This state of things is not changed by the transfer of this yarn to the cycle of some other industrial capital. The general circulation comprises as much the interrelations of the various independent fractions of social capital, in other words, the totality of the individual capitals, as the circu- lation of those values which are not thrown on the market as capital, but enter into individual consumption.
The different relations in the cycle of capital, according to whether it is a part of the general circulation, or forms certain links in the independent cycles of capital, may be further understood when we consider the circulation of M', or of M plus m. M as money-capital, continues the cycle of capital. On the other hand m, spent as revenue in the act m — c, enters into the general circulation, but is elimi- nated from the cycle of capital. Only that part enters the capital cycle which performs the.function of additional money-capital. In c — m — c, money serves only as coin, and the purpose of this circulation is the individual con- sumption of the capitalist. It is significant for the idiocy of 80 i Capital.
80 i Capital.
vulgar economy that it pretends to regard this circulation, which does not enter into the circulation of capital but is merely the circulation of that part of the surplus-product which is consumed as revenue, as the characteristic cycle of capital.
In its second phase, M — C, the capital-value M (which is equal to P, the value of the productive capital that at this point re-opens the cycle of industrial capital) is again pres- ent, delivered of its surplus-value. Therefore it has once more the same magnitude which it had in the first stage of the cycle of money-capital, M — C. In spite of the different place at which we now find it, the function of money-capi- tal, into which form the commodity-capital has now been transformed, is the same: Transformation into Pm and L, into means of production and labor-power.
Simultaneously with c — m, capital-value in the function of commodity-capital (C — M') has also gone through the phase C — M, and enters now into the supplementary phase M — C|pm. Its complete circulation is, therefore, C — M — C Pm.
First: Money-capital M appeared in cycle I (M...M') as the original form in which capital-value is advanced; it appears at the very outset as a part of that sum of money into which commodity-capital transformed itself in the first phase of circulation, C — M'. It is from the beginning the transformation of P by means of the sale of commodities into the money-form. Money-capital exists here as that form of capital-value which is neither its original nor its final one, since the phase M — C, which supplements the phase C — M, can only be completed by again discarding the mon- ey-form. Therefore, that part of M — C which is at the same time M — L appears now no longer as a mere advance of money in the purchase of labor-power, but also as an advance by means of which the same 1,000 pounds of yarn, valued at 50 pounds, which form a part of the commodity-value created by labor-power, are given to the laborer in the form of money. The money thus advanced to the laborer is merely a transformed equivalent of a fraction of the value of the commodities produced by himself. And for this very reason, the act M — C, so far as it means M — L, is by no The Rotation of Productive Capital. 81 means simply a replacement of a commodity in the form of money by a commodity in the form of a use-value, but it includes other elements which are in a way independent of the general circulation of commodities.
M' appears as a changed form of C, which is itself a prod- uct of a previous function of P, of the process of production. The entire sum of money M is therefore a money-expression of past labor. In our illustration, 10,000 pounds of yarn (worth 500 pounds sterling), are the product of the spinning process. Of this quantity, 7,440 pounds represent the ad- vanced constant capital c (worth 372 pounds sterling); 1,000 pounds represent the advanced variable capital v (worth 50 pounds sterling); and 1,560 pounds represent the surplus- value s (worth 78 pounds sterling). If in M', only the original capital of 422 pounds sterling is again advanced, other conditions remaining the same, then the laborer re- ceives next week, in M — L, only a part of the 10,000 pounds of yarn produced in this week (the money-value of 1,000 pounds of yarn). As a result of C — M, money is always the expression of past labor. If the supplementary act M — C takes place at once on the commodity-market and M is given in return for commodities existing in this market, then this act is again a transformation of past labor from the money-form into the commodity-form. But M — C dif- fers in the matter of time from C — M. True, these two acts may exceptionally take place at the same time, for instance when the capitalist who performs the act M — C and the other capitalist for whom this act signifies C — M mutually ship their commodities at the same time and M is used only to square the balance. The difference in time between the performance of C — M and M — C may be considerable or insignificant. Although M, as the result of C — M, repre- sents past labor, it may, in the act M — C, represent the changed form of commodities which are not as yet on the market, but will be thrown upon it in the future, since M — C need not take place until C has been produced anew M may also stand for commodities which are produced sim- ultaneously with the C whose money-expression M is; for instance, in the movement M — C (purchase of means of pro- duction), coal may be bought before it has been mined.
82 Capital.
In so far as m represents an accumulation of money which is not spent as revenue, it may stand for cotton which will not be produced until next year. The same holds good of the revenue of the capitalist represented by m — c. It also applies to wages, in this case to L equal to 50 pounds ster- ling; this money is not only the money-form of the past labor of the laborers, but at the same time a draft on simul- taneously performed labor or on future labor. The laborer may buy for his wages a coat which will not be made until next week. This applies especially to the vast number of necessary means of subsistence which must be consumed al- most as soon as they have been produced, to prevent their being spoiled. Thus the laborer receives in the money which represents his wages the changed form of his own future labor or that of others. By means of a part of the laborer's past labor, the capitalist gives him a draft on his own future labor. It is the laborer's simultaneous or future labor which represents the not yet existing supply that will pay for his past labor. In this case, the idea of the formation of a sup* ply disappears altogether.
Second: In the circulation C — M — C \ pm the same money changes places twice; the capitalist first receives it as a seller and gives it away as a buyer; the transformation of commodities into the money-form serves only for the purpose of retransforming it from money into commodities; the money-form of capital, its existence as money-capital, is therefore only a passing factor in this movement; or, so far as the movement proceeds, money-capital appears only as a circulating medium when it serves to buy things; on the other hand, money-capital performs the function of a pay- ing medium when capitalists buy mutually from one an- other and square only the balance of their accounts.
Third: The function of money-capital, whether it is a mere circulating medium or a paying medium, mediates only the renewal of C by L and Pm, that is to say, the renewal of the commodities produced by productive capital, such as yarn (after deducting the surplus-value used as revenue), out of its constituent elements, in other words, the retransformation of capital-value from its commodity - form into the elements constituting this commodity. In the The Rotation of Productive Capital. 83 last analysis, the function of money-capital mediates only the retransformation of commodity-capital into productive capital.
In order that the cycle may be completed normally, C must be sold at its value and completely. Furthermore, C — M — C does not signify merely the replacing of one com- modity by another, but also the replacing of the same rela- tive values. We assume that this takes place here. As a matter of fact, however, the values of the means of produc- tion vary; it is precisely capitalist production which has for its characteristic a continuous change of value-relations, and this is conditioned on the ever changing productivity of labor, which is another characteristic of capitalist produc- tion. This change in the value of the factors of produc- tion will be discussed later on, and we merely refer to it here. The transformation of the elements of production into commodity-products, of P into C, takes place in the sphere of production, while their retransformation from C into P takes place in the sphere of circulation; it is ac- complished by way of the simple metamorphosis of com- modities, but its content is a phase in the process of repro- duction, regarded as a whole. C — M — C, considered as a form of the circulation of capital, includes a change of sub- stance due to this function. The process C — M — C requires that C should be identical with the elements of production of the quantity of commodities C, and that these elements maintain their relative proportions toward one another. It is, therefore, understood that the commodities are not only bought at their value, but also that they do not undergo any change of value during their circulation. Otherwise this process cannot run normally.
In M...M', the factor M represents the original form of capital-value, which is discarded only to be resumed. In P...C — M' — C...P, the factor M represents a form which is only assumed in this process and which is discarded before this process is over with. The money-form appears here only as a passing independent form of capital-value. Capital is just as anxious to assume this form in C as it is to discard it in M' after barely assuming it, in order to again transform itself into productive capital. So long as it remains in the 84 Capital.
84 Capital.
money-form, it does not perform the function of capital and does not, therefore, generate new values; it then lies fal- low. M serves here as a circulating medium, but as a circu- lating medium of capital. The semblance of independence, which the money-form of capital-value possesses in the first form of the circulation of money-capital, disappears in this second form, which, therefore, is the negation of the first form and reduces it to a concrete form. If the second meta- morphosis M — C meets with any obstacles — for instance, if there are no means of production in the market — the unin- terrupted flow of the process of reproduction is arrested, quite as much as it is when capital in the form of commodity- capital is held fast. But there is this difference-. It can re- main longer in the money-form than in that of commodi- ties. It does not cease to be money, if it does not perform the functions of money-capital; but it does cease to be a commodity, or even a use-value, if it is interrupted too long in its functions of commodity-capital. Furthermore, it is capable in its money-form, of assuming another form in- stead of its original one of productive capital, while it does not change places at all if held in the form of C\ C — M' — C includes processes of circulation only for C, and they are phases in its reproduction, but the actual repro- duction of C, into which C is transformed, is necessary for the completion of C — M' — C. This, however, is conditioned on a process of reproduction which lies outside of the process of reproduction of the individual capital represented by C\ In the first form, M — C Pm prepares only the first trans- formation of money-capital into productive capital; in the second form, it prepares the retransformation of commodity- capital into productive capital; that is to say, so far as the investment of industrial capital remains the same, the com- modity-capital is retransformed into the same elements of production out of which it originated. Here as well as in the first form, the process of production is in a preparatory stage, but it is a return to it and its renewal, it is for the pur- pose of repeating the process of self-utilization.
It must be noted, once more, that M — L is not merely the exchange of commodities, but the purchase of a commodity L, which is to serve for the production of surplus-value, just The Rotation of Productive Capital. 85 as M — Pm is a process which is indispensable for the same end.
When M — C |pm has been completed, M has been retrans- formed into productive capital P, and the cycle begins anew.
The elaborated form of P...C— M'— C...P is c M + + c m The transformation of money-capital into productive capital is the purchase of commodities for the purpose of producing commodities. Consumption falls within the cycle of capital only in so far as it is productive consumption; its premise is that surplus-value is produced by means of the commodities so consumed. And this is quite different from a production, even though it be a production of commodi- ties, which has for its end the existence of the producer. A replacing of one commodity by another for the purpose of producing surplus-value is a different matter than the ex- change of products which is perfected merely by means of money. But some economists use this sort of exchange as a proof that there can be no overproduction.
Apart from the productive consumption of M, which is transformed into L and Pm, this cycle contains the first phase M — L, which signifies, from the standpoint of the laborer L — M, or C — M. In the laborer's circulation, L — M — C, which includes his individual consumption, only the first factor falls within the cycle of capital by means of L — M. The second act, M — C, does not fall within the circulation of individual capital, although it is conditioned on it. But the continuous existence of the laboring class is necessary for the capitalist class, and this requires the indi- vidual consumption of the laborer, made possible by M — C.
The act C — M' requires only that C be transformed into money, that it be sold, in order that capital-value may con- tinue its cycles and surplus-value be consumed by the capi- talist. Of course, C is bought only because the article is a use-value and serviceable for individual or productive con- sumption. But if C continues to circulate, for instance, in the hand of the merchant who has bought the yarn, this 86 Capital.
86 Capital.
does not interfere with the continuation of the cycle of indi- vidual capital which produced the yarn and sold it to the merchant. The entire process proceeds uninterruptedly and simultaneously with the individual consumption of the capi- talist and the laborer. This point is important in a discus- sion of commercial crises.
As soon as C has been sold for money, it may re-enter into the material elements of the labor process, and thus of the reproductive process. Whether C is bought by the final consumer or by a merchant, does not alter the case. The quantity of commodities produced by capitalist production depends on the scale of production and on the continual necessity for expansion following from this production. It does not depend on a predestined circle of supply and de- mand, nor on certain wants to be supplied. Production on a large scale can have no other buyer, apart from other indus- trial capitalists, than the wholesale merchant. Within certain limits, the process of reproduction may take place on the same or on an increased scale, although the commodi- ties taken out of it may not have gone into individual or productive consumption. The consumption of commodities is not included in the cycle of the capital which produced them. For instance, as soon as the yarn has been sold, the cycle of the capital-value contained in the yarn may begin anew, regardless of what may become of the sold yarn. So long as the product is sold, everything is going its regular course from the standpoint of the capitalist producer. The cycle of his capital-value is not interrupted. And if this process is expanded — including an increased productive con- sumption of the means of production — this reproduction of capital may be accompanied by an increased individual con- sumption (demand) on the part of the laborers, since this individual consumption is initiated and mediated by produc- tive consumption. Thus the production of surplus- value, and with it the individual consumption of the capitalist, may increase, the entire process of reproduction may be in a flour- ishing condition, and yet a large part of the commodities may have entered into consumption only apparently, while in reality they may still remain unsold in the hands of deal- The Rotation of Productive Capital. 87 ers, in other words, they may still be actually in the market. Now one stream of commodities follows another, and finally it becomes obvious that the previous stream had been only apparently absorbed by consumption. The commodity-cap- itals compete with one another for a place on the market. The succeeding ones, in order to be able to sell, do so below price. The former streams have not yet been utilized, when the payment for them is due. Their owners must declare their insolvency, or they sell at any price in order to fulfill their obligations. This sale has nothing whatever to do with the actual condition of the demand. It is merely a question of a demand for payment, of the pressing necessity of transforming commodities into money. Then a crisis comes. It becomes noticeable, not in the direct decrease of consumptive demand, not in the demand for individual con- sumption, but in the decrease of exchanges of capital for cap- ital, of the reproductive process of capital.
If the ■commodities Pm and L, into which M is trans- formed in the performance of its function of money-capital, in its capacity as capital-value destined for retransformation into productive capital, if, I say, those commodities are to be bought or paid at different dates, so that M — C represents a series of successive purchases or payments, then a part of M performs the act M — C, while another part persists in the form of money, and does not serve in the performance of simultaneous or successive acts M — 0, until the conditions of this process itself demand it. This part of M is temporarily withheld from circulation, in order to perform its function at the proper moment. This storing of M for a certain time is a function conditioned on its circulation and intended for circulation. Its existence as a fund for purchase and pay- ment, the suspension of its movement, the condition of its interrupted circulation, are conditions in which money per- forms one of its functions as money-capital. I say money- capital; for in this case the money remaining temporarily at rest is itself a part of money-capital M (of M' — m equal to M), of that part of commodity-capital which is equal to P, of that value of productive capital from which the cycle proceeds. On the other hand, all money withdrawn from cir- culation has the form of a hoard. In the form of a hoard, 88 Capital.
money is thus likewise a function of money-capital, just as the function of money in M — C as a medium of purchase or payment becomes a function of money-capital. For capital- value here exists in the form of money, the money-form is a condition of industrial capital in one of its stages, pre- scribed by the interrelations of processes within the cycle. At the same time it is here once more obvious, that money- capital performs no other functions than those of money within the cycle of industrial capital, and that these func- tions assume the significance of capital functions only by virtue of their interrelations with the other stages of this cycle.
The representation of M' as a relation of m to M, as a capital relation, is not so much a function of money-capital, as of commodity-capital C, which in its turn, as a relation of c to C, expresses but the result of the process of production, of the self-utilization of capital which took place in it.
If the movement of the process of circulation meets with obstacles, so that M must suspend its function M — C on account of external conditions, such as the condition of the market, etc., and if it therefore remains for a shorter or longer time in its money-form, then we have once more money in the form of a hoard which it may also assume in the simple circulation of commodities, as soon as the transi- tion from C — M to M — C is interrupted by external condi- tions. It is an involuntary formation of a hoard. In the present case, money has the form of fallow, latent, money- capital. But we will not discuss this point any further for the present.
In both cases, the suspension of money-capital in the form of money is the result of an interruption of its movements, no matter whether this is advantageous or harmful, volun- tary or involuntary, in accord with its functions or contrary to them.
The Rotation of Productive Capital. 89 II. Accumulation and Reproduction On An Enlarged Scale.
Since the proportions of the expansion of the productive process are not arbitrary, but determined by technical condi- tions, the produced surplus-value, though intended for capi- talization, frequently does not attain a size sufficient for its function as additional capital, for its entrance into the cycle of circulating capital-value, until several cycles have been repeated so that it must be accumulated until that time. , Surplus-value thus assures the rigid form of a hoard and is, then, latent capital. It is latent, because it cannot function as capital so long as it persists in the money-form. 6a The formation of a hoard thus appears as a phenomenon included in the process of capitalist accumulation, accompanying it, but nevertheless essentially different from it. For the proc- ess of reproduction is not expanded by latent capital. On the contrary, latent money-capital is here formed, because the capitalist producer cannot at once expand the scale of his production. If he sells his surplus-product to a producer of gold or silver, or, what amounts to the same thing, to a merchant who imports additional gold or silver from foreign countries for a part of the national surplus-product, then his latent money-capital forms an increment of the national gold or silver hoard. In all other cases, the surplus-value, for instance the 78 pounds sterling, which were a circulating medium in the hand of the purchaser, have only assumed the form of a hoard in the hands of the capitalist. In other words, a different repartition of the national gold or silver hoard has taken place, that is all.
If the money serves in the transactions of our capitalist as a means of payment, in such a way that the commodities are to be paid for by the buyer on long or short terms, then the surplus-product intended for capitalization is not trans- formed into money, but into creditor's claims, into titles of 6a The term "latent" is borrowed from the idea of latent heat in physics, which has now been almost replaced by the theory of the trans- formation of energy Marx therefore uses in the third part, which is of later date, another term borrowed from the idea of potential energy, viz.: "potential," or, analogous to the virtual velocities of D'Alembert, "virtual capital." — F. E.
90 Capital.
ownership of a certain equivalent, which the buyer may either have in his possession, or which he may expect to pos- sess. It does not enter into the reproductive process of the cycle any more than money which is invested in interest^ bearing papers, although it may enter into the cycles of other individual industrial capitals.
The entire character of capitalist production is determined by the utilization of the advanced capital-value, that is to say, in the first instance by the production of as much surplus- value as possible; in the second place, by the production of capital, in other words, by the transformation of surplus- value into capital (see vol. I, chap. XXIV). But, as we have seen in volume I, the further development makes it a necessity for every individual capitalist to accumulate, or to produce on an enlarged scale, in order to produce more and more surplus-value, and this appears as a personal motive of the capitalist for his own enrichment. The preservation of his capital is conditioned on its continuous enlargement. But we do not revert any further to our previous analysis.
We considered first simple reproduction, and we assumed that the entire surplus-value was spent as revenue. But in reality and under normal conditions, only a part of the sur- plus-value can be spent as revenue, and another part must be capitalized. And it is quite immaterial, whether a certain surplus-value, produced within a certain period, is entirely consumed or entirely capitalized. In the average movement — and the general formula cannot represent any other — both cases occur. But in order not to complicate the form- ula, it is better to assume that the entire surplus-value is accumulated. The formula P...C — M' — C {£m...P stands for productive capital, which is reproduced on an enlarged scale and with enlarged values, and which begins its second cycle as enlarged productive capital, or, what amounts to the same, which renews its first cycle. As soon as this second cycle is begun, we have once more P as a starting point; only P is a larger productive capital than the first P was. Hence, if the second cycle begins with M' in the formula M — M', this M' functions as M, as an advanced capital of a definite size. It is a larger money-capital than the one with which the first cycle was opened; but all relations to its growth by the The Rotation of Productive Capital. 91 capitalization of surplus-value have disappeared, as soon as it appears in the function of advanced money-capital. This origin is extinguished in its form of money-capital which begins its cycle. This also applies to P', as soon as it becomes the starting point of a new cycle.
If we compare P...P' with M...M', or with the first cycle, we find that they have not the same significance. M...M', taken by itself as an individual cycle, expresses only that M, money-capital, or industrial capital in its cycle as money-capital, is money generating more money, value generating more value, in other words, producing surplus- value. But in the cycle of P, the process of utilization is completed as soon as the first stage, the process of produc- tion, is over with, and after going through the second stage (the first stage of the circulation), C — M', the capital-value plus surplus-value exists already as materialized money-cap- ital, as M', which appeared as the last extreme in the first cycle. The fact that surplus-value has been produced is registered in the first considered formula P...P by c — m — c (see expanded formula previously given). This, in its sec- ond stage, falls outside of the circulation of capital and represents the circulation of surplus-value as revenue. In this form, where the entire movement is represented by P...P and where there is no difference in value between the two extremes, the utilization of the advanced value, or the production of surplus-value, is represented in the same way as in M...M', only the act C — M', which appears as the last