The general reply has already been given: When a mass of commodities valued at x times 1,000 p. st. has to circulate, it changes absolutely nothing in the quantity of the money required for this circulation, whether this mass of commodities contains any surplus-value or not, and whether this mass of commodities has been produced capitalistically or not. In other words, the problem itself does not exist. All other conditions being given, such as velocity of circulation of money, etc., a definite sum of money is required in order to circulate the value of commodities worth x times 1,000 p. st., quite independently of the fact how much or how little of this value falls to the share of the direct producers of these commodities. So far as any problem exists here, it coincides with the general problem: Where does all the money required for the circulation of the commodities of a certain country come from?
However, from the point of view of capitalist production, 384 Capital.
the semblance of a special problem does indeed exist. It is in the present case the capitalist who appears as the point of departure, who throws money into circulation. The money, which the laborer expends for the payment of his means of subsistence, exists previously as the money form of the variable capital and is, therefore, thrown originally into circulation by the capitalist as a medium of buying labor-power and paying for it. The capitalist furthermore throws into circulation the money which constitutes originally the money-form of his constant, fixed and circulating, capital; he expends it as a medium of purchase, or payment, for materials of production and instruments of labor. But beyond this, the capitalist no longer appears as the starting point of the quantity of money in circulation. Now, there are only two points of departure: The capitalist and the laborer. All third classes of persons must either receive money for their services from these two classes, or, to the extent that they receive it without any equivalent services, they are joint owners of the surplus-value in the form of rent, interest, etc. The fact that the surplus-value does not all stay in the pocket of the industrial capitalist, but must be shared by him with other persons, has nothing to do with the present question. The question is: How does he monetize his surplus-value, not, how does he divide the money later after he has secured it? For the present case, the capitalist may as well be regarded as the sole owner of his surplus-value. As for the laborer, it has already been said that he is but the secondary point of departure, while the capitalist is the primary starting point of the money thrown by the laborer into circulation. The money first advanced as variable capital is going through its second circulation, when the laborer spends it for the payment of means of subsistence.
The capitalist class, then, remains the sole point of departure of the circulation of money. If they need 400 p. st. for the payment of means of production, and 100 p. st. for the payment of labor-power, they throw 500 p. st. into circulation. But the surplus-value incorporated in the product, with a rate of surplus-value of 100%, is equal to the The Circulation of Surplus-Value. 385 value of 100 p. st. How can they continually draw 600 p. st. out of circulation, when they continually throw only 500 p. st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.
Exception is here made of the fact that the sum of 400 p. st. may, perhaps, suffice, when turned over ten times, to circulate means of production valued at 4,000 p. st. and labor-power valued at 1,000 p. st., and that the other 100 p. st. may likewise suffice for the circulation of 1,000 p. st. of surplus-value. The proportion of the sum of money to the value of the commodities circulated by it does not matter here. The problem remains the same. Unless the same pieces of money circulate several times, a capital of 5,000 p. st. must be thrown into circulation, and 1,000 p. st. would be required to monetize the surplus-value. The question is, where this money comes from, whether it be 1,000 or 100 p. st. There is no doubt that it is in excess of the money, capital thrown into the circulation.
Indeed, paradoxical as it may appear at first sight, it is the capitalist class itself that throws the money into circulation which serves for the realization of the surplus-value incorporated in the commodities. But, mark well, it is not thrown into circulation as advanced money, not as capital. The capitalist class spends it for their individual consumption. The money is not advanced by them, although they are the point of departure of its circulation.
Take some individual capitalist, who opens his business, for instance, a capitalist farmer. During the first year, he advances a money-capital of, say, 5,000 p. st., paying 4,000 p. st. for means of production, and 1,000 p. st. for laborpower. Let the rate of surplus-value be 100%, the amount of surplus-value appropriated by him 1,000 p. st. The above 5,000 p. st. comprise all the money advanced by him. But the man must also live, and he does not get any receipts until the end of the year. Take it that his consumption amounts to 1,000 p. st. These he must have in his possession. He may say to himself that he has to advance these 1,000 p. st. during the first year. But this advance has only a 386 Capital.
subjective meaning, for it signifies that he must pay for his individual consumption during the first year out of his own pocket, instead of getting the money for it out of the unpaid labor of his employes. He does not advance this money as capital. He spends it, pays it out as an equivalent for means of subsistence which he consumes. This value is spent by him as money, thrown as such into circulation and withdrawn from it as commodities. He has consumed commodities of that amount. He has thus ceased to be in any way related to their value. The money with which he paid for this value is now an element of the circulating money. But he has withdrawn the value of this money from circulation in the form of products, and this value is destroyed with the commodities in which it was incorporated. It has disappeared. But at the end of the year he throws commodities worth '6,000 p. st. into circulation and sells them. By this means he recovers: (1) His advanced money-capital of 5,000 p. st.; (2) the monetized surplusvalue of 1,000 p. st. He had thrown 5,000 p. st. into circulation when he advanced capital, and he withdraws from it 6,000 p. st., 5,000 p. st. of which cover his capital, and 1,000 p. st., his surplus-value. The last 1,000 p. st. are monetized with the money which he had himself thrown into circula tion, not as a capitalist, but as a consumer, not advanced, but spent. They now flow back to him as the money-form of the surplus-value produced by him. And henceforth this operation is repeated every year. But beginning with the second year, the 1,000 p. st. which he spends are continually the converted form, the money-form of surplus-value produced by him. He spends it annually and it flows back annually.
If his capital were turned over more frequently in one year, it would not alter this condition of things, except so far as the time is concerned, and thus the size of the amount which he would have to throw into circulation, over and above his advanced money-capital, for his individual consumption.
This money is not thrown into circulation by the capitalist as money. It is rather inherent in the character of a Thi Circulation of Surplus-Value. 387 capitalist to be able to live on means in his possession until some surplus-value flows back to him.
In the present case we had assumed, that the sum of money, which the capitalist throws into circulation until the first surplus-value flows back to him, is exactly equal to the surplus-value which he is going to produce and monetize. This is obviously an arbitrary assumption, so far as the individual capitalist is concerned. But it must be correct when applied to the entire capitalist class, when simple reproduction is assumed. It expresses the same thing that this assumption does, namely, that the entire surplus-value is consumed unproductively, but it only, not any portion of the original capital stock.
It had been previously assumed, that the entire production of precious metals (500 p. st.) sufficed only for the wear and tear of the money.
The capitalists producing gold possess their entire product in gold, that portion which replaces constant capital as well as that which replaces variable capital and that consisting of surplus-value. A portion of the social surplus-value, therefore, consists of gold, not of a product which is monetized by means of circulation. It consists from the outset of gold and is thrown into circulation in order to draw products out of it. The same applies in this case to wages, to variable capital, and to the part replacing the advanced constant capital. Hence, while a part of the capitalist class throws into circulation commodities greater in value, (by the amount of the surplus-value) than the money-capital advanced by them, another part of the capitalist class throws into circulation money of greater value (by the amount of the surplus-value) than the commodities which they continually withdraw from circulation for the production of gold. While one part of the capitalist class pumps continually more gold out of the circulation than they throw into it, another part of them who produce gold pump continually more gold into it than they take out in means of production.
Although a part of this product of 500 p. st. in gold is surplus-value of the gold-producers, still the entire sum is 388 Capital.
intended only to replace the money worn out in the circulation of commodities. It is immaterial for this purpose, how much of this gold monetizes the surplus-value incorporated in the commodities, and how much of their other constituents.
By transferring the production of gold from one country to another, nothing is changed in the fundamental condition of the matter. One part of the social labor-power and the social means of production of the country A is converted into a product, for instance, linen, valued at 500 p. st., which is exported to the country B in order to be there traded for gold. The productive capital employed for this purpose by the country A throws no more commodities, as distinguished from money, upon the market of this country than it would if it were directly engaged in the production of gold. This product of A is represented by 500 p. st. in gold, and enters into the circulation of this country only in money.
That portion of the social surplus-value which is contained in this product exists directly in the form of money, and never in any other form for the country A. Although, from the point of view of the capitalist, only a part of the product represents surplus-value, and another part replaces capital, still the question as to how much of this gold replaces constant, and how much variable capital, and how much of it represents surplus-value, depends exclusively on the respective proportions which wages and surplus-value constitute of the value of the circulating commodities. That portion which represents surplus-value is distributed among the various members of the capitalist class. Although this surplus-value is continually spent by them for individual consumption and recovered by the sale of new products — it is precisely this purchase and sale which circulates the money required for the monetization of the surplus-value among them — there is nevertheless a portion of the social surplus-value, in the form of money, in varying proportions, in the pockets of the capitalists, just as a portion of the wages stays during a certain part of the week in the pockets of the laborers in the form of money. And this portion is not limited by that portion of the money-product which forms The Circulation of Surplus-Value.
originally the surplus-value of the capitalists producing gold, but, as we have said, by the proportion in which the above product of 500 p. st. is generally distributed between capi-' talists and laborers, and in which the commodity-supply to be circulated consists of surplus-value and other constituents of value.
However, that portion of surplus-value, which does not exist in other commodities, but outside of them in the form of money, consists of a portion of the annually produced gold only to the extent that a portion of the annual production of gold circulates for the realization of surplus-value. The other portion of money, which is continually in the hands of the capitalists, in varying portions, being the money-form of their surplus-value, is not an element of the annually produced gold, but of the masses of money previously accumulated in the country.
According to our assumption, the annual production of gold just covers the annual wear of money, to the amount of 500 p. st. If we keep in mind these 500 p. st., and make abstraction of that portion of the annually produced mass of commodities which is circulated by means of previously accumulated money, then the surplus-value incorporated in the commodities will find money for its monetization in circulation for the simple reason that surplus-value is annually produced in the form of gold on the other side. The same applies to the other parts of the gold product which replace the advanced money-capital.
Now, two things are to be noted here.
In the first place, it follows that the surplus-value spent by the capitalists as money, as well as the variable and other productive capital advanced by them in money is actually a product of the laborers, namely of those engaged in the production of gold. They produce anew not only that portion of gold which is "advanced" to them as wages, but also that portion of gold in which the surplus-value of the capitalist gold producers is directly embodied. As for that portion of the gold product, which replaces only the constant capitalvalue advanced for its production, it re-appears in the form of money (or a product in general) only through the annu- 390 Capital.
390 Capital.
al labor of the working men. In the beginning of the business, it was originally expended in money by the capitalists, and this money was not newly produced, but formed a part of the circulating mass of social money. But to the extent that it is replaced by a new product, by additional money, it is the annual product of the laborer. The advance on the part of the capitalist appears here likewise merely as a form, which owes its existence to the fact that the laborer is neither the owner of his own means of production, nor able to command, during his production, the means of subsistence produced by other laborers.
In the second place, as concerns that mass of money which exists independently of this annual reproduction of 500 p. st., either in the form of a hoard, or of circulating money, things must be, or rather must have been originally just as they still are with reference to these 500 p. st. annually. We shall return to this point at the close of this section. For the present, we wish to make a few other remarks.
"We have seen during our study of the turn-over, that, other circumstances remaining equal, a change in the length of the periods of turn-over requires different amounts of money-capital, in order to carry on production on the same scale. The elasticity of the money-circulation must, therefore be sufficient to adapt itself to this fluctuation of expansion and contraction.
If we furthermore assume other circumstances as equal — the length, intensity, and productivity of the working day also remaining unchanged — but a different division of the value of the product, between wages and surplus-value, so that either the former rise and the latter fall, or vice versa, the mass of the circulating money is not touched thereby. This change can take place without any expansion or contraction of the mass of money in circulation. Let us consider particularly the case in which there would be a general rise in wages, so that, under the given assumptions, there would be a general fall in the rate of surplus-value, while there would not be any change, also according to our assump- The Circulation of Surplus-Value. 391 tion, in the mass of circulating commodities. In this case, there should be indeed ar increase of the money-capital which must be advanced as variable capital in the quantity of money which serves for this purpose. But to the exact extent that the amount of money required for the function of variable capital grows, does the surplus-value decrease, and thus the amount of money required for its realization. The amount of money required for the realization of the values of the commodities is not affected thereby, any more than this value itself. The cost price of the commodity rises for the individual capitalist, but its social price of production remains unchanged. That which is changed is the proportion, in which, apart from the constant portion of its value, the price of production stands to wages and profits But, it is argued, a greater outlay of variable capital (the value of the money is, of course, considered the same) means a, larger amount of money in the hands of the laborer. This causes a greater demand for commodities on the part of the laborer. This, in turn, leads to a rise in the price of commodities. Or, it is said: If wages rise, the capitalists raise the prices of their commodities. In either case, the general rise in wages causes a rise in the prices of commodities. Hence a greater amount of money is needed for the circulation of commodities, no matter whether the rise in prices is explained in this or that way.
Reply to the first argument: In consequence of a rise in wages, especially the demand of the laborers for the necessities of life will rise. In a lesser degree their demand for articles of luxury will increase, or the demand will be developed for things which did not generally belong to the scope of their consumption. The sudden and increased demand for the necessities of life will doubtless raise their prices momentarily. As a result, a greater portion of the social capital will be invested in the production of the necessities of life, and a smaller portion in the production of articles of luxury, since these fall in price on account of the decrease in surplus-value and the consequent decrease in the demand of the capitalists for these articles. And to the extent that the laborers themselver buy articles of luxury, 392 Capital.
the rise in their wages — to this degree — does not promote an increase in the prices of necessities of life, but simply fills the place of the buyers of luxuries. More luxuries than before are consumed by laborers, and relatively fewer by capitalists. That is all. After some fluctuations, the value of the circulating commodities is the same as before. As for the momentary fluctuations, they will not have any other effect than to throw unemployed money-capital into the inland circulation, capital which so far had sought employment in speculative enterprises at the stock exchange or in foreign countries.
Reply to the second argument: If it were in the power of the capitalist producers to raise the prices of their commodities at will, they could and would do so without waiting for a rise in wages. Wages would never rise while the prices of commodities were going down. The capitalist class would never resist the trades unions, since the capitalists could always and under all circumstances do what they are now doing exceptionally under definite peculiar, one might say local, circumstances, to wit, to avail themselves of every rise in wages to raise prices much higher and thus pocket greater profits.
The claim that the capitalists can raise the prices of articles of luxury, because the demand for them decreases (in consequence of the reduced demand of the capitalists whose spending money has decreased) would be a very unique application of the law of supply and demand. The prices of articles of luxury fall in consequence of reduced demand to the extent that capitalist buyers are not replaced by laboring buyers, and so far as this replacement takes effect, the demand of the laborers does not result in a rise of the prices of necessities, for the laborers cannot spend that portion of their increased wages for necessities which they spend for luxuries. Consequently capital is withdrawn from the production of luxuries, until their supply in the market is reduced to the measure which corresponds to their altered role in the process of social production. With their production thus reduced, they rise in price, provided their value is otherwise unchanged, to their normal level. So long as this contraction, or this process of compensation, takes place, The Circulation of Surplus-Value. 393 there is just as constantly, with rising prices of necessities, a migration of capital into the production of these to the degree that it is withdrawn from the other line of business, until the demand is satisfied. Then the balance is restored, and the end of the whole process is that the social capital, including the money-capital, is divided in a different proportion between the production of necessary means of subsistence and that of luxuries.
The entire objection is a scarecrow set up by the capitalists and their apologists in economics.
The facts, which furnish the material for this scarecrow, are of three kinds: (1). It is the general law of the circulation of money that the quantity of circulating money increases if the total price of the circulating commodities increases, other circumstances remaining the same, regardless of whether this increase of the totality of prices applies to the same quantity of commodities, or to a greater quantity. The effect is then taken for the cause. Wages rise (although rarely and only exceptionally in proportion) with the increasing price of the necessities of life. This rise in wages is a result, not a cause, of the rise in the prices of commodities.
(2). In the case of a partial, or local, rise of wages — that is to say, a rise only in some lines of production — a local rise in the prices of the products of this line may follow. But even this depends on many circumstances, for instance, that wages had not been abnormally depressed previously, so that the rate of profits was abnormally high, that the market is not narrowed by a rise in prices (so that a contraction of its supply previous to the raising of its prices will not be necessary), etc.
(3) In the case of a general rise of wages, the price of 'the produced commodities rises in lines of business where the variable capital preponderates, but falls, on the other hand, in lines where the constant, or eventually the fixed, capital preponderates.
We found in our study of the simple circulation of commodities (volume I, chapter III, 2), that, even though the 394 Capital money-form of any definite quantity of commodities is infinitesimal within its circulation, still the money in the hand of one man disappears during the transformation of a certain commodity and takes its place in the hands of another, so that commodities are not only exchanged, or replaced by one another, but this mutual exchange of places is also promoted and accompanied by a universal precipitation of money. "When one commodity replaces another, the money commodity sticks to the hands of some third person. Circulation sweats money from every pore." (Vol. I, page 127.) The same fact is expressed, on the basis of capitalist production, of commodities, by the continual existence of a portion of capital in the form of money-capital, and by the retention of a portion of surplus-value in the hands of its owners, likewise in the form of money.
Aside from this, the rotation of money — that is to say, the return of money to its point of departure — so far as it is an element in the turn-over of capital, is a phenomenon entirely different from, or even the reverse of, the circulation of money, 28 which expresses its removal from the point of departure through a number of hands. (Vol. I. page 129.) Nevertheless an accelerated turn-over implies naturally an acceleration of the circulation.
As for the variable capital, if a certain money-capital, say 500 p. st., is turned over ten times in a year, in the form of a variable capital, it is evident that this aliquot part of the 28 Although the physiocrats still intermingle these two phenomena indiscriminately, they are nevertheless the first who emphasize the reflux of money to its starting point as the essential form of circulation of capital, as that form of circulation which promotes reproduction. "Throw a glance at the Tableau Economique, and you will see that the productive class gives the money with which the other classes buy products from it, and that they return this money to it when they come back next year to make the same purchases...You see, then, that there is in this instance no other cycle but that of expenditure followed by reproduction, and of reproduction followed by expenditure. And this cycle is described by the circulation of money, which is the measure of expenditure and reproduction." — Quesnay, Problemes Economiques, Daire edition, Physiocrats, I, pages 208, 209.) "It is this continual advance and return of capitals which must be called the circulation of money, this useful and fertile circulation, which gives life to all the labors of society, which maintains the activity and life of the social body, and which is with good justification compared to the circulation of blood in the animal body." (Turgot, Reflexions, etc., Daire '•edition, I, page 45.)
The Circulation of Surplus-Value. 395 quantity of money in circulation circulates ten times its value, or 5,000 p. st. It circulates ten times per year between the capitalist and the laborer. The laborer is paid, and pays, ten times per year with the same aliquot amount of money. If the same variable capital were turned over only once a year, the scale of production remaining the same, there would be only one turn-over of capital per year.
Furthermore: The constant portion of the circulating capital may be, say, 1,000 p. st. If the capital is turned over ten times, the capitalist sells his commodity, and therefore also the constant circulating portion of its value, ten times per year. The same aliquot part of the circulating quantity of money (1,000 p. st.) passes ten times from the hands of its owners into those of the capitalist. This means ten changes of place on the part of this money from one hand into another. In the second place, the capitalist buys means of production ten times per year. This again implies ten turn-overs of the money from one hand into another. With regard to the amount of 1,000 p. st., commodities valued at 10,000 p. st. have been sold by the industrial capitalist, and then commodities valued at 10,000 p. st. purchased. By means of 20 circulations of 1,000 p. st. in money a commodity supply of 20,000 p. st. has been circulated.
Finally, with an acceleration of the turn-over, also that portion of money circulates faster, which realizes the surplus-value.
But, on the other hand, an acceleration in the circulation of money does not necessarily imply a more rapid turnover of capital, and thus of money, that is to say, it does not necessarily imply a contraction and more rapid renewal of the process of reproduction.
A more rapid circulation of money takes place whenever a larger number of transactions are carried on with the same amount of money. This may take place also with the same periods of reproduction of capital, as a result of changes in the technical appliances of the circulation of money. Furthermore, there may be an increase in the number of transactions in which money circulates without expressing actual exchanges, of commodities (marginal business at the stock- 396 Capital.
exchange, etc.). On the other hand, some circulations of money may be entirely dispensed with. For instance, where the farmer is himself a real estate owner, there is no circulation of money between the capitalist farmer and the real estate owner; where the industrial capitalist is himself the owner of the capital, there is no circulation of money between him and the creditor.
As for the primitive formation of a hoard of money in a certain country, and its appropriation by a few, it is unnecessary to discuss it at this point.
The capitalist mode of production — its basis being wagelabor as well as the payment of the laborer in money and in general the transformation of services for natural products into services for money — cannot develop a larger extension and a greater systematization, unless there is available in this country a quantity of money sufficient for the circulation and the corresponding formation of a hoard (reserve fund, etc.). This is the historical premise. However, this must not be interpreted in the sense that a sufficient hoard must first be formed, before capitalist production can begin. It rather develops simultaneously with the evolution of its foundations and one of these foundations is a sufficient supply of precious metals. Hence the increased supply of precious metals since the 16th century is an essential factor in the history of the development of capitalist production. But so far as the necessary further supply of money material on the basis of capitalist production is concerned, surplus-value incorporated in products is on the one hand thrown into circulation without the money required for its monetization, and on the other hand surplusvalue in the form of gold without the previous transformation of products into gold.
The additional commodities which are to be converted into money find the necessary amount of money at hand, because on the other side additional gold (and silver) intended for conversion into commodities is thrown into circulation, not by means of exchange, but by production itself..
The Circulation of Surplus-Value. 397 II. Accumulation and Reproduction on an Enlarged Scale.
To the extent that accumulation takes place in the form of reproduction on an enlarged scale, it is evident that it does not offer any new problem in matters of the circulation of money.
In the first place, the additional money-capital required for the function of the increasing productive capital is supplied by that portion of the realized surplus-value, which is thrown into circulation by the capitalists as money-capital, not as the money-form of their revenue. The money is already present in the hands of the capitalists. Only its employment is different.
Now, by means of the additional productive capital, its product, an additional quantity of commodities, is thrown into circulation. Together with this additional quantity of commodities, a portion of the additional money required for its circulation is thrown into circulation, so far as the value of this mass of commodities is equal to that of the productive capital consumed in their production. This additional quantity of money has precisely been advanced as an additional money-capital, and therefore it flows back to the capitalist through the turn-over of his capital. Here the same question reappears, which we met previously. Where does the additional money come from, by which the additional surplus-value now contained in the form of commodities is to be realized?
The general reply is again the same. The sum total of the prices of the commodities has been increased, not because the prices of a given quantity of commodities have risen, but because the mass of the commodities now circulating is greater than that of the previously circulating commodities, and because this increase has not been offset by a fall in prices. The additional money required for the circulation of this greater quantity of commodities of greater value must be secured, either by greater economy in the circulating quantity of money — whether by means of balancing payments, etc., or by some measure which accelerates the circulation of the same coins — or, by the transformation 398 Capital.
398 Capital.
of money from the form of a hoard into that of a circulating medium. This does not merely imply that barren money-capital becomes active as a means of purchase or payment, or that money-capital which is already actually circulating for the benefit of the society while representing a reserve fund for its owner is thus performing a double service (such as deposits in banks which are continually balanced). It also implies that the stagnating reserve funds of money are economized.