCUMULATION IN DEPARTMENT 2.
We have hitherto assumed that the capitalists A, A', A", etc., (I), sell their surplus-product to the capitalists B, B', B", etc., who belong to the same department. But take it now that A (I) converts his surplus-product into gold by selling it to a capitalist B in department II. This can be done only by the sale of means of production on the part of A (I) to B(II) without a subsequent purchase of articles of consumption, in other words, only by a one-sided sale on A's part. Now we have seen that II c cannot be converted Accumulation and Reproduction. 587 into the natural form of productive constant capital unless not only I v, but also at least a portion of I s, is exchanged for a portion of II c, which II c exists in the form of ar- ticles of consumption. But now that A has converted his I s into gold by making this exchange impossible and with- drawing the money obtained from II c out of circulation, instead of spending it for articles of consumption of II c, there is indeed on the part of A (I) a formation of addi- tional virtual money-capital, but on the other hand there is a corresponding portion of the value of the constant capital B (II) held in the form of commodity-capital, unable to transform itself into natural productive constant capital. In other words, a portion of the commodities of B(II), and at that a portion which must be sold if he wishes to reconvert his entire constant capital into its productive form, has become unsaleable. To that extent there is an over production, which clogs reproduction, even on the same scale.
In this case, the additional virtual money-capital on the side of A (I) is indeed a gilded form of surplus-product (surplus-value), but the surplus-product (surplus-value) as such is as yet but a phenomenon of simple reproduction, not of reproduction on an expanded scale. In order that the reproduction of II c may take place on the same scale, I (v+s) must ultimately be exchanged for II c, and this applies at all events to a portion of I " By the sale of his surplus-product to B(II), A (I) has supplied to B(II) a certain portion of the value of constant capital in its natural form. But at the same time he has rendered an equal por- tion of the value of the commodities of B(II) unsaleable by withdrawing the money from circulation and not mak- ing a compensating purchase. Hence, if we view the entire social reproduction, which comprises both the capitalists of I and II, then the conversion of the surplus-product of A (I) into a virtual money-capital implies the impossibility of reconverting an equal portion of the value of the com- modity-capital of B(II) into productive (constant) capital, in other words, not a virtual production on an enlarged scale, but an obstruction of simple reproduction, a deficit in the simple reproduction. As the formation and sale of 688 Capital.
688 Capital.
the surplus-product of A (I) are normal phenomena of sim- ple reproduction, we have here even on the basis of simple reproduction the following mutually interdependent phe- nomena: The formation of virtual additional money-capital in department I (implying underconsumption in depart- ment II); the stagnation of commodities of department II which cannot be reconverted into productive capital (imply- ing a relative overproduction in department IT); a surplus of money-capital in department I and a deficit in the repro- duction of department II.
Without pausing any longer at this point, we simply repeat that we had assumed in the analysis of simple repro- duction that the entire surplus-value of I and II is spent as revenue. As a matter of fact, however, one portion of the surplus-value is spent as revenue, and another is converted into capital. Actual accumulation can take place only on this condition. That accumulation should take place at the expense of consumption, is, as a general assumption, an illu- sion contradicting the nature of capitalist production. For it takes for granted that the aim and compelling motive of capitalist production is consumption, instead of the gain of surplus-value and its capitalization, in other words, ac- cumulation.
Let us now take a closer look at the accumulation in department II.
The first difficulty with reference to II c, that is to say the conversion of an element of the commodity-capital of II into the natural form of constant capital of II, concerns simple reproduction.
Let us take the formula previously used.
Now, if one half of the surplus-product of I, or 500 s, is reincorporated in department I as constant capital, then this portion, being detained in department I, cannot take the place of any portion of II c. Instead of being converted into articles of consumption, it is made to serve as an addi- tional means of production in department T itself (and it Accumulation and Reproduction. 589 must be noted that in this section of the circulation be- tween I and II the exchange is actually mutual, consisting of a double change of position, different from the substitu- tion of 1000 I v for 1000 II c by the laborers of I). It can- not perform this function simultaneously in I and II. The capitalist cannot spend the value of his surplus-product for articles of consumption, and at the same time consume the surplus-product itself productively, by incorporating it in his productive capital. Instead of 2000 I(v + s), only 1500 are exchangeable for 2000 II c, namely 1000 v + 500 s of I. But 500 I c cannot be reconverted from the form of commodities into productive constant capital of II. Hence there would be an overproduction in department II, equal in volume to the expansion of production in department I. This over- production of II might react to such an extent on depart- ment I that even the reflux of the 1000 v spent by the labor- ers of I for articles of consumption of II might take place but partially, so that these 1000 would not return to the hands of the capitalists of I in the form of variable money- capital. In that case, these capitalists would be hampered even in reproduction on a simple scale by the mere attempt of expanding it. And it must be remembered in this con- nection that department I had actually resumed only sim- ple reproduction, and that only the elements classified in our diagram were differently grouped with a view of ex- panding in the future, say, next year.
One might attempt to circumvent this difficulty in the following way: The 500 II c which are held by the capital- ists, and cannot be immediately converted into productive capital, do not by any means represent any overproduction, but are, on the contrary, a necessary element of reproduc- tion, which we have so far neglected. We have seen that a money supply must be accumulated at many points by with- drawing it from circulation, either for the purpose of facili- tating the formation of new money-capital in department I, or to the end of temporarily holding the gradually de- preciating portion of the fixed capital in the form of money. But since we have placed all the available money and com- modities exclusively into the hands of the capitalists of I 590 Capital.