240 Capital.
point of view of society, these things must finally serve in the same country as fixed capital in some process of production fixed by their own locality, unless they are to be useless. This does not imply by any means that immovable things are fixed capital of themselves. They may belong to the fund for consumption, for instance residence houses, and in that case they do not belong to the social capital at all, although they are an element of the social wealth, of which capital is only a part. The producer of these things, to use the language of Smith, makes a profit by their sale. In other words, circulating capital! Their user, their final purchaser, can use them only by utilizing them in the process of production. Therefore, fixed capital!
Titles to property, for instance railroad shares, may change hands every day, and their owner may even make a profit by their sale to foreign countries, so that the title may be exported, if not the railroad. But nevertheless these things themselves must either lie fallow in the country that produced them, or serve as a fixed part of some productive capital. In the same way the manufacturer A may make a profit by the sale of his factory to the manufacturer B, but this does not prevent the factory from serving as fixed capital, the same as before.
However, it does not follow that fixed capital necessarily consists of immovable things, because the locally fixed instruments of labor, which cannot be detached from the soil, must to all intents and purposes serve at some time as fixed capital in the same country, even though they may serve as commodity-capital for their producer and do not constitute any elements of his fixed capital, which is made up of the instruments of labor required by him for the building of factories, railroads, etc. A ship and a locomotive produce their effects only by motion; yet they serve as fixed capital for the owner who uses them, although not for him who produced them. On the other hand, some things which are very decidedly fixed in the process of production, which live and die in it and never leave it any more after they have entered it, are circulating parts of the productive capital. Such are, for instance, the coal consumed by the machine in the process of production, the gas used for light- Theories of Fixed and Circulating Capital. 241 ing the factory, etc. They are circulating capital not because they bodily leave the process of production together with the product and circulate as commodities, but because their entire value is transferred to that of the product in whose production they assisted, so that their value must be entirely reproduced by the sale of the product.
In the last quotation from Adam Smith, notice must furthermore be taken of the following phrase: "A circulating capital which furnishes...the maintenance of the workmen who make them" (meaning machines, etc.).
In the works of the physiocrats, that part of capital which is advanced for wages figures correctly under the Avarices annuelles as distinguished from the Avarices primitives. On the other hand it is not the labor-power used as a part of the productive capital of the farmer which figures in their accounts, but the foodstuffs given to the farm laborers (the maintenance of workmen, as Smith calls it). This corresponds exactly to their specific doctrine. For according to them the value added to the product by labor (like the value added to the product by raw material, instruments of labor, etc., in short by all the substantial parts of constant capital) is equal only to the value of the articles of consumption paid to the laborers and necessary for the maintenance of their labor functions. Their doctrine stands in the way of their discovering the distinction between constant and variable capital. If it is labor that produces surplus-value in addition to the reproduction of its own price, then it does so in industry as well as in agriculture. But since, according to their system, surplus-value arises only in one branch of production, namely, agriculture, it does not come out of labor, but out of the special activity (assistance) of nature in this branch. And only for this reason agricultural labor is for them productive labor, as distinguished from other kinds of labor.
Adam Smith classes the maintenance of laborers among the circulating capital as distinguished from fixed.
1. Because he confounds circulating capital as distinguished from fixed with forms of capital belonging to the sphere of circulation, with capital of circulation; this mistake persisted after him without being criticized. He therefore con- 242 Capital.
founds the commodity-capital with the circulating part of the productive capital, and in that case it is a matter of course that, whenever the social product assumes the form of commodities, the maintenance of the laborers as well as that of the non-laborers, the materials as well as the instruments of labor, must be taken out of the commodity-capital.
2. But the physiocratic conception likewise intermingles with the analysis of Smith, although it contradicts the esoteric — really scientific — part of his own deductions.
The advanced capital is universally converted into productive capital, that is to say it assumes the form of elements of production which are themselves the products of past labor. Labor-power is included in them. Capital can serve in the process of production only in this form. Now, if instead of labor-power itself we take the laborer's necessities of life into which the variable part of capital has been converted, it is evident that these necessities of life are not essentially different, so far as the formation of values is concerned, from the other elements of productive capital, from the raw materials and the food of the laboring cattle, with whom Smith, after the manner of the physiocrats, places the laborers on the same level, in one of the passages quoted above. The necessities of life cannot expand their own value or add any surplus-value to it. Their value, like that of the other elements, can re-appear only in that of the product. They cannot add any more to their value than they have themselves. They, like raw materials, partly finished articles, etc., differ from fixed capital composed of instruments of labor only in that they are entirely consumed in the product of the capitalist who pays for them and uses them in the manufacture of this product, so that their value must be entirely reproduced by this product, while in the case of the fixed capital this takes place gradually and piecemeal. The part of productive capital advanced for labor-power (or for the laborer's articles of consumption) differs here only in the matter of material from the other material elements of productive capital, not in the matter of the process of production or self-expansion. It differs only in so far as it falls into the same category, namely, that of circulating capital, with one part of the objective elements active in the formation of the product (materials, Theories of Fixed and Circulating Capital. 243 Adam Smith calls them), while another part of these belongs in the category of fixed capital.
The fact that the capital invested in wages belongs to the circulating part of productive capital and shares this circulating quality, as distinguished from the fixed character of productive capital, with a part of the material objects, the raw materials, etc., instrumental in creating the product, has nothing whatever to do with the role played by this variable part of capital in the process of self-expansion, as distinguished from the constant part of capital. It refers merely to the manner in which this part of the invested capital-value is reproduced out of the value of the product by way of the circulation. The purchase and repeated purchase of labor-power belongs in the process of circulation.
But it is only within the process of production that the value invested in labor-power (not for the benefit of the laborer, but that of the capitalist) is converted from a definite constant into a variable magnitude, and only thus the advanced value is converted into capital-value, into selfexpanding value. But by classing the value advanced for articles of consumption among the circulating elements of productive capital, as Smith does, instead of the value invested in labor-power, the understanding of the difference between variable and constant capital, and thus the understanding of the capitalist process of production in general, is rendered impossible. The mission of this part of capital of being variable as distinguished from the constant capital invested in material objects instrumental in production, is hidden under the mission of the capital invested in laborpower of serving in the turn-over as a circulating part of productive capital. And the obscurity is made complete by enumerating the laborer's maintenance among the elements of productive capital, instead of his labor-power. It is immaterial, whether the value of labor-power is advanced in money or immediately in articles of consumption. However, under capitalist production, the last-named eventuality can be but an exception.24 24 To what extent Adam Smith has blocked his own way to an understanding of the role of labor-power in the process of self-expansion is proven by the following sentence, which places the labor of human laborers on the same level with that of laboring cattle, after the manner of the physiocrats. "Not only his (the farmer's) laboring servants, but his laboring cattle are productive laborers." (Book II, chap. V, p. 243.)
244 Capital.
244 Capital.
By thus emphasizing the role of the circulating capital as the determining element of the capital-value invested in labor-power, by using this physiocratic conception without the fundamental premise of the physiocrats, Adam Smith haply rendered the understanding of the role of variable capital as a determinant of capital invested in labor-power impossible for his followers. The more profound and correct analyses given by him in other places did not survive, but this mistake of his did. Other writers after him went even farther. They were not content to make it the essential characteristic of capital invested in labor-power to be circulating as distinguished from fixed capital; they rather made it an essential mark of circulating capital to be invested in articles of consumption for laborers. This resulted naturally in the doctrine of a labor fund of definite magnitude consisting of requirements of life, which on one side established a physical limit for the share of the laborers in the social product, and on the other had to be fully expended in the purchase of labor-power.
Theories of Fixed and Circulating Capital. 245 CHAPTER XI.
THEORIES OF FIXED AND CIRCULATING CAPITAL. RICARDO.
Ricardo mentions the distinction between fixed and circulating capital merely for the purpose of illustrating the exceptions to the law of value, namely, in cases where the rate of wages affects the prices. The discussion of this point is reserved for volume III.
But the original confusion is apparent at the outset in the following indifferent parallel: "This difference in the degree of durability of fixed capital, and this variety in the proportions in which the two sorts of capital may be combined." (Principles, page 25.)
And if we ask him which two sorts of capital he is referring to, we are told: "The proportions, too, in which the capital that is to support labor, and the capital that is invested in tools, machinery, and buildings, may be variously combined." (1. c.) In other words, fixed capital consists of instruments of labor, and circulating capital is such as is invested in labor. "Capital that is to support labor" is a senseless term culled from Adam Smith. On one hand, the circulating capital is here confounded with the variable capital, that is to say, with that part of productive capital which is invested in labor. On the other hand, twice confounded conceptions arise for the reason that the distinction is not between variable and constant capital and derived from the process of self -expansion, but from the process of circulation repeating the old confusion of Smith.
1. The difference in the degree of durability of fixed cppital and the difference in the proportion in which constant and variable capital may be combined, are conceived as being of equal significance. But the last-named difference determines the difference in the production of surplusvalue; the first-named, on the other hand, refers merely to the manner in which a given value is transferred from a mean? of production to the product, in so far as the process 246 Capital.
of self -expansion is concerned; and as for the process of circulation, this difference refers only to the period of the reproduction of the advanced capital, or, from 9 pother point of view, the time for which it has been advanced. Of course, if one looks upon the capitalist process of production in the light of a completed phenomenon, instead of seeing through its internal machinery, then these differences coincidp In the distribution of the social surplus-value among the various capitals invested in different lines of production, the proportions of the different periods of time for which capital has been advanced (for instance, the different durability of fixed capital) and the different organic composition of capital (and therefore also the different circulation of constant and variable capital) contribute equally toward »a equalization of the general rate of profit and the conversion of values into prices of production.
2. From the point of view of the process of circulation, we have on one side the instruments of labor — fixed capital, on the other the materials of labor and wages — circulating capital. But from the point of view of the process of production and self-expansion, we have on one side means of production (instruments of labor and raw material) — constant capital; on the other, labor-power — variable capital. It is immaterial for the organic composition of capital (Book I, Chap. XXV, 2, page 683) whether the same quantity of constant capital consists of many instruments of labor and little raw material, or of much raw material and few instruments of labor, but everything depends on the proportion of the capital invested in means of production to that invested in labor-power. Vice versa, from the point of view of the process of circulation, of the difference between fixed and circulating capital, it is just as immaterial in what proportions a given amount of circulating capital is divided between raw material and wages. From one of these points of view the raw material is classed in the same category with the instruments of labor, as compared to the capital-value invested in labor-power; from the other the capital-value invested in labor-power ranks with that invested in raw material, as compared to that invested in instruments of labor.
Theories of Fixed and Circulating Capital. 247 For this reason, the capital-value invested in materials of labor (raw and auxiliary materials) does not appear on either side. It disappears entirely. For it does not agree with the side of fixed capital, because its mode of circulation coincides entirely with that of the capital-value invested in labor-power. And on the other hand, it must not be placed on the side of circulating capital, because in that case the identification of the distinction between fixed and circulating capital with that of constant and variable capital, which had been carried over from Adam Smith and tacitly perpetuated, would abolish itself. Ricardo has too much logical instinct not to feel this, and for this reason that part of capital disappears entirely for him.
It is to be noted at this point that the capitalist, to use the language of political economy, advances the capital invested in wages for different periods, according to whether he pays these wages weekly, monthly, or quarterly. But in reality, the reverse takes place. The laborer advances his labor to the capitalist for one week, one month, or three months, according to whether he is paid by the week, by the month, or every three months. If the capitalist really were to buy labor-power, instead of only paying for it, in other words, if he were to pay the laborer in advance for a day, a week, a month, or three months, then he would be justified in claiming that he advanced wages for those periods.
But since he does not pay until labor has lasted for days, weeks, or months, instead of buying it and paying for the time which it is intended to last, we have here a confusion of terms on the part of the capitalist, who performs the trick of converting an advance of labor made to the capitalist by the laborer into an advance of money made to the laborer by the capitalist. It does not alter the case that the capitalist may not get any returns from his product by way of the circulation in the shape of a reproduction of his product or of its value (increased by the surplus value embodied in it) until after a certain length of time, according to the different periods required for its manufacture, or for its circulation. It does not concern the seller of a commodity what its buyer is going to do with it. The capitalist does not get a machine cheaper, because he must ad- 248 Capital.
vance its entire value at one time, while this value returns to him only gradually and piecemeal by way of the circulation; nor does he pay more for cotton, because its value is assimilated fully by the product into which it is made over, and is therefore fully recovered at one time by the sale of the product.
Let us return to Ricardo.
1. The characteristic mark of variable capital is that a certain given, and to that extent constant, part of capital representing a given sum of values (supposed to be equal to the value of labor-power, although it is immaterial for this discussion whether wages are equal to the value of labor-power or higher or lower than it) is exchanged for a self-expanding power which creates value, namely, labor-power, which not only reproduces the value paid for it by the capitalist, but produces a surplus-value, a value not previously existing and not paid for by any equivalent. This characteristic mark of the capital-value advanced for wages, which distinguishes it as a variable capital from constant capital, disappears whenever the capital-value advanced for wages is considered solely from the point of view of the circulation, for then it appears as a, circulating capital as distinguished from the fixed capital invested in instruments of labor. This is apparent from the simple fact that it is then classed under one head, namely, under that of circulating capital, together with a part of the constant capital, namely, that which is invested in raw materials, and thus distinguished from another part of constant capital, namely, that invested in instruments of labor. The surplus-value, the very fact which converts the advanced sum of values into capital, is entirely ignored under these circumstances. Furthermore, the fact is ignored that the value added to the product by the capital invested in wages is newly produced (and therefore actually reproduced), while the value transferred from the raw material to the product is not newly produced, not actually reproduced, but only preserved in the value of the product and merely reappears as a part of the value of the product. The distinction, as seen from the point of vie*; Theories of Fixed and Circulating Capital. 249 of the contrast between fixed and circulating capital, consists now simply in this: The value of the instruments of labor used for the production of a certain commodity is transferred only partially to the value of the commodity and is therefore only partially recovered by its sale, is only partially and gradually returned. On the other hand, the value of the labor-power and materials of labor (raw materials, etc.) used in the production of a certain commodity is entirely assimilated by it, and is therefore entirely recovered by its sale. From this standpoint, and with reference to the process of circulation, one part of capital appears as fixed, the other as circulating. In both cases it is a matter of a transfer of definite advanced values to the product and of their recovery by the sale of the product. The only difference which is essential at this point is whether the transfer of values, and consequently their recovery, proceeds gradually or in one bulk. By this means the really decisive difference between the variable and constant capital is blotted out, the whole secret of the production of surplus-value and of capitalist production, namely, the circumstances which transform certain values and the things in which they are contained into capital, are obliterated. All constituent parts of capital are then distinguished merely by their mode of circulation (and, of course, circulation concerns itself solely with already existing values of definite size). And the capital invested in wages then shares a peculiar mode of circulation with a part of capital invested in raw materials, partly finished articles, auxiliary substances, as distinguished from another part of capital invested in instruments of labor.
It is, therefore, easy to understand why the bourgeois political economy instinctively clung to Adam Smith's confusion of the categories of "constant and variable capital" with the categories "fixed and circulating capital," and repeated it parrotlike from generation to generation for a century. The capital invested in wages is not in the least distinguished by bourgeois political economy from capital invested in raw materials, and differs only formally from constant capital to the extent that it is partially or in bulk 250 Capital.
circulated by the product. In this way the fiwf retirement for an understanding of the actual movement of capitalist production, and thus of capitalist exploitation, is buried pt one stroke. It is henceforth but a question of the reappearance of advanced values.
In Ricardo the uncritical adoption of the Smithian confusion is annoying, and not only more so than in the later apologetic writers, in whom the confusion of terms is rather otherwise than annoying, but also more than in Adam Smith himself, because Ricardo is comparatively more consistent and clear in his analysis of value and surplus-value, and indeed rescues the esoteric Adam Smith from the exoteric Adam Smith.
Among the physiocrats this confusion is not found. The distinction between avarices annuelles and avances primitives refers only to the different periods of reproduction of the various parts of capital, especially of agricultural capital; while their ideas concerning the production of surplusvalue form a part of their theory, apart from these distinctions, being upheld by them as the salient point 0/ this theory. The formation of surplus-value is not explained out of capital as such, but only attributed to one special sphere of production of capital, namely, agriculture.
2. The essential point in the determination of variable capital — and therefore for the conversion of any sum of values into capital — is that the capitalist exchanges a definite given, and to that extent constant, magnitude of values for a power which creates values, a magnitude of values for a production, a self-expansion, of values. It does not alter this essential fact that the capitalist may pay the laborer either in money or in means of subsistence. This alters merely the mode of existence of the value advanced by the capitalist, seeing that in one case it has the form of money for which the laborer himself buys his means of subsistence on the market, in the other case that of means of subsistence which he consumes directly. A developed capitalist production rests indeed on the assumption that the laborer is paid in money and more generally on the assumption that the process of production is promoted by the process of circulation, in other words, by the monetary system. But the production of Theories of Fixed and Circulating Capital. 251 surplus-value — and consequently the capitalization of the advanced sum of values — has its source neither in the moneyform, nor in the natural form, of wages, or of the capital invested in the purchase of labor power. It arises out of the exchange of value for a power creating value, the conversion of a constant into a variable magnitude.
The greater or smaller fixity of the instruments of labor depends on the degree of their durability, on their physical properties. According to the degree of their durability, other circumstances being equal, they will wear out fast or slowly, will serve a long or a short time as fixed capital. The raw material in metal factories is just as durable as the machines used in manufacturing, and more durable than many parts of these machines, such as leather, wood, etc. Nevertheless the metal serving as raw material forms a part of the circulating capital, while the instrument of labor, although probably built of the same metal, is a part of the fixed capital, when in use. Hence it is not the substantial physical nature, not its great or small durability, to which the same metal owes its place, now in the category of the fixed, now of the circulating capital. This distinction is rather due to the role played by it in the process of production, being an object of labor in one case, and an instrument of labor in another.
The function of an instrument of labor in the process of production requires generally, that it should serve for a longer or shorter period in ever renewed labor processes. Its function, therefore, determines the greater or lesser durability of its substance. But it is not the durability of the material of which it is made that gives to it the character of fixed capital. The same material, if in the shape of raw material, becomes a circulating capital, and among those economists who confound the distinction between commodity-capital and productive-capital with that between circulating and fixed capital the same material, the same machine, are circulating capital as products and fixed capital as instruments of labor.
Although it is not the durability of the material of which it is made that gives to an instrument of labor the character of fixed capital, nevertheless its role as such an instru- 252 Capital.
ment requires that it should be composed of relatively durable material. The durability of its material is, therefore, a condition of its function as an instrument of labor, and consequently the material basis of the mode of circulation which renders it a fixed capital. Other circumstances being equal, the greater or lesser durability of its material endows it in a higher or lower degree with the quality of fixedness, in other words, its durability is closely interwoven with its quality of being a fixed capital.
If the capital-value advanced for labor-power is considered exclusively from the point of view of circulating capital, in distinction from fixed capital, and if consequently the distinction between constant and variable capital is confounded with that between fixed and circulating capital, then it is natural to attribute the character of circulating capital, in distinction from fixed capital, to the substantial reality of the capital invested in labor-power, just as the substantial reality of the instrument of labor constitutes an essential element of its character of fixed capital, and to determine the circulating capital by the substantial reality of the variable capital.