share in its metamorphoses, while this is not so in the case of the fixed capital. On the contrary, he jumbles it together with those forms which capital assumes in its transition from the sphere of production to that of circulation, that is to say,, commodity-capital and money-capital. But both forms, commodity-capital as well as money-capital, are bearers of the value of the fixed and the circulating parts of productive capital. Both of them are capitals of circulation, as distinguished from productive capital, but they do not represent circulating capital as distinguished from fixed capital.
Finally, owing to the entirely confused idea of the making of profit by the staying of the fixed capital in the process of production, and the passing from it and circulating of the circulating capital, the essential difference between the variable capital and the circulating parts of the constant capital in the process of self-expansion and the formation of surplus-value is hidden under the identity of form, so that the entire secret of capitalist production is obscured still more; by the application of the common term "circulating capital" this essential difference is abolished; political economy subsequently went still farther by neglecting the distinction between variable and constant capital and dwelling on the difference between fixed and circulating capital as the essential and typical distinction.
After Adam Smith has defined fixed and circulating capital as two different ways of investing capital, each of which yields a profit by itself, he says: "No fixed capital can yield any revenue but by means of a circulating capital. The most useful machines and instruments of trade will produce nothing without the circulating capital which affords the materials they are employed upon, and the maintenance of the workmen who employ them." (Page 188.)
Here it becomes apparent what the previously used phrases "yield a revenue, make a profit, etc.," signify, viz., that both parts of capital serve in the formation of the product.
Adam Smith then gives the following illustration: "That part of the capital of the farmer which is employed in the implements of agriculture is a fixed, that which is employed 228 Capital.
in the wages and maintenance of his laboring servants is » circulating capital." (Here the difference of fixed and circulating capital is correctly applied as referring to the different circulation, the turn-over of different constituent parts of productive capital.) "He makes a profit of the one by keeping it in his own possession, and of the other by parting with it. The price or value of his laboring cattle is a fixed capital" (here he is again correct in that it is the value, not the material substance, which determines the difference), "in the same manner as that of the instruments of husbandry; their maintenance" (meaning that of the laboring cattle) "is a circulating capital, in the same way as that of the laboring servants. The farmer makes his profit by keeping the laboring cattle and parting with their maintenance." (The farmer keeps the fodder of the cattle, he does not sell it. He uses it to feed the cattle, while he exploits the cattle themselves as instruments of labor. The difference is only this: The feed used for the maintenance of the cattle is wholly consumed and must be continually reproduced by new feed, either by means of the products of agriculture or by their sale; while the cattle themselves are reproduced only to the extent that each specimen becomes worn out.) "Both the price and the maintenance of the cattle which are bought in and fattened, not for labor, but for sale, are a circulating capital. The farmer makes his profit by parting with them." (Every producer of commodities, hence the capitalist producer likewise, sells his product, the result of his process of production, but this is not a means of constituting this product a part of either the fixed or the circulating part of his productive capital.
The product has now rather that form, in which it is released from the process of production and compelled to perform the function of commodity-capital. The fattened stock serve in the process of production as raw material, not as instruments of labor like the laboring cattle. Hence the fattened cattle enter bodily into the product, and their whole value enters into it, just as that of the auxiliary material, the feed, does. The fattened cattle are, therefore, a circulating part of the productive capital, but they are not so, because the sold product, these same cattle, have the same Theories of Fixed and Circulating Capital. 229 natural form as the raw material, that is to say these cattle when not yet fattened. This is a mere coincidence. At the same time Adam Smith might have seen by this illustration that it is not the material form of the elements of production, but their function within the process of production, which determines the value contained in them as a fixed or circulating one.) "The whole value of the seed, too, is a fixed capital Though it goes backwards and forwards between the ground and the granery, it never changes masters, and therefore it does not properly circulate. The farmer makes his profit not by its sale, but by its increase."
At this point, the utter thoughtlessness of Smith's distinction reveals itself. According to him, the seeds would be fixed capital, if there would be no change of masters, that is to say, if the seeds were directly reproduced out of the annual product by subtracting them from it. On the other hand, they would be circulating capital, if the entire product were sold and a part of its value employed for the purchase of another's seed. In the one case, there would be a change of masters, in the other there would not. Smith once more confounds circulating and commodity-capital at this point. The product is the material bearer of the commodity-capital, but of course only that part of it which actually enters into the circulation and does not re-enter directly into the process of production, from which it came as a product.
Whether the seed is directly subtracted as a part of the product, or whether the entire product is sold and a part of its value converted in the purchase of another man's seed, in either case it is mere reproduction which takes place, and no profit is produced by it. In the one case, the seed enters into circulation with the remainder of the product as a commodity, in the other it figures only in bookkeeping as a part of the value of the advanced capital. But in both cases, it remains a circulating part of the productive capital. It is entirely consumed in getting the product ready, and it must be entirely reproduced by means of it, in order to make self-expansion possible.
According to Adam Smith, raw and auxiliary materials lose their independent form, which they carried as use- 2'SO Capital.
values into the labor-process. Not so the instruments of labor proper. An instrument, a machine, a factory-building, a vessel, etc., serve in the labor-process only so long as they preserve their original form and enter the labor-process to-morrow in the same form in which they did yesterday. Just as they preserve their independent form as compared to the product during life, in the labor-process, so they do after death. The corpses of machines, shops, factory-buildings, still exist independently of the products, which they helped to form. (Book I, chapter VIII, page 227.)
These different ways in which means of production are used in the formation of the product, some of them preserving their independent form as compared to the product, others changing or losing it entirely, — this difference pertaining to the labor-process itself, regardless of whether it is carried on for home use, without exchange, without any production of commodities, as it was, for instance, in the patriarchal family, is falsified by Adam Smith, (1) by vitiating it with the irrelevant definition of profit, saying that some of the elements of production yield a profit to their owner by preserving their form, while others do so by losing it; (2) by jumbling together the changes of a part of the elements of production in the labor-process with that metamorphosis in the circulation of commodities which consists of the exchange, the sale and purchase, of products and involves a change of masters of the circulating commodities.
The turn-over presumes the reproduction by the intervention of the circulation, by the sale of the product, by its conversion into money and its reconversion from money into elements of production. But to the extent that a part of the product of the capitalist producer serves him directly as his own means of production, he figures as its seller to himself, and this transaction is so entered in his books. This part of the reproduction is not accomplished by the intervention of the circulation, but proceeds directly. But a part of the product thus re-employed as means of production replaces circulating, not fixed, capital, to the extent, (1) that its value passes wholly into the product, and (2) that it is itself wholly reproduced in its natural form by means of the new product.
Theories of Fixed and Circulating Capital. 231 Adam Smith, however, tells us what circulating and fixed capital consist of. He enumerates the things, the material elements, which form fixed, and those which form circulating capital, just as though this character were due to the natural substance of those things, instead of to their definite function within the capitalist process of production. And yet in book II, chapter I, he makes the remark that although a certain thing, for instance, a residence, which is reserved for direct consumption, "may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of the people can never be in the smallest degree increased by it." (Page 186.) Here, then, Adam Smith clearly states that the character of capital is not inherent in the things themselves, but is a function with which they may or may not be invested, according to circumstances. But what is true of capital in general, is also true of its subdivisions.
The same things form constituent parts of the circulating or fixed capital, according to whether they perform this or that function in the labor-process. A domestic animal, for instance, as a laboring animal (instrument of labor), represents the material mode of existence of fixed capital, while as stock for fattening (raw material) it is a constituent part of the circulating capital of the farmer. On the other hand, the same things serve either as constituent parts of productive capital, or belong to the fund for direct consumption. A house, for instance, when performing the function of a workshop, is a fixed part of productive capital; when serving as a residence, it is not at all a form of productive capital. The same instruments of labor may in many cases serve now as means of reproduction, now as means of consumption.
It was one of the errors following from the conception of Smith that the capacity of fixed and circulating capital was regarded as vested in the things themselves. The mere analysis of the labor-process on his part, in book I, chapter V, shows that the capacity of instruments of labor, materials of labor, and products changes according to the different 232 Capital.
role played by one and the same thing in the process. The determination of what is fixed or circulating capital, in its turn, is based on the definite roles played by these elements in the labor-process, and therefore also in the process of the formation of value.
In the second place, in enumerating the things of which fixed and circulating capital may consist, Smith plainly discloses the fact that he jumbles together the distinction between fixed and circulating capital, applicable and justified only with reference to productive capital (capital in its productive form), with the distinction between productive capital and those of its forms which belong to the process of circulation, viz., commodity-capital and money-capital. He says in the same place (pages 187, 188): "The circulating capital consists...of the provisions, materials, and finished work of all kinds that are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them, etc." Indeed, if we look closer, we observe that he has here, contrary to previous statements, used circulating capital as being equivalent to commoditycapital and money-capital, that is to say to two forms of capital which do not belong to the process of production at all, which are not circulating capital as opposed to fixed, but capital of circulation as opposed to productive capital. It is only in co-ordination with these that those constituents of productive capital, which are advanced in materials (raw materials or partly finished products) are actually embodied in the process of production, play a role. He says: "...The third and last of the three portions into which the general stock of society naturally divides itself, is the circulating capital, of which the characteristic is, that it affords a revenue only by circulating or changing masters. This is composed likewise of four parts: first, of the money..." (but money is never a form of productive capital, of capital performing its function in the productive process; it is always merely one of the forms assumed by capital within its process of circulation.)..."secondly, of the stock of provisions which are in the possession of the butcher, the grazier, the farmer...and from the sale of which they expect to derive a profit Theories of Fixed and Circulating Capital. 233 Fourthly and lastly, of the work which is made up and completed, but which is still in the hands of the merchant and manufacturer. And, thirdly, of the materials, whether altogether rude or more or less manufactured, of clothes, furniture, and buildings, which are not yet made up into any of those three shapes but which remain in the hands of the growers, the manufacturers, the mercers and drapers, the timber-merchants, the carpenters and joiners, the brickmakers, etc."
His second and fourth count contain nothing but products, which have been released by the process of production and must be sold; in short, they are products which now perform the function of commodities, or commodity-capital, and which, therefore, have a form and occupy a place in the process, in which they are not elements of productive capital, no matter what may be their destination, whether they answer their final purpose as use-values in individual or productive consumption. The products mentioned under secondly are foodstuffs, those under fourthly all other finished products, which in their turn consist only of finished instruments of labor or finished articles of consumption not included in the foodstuffs under count two.
The fact that Smith at the same time speaks of the merchant, shows his confusion. To the extent that the producer transfers his product to the merchant, it does no longer form any part of his capital. From the social point of view, it is indeed still a commodity-capital, although in other hands than those of its producer; but for the very reason that it is a commodity-capital, it is neither a circulating nor a fixed capital.
Under every mode of production not carried on for direct home-consumption the product must circulate as a commodity, that is to say, it must be sold, not in order to make a profit out of it, but that the producer may be able to live at all. Under the capitalist mode of production we have the further fact that the surplus-value embodied in a certain commodity is realized by its sale. In its capacity as a commodity, the product leaves the process of production and is, therefore, neither a fixed nor a circulating element of this process.
234 Capital.
By the way, Smith here testifies against himself. The finished products, whatever may be their material form, their use-value, their utility, are all commodity-capital, that is to say capital in a form typical of the process of circulation. Being in this form, they are not constituent parts of any productive capital which their owner may have. Of course, this does not argue against the fact that, after their sale, they may become constituent parts of productive capital in the hands of their purchaser, and then represent either fixed or circulating capital. This shows that the same things, which at a certain time appear on the market as commodity-capital distinct from productive capital, may or may not perform the function of productive capital after they have been removed from the market.
The product of the cotton spinner, yarn, is the commodityform of his capital, is a commodity-capital from his point of view. It cannot again perform the function of some constituent part of his productive capital, neither as raw material nor as an instrument of labor. But in the hands of the weaver who buys it, it is embodied in his productive capital as one of its circulating parts. For the spinner, on the other hand, the yarn is the bearer of the value of his fixed and circulating capital (not considering the surplus-value). So is a machine, the product of a machine maker, the commodity-form of his capital, commodity-capital from his point of view. And so long as it persists in this form, it is neither fixed nor circulating capital. But if it is sold to a manufacturer for use in his production, it becomes a fixed part of his productive capital. Even if a certain product re-enters as a use-value for the purpose of production into the same process from which it emanated, for instance coal in the production of coal, even then that part of the output of coal which is intended for sale represents neither fixed nor circulating capital, but commodity-capital.
On the other hand, the utility-form of a certain product may be such that it is incapacitated for service as an element of productive capital, either as raw material or an instrument of labor. This is the case, for instance, with articles of food. Nevertheless it is a commodity-capital for its producer, in which the value of his fixed as well as his circulate Theories of Fixed and Circulating Capital. 235 ing capital is incorporated; and it is the representative of the value of either the one or the other of these two forms according to whether the capital employed in its production has to be reproduced in full or partially, in other words, according to whether this capital transfers its full or its partial value to the product.
With Smith, in his count No. 3, the raw material (raw material, partly finished product, auxiliary material), does not figure as a part embodied in the productive capital, but merely as a special kind of use-values of which the social product generally consists, a mass of commodities existing apart from the other material elements, foodstuffs, etc., enumerated under Nos. 2 and 4. On the other hand, these materials are indeed incorporated in the productive capital and therefore also classed as its elements in the hands of the producer. The confusion arises from the fact that they are partly regarded as performing a function in the hands of the producer (in the hands of the growers, the manufacturers, etc.), and partly in the hands of merchants (mercers, drapers, timber-merchants), where they are merely commoditycapital, not elements of productive capital.
Indeed, Adam Smith forgets here, in the enumeration of the elements of circulating capital, all about the fact that the distinction of fixed and circulating capital applies only to the productive capital. He rather places commodity-capital and money-capital, the two forms of capital typical of the process of circulation, opposite of the productive capital, but quite unconsciously.
Finally, it is worthy of note that Adam Smith forgets to mention labor-power as one of the elements of productive capital. And there are two reasons for this.
We have just seen that, apart from money-capital, circulating capital is only another name for commodity-capital. But to the extent that labor-power circulates on the market, it is not capital, not a form of commodity-capital. It is not capital at all; the laborer is not a capitalist, although he brings his commodity to market, namely his own skin. Not until labor-power has been sold and incorporated in the process of production, in other words, until it has ceased to circulate as a commodity, does it became an element of produc- 236 Capital.
236 Capital.
. tive capital, variable capital and the source of surplus-value, a circulating part of productive capital so far as the turnover of the capital-value invested in it is concerned. Since Smith here confounds the circulating capital with commodity-capital, he cannot place labor-power under his category of circulating capital. Hence the commodity-capital here appears in the form of commodities which the laborer buys with his wages, that is to say, means of subsistence. In this form, the capital-value invested in wages is supposed to belong to the circulating capital. That which is incorporated in the process of production is labor-power, the laborer himself, not the means of subsistence by which the laborer maintains himself. True, we have seen in volume I, chapter XXIII, that, from the point of view of society, the reproduction of the laborer himself by means of his individual consumption belongs to the process of reproduction of social capital. But this does not apply to the individual and isolated process of production which we are studying here. The "acquired and useful abilities" which Smith mentions under the head of fixed capital, are on the contrary elements of circulating capital, when they are abilities of the wage-worker and have been sold by him with his labor.
It is a great mistake on the part of Smith to divide the entire social wealth into (1) a fund for immediate consumption, (2) fixed capital, and (3) circulating capital. According to this, wealth would have to be classified as (1) a fund for consumption, which would not represent a part of social capital engaged in the performance of its functions, although some parts of it may continually assist in this performance; and (2) as capital. In other words, a part of the wealth would be performing the functions of capital, another those of non-capital or a fund for consumption. And it seems that it is here an indispensable requirement for all capital to be either fixed or circulating, about in the same way that it is a natural necessity for a mammal to be either male or female. But we have seen that the distinction of being fixed or circulating applies solely to the elements of productive capital, that, therefore, there is also a considerable quantity of capital — commodity-capital and money-capital — existing in a form which does not permit of its being either fixed or circulating.
Theories of Fixed and Circulating Capital. 237 Seeing that the entire mass of social products, under capitalist production, circulates on the market as commoditycapital, with the exception of that part of the product which is directly consumed by the individual capitalist producers in its natural form as means of production without being sold or bought, it is evident that not only the fixed and circulating elements of productive capital, but also all the elements of the fund for consumption are derived from the commodity-capital. This is equivalent to saying that, on the basis of capitalist production, both means of production and of consumption first appear as commodity-capital, even though they are intended for later use as means of production or consumption. Labor-power itself is likewise found on the market as a commodity, if not as commodity-capital.
This accounts for the following confusion in Adam Smith: "Of these four parts" (meaning circulating capital, that is to say capital in its forms of commodity-capital and moneycapital typical of the process of circulation, which Adam Smith transforms into four parts by making distinctions between the substantial parts of commodity-capital) "three — provisions, materials, and finished work, are either annually or in a longer or shorter period, regularly withdrawn from it, and placed either in the fixed capital, or in the stock reserved for immediate consumption. Every fixed capital is both originally derived from, and requires to be continually supported by, a circulating capital. All useful machines and instruments of trade are originally derived from a circulating capital, which furnishes the materials of which they are made and the maintenance of the workmen who make them. They require, too, a capital of the same kind to keep them in constant repair." (Page 188.)
With the exception of that part of the product which is immediately consumed as means of production, the following general rule applies to capitalist production: All products are taken to market as commodities and, therefore, circulate as capital in the form of commodities, as the commodity-capital of the capitalist, regardless of whether these products must or may serve in their natural form, as usevalues, in the performance of their function as elements of productive capital in the process of production, in other 238 Capital.
words, as means of production and, therefore, as fixed or circulating parts of productive capital, or whether they can serve only as means of individual, not of productive, consumption. All products are thrown upon the market as commodities; all means of production or consumption, all elements of productive and individual consumption, must therefore be released from the market by purchasing them as commodities.
Of course, this truism is correct. It applies for this reason to the fixed as well as the circulating elements of productive capital, for instruments of labor as well as raw material in all its forms. (This, moreover, is leaving aside the fact that there are certain elements of productive capital which are furnished ready by nature and are not products.) A machine is bought on the market as well as cotton. But this implies by no means that every fixed capital comes originally from some circulating capital; it is only through the confusion, on the part of Smith, of capital of circulation with circulating capital, with capital that is not fixed, that this erroneous conclusion is reached. And to cap the climax, Smith refutes himself. According to him, machines, as commodities, form a part of No. 4, the circulating capital. To say that they come from the circulating capital means that they were performing the function of commodity-capital before they performed the function of machines, but that substantially they are derived from themselves; so is cotton, as the circulating element of some spinner's capital, derived from the cotton on the market. But as for deriving fixed capital from circulating capital for the reason that labor and raw material are required for the making of machines, as Adam Smith is doing in his further arguments, we say that in the first place, fixed capital is also required for the making of machines, and in the second place, fixed capital, such as machinery, is likewise required for the making of raw materials, since the productive capital always includes instruments of labor, but not always raw materials. He says himself immediately afterwards: "Lands, mines, and fisheries, require all both a fixed and circulating capital to cultivate them;" — thus he admits that not only circulating, but also fixed capital is required Theories of Fixed and Circulating Capital. 239 for the production of raw materials — "and" — renewed confusion at this point — "their produce replaces with a profit, not only those capitals, but all the others in society." (Page 188.) This is entirely wrong. Their produce furnishes the raw materials, auxiliary substances, etc., for all other branches of industry. But their value does not reproduce the value of all other social capitals; it reproduces merely the value of their own capital (plus the surplus-value). Adam Smith is here stampeded by his recollection of the physiocrats.
Socially speaking, it is true that that part of the commodity capital which consists of products available for immediate or later service as instruments of labor — unless they are produced uselessly and cannot be sold — must in fact perform this service whenever they cease to be commodities and become actual elements of the productive capital, in stead of being merely its prospective ones.
But there is a distinction arising from the natural form of the product.
A spinning machine, for instance, has no use-value, unless it is consumed in spinning, so that it performs its function as an element of production and, from the point of view of the capitalist, constitutes a fixed part of his capital. But a spinning machine is movable. It may be exported from the country in which it was produced and sold in a foreign country directly or indirectly, for raw materials, etc., or even for champagne. In that case it has served only as commoditycapital in the country in which it was produced, but never as fixed capital, not even after its sale.
But products which are localized by being imbedded in the soil, and therefore can be consumed only locally, such as factory buildings, railroads, bridges, tunnels, wharves, etc., improvements of the soil, etc., cannot be bodily exported. They are not movable. They are either useless, or they must serve as fixed capital, in the country that produced them, as soon as they have been sold. From the point of view of their capitalist producer, who builds factories or improves land for speculation and sale, these things are forms of his commodity-capital, or, according to Adam Smith, a form of circulating capital. But from the 240 Capital.