1 The following shows the debtor and creditor relations existing between English traders at the beginning of the 18th century. " Such a spirit of cruelty reigns here in England among the men of trade, that is not to be met with in any other society of men, nor in any other kingdom of the world." ("An Essay on Credit and the Bankrupt Act," Lond., 1707, p. 2.)
Money ^ or the Circulation of Commodities, 113 neous. The money functions now, first as a measure of value in the determination of the price of the commodity sold; the price fixed by the contract measures the obligation of the debtor, or the sum of money that he has to pay at a fixed date. Secondly, it serves as an ideal means of purchase. Although existing only in the promise of the buyer to pay, it causes the commodity to change hands. It is not before the day fixed for payment that the means of payment actually steps into circulation, leaves the hand of the buyer for that of the seller. The circulating medium was transformed into a hoard, because the process stopped short after the first phase, because the converted shape of the commodity, viz., the money, was withdrawn from circulation. The means of payment enters the circulation, but only after the commodity has left it. The money is no longer the means that brings about the process. It only brings it to a close, by stepping in as the absolute form of existence of exchange value, or as the universal commodity. The seller turned his commodity into money, in order thereby to satisfy some want; the hoarder did the same in order to keep his commodity in its money-shape, and the debtor in order to be able to pay; if he do not pay, his goods will be sold by the sheriff". The value-form of commodities, money, is therefore now the end and aim of a sale, and that owing to a social necessity springing out of the process of circulation itself.
The buyer converts money back into commodities before he has turned commodities into money: in other words, he achieves the second metamorphosis of commodities before the first. The seller's commodity circulates, and realises its price, but only in the shape of a legal claim upon money. It is converted into a use-value before it has been converted into money. The completion of its first metamorphosis follows only at a later period.^ 1 It will be seen from the following quotation from my book which appeared ia 1859, why I take no notice in the text of an opposite form: * 'Contrariwise, in the process M — C, the money can be alienated as a real means of purchase, and in that way, the price of the commodity can be realised before the use-value of the money is realised and the commodity actually delivered. This occurs constantly under the every-day form of pre-payments. And it is under this form, that the EnglisL H The obligations falling due within a given period, represent the sum of the prices of the commodities, the sale of which gave rise to those obligations. The quantity of gold necessary to realise this sum, depends, in the first instance, on the rapidity of currency of the means of payment. That quantity is conditioned by two circumstances: first the relations between debtors and creditors form a sort of chain, in such a way that A, when he receives money from his debtor B, straightway hands it over to C his creditor, and so on; the second circumstance is the length of the intervals between the different due- days of the obligations. The continuous chain of payments, or retarded first metamorphoses, is essentially different from that interlacing of the series of metamorphoses which we considered on a former page. By the currency of the circulating medium, the connexion between buyers and sellers, is not merely expressed. This connexion is originated by, and exists in, the circulation alone. Contrariwise, the movement of the means of payment expresses a social relation that was in existence long before.
The fact that a number of sales take place simultaneously, and side by side, limits the extent to which coin can be replaced by the rapidity of currency. On the other hand, this fact is a new lever in economising the means of payment. In proportion as payments are concentrated at one spot, special institutions and methods are developed for their liquidation. Such in the middle ages were the virements at Lyons. The debts due to A from B, to B from C, to C from A, and so on, have only to be confronted with each other, in order to annul each other to a certain extent like positive and negative quantities. There thus remains only a single balance to pay. The greater the amount of the payments concentrated, the less is this balance relatively to that amount, and the less is the mass of the means of payment in circulation.
The function of money as the means of payment implies a government purchases opium from the ryots of India...In these cases, however, the money always acts as a means of purchase...Of course capital also is advanced in the shape of money...This point of view, however, does not fall within the horizon of simple circulation." ("Zur Kj-itik." &c., pp. 119, 120.)
Money, or the Circulation of Commodities. 115 contradiction without a terminus medius. In so far as the payments balance one another, money functions only ideally as money of account, as a measure of value. In so far as actual payments have to be made, money does not serve as a circulating medium, as a mere transient agent in the interchange of products, but as the individual incarnation of social labour, as the independent form of existence of exchange value, as the universal commodity. This contradiction comes to a head in those phases of industrial and commercial crises which are known as monetary crises.^ Such a crisis occurs only where the ever-lengthening chain of payments, and an artificial system of settling them, has been fully developed. Whenever there is a general and extensive disturbance of this mechanism, no matter what its cause, money becomes suddenly and immediately transformed, from its merely ideal shape of money of account, into hard cash. Profane commodities can no longer replace it. The use-value of commodities becomes valueless, and their value vanishes in the presence of its own independent form. On the eve of the crisis, the bourgeois, with the selfsufficiency that springs from intoxicating prosperity, declares money to be a vain imagination. Commodities alone are money. But now the cry is everywhere: money alone is a commodity! As the hart pants after fresh water, so pants his soul after money, the only wealth.^ In a crisis, the antithesis between commodities and their value-form, money, becomes heightened into an absolute contradiction. Hence, in such events, the form under which money appears is of no import- 1 The monetary crisis referred to in the text, being a phase of every crisis, must be clearly distinguished from that particular form of crisis, which also is called a monetary crisis, but which may be produced by itself as an independent phenomenon in such a way as to react only indirectly on industry and commerce. The pivot of these crises is to be found in moneyed capital, and their sphere of direct action is therefore the sphere of that capital, viz., banking, the stock exchange, and finance.
2 ' ' The sudden reversion from a system of credit to a system of hard cash heaps theoretical fright on top of the practical panic; and the dealers by whose agency circulation is affected, shudder before the impenetrable mystery in which their own economical relations are involved " (Karl Marx, 1. c. p. 126). "The poor stand still, because the rich have no money to emjjloy them, though they have the same land and hands to provide victuals and clothes, as ever they had;,.. which is the true Riches of a Nation, and not the money." (John Bellers: " Proposals for raising a Colledge of Industry," Lond. 1695. p. 3.)
ance. The money famine continues, whether payments have to be made in gold or in credit money such as bank-notes/ If we now consider the sum total of the money current during a given period, we shall find that, given the rapidity of currency of the circulating medium and of the means of payment, it is equal to the sum of the prices to be realised, plus the sum of the payments falling due, minus the payments that balance each other, minus finally the number of circuits in which the same piece of coin serves in turn as means of circulation and of payment. Hence, even when prices, rapidity of currency, and the extent of the economy in payments, are given, the quantity of money current and the mass of commodities circulating during a given period, such as a day, no longer correspond. Money that represents commodities long withdrawn from circulation, continues to be current. Commodities circulate, whose equivalent in money will not appear on the scene till some future day. Moreover, the debts contracted each day, and the payments falling due on the same day, are quite incommensurable quantities.^ Credit-money springs directly out of the function of money as a means of payment. Certificates of the debts owing for the 1 The following shows how such times are exploited by the "amis du commerce." ' ' On one occasion (1839) an old grasping banker (in the city) in his private room raised the lid of the desk he sat over, and displayed to a friend rolls of banknotes, saying with intense glee there were £000,000 of them, they were held to make money tight, and would all be let our after three o'clock on the same day." ("The Theory of Exchanges. The Bank Charter Act of 1844." Lond. 1864. p. 81.) The Obsei-ver, a semi-official government organ, contained the following paragraph on 24th April, 1864: ' * Some very curious rumours are current of the means which have been resorted to in order to create a scarcity of Banknotes Questionable as it would seem, to suppose that any trick of the kind would be adopted, the report has been so universal that it really deserves mention."
2 ' ' The amount of purchases or contracts entered upon during the course of any given day, will not affect the quantity of money afloat on that particular day, but, in the vast majority of cases, will resolve themselves into multifarious drafts upon the quantity of money which may be afloat at subsequent dates more or less distant...The bills granted or credits opened, to-day, need have no resemblance whatever, cither in quantity, amount, or duration, to those granted or entered upon to-morrow or next day; nay, many of to-day's bills, and credits, when due, fall in with a mass of liabilities whose origins traverse a range of antecedent dates altogether indefinite, bills at 12, 6, 3 months or 1 often aggregating together to swell the common liabilities of one particular day..." (" The Currency Theory Keviewed; a letter to the Sc(fttish people." By a Banker in England. Edinburgh, 1845, pp. 29, 30 passim.)
Mo7tey^ or the Circulation of Co7n7nodities, \\^ purchased commodities circulate for the purpose of transferring those debts to others. On the other hand, to the same extent as the system of credit is extended, so is the function of money as a means of payment. In that character it takes various forms peculiar to itself under which it makes itself at home in the sphere of great commercial transactions. Gold and silver coin, on the other hand, are mostly relegated to the sphere of retail trade.^ When the production of commodities has sufficiently extended itself, money begins to serve as the means of payment beyond the sphere of the circulation of commodities. It becomes the commodity that is the universal subject-matter of all contracts.^ Eents, taxes, and such like payments are transformed from payments in kind into money payments. To what extent this transformation depends upon the general conditions of production, is shown, to take one example, by the fact that the Eoman Empire twice failed in its attempt to levy all contributions in money. The unspeakable misery of the French agricultural population under Louis XI Y., a misery so eloquently denounced by Boisguillebert, Marshal Vauban, and others, was due not only to the weight of the taxes, but also 1 As an example of how little ready money is required in true commercial operations, I give below a statement by one of the largest London houses of its yearly receipts and payments. Its transactions during the year 1856, extending to many millions of pounds sterling, are here reduced to the scale of one million.
Receipts.
Paymrnts.
Bankers' and Merchants' Bills Bills payable after date.
payable after date, Cheques on London Bankers, Cheques on Bankers, Bank of England Notes, l^ayable on demand, - Country Notes, Silver and Copper, Bank of England Notes, Silver and Copper, Post Office Orders, Total, Total, •' Report from the Select Committee on the Bank Acts, July, 1858," p. Ixxi.
2 "The course of trade being thus turned, from exchanging of goods for goods, or delivering and taking, to selling and paying, all the bargains...are now stated upon the foot of a Price in money." (" An Essay upon Publick Credit." 3rd Ed.
to the conversion of taxevS in kind into money taxes.^ In Asia, on the other hand, the fact that state taxes are chiefly composed of rents payable in kind, depends on conditions of production that are reproduced with the regularity of natural phenomena. And this mode of payment tends in its turn to maintain the ancient form of production. It is one of the secrets of the conservation of the Ottoman Empire. If the foreign trade, forced upon Japan by Europeans, should lead to the substitution of money rents for rents in kind, it will be all up with the exemplary agriculture of that country. The narrow economical conditions under which that agriculture is carried on, will be swept away.
In every country, certain days of the year become by habit recognised settling days for various large and recurrent payments. These dates depend, apart from other revolutions in the wheel of reproduction, on conditions clcsely connected with the seasons. They also regulate the dates for payments that have no direct connexion with the circulation of commodities such as taxes, rents, and so on. The quantity of money requisite to make the payments, falling due on those dates all over the country, causes periodical, though merely superficial, perturbations in the economy of the medium of payment.^ From the law of the rapidity of currency of the means of 1 " L'argent...est devenu le bourreau de toutes choses." Finance is the " alambic, qui a fait evaporer nne quantite effroyable de biens et de denrees pour faire ce fatal precis." "L'argent declare la guerre k tout le genre humain." (Boisguillebert: " Dissertation sur la nature des richesses, de l'argent et des tributs." Edit. Daire» Economistes financiers. Paris, 1843, t. i., pp. 413, 419, 417. ) 2 " On Whitsuntide, 1824," says Mr Craig before the Commons' Committee of 182G, "there was such an immense demand for notes upon the banks of Edinburgh, that by 11 o'clock they had not a note left in their custody. They sent round to all the different banks to borrow, but could not get them, and many of the transactions were adjusted by slips of paper only; yet by three o'clock the whole of the notes were returned into the banks from which they had issued! It was a mere transfer from hand to hand." Although the average, effective circulation of bank-notes in Scotland is less than three millions sterling, yet on certain pay days in the year, every single note in the possession of the bankers, amounting in the whole to about £7,000,000, is called into activity. On these occasions the notes have a single and specific function to perform, and so soon as they have performed it, they flow back into the various banks from which they issued. (See John Fullarton, " Regulation of Currencies." Lend: 1844, p. 85 note). In explanation it should be stated, that in Scotland, at the date of FuUarton's work, notes and not cheques were used to withdraw deposits.
Money ^ 07"" the Circtdation of Commodities. 119 payment, it follows that the quantity of the means of payment required for all periodical payments, whatever their source, is in inverse proportion to the length of their periods. The development of money into a medium of payment makes it necessary to accumulate money against the dates lixed for the payment of the sums owing. While hoarding, as a distinct mode of acquiring riches, vanishes with the progress of civil society, the formation of reserves of the means of payment grows with that progress.
c. Universal Money.
When money leaves the home sphere of circulation, it strips off the local garbs which it there assumes, of a standard of prices, of coin, of tokens, and of a symbol of value, and returns to its original form of bullion. In the trade between the markets of the world, the value of commodities is expressed so as to be universally recognised. Hence their independent value-form also, in these cases, confronts them under the shape of universal money. It is only in the markets of the world that money acquires to the full extent the character of the commodity whose bodily form is also the immediate social incarnation of human labour in the abstract. Its real mode of existence in this sphere adequately corresponds to its ideal concept.
Within the sphere of home circulation, there can be but one commodity which, by serving as a measure of value, becomes money. In the markets of the world a double measure of value holds sway, gold and silver.^ 1 To the question, "If there were occasion to raise 40 millions p. a., whether the same 6 millions (gold)...would suffice for such revolutions and circulations thereof, as trade requires," Petty replies in his usual masterly manner, " I answer yes: for the expense being 40 millions, if the revolutions were in such short circles, viz., weekly, as happens among poor artizans and labourers, who receive and pay every Satui'day, then \% parts of 1 million of money would answer these ends; but if the circles be quarterly, according to our custom of paying rent, and gathering taxes, then 10 millions were requisite. Wherefore, supposing payments in general to be of a mixed circle between one week and 13, then add 10 millions to |§, the half of which will be 5.3, so as if we have 5| millions we have enough." (William Petty: " Political Anatomy of Ireland." 1672. Edit.: Lond. 1691, pp. 13. 14.)
2 Hence the absurdity of every law prescribing that the banks of a country shall form reserves of that precious metal alone which circulates at home. The " pleasant I20 Capitalist Production.
Money of the world serves as the universal medium of payment, as the universal means of purchasing, and as the universally recognised embodiment of all wealth. Its function as a means of payment in the settling of international balances is its chief one. Hence the watchword of the mercantilists, balance of trade.^ Gold and silver serve as international means of purchasing chiefly and necessarily in those periods when the customary equilibrium in the interchange of products between different nations is suddenly disturbed. And lastly, it serves as the universally recognised embodiment of social wealth, whenever the question is not of buying or paying, but of transferring wealth from one country to another, and whenever this transference in the form of commodities is rendered impossible, either by special conjunctures in the markets, or by the purpose itself that is intended.^ Just as every country needs a reserve of money for its home circulation, so, too, it requires one for external circulation in difficulties " thus self -created by the Bank of England, are well known. On the subject of the great epochs in the history of the changes in the relative value of gold and silver, see Karl Marx, 1. c. p. 136 sq. Sir Eobert Peel, by his Bank Act of 1844, sought to tide over the difficulty, by allowing the Bank of England to issue notes against silver bullion, on condition that the reserve of silver should never exceed more than one-fourth of the reserve of gold. The value of silver being for that purpose estimated at its price in the London market.
1 The opponents, themselves, of the mercantile system, a system which considered the settlement of surplus trade balances in gold and silver as the aim of international trade, entirely misconceived the functions of money of the world. I have shown by the example of Ricardo in what way their false conception of the laws that regulate the quantity of the circulating medium, is reflected in their equally false conception of the international movement of the precious metals (1. c. pp. 150 sq.) His erroneous dogma: "An unfavourable balance of trade never arises but from a redundant currency...The exportation of the coin is caused by its cheapness, and is not the effect, but the cause of an unfavourable balance," already occurs inBarbon: " The Balance of Trade, if there be one, is not the cause of sending away the money out of a nation; but that proceeds from the difference of the value of bullion in every country." (N. Barbon; 1. c. pp. 59, 60.) MacCulloch in "the Literature of Political Economy, a classified catalogue, Lond. 1845," praises Barbon for this anticipation, but prudently passes over the naive forms, in which Barbon clothes the absurd supposition on which the "currency principle " is based. The absence of real criticism and even of honesty, in that catalogue, culminates in the sections devoted to the history of the theory of money; the reason is that MacCulloch in this part of the work is flattering Lord Overstone whom he calls "facile princeps argentariorum."
1 For instance, in subsidies, money loans for carrying on wars or for enabling banks to resume cash payments, &c., it is the money form, and no other, of value that may be wanted.
Money ^ or the Circulation of Commodities. 121 the markets of the world. The functions of hoards, therefore, arise in part out of the function of money, as the medium of the home circulation and home payments, and in part out of its function of money of the world.^ For this latter function, the genuine money-commodity, actual gold and silver, is necessary. On that account, Sir James Steuart, in order to distinguish them from their purely local substitutes, calls gold and silver "money of the world."
The current of the stream of gold and silver is a double one. On the one hand, it spreads itself from its sources over all the markets of the world, in order to become absorbed, to various extents, into the different national spheres of circulation, to till the conduits of currency, to replace abraded gold and silver coins, to supply the material of articles of luxury, and to petrify into hoards.^ This first current is started by the countries that exchange their labour, realised in commodities, for the labour embodied in the precious metals by gold and silver-producing countries. On the other hand, there is a continual flowing backwards and forwards of gold and silver between the different national spheres of circulation, a current whose motion depends on the ceaseless fluctuations in the course of exchano^e.^ Countries in which the bourgeois form of production is developed to a certain extent, limit the hoards concentrated in the strong rooms of the banks to the minimum required for 1 " I would desire, indeed, no more convincing evidence of the competency of bhe machinery of the hoards in specie-paying countries to perform every necessary oflSce of international adjustment, without any sensible aid from the general circulation, than the facility with which France, when but just recovering from the shock of a destructive foreign invasion, completed within the space of 27 months the payment of her forced contribution of nearly 20 millions to the allied powers, and a considerable proportion of the sum in specie, without any perceptible contraction or derangement of her domestic currency, or even any alarming fluctuation of her exchanges.'* 2 " L'argent se partage entre les nations relativement au besoin qu'elles en ont...ctant tou jours attir6 par les productions." (Le Trosne 1. c, p. 916.) " The mines which are continually giving gold and silver, do give suflBcient to supply such a needful balance to every nation." (J. Yanderlint, 1. c, p. 40.)
3 " Exchanges rise and fall every week, and at some particular times in the year run high against a nation, and at other times run as high on the contrary." (N.
122 Capitalist Production.
the proper performance of their peculiar functions.^ Whenever these hoards are strikingly above their average level, it is, with some exceptions, an indication of stagnation in the circulation of commodities, of an interruption in the even flow of their metamorphoses.^ 1 These various functions are liable to come into flangerous conflict with one another whenever gold and silver have also to serve as a fund for the conversion of banknotes.
2 " What money is more than of absolute necessity for a Home Trade, is dead stock...and brings no profit to that country it's kept in, but as it is transported in trade, as well as imported." (John Bellers, Essays, p. 12.) "What if we have too much coin? We may melt down the heaviest and turn it into the splendour of plate, vessels or utensils of gold or silver; or send it out as a commodity, where the same is wanted or desired; or let it out at interest, where interest is high. " (W. Petty: " Quail tulumcunque," p. 39.) " Money is but the fat of the Body Politick, whereof too much doth as often hinder its agility, as too little makes it sick...as fat lubricates the motion of the muscles, feeds in want of victuals, fills up the uneven cavities, and beautifies the body; so doth money in the state quicken its action, feeds from abroad in time of dearth at home; evens accounts.. and beautifies the whole; altho more especially the particular persons that have it in plenty." (W. Petty, " Political Anatomy of Ireland," p. 14.)
^ PART II.
THE TRANSFORMATION OF MONEY INTO CAPITAL.
CHAPTER IV.
THE GENERAL FORMULA FOR CAPITAL.
The circulation of commodities is the starting point of capital. The production of commodities, their circulation, and that more developed form of their circulation called commerce, these form the historical groundwork from which it rises. The modern history of capital dates from the creation in the 16th century of a world-embracing commerce and a world-embracing market.
If we abstract from the material substance of the circulation of commodities, that is, from the exchange of the various usevalues, and consider only the economic forms produced by this process of circulation, we find its final result to be money: this final product of the circulation of commodities is the first form in which capital appears.
As a matter of history, capital, as opposed to landed property, invariably takes the form at first of money; it appears as moneyed wealth, as the capital of the merchant and of the usurer.^ But we have no need to refer to the origin of capital in order to discover that the first form of appearance of capital is money. We can see it daily under our very eyes. All new capital, to commence with, comes on the stage, that is, on the market, whether of commodities, labour, or money, even in our 1 The contrast between the power, based on the personal relations of dominion and servitude, that is conferred by landed property, and the impersonal power that is given by money, is well expressed by the two French proverbs, " NuUe terre sans seigneur," and " L'argent n'a pas de maitre."
124 Capitalist Production.
days, in the shape of money that by a definite process has to be transformed into capital.
The first distinction we notice between money that is money only, and money that is capital, is nothing more than a diflference in their form of circulation.
The simplest form of the circulation of commodities is C — M — C, the transformation of commodities into money, and the change of the money back again into commodities; or selling in order to buy. But alongside of this form we find another specifically diflferent form: M — C — M, the transformation of money into commodities, and the change of commodities back again into money; or buying in order to sell. Money that circulates in the latter manner is thereby transformed into, becomes capital, and is already potentially capital.
Now let us examine the circuit M — C — M a little closer. It consists, like the other, of two antithetical phases. In the first phase, M — C, or the purchase, the money is changed into a commodity. In the second phase, C — M, or the sale, the commodity is changed back again into money. The combination of these two phases constitutes the single movement whereby money is exchanged for a commodity, and the same commodity is again exchanged for money; whereby a commodity is bought in order to be sold, or, neglecting the distinction in form between buying and selling, whereby a commodity is bought with money, and then money is bought with a commodit}^^ The result, in which the phases of the process vanish, is the exchange of money for money, M— M. If I purchase 2000 lbs. of cotton for £100, and resell the 2000 lbs. of cotton for £110, 1 have, in fact, exchanged £100 for £110, money for money.
Now it is evident that the circuit M — C — M would be absurd and without meaning if the intention were to exchange by this means two equal sums of money, £100 for £100. The miser's plan would be far simpler and surer; he sticks to his £100 instead of exposing it to the dangers of circulation. And yet, whether the merchant who has paid £100 for his cotton 1 "Avec de I'argent on achete des marchandises, et avec des marchandises on acliete de I'argent." (Mercier de la Eiviere: *' L'ordre natural et essentiel des societ^s politiques," j), 543.)
The General Foi'imda for Capital. 125