In the second place, a definite functional role played by every metamorphosis of some individual capital within the process of circulation, need not represent a corresponding opposite metamorphosis in the rotation of the other capital, provided we assume that the entire production of the worldmarket is carried on capitalistically. For instance, in the cycle P...P, the M' which pays for C may be merely the money-form of the surplus-value of the buyer, in case that the commodity is an article for consumption; or, in M' — C \ pm where accumulated capital is concerned, it may simply replace the advanced capital of the seller of Pm, or it may not return into the rotation of his capital at all by being side-tracked into expenditures as revenue.
This shows that the manner in which the different component parts of the aggregate social capital, of which individual capitals are merely components performing independent Diagrams of the Process of Circulation. 131 functions, mutually replace one another in the process of circulation (in regard to capital as well as surplus-value), is not apparent from the simple intermingling of the metamorphoses in the circulation of commodities. Such intermingling occurs in the transactions of capital circulation as it does in all other circulation of commodities, but it requires a different method of analysis. Hitherto nothing but general phrases have been employed by economists for his purpose, and if we test those phrases, they contain nothing but indefinite ideas borrowed from the intermingling of metamorphoses common to all circulations of commodities.
One of the most obvious peculiarities of the process of rotation of industrial capital, and therefore of capitalist production, is the fact that on the one side, the component elements of productive capital are derived from the commodity-market, are continually renewed out of it, and are sold as commodities; that, on the other side, the product of the laborprocess comes forth from it as a commodity and must be continually sold over and over as a commodity. Compare, for instance, a modern tenant of Lower Scotland with an old-fashioned small farmer on the continent. The former sells his entire product and has therefore to reproduce all its elements, even his seeds, by means of the market; the latter consumes the greater part of his product directly, buys and sells as little as possible, fashions tools, clothing, etc., so far as possible himself.
Such comparisons have led to the classification of production into natural economy, the money-system, and the credit-system, as being the three characteristic stages of economy in the development of social production.
But in the first place, these three forms do not represent any equivalent phases of development. The so-called creditsystem is itself merely a modification of the money-system, so far as both terms express transactions between the producers themselves. In the developed capitalist production, the money-system appears only as the basis of the creditsystem. The money-system and credit-system thus corre- 132 Capital 132 Capital spond only to different stages in the development of capitalist production, but they are by no means independent modes of economy as compared to natural economy. With the same justification, one might place the various forms of natural economy as equivalents by the side of those two systems.
In the second place, it is not the process of production itself which is emphasized as the distinguishing mark of the two systems of that classification, the money-system, the credit-system, but rather the mode of transaction between the various producers under those systems. Then the same should apply to the natural economy, which should in that case be classified as the exchange-system. A completely rounded system of natural economy, such as the state of the Inkas in Peru, would not fall under any of these classifications.
.In the third place, the money-system is common to all production of commodities, and the product appears as a commodity in the most varied organisms of social production. The characteristic mark of capitalist production would then be only the extent to which the product is manufactured for purposes of trade, as a commodity, and the extent to which its own elements of formation enter as commodities into the economy which creates that product.
It is true, that capitalist production has for its general form the production of commodities. But it is so and becomes more so in its development, only because labor itself here appears as a commodity, because the laborer sells labor, that is to say the function of his labor-power, and our assumption is that he sells it at a value determined by \U cost of reproduction. To the extent that labor becomes wage-labor, the producer becomes an industrial capitalist. For this reason capitalist production (and the production of commodities) does not reach its full scope, until the agricultural laborer becomes a wage-laborer. In the relation of capitalist and wage-laborer, the relation between the buyer and the seller, the money-relation, becomes an imminent relation of production. And this relation has its foundation in the social character of production, not of circulation. The character of the circulation rather depends on that of production.
Diagrams of the Process of Circulation. 133 It is, however, quite characteristic of the bourgeois horizon, which is entirely bounded by the craze for making money, not to see in the character of the mode of production the basis of the corresponding mode of circulation, but vice versa.7 The capitalist throws less value in the form of money into the circulation than he draws out of it, because he throws into it more value in the form of commodities than he had withdrawn from it. To the extent that he is simply a personification of capital, an industrial capitalist, his supply of commodity-value is always larger than his demand for that value. The equality of his supply and demand in this respect would indicate that his capital had not produced any surplus-value; it would not have performed the functions of productive capital; the productive capital would have been converted into commodity-capital which would not be impregnated with surplus-value; it would not have drawn any surplus-value in commodity-form out of laborpower during the process of production, it would not have performed any capital-functions at all. The capitalist must indeed "sell dearer than he has bought," but he succeeds only in doing so, because the capitalist process of production enables him to transform the cheaper commodity, which contains less value, into a dearer commodity with increased value. He sells dearer, not because he gets more than the value of his commodity, but because his commodity contains a greater value than that contained in the natural elements of its production.
The rate at which value is added to the capital of the capitalist increases in proportion to the difference between his supply and his demand, that is to say in proportion as the surplus of the commodities which he places on the market exceeds the value of the commodities which he has taken from it. His aim is not to equalize his supply and demand, but to make the difference between them as much as possible in favor of his supply.
7 End of Manuscript V. What follows to the end of the chapter is a note found in a Manuscript of 1877 or 1S78 amid extracts from other works.
134 Capital.
What is true of the individual capital, also applies to the capitalist class.
In so far as the capitalist personifies but his industrial capital, his own demand is only for means of production and labor-power. His demand for Pm, expressed in value, is smaller than his advanced capital; he buys means of production of a value smaller than his capital, and therefore much smaller than the value of the commodity-capital which he takes back to the market.
As regards his demand for labor-power, its value is determined by the proportion of his variable capital to his total capital, as expressed by Vh-C Its proportion in capitalist production decreases continually more than his demand for means of production. His purchases of Pm steadily increase over his purchases of L.
Inasmuch as the laborer generally converts his wages into means of existence, and for the overwhelmingly larger part necessities of life, the demand of the capitalist for laborpower is indirectly also a demand for the articles of consumption assimilated by the working class. But this demand is equal to v and not one atom greater. If the laborer saves a part of his wages — we do not consider any questions of credit at all — he converts a part of his wages into a hoard and does not perform the functions of a purchaser to that extent. The limit of the maximum demand of the capitalist is C, equal to c plus v, but his supply for the market is c plus v plus s. If the composition of his commodity-capital is 80c+20v+ 20s, his demand is equal to 80c+20v, or one fifth smaller in value than his supply. His demand as compared to his supply decreases in proportion as the percentage of the mass of surplus-value produced by him (his rate of profit) increases. Although the demand of the capitalist for labor-power, and thus indirectly for necessities of life, decreases continually compared to his demand for means of production in the further development of production, it must not be forgotten that day by day his demand for Pm is always smaller than his capital. His demand for means of production must, therefore, be always smaller in value than the commodityproduct of the capitalist who, working with a capital of equal value and conditions like his, furnishes him with those Diagrams of the Process of Circulation. 135 means of production. It does not alter the case, if manycapitalists instead of one furnish him with means of production. Take it that his capital is 1,000 pounds sterling, and its constant part 800 pounds sterling; then his demand on all the capitalists supplying him is equal in value to 800 pounds sterling. Together they supply for each 1,000 pounds sterling means of production valued at 1,200 pounds sterling, assuming that the rate of profit is the same for all of 'them, regardless of the rate at which they share in the 1,000 and of the proportion which -the share of each one may represent in his total capital. The demand of the buying capitalist covers only 'two-thirds of the supply of the sellers, while his total demand equals only four-fifths of the value of 'his own supply to the market.
It still remains to anticipate the analysis of the problem of turn-over. Let the total capital of the capitalist be 5,000 pounds sterling, of which 4,000 pounds is fixed and 1,000 pounds circulating capital; these 1,000 pounds sterling are composed of 800 c plus 200 v, as assumed before. His circulating capital must be turned over five times per year in order that his fixed capital may be turned over once. His commodity-product is then equal in value to 6,000 pounds sterling, it is valued at 1,000 pounds sterling more than his advanced capital, so that the same proportion of surplusvalue is obtained as before: This turn-over does not change anything in the proportion of the total demand of the capitalist to his total supply. The former remains one-fifth smaller than the latter.
Take it that his fixed capital must be reproduced in 10 years. Hence he sinks every year one tenth, or 400 pounds sterling, so that he has only -a value of 3,600 pounds of fixed capital left plus 400 pounds in money. Inasmuch as repairs are necessary which do not exceed the average, they represent nothing but capital invested later. "We may look at the matter from the standpoint that he has allowed for the expenses for repairs when calculating the value of his investment, so far as this enters into the annual commodity-product, so that they are included in that one tenth of sinking fund. If the repairs cost less than the average he is so much 136 Capital.
money in pocket, and in the reverse case he loses it. At any rate, although his demand, after his total capital has been turned over once a year, still remains at 5,000 pounds sterling which was the value of the original capital advanced, it increases so far as the circulating part of this capital is concerned, while it decreases so far as the fixed part is concerned.
We now come to the question of reproduction. Take it that the capitalist consumes the entire surplus-value composed of money m and reconverts only the original capitalvalue C into productive capital. Then the demand of the capitalist is equal to his supply; but this does not refer to the movements of his capital. As a capitalist, his demand is only for four-fifths of the value of his supply. He consumes one-fifth as a non-capitalist; he consumes it, not in the performance of his function as capitalist, but for his private requirements or pleasure.
His calculation, expressed in percentages, stands as follows: Demand as capitalist 100, supply 120.
Demand as man of the world. 20, supply 0.
Total demand 120, supply 120.
This assumption amounts to a non-existence of capitalist production, and thus the non-existence of the industrial capitalist himself. For capitalism is destroyed in its very foundation, if we assume that its compelling motive is enjoyment instead of the accumulation of wealth.
But such an assumption is also technically impossible. The capitalist must not only form a reserve-capital as a protection against fluctuations of value and as a fund enabling him to wait for favorable conditions of the market for sale and purchase; he must also accumulate capital, in order to extend his production and embody the progress of technique in his productive organization.
In order to accumulate capital, he must first withdraw a a part of the surplus-value from circulation which he obtained from that circulation in the form of money, and must hoard it until it has increased sufficiently for the extension of his old business or the opening of a side-line. So long as Diagrams of the Process of Circulation. 137 the formation of the hoard continues, it does not increase the demand of the capitalist. The money is then inactive. It does not withdraw from the commodity-market any equivalent in commodities for the money-equivalent which it withdrew for commodities supplied to it.
Credit is not considered here. And credit includes the depositing, on the part of the capitalist, of accumulating money in a bank on payment of interest as shown by a running account.
138 Capital.
CHAPTER V.
THE TIME OF CIRCULATION.8 We have seen that the movement of capital through the sphere of production and the two phases of circulation takes place in a succession of time. The duration of its sojourn in the sphere of production is its time of production, that of its stay in the sphere of circulation its time of circulation.
The time of production naturally includes the period of the labor-process, but is not comprised in it. We must first remember that a part of the constant capital exists in the form of instruments of production, such as machinery, buildings, etc., which serve for the repeated labor-processes until they are worn out. Periodical interruptions of the labor-process by night, etc., interrupt the function of these instruments of production, but not their location on the place of production. They belong to this place when they are not in function as well as when they are. On the other hand, the capitalist must have a definite supply of raw material and auxiliary substances in readiness, in order that the process of production may take place for a longeT or shorter time on a previously determined scale, without being dependent on the accidents of a daily supply from the market. This supply of raw material, etc., is consumed productively by degrees. There is, therefore, a difference between its time of production9 and its time of function. The time of production of the means of production in general comprises, therefore, first the time during which they serve as means of production by taking part in the productive process; second, the stops during which a certain process of production, and thus the function of the means of 8 Beginning of Manuscript IV.
9 Time of production of the means of production does not mean, in this case, the time required for their production, but the time during which they take part in the process of production *f a certain commodity. — F. E.
The Time of Circulation. 139 production embodied in it, is interrupted; third, the time during which the means of production are held in readiness as requirements for the process of production, during which they represent productive capital, without having entered into the process of production.
The difference so far discussed is always the difference between the time which the productive capital passes in the sphere of production and that in the process of production. But the process of production itself may require interruptions of the labor-process, and thus of the labor time, and during such pauses the object of labor is exposed to the influence of physical processes without the intervention of human labor. The process of production, and thus the function of the means of production, continue in this case, although the labor-process, and thus the function of the means of production as instruments of labor, have been interrupted. This applies, for instance, to the grain, after it has been sowed, the wine fermenting in the cellar, the labor-material of many manufacturers, such as tanneries, where the material is given over to chemical processes. The time of production is then greater than the labor-time. The difference between the two consists in an excess of the time of production over the labor-time. This excess always arises by the latent existence of productive capital in the sphere of production, without performing its function in the process of production itself, or by the performance of its function in the productive process without taking part in the labor-process.
That part of the latent productive capital, which is held in readiness as a requirement for the productive process, such as cotton, coal, etc., in a spinnery, produces neither products nor value. It is fallow capital, although its fallow condition is a requirement for the uninterrupted flow of the process of production. The buildings, apparatus, etc., necessary for the storage of the productive supply (latent capital) are requirements of the productive process and therefore component parts of the advanced productive capital. They perform their function as conservators of the elements of production in a preliminary stage. Inasmuch as labor-processes are required in this stage, they add to 140 Capital.
the cost of the raw material, etc., but they are productive labor and produce surplus-value, because a part of this labor, like all wage-labor, is not paid. The normal interruptions of the entire process of production, the pauses in which the productive capital does not perform any functions, create neither value nor surplus-value. Hence the tendency to keep the work going at night (Volume I, Chapter X, 4). — The intervals in the labor-time, which the object of labor must endure in the process of production itself, create neither value nor surplus-value. But they advance the product, form a part of its life, a process through which it must necessarily pass. The value of the apparatus, etc., is transferred to the product in proportion to the entire time, during which they perform their function; the product is brought to this stage by labor itself, and the employment of these apparatus is as much a requirement of production as the wasting of a part of the cotton which does not enter into the product, but nevertheless transfers its value.to that product. The other parts of latent capital, such as buildings, machinery, etc., that is to say those instruments of labor whose function is interrupted only by the regular pauses of the productive process (irregular interruptions caused by the restriction of production, crises, etc., are total losses) create additional values without entering into the creation of the product. The total value which this part of capital adds to the product, is determined by the average time which it lasts, for its own value, being use-value, diminishes during the time that it performs its functions as well as during that in which it does not.
Finally, the value of the constant part of capital, which continues in the productive process although the laborprocess is interrupted, re-appears in the result of the productive process. Labor itself has here placed the means of production in a condition, where they pass without further assistance through certain useful processes, the result of which is a definite advantage or a change in the form of the use-values. Labor always transfers the value of the means of production to the product, to the extent that it really consumes them to good effect as means of production. And it does not change the case, whether labor has to be exerted The Time of Circulation. 141 continually on its object in order to produce this effect, or whether it merely gives the first impulse for it by placing the means of production in a condition wherein they undergo the intended transformation through the influence of natural processes, without further assistance from labor.
Whatever may be the reason for the excess of the time of production over the labor-time — whether it is that the means of production are still latent capital in a stage preliminary to the actual productive process, or that their function is interrupted within the process of production by its pauses, or that the process of production itself requires an interruption of the labor-process — in none of these cases do the means of production assimilate any labor. And if they do not assimilate any labor, they do not imbibe any surplus-labor. Hence the productive capital does not increase its value, so long as it remains in that part of its time of production which exceeds the labor-time, no matter how indispensable these pauses may be for the realization of the process of increasing value. It is plain, that the productivity and increment of a given productive capital in a given time are so much greater, the more nearly the time of production and labor-time are equal. Hence we have the tendency of capitalist production to reduce the excess of the time of production over the labor-time as much as possible. But although the time of production of a certain capital may exceed its labor-time, it always includes the latter, and its excess is a logical condition of the process of production.
The time of production, then, is always that time in which a capital produces use-values and surplus-values, and in which it performs the functions of productive capital, although it includes time in which it is either latent or produces without creating surplus-values.
Within the sphere of circulation, capital abides as commodity-capital and money-capital. Its two processes of circulation consist in its transformation from the commodityform into that of money, and from the money-form into that of commodities. It does not alter the character of these processes as transactions in circulation, of processes in the simple metamorphosis of commodities, that this transformation of commodities into money is at the same time a re- 142 Capital.
alization of the surplus-values embodied in the commodities, and that the transformation of money into commodities is at the same time a transformation or reconversion of capital-value into the forms of its elements of production.
The time of circulation and time of production mutually exclude one another. During its time of circulation, capital does not perform the functions of productive capital and therefore produces neither commodities nor surplus-value.
If we study the cycle in its simplest form, so that the entire capital-value passes in one bulk from one phase into the other, we can plainly see that the process of production is interrupted and therefore also the production of surplusvalue, so long as its time of circulation lasts, and that the renewal of the process of production will take place promptly or slowly, according to the length of the time of circulation. But if the various parts of capital pass through the cycle successively, so that the rotation of the entire capitalvalue proceeds successively by the rotation of its component parts, then it is evident that the part performing continually the function of productive capital must be so much smaller, the longer the aliquot parts of capital-value remain in the sphere of circulation. The expansion and contraction of the time of circulation are therefore a check on the contraction or expansion of the time of production or of the volume which a given capital can assume for its productive function. To the extent that the metamorphoses of circulation of a certain capital are reduced, to the extent that the time of circulation approaches zero, its productivity and increment of surplus-value will increase. For instance, if a capitalist executes an order, so that he receives payment for his goods on delivery, and if this payment is made in his own elements of production, the time of circulation of his capital approaches zero.
In short, the time of circulation of a certain capital limits its time of production and the process of creating surplusvalue. And this limitation is proportional to the duration of the time of circulation. Seeing that this time may increase or decrease in different ratios, it may limit the time of production in various degrees. But political economy sees only the seeming effect, that is to say the effect of the The Time of Circulation. 148 time of circulation on the creation of surplus-values in general. It takes this negative effect for a positive one, because its results are positive. It clings so much the more to this semblance, as this seems to prove that capital has a mystic source from which surplus-value flows toward it through the circulation, independently of its process of production and the exploitation of labor. We shall see later, that even scientific political economy has been deceived by this appearance of things. Various phenomena contribute to this deception: 1. The capitalist method of calculating profit, in which the negative cause figures as a positive one, seeing that with capitals in different spheres of investment, with different times of circulation only, a longer time of circulation tends toward an increase of prices, in short serves as one of the causes which bring about an equalization of profits. 2. The time of circulation is but a factor in the period of turn-over; and this period includes both the time of production and reproduction. What is really due to the period of turn-over, seems to be due to the time of circulation. 3. The conversion of commodities into variable capital (wages) is conditioned on their previous conversion into money. In the accumulation of capital, the conversion into additional variable capital takes place in circulation, or during the time of circulation. It thus appears as though this accumulation were due to the time of circulation.
Within the sphere of circulation, capital passes through the two opposite phases of C — M and M — C, no matter in what succession. Hence its time of circulation is likewise divided into two parts, viz.: the time required for its conversion from money into commodities, and that required for its conversion from commodities into money. We have already learned from the analysis of the simple circulation of commodities (Vol. I, Chap. Ill), that C — M, the sale, is the most difficult part of its metamorphosis and that, therefore, under ordinary conditions, it takes up the greater part of its time of circulation. As money, value exists in its ever convertible form. But as a commodity, value must first be transformed into money in order to assume such a directly convertible form of continual readiness. However, in the process of circulation of capital, its phase C — M 144 Capital.
deals with commodities which constitute definite elements of. productive capital in a certain investment. The means of production may not be on the market and must first be produced, or they must be ordered from distant markets, or their ordinary supply is interrupted, or prices change, etc., in short there are a multitude of circumstances which are not visible in the simple change of form from M to C, but which nevertheless require more or less time for this part of the phase of circulation. C — M and M — C may not only be separate in time, but also in space, the selling and the buying market may be located apart. In the case of factories, for instance, the buyer and seller are frequently different persons. In the production of commodities, circulation is as necessary as production itself, so that agents are just as much needed in circulation as in production. The process of reproduction includes both functions of capital, therefore it also includes the necessity of having representatives for both of them, either in the person of the capitalist or of wage-workers, as his agents. But this is no more a good reason for mistaking the agents in circulation for those in production, than it is to confound the functions of commodity-capital and money-capital with those of productive capital. The agents of circulation must be paid by the agents of production. And since capitalists who mutually sell and buy do not create either values or products by these transactions, this state of affairs is not changed, if they are enabled or compelled by the expansion of their business to charge others with those transactions.
In some businesses, the buyers and sellers get their wages in the form of percentages on the profits. It does not alter the matter to use the phrase that they are paid by the consumer. The consumers can pay only inasmuch as they are themselves instrumental in producing an equivalent in commodities as agents of production or appropriate it out of the product of other agents in production, whether it be by means of legal titles or of personal services.
There is a difference between C — M and M — C, which has nothing to do with the different forms of commodities and money, but arises from the capitalist character of production. Intrinsicallv. C — M as well as M — G is merely a The Time of Circulation. 145 conversion of a given value out of one form into another. But C — M' is at the same time a realization of the surplusvalue contained in C Not so M — C. For this reason the sale is more important than the purchase. M — C is under normal conditions a necessary act for the creation of more value by means of the value contained in it, but it is not the realization of surplus-value; it is the intimation of its production, not its after-effect.