While the surplus-product, directly produced and appropriated by the capitalists A, A', A" (I), is the actual basis of the accumulation of capital, that is to say, of expanded reproduction, although it does not actually serve in this capacity until it reaches the hands of the capitalists B, B', B", etc. (I), it is quite unproductive in its chrysalis stage of money, of a hoard representing virtual money-capital in process of formation. It runs parallel with the process of production, but moves outside of it. It is a dead weight of capitalist production. The desire to utilize this surplusvalue, while accumulating as virtual money-capital, for the purpose of deriving profits or revenue from it, finds in the credit system and paper securities its consummation. Money-capital thereby gains in another form an enormous influence on the course and the stupendous development of the capitalist system of production.
The surplus-product converted into virtual money-capital will grow so much more in volume, the greater the aggregate amount of capital actually engaged which produced it by its function. With the absolute increase of the volume of the annually reproduced virtual money-capital its segmentation also becomes easier, so that it is more rapidly invested in a certain business, either in the hands of the same capitalist or in those of others (for instance members of the family, in the case of a division of inheritances, etc.). By segmentation of money-capital I mean in this case that it is wholly detached from the parent capital in order to be Accumulation and Reproduction. 583 invested as a new money capital in a new and independent business.
While the sellers of the surplus-product, A, A', A", etc., (I), have obtained it as a direct outcome of the process of production, which does not require any additional act of circulation aside from the advance of constant and variable capital made even in simple reproduction; and while they thereby construct the real basis for a reproduction on an expanded scale, seeing that they manufacture virtually additional capital — the attitude of B, B', B" ", etc., (I), is different. (1) The surplus-product of A, A', A", etc., does not actually seive as additional constant capital until it reaches the hands of B, B', B", etc. (We leave out of consideration for the present the other elements of productive capital, the additional labor-power, in other words, the additional variable capital). (2) In order that the surplusproduct may reach their hands, they must buy it.
In regard to point 1, it may be noted that a large portion of the surplus-product (virtual additional constant capital) is produced by A, A', A", (I), in the course of the current year, but may not serve as industrial capital in the hands of B, B', B", (I), until next year, or still later. With reference to point 2, the question is: Whence comes the money required for the process of circulation?
To the extent that the products created by B, B', B", etc., (I), re-enter in their natural form into their own process, it goes without saying that a corresponding portion of their own surplus-product is transferred directly (without any intervention of circulation) to their productive capital and becomes an element of additional constant capital. To the same extent they do not help to convert any surplus-product of A, A', A", etc., (I), into money. Aside from this where does the money come from? We know that they have formed their hoard in the same way as A, A', etc., by the sale of their respective surplus-products. Now they have arrived at the point where their accumulated hoard of virtual money-capital is to enter effectually upon its function as additional money-capital. But this is merely turn- 584 Capital.
ing around in a circle. The question still remains: Where does the money come from, which the various B's (1) withdrew from the circulation and accumulated?
Now we know from the analysis of simple reproduction, that the capitalists of I and II must have a certain amount of ready money in their hands, in order to be able to dispose of their surplus-products. In that case, the money which served only for the spending of revenue in articles of consumption returned to the capitalists in the same measure in which they advanced it for the purpose of disposing of their commodities. Here the same money re-appears, but in a different function. The A's and B's supply one another alternately with the money for converting their surplus-product into virtual additional capital, and throw the newly formed money-capital alternately into circulation as a medium of purchase.
The only assumption made in this case is that the amount of money existing in a certain country (the velocity of circulation, etc., being the same) suffices for both the active circulation and the reserve hoard. It is the same assumption which had to be made in the case of the simple circulation of commodities, as we have seen. Only the function of the hoards is different in the present case. Furthermore, the existing amount of money must be larger, first, because all the products (with the exception of the newly produced precious metals and the few products consumed by the producer himself) are produced as commodities under capitalist production and must, therefore, pass through the stage of money; secondly, because on a capitalist basis the quantity of the commodity-capital and the volume of its value is not only absolutely greater, but also grows with much greater rapidity; thirdly, an ever more voluminous variable capital must be converted into moneycapital; fourthly, with the extension of production, the formation of new money-capital keeps step, so that the material for it must be available in the form of a hoard.
While this is a common truism for the first phase of capitalist production, in which even the credit system is accompanied by a prevalence of metallic circulation, it ap- Accumulation and Reproduction. 585 plies even to the most developed phase of the credit system to the extent that metallic circulation remains its basis. On the one hand, the additional production of precious metals may exert a disturbing influence on the prices of commodities according to whether it is abundant or scarce, not only in long, but also in very short intervals. On the other hand, the entire mechanism of credit is continually occupied in reducing the actual metallic circulation to a relatively more and more decreasing minimum by means of sundry operations, methods, and technical devices. To the same extent are the artificiality of the entire mechanism and the possibility of disturbing its normal flow increased.
It may be that the different B, B', B", etc., (I), whose virtual new capital enters upon its active function, are compelled to buy from one another their product (portions of their surplus-product) or to sell it to one another. In that case the money advanced by them for the circulation of their surplus-product flows back under normal conditions to the different B's in the same proportion in which they advanced it for the circulation of their respective commodities. If the money circulates as a medium of payment, then only balances are to be paid so far as the alternate purchases and sales do not cover one another. But it is important to assume here, as everywhere, metallic circulation in its simplest form, because then the flux and reflux, the balancing of accounts, in short all elements appearing as consciously directed processes under the credit system, appear as forms independent of the credit system, show themselves in their primitive form instead of their later, reflected, one.
(3). The Additional Variable Capital.
Hitherto we have been dealing only with additional constant capital. Now we must direct our attention to a consideration of the additional variable capital.
We have explained at great length in volume I that labor-power is always held available under the capitalist system of production, and that more labor can be set in 586 Capital.
motion, if necessary, without increasing the number of laborers, or quantity of labor-power, employed. We need not detail this any further for the present, but assume without ceremony that the portion of the newly created moneycapital which is to be converted into variable capital will always find as much labor-power as it cares to transform. It has also been explained in volume I that a certain capital may expand its volume of production within certain limits without any accumulation. But now we are dealing with the accumulation of capital in the strict meaning of the term, so that the expansion of production is conditioned on the conversion of surplus-value into additional capital, and thus on an expansion of the basis of productive capital.
The gold producer can accumulate a portion of his golden surplus-value as a virtual money-capital. As soon as it reaches a sufficient volume, he can transform it directly into new variable capital, without first selling his surplusproduct. In the same way he can convert it into the elements of constant capital. But in this last case, he must find the material elements of constant capital at hand. This may be accomplished by having each producer working to stock his supply, as was hitherto assumed, and then bringing his finished product on the market, or by having them work to fill orders. The actual expansion of production, that is to say, the surplus-product, is assumed in either case, in the one case as actually on hand, in the other as virtually available, because ordered.
II. ACCUMULATION IN DEPARTMENT 2.
We have hitherto assumed that the capitalists A, A', A", etc., (I), sell their surplus-product to the capitalists B, B', B", etc., who belong to the same department. But take it now that A (I) converts his surplus-product into gold by selling it to a capitalist B in department II. This can be done only by the sale of means of production on the part of A (I) to B(II) without a subsequent purchase of articles of consumption, in other words, only by a one-sided sale on A's part. Now we have seen that II c cannot be converted Accumulation and Reproduction. 587 into the natural form of productive constant capital unless not only I v, but also at least a portion of I s, is exchanged for a portion of II c, which II c exists in the form of articles of consumption. But now that A has converted his I s into gold by making this exchange impossible and withdrawing the money obtained from II c out of circulation, instead of spending it for articles of consumption of II c, there is indeed on the part of A (I) a formation of additional virtual money-capital, but on the other hand there is a corresponding portion of the value of the constant capital B (II) held in the form of commodity-capital, unable to transform itself into natural productive constant capital. In other words, a portion of the commodities of B(II), and at that a portion which must be sold if he wishes to reconvert his entire constant capital into its productive form, has become unsaleable. To that extent there is an over production, which clogs reproduction, even on the same scale.
In this case, the additional virtual money-capital on the side of A (I) is indeed a gilded form of surplus-product (surplus-value), but the surplus-product (surplus-value) as such is as yet but a phenomenon of simple reproduction, not of reproduction on an expanded scale. In order that the reproduction of II c may take place on the same scale, I (v+s) must ultimately be exchanged for II c, and this applies at all events to a portion of I " By the sale of his surplus-product to B(II), A (I) has supplied to B(II) a certain portion of the value of constant capital in its natural form. But at the same time he has rendered an equal portion of the value of the commodities of B(II) unsaleable by withdrawing the money from circulation and not making a compensating purchase. Hence, if we view the entire social reproduction, which comprises both the capitalists of I and II, then the conversion of the surplus-product of A (I) into a virtual money-capital implies the impossibility of reconverting an equal portion of the value of the commodity-capital of B(II) into productive (constant) capital, in other words, not a virtual production on an enlarged scale, but an obstruction of simple reproduction, a deficit in the simple reproduction. As the formation and sale of 688 Capital.
688 Capital.
the surplus-product of A (I) are normal phenomena of simple reproduction, we have here even on the basis of simple reproduction the following mutually interdependent phenomena: The formation of virtual additional money-capital in department I (implying underconsumption in department II); the stagnation of commodities of department II which cannot be reconverted into productive capital (implying a relative overproduction in department IT); a surplus of money-capital in department I and a deficit in the reproduction of department II.
Without pausing any longer at this point, we simply repeat that we had assumed in the analysis of simple reproduction that the entire surplus-value of I and II is spent as revenue. As a matter of fact, however, one portion of the surplus-value is spent as revenue, and another is converted into capital. Actual accumulation can take place only on this condition. That accumulation should take place at the expense of consumption, is, as a general assumption, an illusion contradicting the nature of capitalist production. For it takes for granted that the aim and compelling motive of capitalist production is consumption, instead of the gain of surplus-value and its capitalization, in other words, accumulation.
Let us now take a closer look at the accumulation in department II.
The first difficulty with reference to II c, that is to say the conversion of an element of the commodity-capital of II into the natural form of constant capital of II, concerns simple reproduction.
Let us take the formula previously used.
Now, if one half of the surplus-product of I, or 500 s, is reincorporated in department I as constant capital, then this portion, being detained in department I, cannot take the place of any portion of II c. Instead of being converted into articles of consumption, it is made to serve as an additional means of production in department T itself (and it Accumulation and Reproduction. 589 must be noted that in this section of the circulation between I and II the exchange is actually mutual, consisting of a double change of position, different from the substitution of 1000 I v for 1000 II c by the laborers of I). It cannot perform this function simultaneously in I and II. The capitalist cannot spend the value of his surplus-product for articles of consumption, and at the same time consume the surplus-product itself productively, by incorporating it in his productive capital. Instead of 2000 I(v + s), only 1500 are exchangeable for 2000 II c, namely 1000 v + 500 s of I. But 500 I c cannot be reconverted from the form of commodities into productive constant capital of II. Hence there would be an overproduction in department II, equal in volume to the expansion of production in department I. This overproduction of II might react to such an extent on department I that even the reflux of the 1000 v spent by the laborers of I for articles of consumption of II might take place but partially, so that these 1000 would not return to the hands of the capitalists of I in the form of variable moneycapital. In that case, these capitalists would be hampered even in reproduction on a simple scale by the mere attempt of expanding it. And it must be remembered in this connection that department I had actually resumed only simple reproduction, and that only the elements classified in our diagram were differently grouped with a view of expanding in the future, say, next year.
One might attempt to circumvent this difficulty in the following way: The 500 II c which are held by the capitalists, and cannot be immediately converted into productive capital, do not by any means represent any overproduction, but are, on the contrary, a necessary element of reproduction, which we have so far neglected. We have seen that a money supply must be accumulated at many points by withdrawing it from circulation, either for the purpose of facilitating the formation of new money-capital in department I, or to the end of temporarily holding the gradually depreciating portion of the fixed capital in the form of money. But since we have placed all the available money and commodities exclusively into the hands of the capitalists of I 590 Capital.
and II, when we made up our diagram, eliminating merchants, money-changers, and bankers, and all merely con suming and not directly producing classes, it follows that the formation of supplies of commodities in the hands of their respective producers is here indispensable in order to keep the machinery of reproduction in motion. The 500 II c now held in stock by the capitalists of II therefore represent the supply of articles of consumption by which the continuity of the process of consumption included in the process of reproduction is promoted. This means in the present case the transition from this year into next. The fund for consumption, which is as yet in the hands of its sellers and producers cannot fall to the point of zero and begin with zero next year, any more than such a thing can take place in the transition from to-day to to-morrow. Since new supplies of commodities must be continually accumulated, even though their volume may differ, our capitalist producers of department II must have a reserve capital, which enables them to continue their process of production, although one portion of their productive capital is temporarily tied up in the shape of commodities. Our assumption is all the time that they combine the business of a merchant with that of a producer. Hence they must also have at their disposal an additional money-capital, which would be in the hands of merchants, if the various functions in the process of reproduction were distributed among independent capitalists.
But we would reply to this argument: (1) That the forming of such supplies and the necessity for it applies to all capitalists, those of I as well as of II. Considering them in their capacity as sellers of commodities, they differ only by the fact that they sell different kinds of commodities. A supply of commodities of II implies a previous supply of commodities of I. If we neglect this supply on one side, we must also do so on the other. But if we count them in on both sides, the problem is not altered in any way. (2) Just as this year closes on the side of II with a supply of commodities for next year, so it was opened by a supply of commodities on the same side- taken over from last year.
Accumulation and Reproduction. 591 In the analysis of annual reproduction, reduced to its abstract form, we must therefore strike it out at both ends. By leaving this year in possession of its entire production, including the supply held for next year, we take from it the supply of commodities transferred from last year, and thus we have actually to deal with the aggregate product of an average year as the object of our analysis. (3) The simple circumstance that the difficulty which must be overcome did not show itself in the analysis of simple reproduction proves that it is a specific phenomenon due merely to the different arrangement of the elements of department I with a view to reproduction, an arrangement without which reproduction on an expanded scale cannot take place at all.
III. DIAGRAMMATIC PRESENTATION OF ACCUMU- LATION.
We now study reproduction by means of the following diagram: We note in the first place that the total volume of the annual product is smaller than that of the first diagram, being 8252 instead of 9000. We might just as well assume a much larger sum, for instance one ten times larger. We have chosen a smaller sum than in our first diagram, in order to demonstrate, that reproduction on an enlarged scale (which is here regarded merely as a production carried on with a larger investment of capital) has nothing to do with the absolute volume of the product, and that it implies merely a different arrangement, a different distribution of functions to the various elements of a certain product, so that it is but a simple reproduction so far as the value of the product is concerned. It is not the quantity^ but the destination of the given elements of simple repro- 592 Capital.
duction which is changed, and this change is the material basis of a subsequent reproduction on an enlarged scale.52 We might vary the diagram by changing the proportions between the variable and constant capital. For instance this way: In this case, the diagram would be arranged for reproduction on a simple scale, so that the surplus-value would be entirely consumed as revenue, instead of being accumulated. In either case, that of (a) as well as (b), we have an annual product of the same value. Only (b) has the functions of its elements arranged in such a way that reproduction is resumed on the same scale, while in the case of (a) the arrangement forms the material basis of reproduction on an enlarged scale. For in the case of (b), the factors (875 v + 875 s) I, equal to 1750 I(v + s), are exchanged without any remainder for 1750 II c, while in the case of (a), the exchange of (1000 v + 1000 s)I, equal to 2000 (v + s)I, for 1500 II c leaves a surplus of 500 Is for accumulation in department I.
Now let us analyze diagram (a) closer. Let us assume that both I and II accumulate one half of their surplusvalue, that is to say, convert it into an additional element of capital instead of spending it as revenue. When one half of 1000 I s, or 500, are accumulated in one form or another, that is to say, invested as additional money-capital, converted into additional productive capital, then only (1000 v + 500 s)I are spent as revenue. Hence 1500 is here inserted as the normal size of II c. We need not examine the exchange between 1500 I(v + s) and 1500 He any more, because this has already been done under the head of simple reproduction. Nor does 4000 I c require any attention, since its re-arrangement was likewise discussed 52 This puts an end, once for all, to the feud over the accumulation of capital between James Mill and S. Bailey, which we have discussed from our point of view in volume I, chapter XXIV, section 5, foot notes on pages 622 and 623, namely the feud concerning the extensibility of the effects of industrial capital without changing its magnitude. We shall revert to this later.
Accumulation and Reproduction. 593 under the head of simple reproduction, although this rearrangement is now preparing for a new reproduction on an enlarged scale.
The only thing which remains for us to examine is 500 I s and (376 v + 376 s)II, both as regards the internal conditions of the two departments and the movements between them. Since we have assumed that department II is likewise accumulating one half of its surplus-value, 188 are to be converted into capital, of which one fourth, or 47, or, to round it off, 48, are variable capital, so that 140 remain to be converted into constant capital.
Here we come across a new problem, whose very existence must appear strange to the current idea that commodities of one kind are exchanged for commodities of another kind, or commodities for money and the same money for commodities of another kind. The 140 II c can be converted into productive capital only by exchanging them for commodities of I s of the same value. It is a matter of course that that portion of I s which must be exchanged for II s must consist of means of production, which may either be fit for service in the production of both I and II, or exclusively adapted to the production of II. This change of place can be made only by means of a onesided purchase on the part of II, as the entire remaining surplus-product of 500 I s, which we shall presently examine, is reserved for accumulation in department I and cannot be exchanged for commodities of II; in other words, it cannot be simultaneously accumulated and consumed by I. Therefore department II must buy 140 I s for cash without recovering this money by a subsequent sale of its commodities to I. And this is a process which is continually repeated in every new annual production, so far as it is reproduction on an enlarged scale. Where does II get the money for this?
It rather seems as though department II were a very unprofitable field for the formation of new money-capital, by means of simple hoarding, which accompanies actual accumulation and is its basis under capitalist production.
We have first 376 II v. The money-capital of 376, advanced for labor-power, returns through the purchase of 594 Capital.
commodities of II continually as variable capital to the capitalists of II. This continually repeated departure from and return to the starting point, the pocket of the capitalist, does not add in any way to the money moving in this cycle. This, then, is not a source of the accumulation of money. Nor can this money be withdrawn from circulation in order to form a hoard, or virtual new money-capital.
But stop! Isn't there a chance to make a little profit?
We must not forget that class II has the advantage over class I that its laborers must buy back from it the commodities produced by themselves. Department II is a buyer of labor-power and at the same time a seller of the commodities to the owners of the labor-power employed by it. Department II, then, may do two things.
(1) It may depress the wages below its average level, and this privilege it shares with department I. By this means a portion of the money serving in the function of variable capital is released, and if this process is continually repeated, it may become a normal source of hoarding, and thus of virtual additional money-capital in department II. Of course we are not referring to a casual stolen profit here, since we are speaking of a normal formation of capital. But it must not be forgotten that the wages actually paid (which determine the magnitude of the variable capi tal under normal conditions) do not depend on the benevolence of the capitalists, but must be paid under certain conditions. This does away with this expedient as a source of additional money. If we assume that 376 v is the variable capital at the disposal of department II, we cannot suddenly substitute the hypothesis that the capitalists pay only 350 v instead of 376 v, merely because we are confronted by a new problem.
(2) On the other hand, department II, taken as a whole, has the above mentioned advantage over I that it is at the same time a buyer of labor-power and a seller of commodities to its own laborers. Every industrial country furnishes the most tangible proofs to what extent this may be exploited, by paying nominally the normal wages, but grabbing, or in plain words, stealing back a large portion with- Accumulation and Reproduction. 595 out a corresponding equivalent in wages; by accomplishing the same thing either through the truck system, or through a falsification of the medium of circulation (perhaps in a way that cannot be punished by law). England and America furnish such instances. (Illustrate this by some striking examples). This is the same operation as under (1), only disguised and carried out by a detour. Therefore it must likewise be rejected as an explanation of the present problem. The question is here of actually paid, not of nominal wages.
We see that some extraordinary disfigurations on the face of capitalism cannot be used in an objective analysis of the mechanism of capitalism as an excuse to get over some theoretical difficulties. But strange to say, the great majority of my bourgeois critics score me as though I had wronged the capitalists by assuming in volume I of this work that they really pay labor-power at its value, a thing which they rarely do! (Here I may exercise some of the magnanimity attributed to me by quoting Schaeffle.)
In short, we cannot accomplish anything with 376 II v for the solution of this question.
But it seems to be still more impossible to do anything with 376 II s. Here the capitalists of the same department are standing face to face, mutually buying and selling their articles of consumption. The money required for these transactions serves only as a medium of circulation and must flow back to the interested parties in the normal course of things, to the extent that they have advanced it to the circulation, in order to pass again and again over the same course.
There seem to be only two ways by which this money can be withdrawn from circulation for the purpose of forming virtual additional money-capital. Either one portion of the capitalists of II cheats the others and thus robs them of their money. We know that no preliminary expansion of the circulating medium is necessary for the formation of new money-capital. All that is necessary is that money should be withdrawn from circulation by certain parties and hoarded. It would not alter the case, if this money were 596 Capital.
stolen, so that the formation of additional money-capital on the part of a portion of the capitalists of II would be accompanied by a positive loss of money on the part of others. The cheated capitalists would have to live a little less gaily, that would be all.
Or, a certain portion of II s, represented by necessities of life, might be directly converted into new variable capital of department II. How that is done, we shall examine at the close of this chapter (in section IV).
(1) First Illustration.
A. Diagram of Simple Reproduction.
B. Initial Diagram for Accumulation on an Expanded Scale.
Assuming that in diagram B one half of the surplusvalue of I, amounting to 500, is accumulated, we have first to accomplish the change of place between (1000 v + 500 s)I, or 1500 I(v + s), and 1500 He. Department I then keeps 4000 c and 500 s, the last sum being accumulated. The exchange between (1000 v + 1000 s)I and 1500 II c is a process of simple reproduction, which has been examined previously.
Let us now assume that 400 of the 500 I s are to be converted into constant capital, and 100 into variable capital. The transactions within the 400 s of I, which are to be capitalized, have already been discussed. They can be immediately annexed to I c, and in that case we get in department I 4400 c +1000 v+100 s (these last to be converted into Department II buys from I for the purpose of accumu- Accumulation and Reproduction. 597 lation the 100 Is (existing in means of production), which thus become additional constant capital in department II, while the 100 in money, which this department pays for them, are converted into the money-form of the additional variable capital of I. We then have for I a capital of 4400 c + 1100 v (these last in money), a total of 5500.
Department II has now 1600 c for its constant capital. In order to be able to operate this, it must advance 50 v in money for the purchase of new labor-power, so that its variable capital grows from 750 to 800. This expansion of the constant and variable capital of II by a total of 150 is supplied out of its surplus-value. Hence only 600 of the 750 II s remain for the consumption of the capitalists of II, whose annual product is now distributed as follows: