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• Preface By Friedrich Engels
• Translator's Note.
• Volume II. the Process of Circulation of Capital.
• Book II. the Circulation of Capital.
• Part I the Metamorphoses of Capital and Their Cycles.
• Part I, Chapter I the Circulation of Money-capital.
• Part I, Chapter Ii the Rotation of Productive Capital.
• Part I, Chapter Iii the Circulation of Commodity-capital.
• Part I, Chapter Iv the Three Diagrams of the Process of Circulation.
• Part I, Chapter V the Time of Circulation.
• Part I, Chapter Vi the Expenses of Circulation.
• Part Ii the Turn-over of Capital.
• Part Ii, Chapter Vii the Period and Number of Turn-overs.
• Part Ii, Chapter Viii Fixed Capital and Circulating Capital.
• Part Ii, Chapter Ix the Total Turn-over of Advanced Capital. Cycles of Turn-over.
• Part Ii, Chapter X Theories of Fixed and Circulating Capital, the Physiocrats and Adam Smith.
• Part Ii, Chapter Xi Theories of Fixed and Circulating Capital. Ricardo.
• Part Ii, Chapter Xii the Working Period.
• Part Ii, Chapter Xiii the Time of Production.
• Part Ii, Chapter Xiv the Time of Circulation.
• Part Ii, Chapter Xv Influence of the Time of Circulation On the Magnitude of an Advance of Capital.
• Part Ii, Chapter Xvi the Turn-over of the Variable Capital.
• Part Ii, Chapter Xvii the Circulation of Surplus-value.
• Part III. the Reproduction and Circulation of the Aggregate Social Capital.
• Part Iii, Chapter XVIII. 35 Introduction.
• Part Iii, Chapter XIX. Former Discussions of the Subject.
• Part Iii, Chapter Xx Simple Reproduction.
• Chapter XXI. Accumulation and Reproduction On an Enlarged Scale.
• IV. Concluding Remarks.

PART II
The Turn-Over of Capital.

Part II, Chapter VII
THE PERIOD AND NUMBER OF TURN-OVERS.

We have seen that the entire time of rotation of a given capital is equal to the sum of its time of circulation plus its time of production. It is the period of time from the moment of the advance of capital-value in a definite form to the return of the rotating capital-value in the same form.

The compelling motive of capitalist production is always the creation of value by means of the advanced value, no matter whether this value is advanced in its independent money-form, or in commodities, in which case its value is only ideally independent in the price of the advanced commodities. In both cases this capital- value passes through various forms of existence during its rotation. Its identity with itself is confirmed by the books of the capitalists, or in the ideal form of calculating money.

No matter whether we consider the formula M...M' or the formula P...P, both forms imply (1) that the advanced value performs the function of capital-value and has created more value; (2) that it has returned to the form in which it began its rotation, having completed its cycle. The creation of more value by means of the advanced value M and the return of capital to this money-form is plainly visible in M...M'. But the same takes place in the second formula. For the starting point of P is the existence of the elements of production, of commodities having a given value. The formula includes the creation of value by means of the advanced value (C' and M') and the return to the original form, for in the second P the advanced value has again the form of the elements of production in which it was originally advanced.

We have seen previously: "If production be capitalistic in form, so, too, will be reproduction. Just as in the former the labor-process figures but as a means towards the self-expansion of capital, so in the latter it figures but as a means of reproducing as capital, i.e., as self-expanding value, the value advanced." (Vol. I, chap. XXIII, p. 620.)

The three formulæ (1) M...M', (II) P...P, and (III) C'...C', present the following distinctions: In formula II, P...P, the renewal of the process by the process of reproduction is expressed as a reality, while it is only implied as a probability in formula I. But both of these formulæ differ from III by the fact that in them the advanced capital-value, either in the form of money or of material elements of production, is the starting and returning point. In M...M', the return to M' means M plus m. If the process is renewed on the same scale, M is again the starting point and m does not enter into it, but shows merely that M performed the function of capital and created surplus-value m, which it threw off. In the formula P...P, capital-value P advanced in the form of means of production is likewise the starting point. This form includes the creation of more value. If simple reproduction takes place, the same capitalist renews the same process in the same form P. If accumulation takes place, then P' (equal in magnitude of value to M' and C') reopens the cycle as an expanded capital-value. But it begins with the advanced capital-value in its original form, although it is of greater value than before. In form III, on the other hand, capital-value does not begin the process as an advance, but as an expanded value, as the aggregate wealth existing in the form of commodities, of which the advanced value is but a part. This last form is important for the third part of this volume, in which the movement of the individual capitals is discussed in connection with the movements of the aggregate social capital. But it is not available for the discussion of the turn-over of capital, which always begins with the advance of capital-value in the forms of money or commodities, and which always requires the return of the rotating capital-value to the form in which it had been advanced. Of these cycles I and II, the former is serviceable in the study of the influence of the turn-over on the formation of surplus-value, the latter in the study of its influence on the formation of the product.

Economists have not distinguished the different relations of the turn-over of capital to its cycles any more than they have distinguished between these cycles. They generally consider the formula M...M, because it dominates the individual capitalist and serves for a basis of his calculations, even if money is the starting point of this cycle only in the form of calculating money. Others start out from the outlay of capital in the form of elements of production and follow the cycle to the point of return, without alluding to the form of the returns, be they commodities or money. For instance, "the economic cycle,...the whole course of production, from the time that outlays are made till returns are received. In agriculture, seed time is its commencement, and harvesting its ending." S. P. Newman, Elements of Political Economy, Andover and New York, p. 81. Others begin with C', the third form. Says Th. Chalmers, in his work on "Political Economy," 2nd Ed., London, 1832, p. 84 and following, in substance: The world of the productive traffic may be regarded as rotating in a cycle, which we will call the economic cycle. Each cycle is completed, whenever the business, after passing through its successive transactions, returns to its starting point. The beginning may be made at the point where the capitalist gets his receipts, which return his capital. From this point, the capitalist proceeds once more to hire his laborers and parcel out to them their subsistence, or rather the means to purchase it with wages. They manufacture for him the articles which are his specialty. And the capitalist then takes his articles to the market and brings the cycle of this one series of transactions to a close by selling and receiving in the price of his commodities a return for his entire investment of capital.

As soon as the entire capital-value invested by some individual capitalist in any one branch of production has completed the cycle of its movements, it finds itself once more in the form in which it started and is ready to repeat the same process. It must repeat this process, if value is to perpetuate itself as capital-value and create more value. The individual cycle is but a fragment in the life of capital, it is a period which is continually repeated. At the end of the period M...M' capital has once more the form of money-capital, which passes anew through that series of metamorphoses in which its process of reproduction, or self-expansion, is included. At the end of the period P...P, capital has resumed the form of elements of production, which are the requirement for a renewal of its cycle. The rotation of capital, considered as a periodical process, not as an individual event, constitutes its turn-over. The duration of this turn-over is determined by the sum of its time of production plus its time of circulation. This sum constitutes the time of turn-over. It measures the passing of time while the entire capital-value goes through the period of its cycle until it reaches the next one. It counts the periods in the life of capital, or, the time of the renewal, repetition, of the process of self-expansion, which is the process of production, of the same capital-value.

Apart from the individual adventures which may accelerate or retard the time of turn-over of individual capitals, this time is different according to the different spheres of investment of capitals.

Just as the working day is the natural unit for the function of labor-power, so the year is the natural unit for the periods of turn-over of rotating capital. The natural basis of this unit is found in the fact that the most important crops of the temperate zone, which is the mother country of capitalist production, are annual products.

If we designate the year as the unit of the time of turn-over by T, the time of turn-over of a given capital by t, and the number of its turn-overs by n, then n = T/t. If, for instance, the time of turn-over t is 3 months, then n is equal to 12/3, or 4: in other words, capital is turned over four times per year. If t is equal to 18 months, then n = 12/18 = 2/3, capital completes only two-thirds of its turn-over in one year. If its time of turn-over is several years, it is computed in multiples of one year.

From the point of view of the capitalist, the time of turn-over is the time for which he must advance his capital in order to create value with it and have it returned in its original form.

Before we can study the influence of the turn-over on the processes of production and self-expansion, we must take a look at two new forms which accrue to capital from the process of circulation and influence the form of its turn-over.

Part II, Chapter VIII
FIXED CAPITAL AND CIRCULATING CAPITAL.

I. Distinctions of Form.

We have seen in vol. I, chap. VIII, that a portion of the constant capital retains that form of the use-value, in which it entered into the process of production and does not share in the transfer to the products toward the creation of which it contributes. In other words, it performs for a longer or shorter period, in the ever repeated labor process, the same function. This applies, for instance, to buildings, machinery, etc., in short to all things which we comprise under the name of instruments of labor. This part of constant capital yields value to the product in proportion as it loses its own exchange-value with the dwindling of its use-value. This transfer of value from an instrument of production to the product which it helps to create is determined by a calculation of averages. It is measured by the average, duration of its function, from the moment that the instrument that it is completely spent and must be reproduced, or replaced by a new specimen of the same kind.

This, then is the peculiarity of this part of constant capital of the instruments of labor:

A certain part of capital has been advanced in the form of constant capital, of instruments of labor, which now perform their function in the labor-process so long as their own use-value lasts, which they bring with them into this process. The finished product, with the elements it absorbed from the instruments of production, is pushed out of the process of production and transferred as a commodity to the sphere of circulation. But the instruments of labor never leave the sphere of production, once that they have entered it. Their function holds them there. A certain portion of the advanced capital-value is fixed in this form by the function of the instruments of labor in the process of production. In the performance of this function, and thus by the wear and tear incidental to it, a part of the value of the instruments of labor is transferred to the product, while another remains fixed in the instruments of labor and thus in the process of production. The value thus fixed decreases constantly, until the instrument of labor is worn out, its value having been distributed during a shorter or longer period, over a mass of products which emanated from a series of currently repeated labor processes. But so long as an instrument of labor is still effective and has not been replaced by a new specimen of the same kind, a certain amount of constant capital-value remains fixed in it, while another part of the value originally fixed in it is transferred to the product and circulates as a component part of the commodity-supply. The longer an instrument lasts, the slower it wears out, the longer will its constant capital-value remain fixed in this form of use-value. But whatever may be its durability, the proportion in which it yields its value is always inverse to its entire time of service. If of two machines of equal value, one wears out in five years and the other in ten, then the first yields twice as much value in the same time as the second.

This value fixed in the instruments of labor circulates as well as any other. We have seen that all capital-value is constantly in circulation, and that in this sense all capital is circulating capital. But the circulation of the portion of capital which we are now studying is peculiar. In the first place, it does not circulate in its use-form, but it is merely its exchange-value which circulates, and this takes place gradually and piecemeal, in proportion as it is transferred to the product which circulates as a commodity. During the entire period of its service, a portion of its value always remains fixed in it, independent of the commodities which it helps to produce. It is this peculiarity which gives to this portion of capital the character of fixed capital. On the other hand, all other substantial parts of the capital advanced in the process of production form the circulating, or fluid, capital.

Some portions of the means of production do not yield their substance to the product. Such are auxiliary substances, which are consumed by the instruments of labor themselves in the performance of their function, such as coal consumed by a steam engine; or substances which merely assist in the operation, such as gas for lighting, etc. It is only their value which forms a part of the value of products. In circulating its own value, the product circulates theirs. To this extent they share the fate of the fixed capital. But they are entirely consumed in every labor-process which they enter, and must therefore be replaced by new specimens of their kind in every new labor-process. They do not preserve their own use-form while performing their function. Hence no portion of capital-value remains fixed in their natural use-value during their service. The fact that this portion of the auxiliary substances does not pass bodily into the product, but yields only its value to swell thereby the value of the product, although the function of these substance is confined to sphere of production, has misled some economists, for instance Ramsay—who also confounded fixed capital with constant capital—to class them among the fixed capital.

That part of the means of production which yields its substance to the product, in other words, the raw materials, may eventually assume forms which enable it to pass into individual consumption. The instruments of labor, properly so called, that is to say, the material bearers of the fixed capital, can be consumed only productively and cannot pass into individual consumption, because their substance does not enter into the product, into the use-value, which they help to create, but they rather retain their independent form until they are completely worn out. The means of transportation are an exception to this rule. The useful effect which they produce by their productive function during their stay in the sphere of production, that is to say, the change of location, passes simultaneously into the individual consumption, for instance into that of a traveler. He pays for its use in the same way in which he pays for the use of other articles of consumption. We have seen that sometimes the raw material and auxiliary substances pervade one another, for instance in the manufacture of chemicals. In the same way, instruments of labor, raw material and auxiliary substances may pervade one another. In agriculture, for instance, the substances employed for the improvement of the soil pass into the plants and help to form the product. On the other hand, their influence is distributed over a lengthy period, say four or five years. A portion of them, therefore, pass into the product and enhance its value, while another portion remains fixed in its old use-form and retains its value. It persists as an instrument of production and retains the form of fixed capital. An ox is fixed capital, so long as it is a beast of toil. If it is eaten, it does not perform the functions of an instrument of production, and is, therefore, not fixed capital.

That which determines whether a certain portion of the capital-value invested in means of production is fixed capital or not is exclusively the peculiar manner in which this value circulates. This peculiar manner of circulation arises from the peculiar manner in which the means of production yield their value to the product, that is to say the manner in which the means of production participate in the creation of values in the process of production. This, again, arises from the special nature of the function of these means of production in the labor-process.

We know that the same use-value, which comes as a product from one labor-process, passes as a means of production into another. It is only the function of a product as a means of production in the labor-process which stamps it as fixed capital. But to the extent that it arises itself out of such a process, it is not fixed capital. For instance, a machine, as a product, as a commodity of the machine manufacturer, belongs to his commodity-capital. It does not become fixed capital, until it is employed productively in the hands of its purchaser.

All other circumstances being equal, the degree of fixity increases with the durability of the means of production. This durability determines the magnitude of the difference between the capital-value fixed in the instruments of labor and between that part of its value which is yielded to the product in successive labor-processes. The slower this value is yielded—and some of it is given up in every repetition of the labor-process—the larger will be the fixed capital, and the greater will be the difference between the capital employed and the capital consumed in the process of production. As soon as this difference has disappeared, the instrument of labor has ceased to live and lost, with its use-value, also its exchange-value. It has ceased to be the bearer of value. Since an instrument of labor, the same as every other material bearer of constant capital, yields value only to the extent that its use-value is converted into exchange-value, it is evident that the period in which its constant capital-value remains fixed will be so much longer, the longer it lasts in the process of production, the more slowly its use-value is lost.

If any one means of production, which is not an instrument of labor, strictly speaking, such as auxiliary substances, raw material, partly finished articles, etc., yields and circulates its value in the same way as the instruments of production, then it is likewise the material bearer, the form of existence, of fixed capital. This is the case with the above-mentioned improvements of the soil, which add chemical substances to the soil, the influence of which is distributed over several periods of production, or years. In this case, a portion of the value continues to exist independently of the product, it persists in the form of fixed capital, while another portion has been transferred to the product and circulates with it. And in the latter case, it is not alone a portion of the value of the fixed capital which is transferred to the product, but also a portion of the use-value, the substance in which this portion of value is embodied.

Apart from the fundamental mistake—the confounding of the categories "fixed capital and circulating capital" with the categories "constant capital and variable capital"—the confusion of the economists in the matter of definitions is based on the following points:

They make of certain qualities, embodied in the substances of the instruments of labor, direct qualities of fixed capital, for instance, the physical immobility of a house. It is always easy in that case to prove that other instruments of labor, which are likewise fixed capital, have an opposite quality, for instance, physical mobility, such as a vessel's.

Or, they confound the definite economic form, which arises from the circulation of value, with some quality of the object itself, as though things which are not at all capital in themselves, but rather become so under given social conditions, could be of themselves and intrinsically capital in some definite forms, such as fixed or circulating capital. We have seen in volume I that the means of production in every labor-process, regardless of the social conditions in which it takes place, are divided into instruments of labor and objects of labor. But both of them do not become capital until the capitalist mode of production is introduced, and then they become "productive capital," as shown in the preceding part. Henceforth the distinction between instruments and objects of labor, based on the nature of the labor-process, is reflected in the new distinction between fixed and circulating capital. It is then only, that a thing which performs the function of an instrument of labor, becomes fixed capital. If it can serve also in other capacities, owing to its material composition, it may be fixed capital or not, according to the functions it performs. Cattle as beasts of toil are fixed capital; if they are fattened, they are raw material which finally enters into circulation as commodities, in other words, they are circulating, not fixed capital.

The mere fixation of some means of production for a certain length of time in repeated labor-processes, which are consecutively connected and form a period of production, that is to say, the entire period required to complete a certain product, demands advances from the capitalist for a longer or shorter term, just as fixed capital does, but this does not give to his capital the character of fixed capital. Seeds, for instance, are not fixed capital, but only raw material which is held for about a year in the process of production. All capital is held in the process of production, so long as it performs the function of productive capital, and so are, therefore, all elements of productive capital, whatever may be their substantial composition, their function and the mode of circulation of their value. Whether the period of fixation lasts a long or a short time, according to the manner of the process of production or the effect aimed at, it does not determine the distinction between fixed and circulating capital.25

A portion of the instruments of labor, which determine the general conditions of labor, may be located in a fixed place, as soon as it enters on its duties in the process of production or is prepared for them, for instance, machinery. Or it is produced from the outset in its locally fixed form, such as improvements of the soil, factory buildings, kilns, canals, railroads, etc. The constant fixation of the instrument of labor in the process of production is in that case also due to its mode of material existence. On the other hand, an instrument of labor may continually be shifted bodily from place to place, may move about, and nevertheless be continually in the process of production, for instance, a locomotive, a ship, beasts of burden, etc. Neither does immobility in the one case bestow the character of fixed capital on the instrument of labor, nor does mobility in the other case deprive it of this character. But the fact that some instruments of labor are attached to the soil and remain so fixed, assigns to this portion of fixed capital a peculiar role in the economy of nations. They cannot be sent abroad, cannot circulate as commodities on the market of the world. The titles to this fixed capital may be exchanged, it may be bought and sold, and to this extent it may circulate ideally. These titles of ownership may even circulate on foreign markets, for instance in the form of stocks. But the change of the persons of the owners of this class of fixed capital does not alter the relation of the immobile, substantially fixed part of national wealth to its circulating part.26

The peculiar circulation of fixed capital results in a peculiar turn-over. That part of value which is lost by wear and tear circulates as a part of the value of the product. The product converts itself by means of its circulation from commodities into money; hence the value of the instrument of labor circulated by the product does the same, and this value is precipitated in the form of money by the process of circulation in the same proportion in which the instrument of labor loses its value in the process of production. This value has then a double existence. One part of it remains attached to the form of its use-value in the process of production, another is detached from the instrument of labor and becomes money. In the performance of its function, that part of the value of an instrument of labor which exists in its natural form constantly decreases, while that which is transformed into money constantly increases, until at last the instrument is exhausted and its entire value, detached from its body, has assumed the form of money. Here the peculiarity in the turn-over of this element of productive capital becomes apparent. The transformation of its value into money keeps pace with the like transformation of the commodity which is its bearer. But its reconversion from the form of money into that of a use-value separates itself from the reconversion of the commodities into their other elements of production and is determined by its own period of reproduction, that is to say by the time during which the instrument of labor has worn out and must be replaced by another specimen of the same kind. If a machine lasts for, say, a period of ten years, then the period of turn-over of the value originally advanced for it amounts to ten years. It need not be replaced until this period has expired, and performs its function in this natural form until then. Its value circulates in the meantime piecemeal as a part of the value of the commodities which it turns out successively, and it is thus gradually transformed into money, until it has entirely assumed the form of money at the end of ten years and is reconverted from money into a machine, in other words, has completed its turn-over. Until this time arrives, its value is meanwhile accumulated in the form of a reserve fund of money.

The other elements of productive capital consist partly of those elements of constant capital which exist in auxiliary and raw materials, partly of variable capital which is invested in labor-power.

The analysis of the processes of labor and self-expansion (vol. I, chap. VII) showed that these different elements behave differently in their role of producers of commodities and values. The value of that part of constant capital which consists of auxiliary and raw materials—the same as of that part which consists of instruments of labor—reappears in the value of the product as transferred value, while labor-power actually adds the equivalent of its value to the product by means of the labor-process, in other words, actually reproduces its value. Furthermore, a part of the auxiliary material, fuel, gas, etc., is consumed in the process of labor without entering bodily into the product, while another part of them enters bodily into the product and forms a part of its substance. But all these differences are immaterial so far as the mode of circulation and turn-over is concerned. To the extent that auxiliary and raw materials are entirely consumed in the creation of the product, they transfer their value entirely to the product. Hence this value is entirely circulated by the product, transformed into money and from money back into the elements of production of the commodity. Its turn-over is not interrupted, as that of fixed capital is, but it rather passes uninterrupted through the entire cycle of its transformations, so that these elements of production are continually reproduced in substance.

As for the variable part of productive capital, which is invested in labor-power, it buys labor-power for a definite period of time. As soon as the capitalist has bought labor-power and embodied it in his process of production, it forms a component part of his capital, definitely speaking, the variable part of his capital. Labor-power performs its function daily during a period of time, in which it not only reproduces its own daily value, but also adds a surplus-value in excess of it to the product. We do not consider this surplus-value for the moment. After labor-power has been bought, say, for a week, and performed its function, its purchase must be continually renewed within the accustomed space of time. The equivalent of its value, which labor-power embodies in its product during its function and which is transformed into money by means of the circulation of the product, must be continually reconverted from money into labor-power, must continually pass through the complete cycle of its transformations, in other words, must be turned over, lest the continuous rotation of its production be interrupted.

That part of the value of capital, then, which has been advanced for labor-power, is entirely transferred to the product—we still leave the question of surplus-value out of consideration—passes with it through the two metamorphoses belonging to the circulation, and always remains in the process of production by means of this continual reproduction. Whatever may be the differences by which labor-power is distinguished, so far as the formation of value is concerned, from those parts of constant capital which do not represent fixed capital, it nevertheless has this manner of turn-over in common with them, as compared to the fixed capital. It is these elements of productive capital—the values invested in labor-power and in means of production which are not fixed capital—that by their common characteristics of turn-over constitute the circulating capital as opposed to the fixed capital.

We have already stated that the money which the capitalist pays to the laborer for the use of his labor-power is but the form of the general equivalent for the means of subsistence required by the laborer. To this extent, the variable capital consists in substance of means of existence. But in this case, where we are discussing the turn-over, it is a question of form. The capitalist does not buy the means of the existence of the laborer, but his labor-power. And that which forms the variable part of capital is not the subsistence of the laborer, but his active labor-power. The capitalist consumes productively in the labor-process the labor-power of the laborer, not his means of existence. It is the laborer himself who converts the money received for his labor-power into means of subsistence, in order to reproduce his labor-power, to keep alive, just as the capitalist converts a part of the surplus-value realized by the sale of commodities into means of existence for himself, and yet would not thereby justify the statement, that the purchaser of his commodities pays him with means of existence. Even if the laborer receives a part of his wages in the form of means of existence, this is still a second transaction in our days. He sells his labor-power at a certain price, with the understanding that he shall receive a part of this price in means of production. This changes merely the form of the payment, but not the fact that that which he actually sells is his labor-power. It is a second transaction, which does not take place between the parties in their capacity as laborer and capitalist, but on the part of the laborer as a buyer of commodities and on that of the capitalist as a seller of commodities; while in the first transaction, the laborer is a seller of a commodity (his labor-power) and the capitalist its buyer. It is the same with the capitalist who replaces his commodity by another, for instance when he takes iron for a machine which he sells to some iron-works. It is, therefore, not the means of subsistence of the laborer which determine the character of circulating capital as opposed to fixed capital. Nor is it his labor-power. It is rather that part of the value of productive capital which is invested in labor-power that receives this character in common with some other parts of constant capital by means of the manner of its turn-over.

The value of the circulating capital—invested in labor-power and means of production—is advanced only for the time during which the product is in process of formation, in harmony with the scale of production dependent on the volume of the fixed capital. This value enters entirely into the product, is therefore fully returned by the sale of the product in the circulation, and can be advanced anew. The labor-power and means of production carrying the circulating part of capital are withdrawn from the circulation to the extent that is required for the formation and sale of the finished product, but they must be continually replaced and reproduced by purchasing them back and reconverting them from money into elements of production. They are withdrawn from the market in smaller quantities at a time than the elements of fixed capital, but they must be withdrawn so much more frequently and the advance of capital invested in them must be repeated in shorter periods. This continual reproduction is promoted by the continuous conversion of the product which circulates the entire value of these elements. And finally, they pass through the entire cycle of metamorphoses, not only so far as their value is concerned, but also their material substance. They are continually reconverted from commodities into the elements of production of the same commodities.

Together with its value, labor-power always adds surplus-value to the product, and this surplus-value represents unpaid labor. This is just as continuously circulated by the finished product and converted into money as its other elements of value. But in this substance, where we are first concerned about the turn-over of capital-value, and not of the surplus-value turned over at the same time, we dismiss the latter for the present.

From the foregoing, the following deductions are made:

1. The definite distinctions of the forms of fixed and circulating capital arise merely from the different turnovers of the capital-value employed in the process of production, the productive capital. This difference of turn-over arises in its turn from the different manner in which the various elements of productive capital transfer their value to the product; they are not due to the different participation of these elements in the production of value, nor to their characteristic role in the process of self-expansion. The difference in the transfer of value to the product-—and therefore the different manner of circulating this value by means of the product and renewing it in its original material form by means of its metamorphoses—arises from the difference of the material forms in which the productive capital exists, one portion of it being entirely consumed during the creation of the individual product, and another being used up gradually. Hence it is only the productive capital, which can be divided into fixed and circulating capital. But this distinction does not apply to the other two modes of existence of industrial capital, that is to say commodity-capital and money-capital, nor does it express the difference of these two capitals as compared to productive capital. It applies only to productive capital and its internal processes. No matter how much money-capital and commodity-capital may perform the functions of capital and circulate, they cannot become circulating capital as distinguished from fixed capital, until they have been transformed into circulating elements of productive capital. But because these two forms of capital dwell in the circulation, the economists since the time of Adam Smith, as we shall presently see, have been misled into confounding them with the circulating parts of productive capital under the head of circulating capital. Money-capital and commodity-capital are indeed circulation capital as distinguished from productive capital, but they are not circulating capital as opposed to fixed capital.

2. The turn-over of the fixed part of capital and therefore also its time of turn-over, comprises several turn-overs of the circulating parts of capital. In the same tine, in which the fixed capital turns over once, the circulating capital turns over several times. One of the component parts of the value of productive capital acquires the definite form of fixed capital only in the case that the instrument of production in which it is embodied is not worn out in the time required for the finishing of the product and its removal from the process of production as a commodity. One part of its value must remain tied up in the form of the old use-value, while another part is circulated by the finished product, and this circulation simultaneously carries with it the entire value of the circulating parts of productive capital.

3. The value invested in the fixed part of productive capital is advanced in a lump-sum for the entire period of employment of that part of the instrument of labor which constitutes the fixed capital. Hence this value is thrown into the circulation by the capitalist all at one time. But it is withdrawn from the circulation only in portions corresponding to the degree in which those values are realized which the fixed capital yields successively to the commodities. On the other hand, the means of production themselves, in which a portion of the productive capital becomes fixed, are withdrawn from the circulation in one bulk and embodied in the process of circulation for the entire period which they last. But they do not require reproduction, they need not be replaced by new specimens of the same kind, until this time is gone by. They continue for a shorter or longer period to contribute to the creation of the commodities to be thrown into circulation, without withdrawing from circulation the elements of their own reproduction. Hence they do not require from the capitalist a renewal of his advances during this period. Finally, the capital-value invested in fixed capital passes through the cycle of its transformations, not in its bodily substance, but only with its ideal value, and even this it does only in successive portions and gradually. In other words, a portion of its value is continually circulated and converted into money as a part of the value of the commodities, without reconverting itself from money into its original bodily form. This reconversion of money into the natural form of an instrument of labor does not take place until at the end of its period of usefulness, when the instrument has been completely worn out.

4. The elements of circulating capital are as continually engaged in the process of production—provided it is to be uninterrupted—as the elements of fixed capital. But the elements of circulating capital held in this condition are continually reproduced in their natural form (the instruments of production by other specimens of the same kind, and labor-power by renewed purchases) while in the case of the elements of fixed capital, neither the substance has to be renewed during their employment, nor the purchases. There are always raw and auxiliary materials in the process of production, but always new specimens of the same kind, whenever the old elements have been consumed in the creation of the finished product. Labor-power is likewise always in the process of production, but only by means of ever new purchases, and frequently with changed individuals. But the same identical buildings, machinery, etc., continue their function during repeated turn-overs of the circulating capital in the same repeated processes of production.

II. Composition, Reproduction, Repair, and Accumulation of Fixed Capital.

In the same investment of capital, the individual elements of fixed capital have a different life-time, and therefore different periods of turn-over. In a railroad, for instance, the rails, ties, earthworks, station-buildings, bridges, tunnels, locomotives, and carriages have different periods of wear and of reproduction, hence the capital advanced for them has different periods of turn-over. For a long term of years, the buildings, platforms, water tanks, viaducts, tunnels, excavations, dams, in short everything called "works of art" in English railroading, do not require any reproduction. The things which wear out most are the rails, ties, and rolling stock.

Originally, in the construction of modern railways, it was the current opinion, nursed by the most prominent practical engineers, that a railroad would last a century and that the wear and tear of the rails was so imperceptible, that it could be ignored for all financial and practical purposes; from 100 to 150 years was supposed to be the life-time of good rails. But it was soon learned that the life-time of a rail, which naturally depends on the velocity of the locomotives, the weight and number of trains, the diameter of the rails themselves, and on a multitude of other minor circumstances, did not exceed an average of 20 years. In some railway-stations, which are centers of great traffic, the rails even wear out every year. About 1867, the introduction of steel rails began, which cost about twice as much as iron rails but which on the other hand last more than twice as long. The life-time of wooden ties was from 12 to 15 years. It was also found, that freight cars wear out faster then passenger cars. The life-time of a locomotive was calculated in 1867 at about 10 to 12 years.

The wear and tear is first of all a result of usage. As a rule, the rails wear out in proportion to the number of trains. (R.C. No. 17,645,)27 If the speed was increased, the wear and tear increased faster in proportion than the square of the velocity, that is to say, if the speed of the trains increased twofold, the wear and tear increased more than fourfold. (R. C. No. 17,046.)

Wear and tear are furthermore caused by the influence of natural forces. For instance, the ties do not only suffer from actual wear, but also from mold. The cost of maintenance does not depend so much on the wear and tear incidental to the railway traffic, as on the quality of the wood, the iron, the masonry, which are exposed to the weather. One single month of hand winter will injure the track more than a whole year of traffic. (R. P. Williams, On the Maintenance of Permanent Way. Lecture given at the Institute of Civil Engineers, Autumn, 1867.)

Finally, here as everywhere else in great industry, the virtual wear and tear plays a role. After the lapse of ten years, one can generally buy the same quantity of cars and locomotives for 30,000 pounds sterling, which would have coat 40,000 pounds sterling at the beginning of that time. Thus one must calculate on a depreciation of 25 per cent on the market price of this material, even though no depreciation of its use-values taken place. (Lardner, Railway Economy.)

Tubular bridges in their present form will not be renewed, writes W. P. Adams in his "Roads and Rails," London, 1862. Ordinary repairs of them, removal and replacing of single parts, are not practicable. (There are now better forms for such bridges.) The instruments of labor are largely modified by the constant progress of industry. Hence they are not replaced in their original, but in their modified form. On the one hand, the quantity of the fixed capital invested in a certain natural form and endowed with a certain average vitality in that form constitutes one reason for the gradual pace of the introduction of new machinery, etc., and therefore an obstacle to the rapid general introduction of improved instruments of labor. On the other hand, competition enforces the introduction of new machinery before the old is worn out, especially in the case of important modifications. Such a premature reproduction of the instruments of labor on a large social scale is generally enforced by catastrophes or crises.

By wear and tear (excepting the so-called virtual wear) is meant that part of value which is yielded gradually by the fixed capital to the product in course of creation in proportion to the average degree in which it loses its use-value.

This wear and tear takes place partly in such a way that the fixed capital has a certain average life-time. It is advanced for this entire period in one sum. After the lapse of this period, it must be replaced. So far as living instruments of labor are concerned, for instance horses, their reproduction is timed by nature itself. Their average lifetime as means of production is determined by laws of nature. As soon as this term has expired, the worn-out specimens must be replaced by new ones. A horse cannot be replaced piecemeal, it must be replaced by another horse.

Other elements of fixed capital permit of a periodical or partial renewal. In this instance, the partial or periodical renewal must be distinguished from the gradual extension of the business.

The fixed capital consists in part of homogeneous elements, which do not, however, last the same length of time, but are renewed from time to time and piecemeal. This is true, for instance, of the rails in railway stations, which must be replaced more frequently than those of the remainder of the track. It also applies to the ties, which for instance on the Belgian railroads in the fifties had to be renewed at the rate of 8 per cent, according to Lardner, so that all the ties were renewed in the course of 12 years. Hence we have here the following proposition: A certain sum is advanced for a certain kind of fixed capital for, say, ten years. This expenditure is made at one time. But a certain part of this fixed capital, the value of which has been transferred to the value of the product and converted with it into money, is bodily renewed every year, while the remainder persists in its original natural form. It is this advance in one sum and the reproduction in natural form by small degrees, which distinguishes this capital in the role of fixed from circulating capital.

Other parts of the fixed capital consist of heterogeneous elements, which wear out in unequal periods of time and must be so replaced. This applies particularly to machines. What we have just said concerning the different life-times of different parts of fixed capital applies in this case to the life-time of different parts of the same machine, which performs a part of the function of this fixed capital.

With regard to the gradual extension of the business in the course of the partial renewal, we make the following remarks: Although we have seen that the fixed capital continues to perform its functions in the process of production in its natural state, a certain part of its value, proportionate to the average wear and tear, has circulated with the product, has been converted into money, and forms an element in the money reserve fund intended for the renewal of the capital pending its reproduction in the natural form. This part of the value of fixed capital transformed into money may serve to extend the business or to make improvements in machinery with a view to increasing the efficiency of the latter. Thus reproduction takes place in larger or smaller periods of time, and this is, from the standpoint of society, reproduction on an enlarged scale. It is extensive expansion, if the field of production is extended; it is intensive expansion, if the efficiency of the instruments of production is increased. This reproduction on an enlarged scale does not result from accumulation—not from the transformation of surplus-value into capital—but from the reconversion of the value which has detached itself in the form of money from the body of the fixed capital and has resumed the form of additional, or at least of more efficient, fixed capital of the same kind. Of course, it depends partly on the specific nature of the business, to what extent and in what proportion it is capable of such expansion, and to what amount, therefore, a reserve-fund must be collected, in order to be invested for this purpose; also, what period of time is required, before this can be done. To what extent, furthermore, improvements in the details of existing machinery can be made, depends, of course, on the nature of these improvements and the construction of the machine itself. That this is well considered from the very outset in the construction of railroads, is apparent from a statement of Adams to the effect that the entire construction should follow the principle of a beehive, that is to say, it should have a faculty for unlimited expansion. All oversolid and preconceived symmetrical structures are impracticable, because they must be torn down in the case of an extension. (Page 123 of the above-named work).

This depends largely on the available space. In the case of some buildings, additional stories may be built, in the case of others lateral extension and more land are required. Within capitalist production, there is on one side much waste of wealth, on the other much impractical lateral extension of this sort (frequently to the injury of labor-power) in the expansion of the business, because nothing is under-taken according to social plans, but everything depends on the infinitely different conditions, means, etc., with which the individual capitalist operates. This results in a great waste of the productive forces.

This piecemeal re-investment of the money-reserve fund, that is to say of that part of fixed capital which has been reconverted into money, is easiest in agriculture. A field of production of a given space is capable of the greatest possible absorption of capital. The same applies also to natural reproduction, for instance to stock raising.

The fixed capital requires special expenditures for its conservation. A part of this conservation is provided by the labor-process itself; the fixed capital spoils, if it is not employed in production. (See vol. I, chap. VIII; and chap. XV, on wear and tear of machinery when not in use.) The English law therefore explicitly regards it as a waste, if rented land is not used according to the custom of the country. (W. A. Holdsworth, barrister at law. "The Law of Landlord and Tenant." London, 1857, p. 96.) The conservation due to use in the labor-process is a natural and free gift of living labor. And the conservating power of labor is of a twofold character. On the one hand, is preserves the value of the materials of labor, by transferring it to the product, on the other hand it preserves the value of the instruments of labor, provided it does not transfer this value in part to the product, by preserving their use-value by means of their activity in the process of production.

The fixed capital requires also a positive expenditure of labor for its conservation. The machinery must be cleaned from time to time. This is additional labor, without which the machinery would become useless; it is labor required to ward off the injurious influences of the elements, which are inseparable from the process of production; it is expended for the purpose of keeping the machinery in perfect working order. The normal life-time of fixed capital is, of course, so calculated that all the conditions are fulfilled under which it can perform its functions normally during that time, just as we assume in placing a man's average life at 30 years that he will wash himself. Nor is it here a question of reproducing the labor contained in the machine, but of labor which must be constantly added in order to keep it in working order. It is not a question of the labor performed by the machine itself, but of labor spent on it in its capacity of raw material, not of an instrument of production. The capital expended for this labor belongs to the circulating capital, although it does not enter into the actual labor-process to which the product owes its existence. This labor must be continually expended in production, hence its value must be continually replaced by that of the product. The capital invested in it belongs to that part of circulating capital, which has to cover the general expenses and is distributed over the produced values according to an annual average. We have seen that in industry, properly so-called, this labor of cleaning is performed gratis by the working men during pauses, and thus frequently during the process of production itself, and many accidents are due to this custom. This labor is not counted in the price of the product. The consumer receives it free of charge to this extent. On the other hand, the capitalist thus receives the conservation of his machinery for nothing. The laborer pays this expense in his own person, and this is one of the mysteries of the self preservation of capital, which constitute in point of fact a legal claim of the laborer on the machinery, on the strength of which he is a part-owner of the machine even from the legal standpoint of the bourgeoisie. However, in various branches of production, in which the machinery must be taken out of the process of production for the purpose of cleaning, and where this labor of cleaning cannot be performed between pauses, for instance in the case of locomotives, this labor of conservation counts with the running expenses and is therefore an element of circulating capital. A locomotive must be taken to the shop after a maximum of three days' work in order to be cleaned; the boiler must cool off before it can be washed out without injury. (R. C. No. 17,823.)

The actual repairs, the small jobs, require expenditures of capital and labor, which are not contained in the originally advanced capital and cannot therefore be reproduced and covered, in the majority of cases, by the gradual replacement of the value of fixed capital. For instance, if the value of the fixed capital is 10,000 pounds sterling, and its total life-time 10 years, then these 10,000 pounds, having been entirely converted into money after the lapse of ten years, will replace only the value of the capital originally invested, but they do not replace the value of the capital, or labor, added in the meantime for repairs. This is an element of additional value which is not advanced all at one time, but rather whenever occasion arises for it, so that the terms of its various advances are accidental from the very nature of the conditions. All fixed capital demands such additional and occasional expenditures of capital for materials of labor and labor-power.

The injuries to which individual parts of the machinery are exposed are naturally accidental, and so are therefore the necessary repairs. Nevertheless two kinds of repairs are to be distinguished in the general mass, which have a more or less fixed character and fall within various periods of life of the fixed capital. These are the diseases of childhood and the far more numerous diseases in the period following the prime of life. A machine, for instance, may be placed in the process of production in ever so perfect a condition, still the actual work will always reveal shortcomings which must be remedied by additional labor. On the other hand, the more a machine passes beyond the prime of life, when, therefore, the normal wear and tear has accumulated and has rendered its material worn and weak, the more numerous and considerable will be the repairs required to keep it in order for the remainder of its average life-time; it is the same with an old man, who needs more medical care to keep from dying than a young and strong man. In spite of its accidental character, the labor of repairing is therefore unequally distributed over the various periods of life of fixed capital.

From the foregoing, and from the otherwise accidental character of the labor of repairing, we make the following deductions.

In one respect, the actual expenditure of labor-power and labor-material for repairs is an accidental as the conditions which cause these repairs; the amount of the necessary repairs is differently distributed over the various life-periods of fixed capital. In other respects, it is taken for granted in the calculation of the average life of fixed capital that it is constantly kept in good working order, partly by cleaning (including the cleaning of the rooms), partly by repairs such as the occasion may require. The transfer of value through wear and tear of fixed capital is calculated on its average life, but this average life itself is based on the assumption that the additional capital required for keeping machine in order is continually advanced.

On the other hand it is also evident that the value added by this extra expenditure of capital and labor cannot be transferred to the price of the products simultaneously as it is made. For instance, a manufacturer of yarn cannot sell his yarn dearer this week than last, merely because one of his machines broke a wheel or tore a belt this week. The general expenses of the spinning industry have not been changed by this accident in some individual factory. Here as in all determinations of value, the average decides. Experience teaches the average extent of such accidents and of the necessary labors of conservation and repair during the average life-time of the fixed capital invested in a given branch of industry. This average expense is distributed over the average life-time. It is added to the price of the product in corresponding aliquot parts and hence also reproduced by means of its sale.

The extra capital which is thus reproduced belongs to the circulating capital, although the manner of its expenditure is irregular. As it is highly important to remedy every injury to a machine immediately, every large factory employs in addition to the regular factory hands a number of other employees, such as engineers, wood-workers, mechanics, smiths, etc. The wages of these special employees are a part of the variable capital, and the value of their labor is distributed over their product. On the other hand, the expenses for means of production are calculated on the basis of the above-mentioned average, according to which they form continually a part of the value of the product, although they are actually advanced in irregular periods and therefore transferred in irregular periods to the product or the fixed capital. This capital, invested in regular repairs, is in many respects a peculiar capital, which can be classed neither with the circulating nor the fixed capital, but still belongs with more justification to the former, since it is a part of the running expenses.

The manner of bookkeeping does not, of course, change in any way the actual condition of the things of which an account is kept. But it is important to note that it is the custom of many businesses to class the expenses of repairing with the actual wear and tear of the fixed capital, in the following manner: Take it that the advanced fixed capital is 10,000 pounds sterling, its life-time 15 years; the annual wear and tear 666 and 2/3 pounds sterling. But the wear and tear is calculated at only ten years, in other words, 1,000 pounds sterling are added annually for wear and tear of the fixed capital to the prices of the produced commodities, instead of 666 and 2/3 pounds sterling. Thus 333 and 1/3 pounds sterling are reserved for repairs, etc. (The figures 10 and 15 are chosen at random.) This amount is spent on an average for repairs, in order that the fixed capital may last 15 years. This calculation does not alter the fact that the fixed capital and the additional capital invested in repairs belong to different categories. On the strength of this mode of calculation it was, for instance, assumed that the lowest estimate for the conservation and reproduction of steamship was 15 per cent, the time of reproduction therefore equal to 6 2/3 years. In the sixties, the English government indemnified the Peninsular and Oriental Co. for it at the rate of 16 per cent, making the time of reproduction equal to 6 1/3 years. On railroads, the average life-time of a locomotive is 10 years, but the wear and tear including repairs is assumed to be 12½ per cent, reducing the life-time down to 8 years. In the case of passenger and freight cars, 9 per cent are estimated, or a life-time of 11 1/9 years.

Legislation has everywhere made a distinction, in the leases of houses and other things, which represent fixed capital for their owners, between the normal wear and tear which is the result of time, the influence of the elements, and normal use and between those occasional repairs which are required for keeping up the normal life-time of the house during its normal use. As a rule, the former expenses are borne by the owner, the latter by the tenant. The repairs are further distinguished as ordinary and substantial. The last-named are partly a renewal of the fixed capital in its natural form, and they fall likewise on the shoulders of the owner, unless the lease explicitly states the contrary. For instance, the English law, according to Holdsworth (Law of Landlord and Tenant, pages 90 and 91), prescribes that a tenant from year to year is merely obliged to keep the buildings water-and-wind proof, so long as this is possible without substantial repairs, and to attend only to such repairs as are known as ordinary. And even in this respect the age and the general condition of the building at the time when the tenant took possession must be considered, for he is not obliged to replace either old or worn-out material by new, or to make up for the inevitable depreciation incidental to the lapse of time and normal usage.

Entirely different from the reproduction of wear and tear and from the work of preserving and repairing is the insurance, which relates to destruction caused by extraordinary phenomena of nature, fire, flood, etc. This must be made good out of the surplus-value and is a deduction from it. Or, considered from the point of view of the entire society, there must be a continuous overproduction, that is to say, a production on a larger scale than is necessary for the simple replacement and reproduction of the existing wealth, quite apart from an increase of the population, in order to be able to dispose of the means of production required for making good the extraordinary destruction caused by accidents and natural forces.

In point of fact, only the smallest part of the capital needed for making good such destruction consists of the money-reserve fund. The most important part consists in the extension of the scale of production itself, which is either actual expansion, or a part of the normal scope of the branches of production which manufacture the fixed capital. For instance, a machine factory is managed with a view to the fact that on the one side the factories of its customers are annually extended, and that on the other hand a number of them will always stand in need of total or partial reproduction.

In the determination of the wear and tear and of the cost of repairing, according to the social average, there are necessarily great discrepancies, even for investments of capital of equal size and in equal conditions, in the same branch of production. In practice, a machine lasts in the case of one capitalist longer than its average time, while in the case of another it does not last so long. The expenses of the one for repairs are above, of the other below the average, etc. But the addition to the price of the commodities resulting from wear and tear and from repairs is the same and is determined by the average. The one therefore gets more out of this additional price than he really spent, the other less. This as well as other circumstances which produce different gains for different capitalists in the same branch of industry with the same degree of the exploitation of labor-power renders an understanding of the true nature of surplus-value difficult.

The boundary between regular repairs and replacement, between expenses of repairing and expenses of renewal, is more or less shifting. Hence we see the continual dispute, for instance in railroading, whether certain expenses are for repairs or for reproduction, whether they must be paid from running expenses or from the capital itself. A transfer of expenses for repairs to capital-account instead of revenue-account is the familiar method by which railway managements artificially inflate their dividends. However, experience has already furnished the most important clues for this. According to Lardner, page 49 of the previously quoted work, the additional labor required during the first period of life of a railroad is not counted under the head of repairs, but must be regarded as an essential factor of railway construction, and is to be charged, therefore, to the account of capital, since it is not due to wear and tear or to the normal effect of the traffic, but to the original and inevitable imperfection of railway construction. On the other hand, it is the only correct method, according to Captain Fitzamaurice (Committee of Inquiry of Caledonian Railway, published in Money Market Review, 1867), to charge the revenue of each year with the depreciation, which is the necessary concomitant of the transactions by which this revenue has been earned, regardless of whether this sum has been spent or not.

The separation of the reproduction and conservation of fixed capital becomes practically impossible and useless in agriculture, at least in so far as it does not operate with steam. According to Kirchhoff (Handbuch der landwirthschaftlichen Betriebslehre, Berlin, 1862, page 137), "it is the custom to estimate on a general average the annual wear and tear and conservation of the implements, according to the differences of existing conditions, at from 15 to 20 per cent of the purchasing capital, wherever there is a complete, though not excessive, supply of implements on the farm."

In the case of the rolling stock of a railroad, repairs and reproduction cannot be separated. According to T. Gooch, Chairman of the Great Western Railway Co. (R. C. No. 17, 327-29), his company maintained its rolling stock numerically. Whatever number of locomotives they might have would be maintained. If one of them became worn out in the course of time, so that it was more profitable to build a new one, it was built at the expense of the revenue, in which case the value of the material remaining from the old locomotive was credited to the revenue. There always was a good deal of material left. The wheels, the axles, the boilers, in short, a good part of the old locomotive remained.

"To repair means of renew; for me there is no such word as 'replacement';...once that a railway company has bought a car or a locomotive, they ought to keep them in such repair that they will run for all eternity (17,784). We calculate 8½ d. per English freight mile for locomotive expenses. Out of this 8½ d. we maintain the locomotives forever. We renew our machines. If you want to buy a machine new, you spend more money than is necessary.... You can always find a few wheels, an axle, or some other part of an old machine in condition to be used, and that helps to construct cheaply a machine which is just as good as an entirely new one (17,790). I now produce every week one new locomotive, that is to say, one that is as good as new, for its boiler, cylinder, and frame are new." (17,843.) Archibald Sturrock, locomotive superintendent of Great Northern Railway, in R. C., 1867.

Lardner says likewise about cars, on page 116 of his work, that in the course of time, the supply of locomotives and cars is continually renewed; at one time new wheels are put on, at another a new frame is constructed. Those parts on which the motion is conditioned and which are most exposed to wear and tear are gradually renewed; the machines and cars may then undergo so many repairs that not a trace of the old material remains in them.... Even if the old cars and locomotives get so that they cannot be repaired any more, pieces of them are still worked into others, so that they never disappear wholly form the track. The rolling stock is therefore in process of continuous reproduction; that which must be done at one time for the track, takes place for the rolling stock gradually, from year to year. Its existence is perennial, it is in process of continuous rejuvenation.

This process, which Lardner here describes relative to a railroad, is not typical for an individual factory, but may serve as an illustration of continuous and partial reproduction of fixed capital intermingled with repairs, within an entire branch of production, or even within the aggregate production considered on a social scale.

Here is a proof, to what extent clever managers may manipulate the terms repairs and replacement for the purpose of making dividends. According to the above quoted lecture of R. B. Williams, various English railway companies deducted the following sums from the revenue-account, as averages of a period of years, for repairs and maintenance of the track and buildings, per English mile of track per year:

These differences arise only to a minor degree from differences in the actual expenses; they are due almost exclusively to different modes of calculation, according to whether expenses are charged to the account of capital or revenue. Williams says in so many words that the lesser charge is made, because this is necessary for a good dividend, and a high charge is made, because there is a greater revenue which can bear it.

In certain cases, the wear and tear, and therefore its replacement, is practically infinitesimal, so that nothing but expenses for repairs have to be charged. The statements of Lardner relative to works of art, which are given in substance below, also apply in general to all solid works, docks, canals, iron and stone bridges, etc. According to him, pages 38 and 39 of his work, the wear and tear which is the result of the influence of long periods of time on solid works, is almost imperceptible in short spaces of time; after the lapse of a long period, for instance of centuries, such influences will nevertheless require the partial or total renewal of even the most solid structures. This imperceptible wear and tear, compared to the more perceptible in other parts of the railroad, may be likened to the secular and periodical inequalities in the motions of world-bodies. The influence of time on the more massive structures of a railroad, such as bridges, tunnels, viaducts, etc., furnishes illustrations of that which might be called secular wear and tear. The more rapid and perceptible depreciation, which is compensated by repairs in shorter periods, is analogous to the periodical inequalities. The compensation of the accidental damages, such as the outer surface of even the most solid structures will suffer from time to time, is likewise included in the annual expenses for repairs; but apart from these repairs, age does not pass by such structures without leaving its marks, and the time must inevitably come, when their condition will require a new structure. From a financial and economic point of view, this time may indeed be too far off to be taken into practical consideration.

These statements of Lardner apply to all similar structures of a secular duration, in the case of which the capital advanced for them need not be reproduced according to their gradual wear and tear, but only the annual average expenses of conservation and repairs are to be transferred to the prices of the products.

Although, as we have seen, a greater part of the money returning for the compensation of the wear and tear of the fixed capital is annually, or even in shorter periods, reconverted into its natural form, nevertheless every capitalist requires a sinking fund for that part of his fixed capital, which becomes mature for complete reproduction only after the lapse of years and must then be entirely replaced. A considerable part of the fixed capital precludes gradual production by its composition. Besides, in cases where the reproduction takes place piecemeal in such a way that every now and then new pieces are added in compensation for worn-out ones, a previous accumulation of money is necessary to a greater or smaller degree, according to the specific character of the branch of production, before replacement can proceed. It is not any arbitrary sum of money which suffices for this purpose; a sum of a definite size is required for it.

If we study this question merely on the assumption that we have to deal with the simple circulation of commodities, without regard to the credit system, which we shall treat later, then the mechanism of this movement has the following aspect: We showed in Volume I, chapter III, 3a, that the proportion in which the total mass of money is distributed over a hoard and means of production varies continually, if one part of the money available in society lies fallow as a hoard, while another performs the functions of a medium of circulation or of an immediate reserve-fund of the directly circulating money. Now, in the present case, the money accumulated in the hands of a great capitalist in the form of a large-sized hoard is set free all at once in circulation for the purchase of mixed capital. It is on its part again distributed over the society as medium of circulation and hoard. By means of the sinking fund, through which the value of the fixed capital flows back to its starting point in proportion to its wear and tear, a part of the circulating money forms again a hoard, for a longer or shorter period, in the hands of the same capitalist whose hoard had been transformed into a medium of circulation and passed away from him by the purchase of fixed capital. It is a continually changing distribution of the hoard existing in society, which performs alternately the function of a medium of exchange and is again separated as a hoard from the mass of the circulating money. With the development of the credit-system, which necessarily runs parallel with the development of great industries and capitalist production, this money no longer serves as a hoard, but as capital, not in the hands of its owner, but of other capitalists who have borrowed it.

Part II, Chapter IX
THE TOTAL TURN-OVER OF ADVANCED CAPITAL.
CYCLES OF TURN-OVER.

We have seen that the fixed and circulating parts of productive capital turn over in different ways and at different periods, also that the different constituents of the fixed capital of the same business have different periods of turn-over according to their different durations of life and, therefore, of their different periods of reproduction. (As concerns the actual or apparent difference in the turn-over of different constituents of circulating capital in the same business, see the close of this chapter, under No. 6.)

1. The total turn-over of advanced capital is the average turn-over of its constituent parts; the mode of its calculation is given later. Inasmuch as it is merely a question of different periods of time, nothing is easier than to compute their average. But

2. It is a question, not alone of a quantitative, but also of a qualitative difference.

The circulating capital entering into the process of production transfers its entire value to the product and must, therefore, be continually reproduced in its natural form by the sale of the product, if the process or production is to proceed without interruption. The fixed capital entering into the process of production transfers only a part of its value (the wear and tear) to the product and continues despite this wear and tear, to perform its function in the process of production. Therefore it need not be reproduced until after the lapse of intervals of various duration, at any rate not as frequently as the circulating capital. This necessity of reproduction, this term of reproduction, is not only quantitatively different for the various constituent parts of fixed capital, but, as we have seen, a part of the perennial fixed capital may be replaced annually or at shorter intervals and added in natural form to the old fixed capital. In the case of fixed capital of a different composition, the reproduction can take place only all at once at the end of its life-time.

It is, therefore, necessary to reduce the specific turn-overs of the various parts of fixed capital to a homogeneous form of turn-over, so that they remain only quantitatively different so far as the duration of their turn-over is concerned.

This quantitative homogeneity does not materialize, if we take for our starting point P...P, the form of the continuous process of production. For definite elements of P must be continually reproduced in their natural form, while others need not to be. This homogeneity of turn-over is found, however, in the form M—M'. Take, for instance, a machine valued at 10,000 pounds sterling, which lasts ten years and one tenth, or 1,000 pounds of which are annually reconverted into money. These 10,000 pounds have been converted in the course of one year from money-capital into productive capital and commodity-capital, and then reconverted into money-capital. They have returned to their original money-form, just as did the circulating capital, if we study it from this point of view, and it is immaterial whether this money-capital of 1,000 pounds sterling is once more converted, at the end of the year, into the natural form of a machine or not. In calculating the total turn-over of the advanced productive capital, we, therefore, fix all its elements in the mold of money, so that the return to the money-form concludes the turn-over. We assume that value has always been advanced in money, even in the continuous process of production, where this money-form of value exists only as calculating money. Then we are enabled to compute the average.

3. It follows that the capital-value turned over during one year may be larger than the total value of the advanced capital, on account of the repeated turn-overs of the circulating capital within the same year, even if by far the greater part of the advanced productive capital consists of fixed capital, whose period of reproduction, and therefore of turn-over, comprises a cycle of several years.

Take it that the fixed capital is 80,000 pounds sterling, its period of reproduction 10 years, so that 8,000 pounds of this capital annually return to their money-form, or complete one-tenth of its turn-over. Let the circulating capital be 20,000 pounds sterling, and its period of turn-over be five times per year. The total capital would then be 100,000 pounds sterling. The turned over fixed capital is 8,000 pounds, the turned-over circulating capital five times 20,000, or 100,000 pounds sterling. Then the capital turned over during one year is 108,000 pounds sterling, or 8,000 pounds more than the advanced capital. 1+2.25 of the capital have turned over.

4. The turn-over of the values of the advanced capital therefore is to be distinguished from its actual time of reproduction, or from the actual time of turn-over of its component parts. Take, for instance, a capital of 4,000 pounds sterling and let it turn over five times per year. The turned over capital is then five times 4,000, or 20,000 pounds sterling. But that which returns at the end of its turn-over and is advanced anew is the original capital of 4,000 pounds sterling. Its magnitude is not changed by the number of its periods of turn-over, during which it performs anew its functions as capital. (We do not consider the question of surplus-value here.)

In the illustration under No. 3, then, the sums returned at the end of one year into the hands of the capitalist are (a) a sum of values in the form of 20,000 pounds sterling, which he invests again in the circulating parts of the capital, and (b) a sum of 8,000 pounds, which have been set free by wear and tear from the advanced fixed capital; at the same time, this same fixed capital remains in the process of production, but with the reduced value of 72,000 pounds, instead of 80,000 pounds sterling. The process of production, therefore, would have to be continued for nine years longer, before the advanced fixed capital would have outlived its term and ceased to perform any service as a creator of products and values, so that it would have to be replaced. The advanced capital-value, then, has to pass through a cycle of turn-overs, in the present case a cycle of ten years, and this cycle is determined by the life-time, in other words by the period of reproduction, or turn-over of the invested fixed capital.

To the same extent that the volume of the value and the duration of the fixed capital develop with the evolution of the capitalist mode of production, does the life of industry and of industrial capital develop in each particular investment into one of many years, say of ten years on an average. If the development of fixed capital extends the length of this life on one side, it is on the other side shortened by the continuous revolution of the instruments of production, which likewise increases incessantly with the development of capitalist production. This implies a change in the instruments of production and the necessity of continuous replacement on account of virtual wear and tear, long before they are worn out physically. One may assume that this life-cycle, in the essential branches of great industry, now averages ten years. However, it is not a question of any one definite number here. So much at least is evident that this cycle comprising a number of years, through which capital is compelled to pass by its fixed part, furnishes a material basis for the periodical commercial crises in which business goes through successive periods of lassitude, average activity, overspeeding, and crisis. It is true that the periods in which capital is invested are different in time and place. But a crisis is always the starting point of a large amount of new investments. Therefore it also constitutes, from the point of view of society, more or less of a new material basis for the next cycle of turn-over.28

5. On the mode of calculation of the turn-overs, Scrope, an American economist, says in substance the following in his work on political economy (published by Alonzo Potter, New York, 1841, pages 141 and 142): In some lines of business the entire capital advanced is turned over, or circulated, several times inside of a year. In some others, one portion is turned over more than once a year, another portion not so often. It is the average period required by the entire capital for the purpose of passing through the hands of the capitalist, or in order to turn over once, which must furnish the basis on which the capitalist figures his profits. Take it, that a certain individual engaged in a certain business has invested half of his capital for buildings and machinery, which are replaced once in every ten years; one-quarter for tools, etc., which are replaced in two years; and the last quarter, invested in wages and raw materials, which quarter is turned over twice per year. Let his entire capital be $50,000. Then his annual expenditure will be:

The average time, then, in which his capital is turned over once, is 16 months. Take another case: One quarter of the entire capital of $50,000 circulates in 10 years; another quarter in one year; the other half twice in one year. The annual expenditure will then be:

6. Real and apparent differences in the turn-over of the various component parts of capital. Scrope also says in the same place that the capital invested by a manufacturer, landlord, or merchant in wages circulates most rapidly, as it is probably turned over once a week, if he pays his laborers weekly, by the weekly receipts from his sales or from paid bills. The capital invested in raw materials and finished supplies does not circulate so fast; it may be turned over two or four times per year, according to the time passing between the purchase of the one and the sale of the other, provided that the capitalist buys and sells on equal terms of credit. The capital invested in tools and machinery circulates still more slowly, as it is turned over, that is to say consumed and circulated, probably on an average of once in five or ten years; many tools, however, are used up in one single series of manipulations. The capital invested in buildings, for instance, in factories, stores, storerooms, barns, streets, irrigation works, etc., circulates almost imperceptibly. But of course these structures are likewise worn out just the same as the others, so long as they serve in production, and must be replaced, in order that the producer may be able to continue his operations. They are merely consumed and reproduced more slowly than the others. The capital invested in them is probably turned over in twenty or fifty years. So far Scrope.—

Scrope here confounds the differences in the flow of certain parts of the circulating capital, caused by terms of payment and conditions of credit so far as the individual capitalist is concerned, with the turn-overs due to the nature of capital. He says that wages are paid weekly on account of the weekly receipts from paid sales or bills. We must note in the first place, that certain differences occur relative to wages, according to the length of the term of payment, that is to say the length of time for which the laborer must give credit to the capitalist, whether it be a week, a month, three months, six months, etc., In this case, the rule stated in volume I, chapter III, 3b, page 158, holds good, to the effect that "the quantity of the means of payment required for all periodical payments (in this case the quantity of the money-capital to be advanced at one time) is in inverse proportion to the length of their periods."

In the second place, it is only the entire new value added to the product by means of one week's labor which enters completely into the weekly product, but also the value of the raw and auxiliary material consumed by the weekly product. These values circulate with the product containing them. They assume the form of money by the sale of the product and must be reconverted into the same elements of production. This applies as well to the labor-power as to the raw and auxiliary materials. But we have already seen (chapter IV, 2, A) that the continuity of the production requires a supply of means of production, different for various branches of industry, and different within one and the same branch for the various component parts of the circulating capital, for instance, for coal and cotton. Hence, although these materials must be continually replaced in their natural form, they need not be bought continually. How often new purchases of them must be made, depends on the magnitude of the available supply, on the times it takes to use it up. In the case of the labor-power, there is no such storing of a supply. The reconversion into money of the capital invested in labor-power goes hand in hand with that of the capital invested in raw and auxiliary materials. But the reconversion of the money, on one side into labor-power, on the other into raw materials, proceeds separately on account of the special terms of purchase and payment of these two constituents of productive capital, one of them being bought as a productive supply for long terms, the other, labor-power, for shorter terms, for instance, for terms of one week. On the other hand, the capitalist must keep a supply of finished commodities besides a supply of materials for production. Apart from the difficulties of selling, etc., a certain quantity must be produced, say for instance, on order. While the last portion of this quantity is being produced, the finished product is waiting in storage until the order can be completely filled. Other differences in the turn-over of circulation capital arise as soon as some of its individual elements must stay in some preliminary stage of the process of production, such as the drying of wood, etc., longer than others.

The credit-system, to which Scrope here refers, and commercial capital, modify the turn-over for the individual capitalist. They modify the turn-over on a social scale only in so far as they do not accelerate merely production, but also consumption.

Part II, Chapter X
THEORIES OF FIXED AND CIRCULATING CAPITAL, THE PHYSIOCRATS AND ADAM SMITH.

In Quesnay's analysis, the distinction between fixed and circulating capital assumes the form of avances primitives and avances annuelles. He correctly represents this distinction as one to be made with regard to productive capital, to capital directly engaged in the process of production. But owing to the fact that he regards the capital invested in agriculture, the capital of the capitalist farmer, as the only really productive capital, he makes these distinctions only for the capital of this farmer. This also accounts for the annual period of turn-over of one part of the capital, and the more than annual (decennial) of the other part. Incidentally it may be noted, that in the course of their development the physiocrats applied these distinctions also to other kinds of capital, to industrial capital in general. The distinction between annual advances and others extending over a longer period retained such lasting value for social science that many economists, even after Adam Smith, returned to it.

The distinction between these two kinds of advances is not made, until money has been transformed into the elements of productive capital. It is a distinction which applies solely to the divisions of productive capital. Quesnay, therefore, never thinks of classing money either among the primitive or the annual advances. In their capacity as advances on production, these two categories confront on one side the money, on the other the commodities existing on the market. Furthermore, the distinction between these two elements of productive capital is correctly defined as resting on the different manner in which they enter into the value of the finished product, and this implies the different way in which their values are circulated together with those of the products. From this, again, follows the different method of their reproduction, the value of the one being entirely replaced annually, that of the other only partially and in longer intervals.29

The only progress made by Adam Smith is the generalization of the categories. He no longer applies them to one special form of capital, the tenant's capital, but to every form of productive capital. Hence it follows as a matter of fact that the distinction between an annual period of turn-over and one of longer duration, derived from agriculture, is replaced by the general distinction of the different periods of turn-over, so that one turn-over of the fixed capital always comprises more than one turn-over of the circulating capital, regardless of the periods of turn-over of the circulating capital, whether they be annual, more than annual, or less. Thus Adam Smith transforms the annual advances into circulating capital, and the primitive advances into fixed capital. But his progress is confined to this generalization of the categories. His analyses are far inferior to those of Quesnay.

His unclearness is manifested at the very outset by the crudely empirical manner in which he broaches the subject: "There are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer." (Wealth of Nations. Book II, Chap. I, page 189, Aberdeen addition, 1848.)

As a matter of fact, the ways in which value may be employed so as to perform the functions of capital and yield surplus-value to its owner are as different and varies as the spheres of investment of capital. It is a question of the different spheres of production in which capital may be invested. If put in this way, the question implies still more. It includes the other question of the way in which value, even if it is not employed as productive capital, may perform the functions of capital for its owner, for instance, as interest-bearing capital, merchants' capital, etc. At this point we are already far away from the real object of the analysis, that is to say from the question: How does the division of productive capital into its various elements affect their periods of turn-over, leaving out of consideration their different spheres of investment?

Adam Smith continues immediately: "First, it may be employed in raising, manufacturing, or purchasing goods, and selling them again with a profit." He does not tell us anything else in this statement than that capital may be employed in agriculture, manufacture, and commerce. He speaks only of the different spheres of investment of capital, including commerce, in which capital is not directly embodies in the process of production and does not perform the functions of productive capital. In so doing he abandons the foundation on which the physiocrats base the distinctions of the elements of productive capital and their influence on its periods of turn-over. He goes still farther and uses merchants' capital as an illustration of a problem, which concerns exclusively differences of productive capital in the process of production and the creation of value, which differences cause those of its turn-over and reproduction.

He continues: "The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession or continues in the same shape." The capital employed in this manner! Smith is referring to capital invested in agriculture, in industry, and he tells us later on that a capital so employed is divided into fixed and circulating capital! But the investment of capital "in this manner" cannot make fixed or circulating capital of it.

Or does he mean to say that capital employed in the production of commodities and their sale at a profit must again be sold after its transformation into commodities and must pass in the first place from the possession of the seller into that of the buyer, and in the second place from its commodity-form into the money-form, so that it is of no use to its owner so long as it retains the same form in his hands? In that case, the problem amounts to this: The same capital-value, which formerly performed the functions of productive capital in a form typical of the process of production, neo performs those of commodity-capital and money-capital in forms typical of the process of circulation, where it is no longer either fixed or circulating capital. And this applies equally to those elements of value which are added by means of raw and auxiliary material, in other words to circulating capital, and to those which are added by the consumption of instruments of production, or to fixed capital. We do not get any nearer to the distinction between fixed and circulating capital in this way.

Adam Smith says furthermore: "The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another, and it is only by means of such circulation, or successive exchanges, that it can yield him any profit. Such capitals, therefore, may very properly be called circulating capital."

That which Adam Smith here calls circulating capital, is a thing which I shall call capital of circulation, that is to say, capital in a form characteristic of the process of circulation, changes of form due to exchange (a change of substance and of hands), in other words, commodity-capital and money-capital, as distinguished from the form of productive capital, which is characteristic of the process of production. These are not special divisions made by the industrial capitalist of his capital, but different forms assumed and discarded by the advanced capital-value during its course of life, in ever renewed cycles. The great backward step of Adam Smith as compared with the physiocrats is that he does not discriminate between these forms and those which arise in the circulation of capital-value through its successive metamorphoses while it exists in the form of productive capital, and which are due to different ways in which the various elements of productive capital take part in the formation of values and transfer their own value to the products. We shall see the consequences of confounding these fundamentals, productive capital and capital in the sphere of circulation (commodity-capital and money-capital) on one side, and fixed and circulating capital on the other. The capital-value advanced in fixed capital is as much circulated by the product as that which has been advanced in the circulating capital, and both are equally transformed into money-capital by the circulation of commodity-capital. The difference arises only from the fact that the value of fixed capital circulates piece-meal and is, therefore, reproduced in the same way in shorter or longer intervals in its natural form.

That Adam Smith means nothing else by this term of circulating capital in the above passage but capital of circulation, that is to say, capital in the form of commodity-capital and money-capital characteristic of the process of circulation, is shown by his singularly ill-chosen illustration. He selects for this purpose a kind of capital which does not belong to the process of production, but to the sphere of circulation. This is merchants' capital, which consists only of capital of circulation.

How absurd it is to start out with an illustration, in which capital does not perform the functions of productive capital, is immediately shown by himself,. "The capital of a merchant is altogether a circulating capital." But later on we learn that the difference between circulating and fixed capital arises out of the essential differences within the productive capital itself. On one side, Adam Smith has the distinction of the physiocrats in mind, on the other the different forms assumed by capital-value in its cycles. And these things are jumbled together by him without any discrimination.

But it is quite incomprehensible how profit should arise by the transformation of money and commodities, by the mere exchange of one of these forms for the other. And an explanation becomes impossible for Adam Smith, because he starts out with merchants' capital which moves only in the sphere of circulation. We shall return to this later. Let us first hear what he has to say about fixed capital.

"Secondly, it (capital) may be employed in the improvement of land, in the purchase of useful machines and instruments of trade, or in such like things as yield a revenue or profit without changing masters, or circulating any further. Such capitals, therefore, may very properly be called fixed capitals. Different occupations require very different proportions between the fixed and circulating capitals employed in them.... Some part of the capital of every master artificer or manufacturer must be fixed in the instruments of his trade. This part, however, is very small in some, and very great in others.... The far greater part of the capital of all such master artificers (such as tailors, shoemakers, weavers) however, is circulated, either in the wages of their workmen, or in the price of their materials, and to be repaid with a profit by the price of the work."

Apart from the naive determination of the source of profit, the weakness and confusion of these statements becomes at once apparent, when we consider, e.g., that, for a machine manufacturer, a machine is his product, which circulates as commodity-capital, or in Adam Smith's words, "is parted with, changes masters, circulates farther." According to his own definition, therefore, this machine would not be fixed, but circulating capital. This confusion is due to the fact that Smith confounds the distinction between fixed and circulating capital, which arises out of the different circulation of the various elements of productive capital, with differences of form successively assumed by the same capital when performing the functions of productive capital within the sphere of production, while in the circulation it becomes capital of circulation, that is to say commodity-capital and money-capital. According to the place which the same things occupy in the life-processes of capital, they may, in the opinion of Adam Smith, perform the functions of fixed capital (means of production, elements of productive capital), or of "circulating" commodity-capital (products transferred from the sphere of production to that of circulation).

But Adam Smith suddenly changes the entire basis of his division, and contradicts the statements with which he had opened his analysis a few lines previously. This is done especially by the statement that "there are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer," that is to say as circulating or as fixed capital. These two categories would, therefore, be different methods of employment of different capitals independent of one another, some being employed in industries, others in agriculture. But immediately he says: "Different occupations require very different proportions between the fixed and circulating capitals employed in them." Here fixed and circulating capital are no longer different independent investments of different capitals, but different proportions of the same productive capital, which represent different portions of the total value of this capital in different spheres of investment. They are here differences arising from the appropriate division of the productive capital itself and valid only with respect to it. But this is contrary to the distinction of commercial capital, which according to him is circulating capital as compared to fixed capital, when he says: "The capital of a merchant is altogether a circulating capital." It is indeed a capital performing its functions entirely within the sphere of circulation, and is for this reason distinguished from productive capital embodied in the process of production. But for this every reason it cannot be regarded as a constituent part of the circulating portion of productive capital, as distinguished from its fixed portion.

In the illustrations given by Adam Smith, he defines the instruments of trade as fixed capital, and the portion of productive capital invested in wages and raw materials, including auxiliary materials, as circulating capital, "repaid with a profit by the price of the work."

He starts out, then, from the various constituents of the labor-process, from labor-power (labor) and raw materials on one side, and instruments of labor on the other. And these are constituents of capital, because a quantity of values is invested in them for the purpose of performing the functions of capital.

To this extent they are material elements, modes of existence of productive capital, that is to say, of capital serving in the process of production. But why is one of these constituents called fixed? Because "some parts of the capital must be fixed in the instruments of trade." But the other parts are also fixed in wages and raw materials. Machines, however, and "instruments of trade...such like things...yield a revenue or profit without changing masters or circulating any further. Such capitals, therefore, may very properly be called fixed capitals."

Take, for instance, the mining industry. No raw material at all is used there, because the object of labor, such as copper, is the product of nature, which must be obtained first of all by labor. The copper to be obtained, the product of the process, which circulates later on as a commodity, or commodity-capital, does not form an element of productive capital. No part of its value is thus invested. On the other hand, the other elements of the productive process, such as labor-power, and auxiliary materials such as coal, water, etc., do not enter bodily into the product. The coal is entirely consumed and only its value enters into the product, just as a part of the value of the machine is transferred to it. The laborer, finally, remains just as independent so far as the product, the copper, is concerned, as the machine. Only the value which he produces by his labor becomes a part of the value of the copper. But in this illustration, not a single constituent part of productive capital changes masters, nor do any of them circulate further, because none of them enter bodily into the product. What becomes of the circulating capital in this case? According to Adam Smith's own definition, the entire capital employed in mining would consist only of fixed capital.

On the other hand, let us look at some other industry, which utilizes raw materials that form the substance of its product, and auxiliary materials that enter bodily into the product, instead of only so far as their value is concerned, as in the case of coal for fuel. Simultaneously with the product, for instance with the yarn, the raw material composing it, the cotton, likewise changes masters, and passes from the process of production to that of consumption. But so long as the cotton performs the function of an element of productive capital, its owner does not sell it, but manipulates it for the purpose of making it into yarn. He does not take his hand from it. Or, to use Smith's crudely erroneous and trivial terms, he does not make any profit by parting with it, by its changing masters, or by circulating it. He does not permit his materials to circulate any more than his machines. They are fixed in the process of production, the same as the spinning machines and the factory buildings. Indeed, a part of the productive capital in the form of coal, cotton, etc., must be just as continually fixed as that in the form of instruments of labor. The difference is only that the cotton, coal, etc., required for the process of production, say, for one week, is always entirely consumed in the manufacture of the weekly product, so that new specimens of cotton, coal, etc., must be supplied; in other words, these elements of productive capital consist continually of new specimens of the same species, identical only so far as the species is concerned, while the same individual spinning machine, the same individual factory-building, continue their participation in a whole series of weekly productions without being replaced by new specimens of their kind. All the elements of productive capital constituting its parts must be continually fixed in the process of production, for it cannot proceed without them. And all the elements of productive capital, whether fixed or circulating, are equally distinguished as productive capital from capital of circulation, that is to say, commodity-capital and money-capital.

It is the same with labor-power. A part of the productive capital must be continually fixed in it, and the same identical labor-powers, just as in the case of the machines, are everywhere employed for a certain length of time by the same capitalist. The difference between labor-power and machines in this case is not that the machines are bought once for all (which is not even the case when they are paid for in instalments), while the laborer is not. The difference is rather that the labor expended by the laborer enters wholly into the value of the product, while the value of the machines enters piecemeal into it.

Smith confounds different definitions, when he says of circulating capital as compared to fixed: "The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession or continues in the same shape." He places the merely formal metamorphosis of the commodity, which the product in the form of commodity-capital, undergoes in the sphere of circulation and which brings about the change of masters of the commodities, on the same level with the bodily metamorphosis, which the different elements of productive capital undergo during the process of production. He unceremoniously jumbles together the transformation of commodities into money, of money into commodities, or purchase and sale, with the transformation of elements of production into products. His illustration for circulating capital is merchants' capital which is transformed from commodities into money and from money into commodities—the metamorphosis C—M—C belonging to the circulation of commodities. But this metamorphosis within the circulation signifies for the industrial capital in action that the commodities into which the money is retransformed are elements of production (means of production and labor power), in other words, that it renders the function of industrial capital continuous, that it makes of the process of production a continuous one, a process of production. This entire metamorphosis takes place in circulation. It is the process of circulation which brings about the bodily transition of the commodities from one master to another. On the other hand, the metamorphoses experienced by productive capital within the process of production take place in the labor-process and are necessary for the purpose of transforming the elements of production into the desired product. Adam Smith clings to the fact that a part of the means of production (the instrument of labor, strictly speaking) serve in the labor process (yield a profit to their master, as he erroneously expresses it) without changing their natural form and wear out only by decrees; while another part, the materials, change their form and fulfill their duty as means of production by virtue of this very fact. This difference in the behavior of the elements of productive capital in the labor-process, however, serves only as the point of departure for the difference between fixed capital and capital which is not fixed, but it is not this difference itself. This is evident from the mere fact that this different behavior is common to all modes of production, whether they are capitalist or not. But on the other hand, this different behavior of the substances is accompanied by a different yield of value to the product, and this in its turn corresponds to a different reproduction of value by the sale of the product. And this is what constitutes the difference in question. Hence capital is not fixed capital, because it is fixed in the means of production, but because a part of the value invested in means of production remains fixed in them, while another part circulates as a part of the value of the product.

"If it (the stock) is employed in procuring future profit, it must procure this profit by staying with him (the employer), or by going from him. In the one case it is a fixed, in the other it is a circulating capital." (Page 189.)

In this statement, it is the crudely empirical conception of profit derived from the ideas of the ordinary capitalist, which is remarkable, being contrary to the better esoteric understanding of Adam Smith. Not only the price of the materials, but also that of the labor-power is reproduced by the price of the product, and so is that part of value which is transferred by wear and tear from the instruments of labor to the product. Under no circumstances does this reproduction yield any profits. Whether a value advanced for the production of a commodity is reproduced entirely or in part, at one time or gradually, by the sale of that commodity, cannot change anything except the manner and time of its reproduction. But it can in no way transform that which is common to both, the reproduction of value, into a production of surplus-value. We meet here once more the common idea that surplus-value arises only through sale, in the circulation, because it is not realized until the product is sold, until it circulates. As a matter of fact, the different genesis of the profit is in this case but a mistaken phrase for the truth that the different elements of productive capital are differently employed, and have a different effect in the labor-process as different productive elements. In the final analysis, the difference is not attributed to the process of production or self-expansion, not to the function of productive capital itself, but it is supposed to apply only subjectively to the individual capitalist, whom one part of capital serves a useful purpose in one way, while another does in a different way.

Quesnay, on the other hand, had derived this difference from the process of reproduction and its requirements. In order that this process may be continuous, the value of the annual advances must be annually reproduced in full by the value of the annual product, while the value of the capital stock is reproduced only by degrees, for instance, in ten years, and is not fully worn out to the point of replacement by another specimen of the same kind until then. Adam Smith here falls far below Quesnay.

Nothing remains therefore to Adam Smith for the determination of the fixed capital but the fact that it is represented by instruments of production which do not change their form in the process of production and continue to serve in production until they are worn out, as distinguished from the product, in the formation of which they co-operate. He forgets that all elements of productive capital are continually confronted in their natural form (instruments of labor, materials, and labor-power) by the product and by the circulating commodity, and that the difference between the part consisting of materials and labor-power and that consisting of instruments of labor is this: Labor-power is always purchased afresh, not bought for good like the instruments of labor; the materials manipulated in the labor-process are not the same identical specimens throughout, but always new specimens of the same kind. At the same time the false impression is created that the value of the fixed capital does not participate in the circulation, although Adam Smith has previously analyzed the wear and tear of fixed capital as a part of the price of the product.

In mentioning the circulating capital as distinguished from the fixed, he does not emphasize the fact, that this distinction rests on the circumstance that circulating capital is that part of productive capital which must be fully reproduced by the value of the product and must therefore fully share in its metamorphoses, while this is not so in the case of the fixed capital. On the contrary, he jumbles it together with those forms which capital assumes in its transition from the sphere of production to that of circulation, that is to say, commodity-capital and money-capital. But both forms, commodity-capital as well as money-capital, are bearers of the value of the fixed and the circulating parts of productive capital. Both of them are capitals of circulation, as distinguished from productive capital, but they do not represent circulating capital as distinguished from fixed capital.

Finally, owing to the entirely confused idea of the making of profit by the staying of the fixed capital in the process of production, and the passing from it and circulating of the circulating capital, the essential difference between the variable capital and the circulating parts of the constant capital in the process of self-expansion and the formation of surplus-value is hidden under the identity of form, so that the entire secret of capitalist production is obscured still more; by the application of the common term "circulating capital" this essential difference is abolished; political economy subsequently went still farther by neglecting the distinction between variable and constant capital and dwelling on the difference between fixed and circulating capital as the essential and typical distinction.

After Adam Smith has defined fixed and circulating capital as two different ways of investing capital, each of which yields a profit by itself, he says: "No fixed capital can yield any revenue but by means of a circulating capital. The most useful machines and instruments of trade will produce nothing without the circulating capital which affords the materials they are employed upon, and the maintenance of the workmen who employ them." (Page 188.)

Here it becomes apparent what the previously used phrases "yield a revenue, make a profit, etc.," signify, viz., that both parts of capital serve in the formation of the product.

Adam Smith then gives the following illustration: "That part of the capital of the farmer which is employed in the implements of agriculture is a fixed, that which is employed in the wages and maintenance of his laboring servants is a circulating capital." (Here the difference of fixed and circulating capital is correctly applied as referring to the different circulation, the turn-over of different constituent parts of productive capital.) "He makes a profit of the one by keeping it in his own possession, and of the other by parting with it. The price or value of his laboring cattle is a fixed capital" (here he is again correct in that it is the value, not the material substance, which determines the difference), "in the same manner as that of the instruments of husbandry; their maintenance" (meaning that of the laboring cattle) "is a circulating capital, in the same way as that of the laboring servants. The farmer makes his profit by keeping the laboring cattle and parting with their maintenance." (The farmer keeps the fodder of the cattle, he does not sell it. He uses it to feed the cattle, while he exploits the cattle themselves as instruments of labor. The difference is only this: The feed used for the maintenance of the cattle is wholly consumed and must be continually reproduced by new feed, either by means of the products of agriculture or by their sale; while the cattle themselves are reproduced only to the extent that each specimen becomes worn out.) "Both the price and the maintenance of the cattle which are bought in and fattened, not for labor, but for sale, are a circulating capital. The farmer makes his profit by parting with them." (Every producer of commodities, hence the capitalist producer likewise, sells his product, the result of his process of production, but this is not a means of constituting this product a part of either the fixed or the circulating part of his productive capital. The product has now rather that form, in which it is released from the process of production and compelled to perform the function of commodity-capital. The fattened stock serve in the process of production as raw material, not as instruments of labor like the laboring cattle. Hence the fattened cattle enter bodily into the product, and their whole value enters into it, just as that of the auxiliary material, the feed, does. The fattened cattle are, therefore, a circulating part of the productive capital, but they are not so, because the sold product, these same cattle, have the same natural form as the raw material, that is to say these cattle when not yet fattened. This is a mere coincidence. At the same time Adam Smith might have seen by this illustration that it is not the material form of the elements of production, but their function within the process of production, which determines the value contained in them as a fixed or circulating one.) "The whole value of the seed, too, is a fixed capital.... Though it goes backwards and forwards between the ground and the granery, it never changes masters, and therefore it does not properly circulate. The farmer makes his profit not by its sale, but by its increase."

At this point, the utter thoughtlessness of smith's distinction reveals itself. According to him, the seeds would be fixed capital, if there would be no change of masters, that is to say, if the seeds were directly reproduced out of the annual product by subtracting them from it. On the other hand, they would be circulating capital, if the entire product were sold and a part of its value employed for the purchase of another's seed. In the one case, there would be a change of masters, in the other there would not. Smith once more confounds circulating and commodity-capital at this point. The product is the material bearer of the commodity-capital, but of course only that part of it which actually enters into the circulation and does not re-enter directly into the process of production, from which it came as a product.

Whether the seed is directly subtracted as a part of the product, or whether the entire product is sold and a part of its value converted in the purchase of another man's seed, in either case it is mere reproduction which takes place, and no profit is produced by it. In the one case, the seed enters into circulation with the remainder of the product as a commodity, in the other it figures only in bookkeeping as a part of the value of the advanced capital. But in both cases, it remains a circulating part of the productive capital. It is entirely consumed in getting the product ready, and it must be entirely reproduced by means of it, in order to make self-expansion possible.

According to Adam Smith, raw and auxiliary materials lose their independent form, which they carried as use-values into the labor-process. Not so the instruments of labor proper. An instrument, a machine, a factory-building, a vessel, etc., serve in the labor-process only so long as they preserve their original form and enter the labor-process to-morrow in the same form in which they did yesterday. Just as they preserve their independent form as compared to the product during life, in the labor-process, so they do after death. The corpses of machines, shops, factory-buildings, still exist independently of the products, which they helped to form. (Book I, chapter VIII, page 227.)

These different ways in which means of production are used in the formation of the product, some of them preserving their independent form as compared to the product, others changing or losing it entirely,—this difference pertaining to the labor-process itself, regardless of whether it is carried on for home use, without exchange, without any production of commodities, as it was, for instance, in the patriarchal family, is falsified by Adam Smith, (1) by vitiating it with the irrelevant definition of profit, saying that some of the elements of production yield a profit to their owner by preserving their form, while others do so by losing it; (2) by jumbling together the changes of a part of the elements of production in the labor-process with that metamorphosis in the circulation of commodities which consists of the exchange, the sale and purchase, of products and involves a change of masters of the circulating commodities.

The turn-over presumes the reproduction by the intervention of the circulation, by the sale of the product, by its conversion into money and its reconversion from money into elements of production. But to the extent that a part of the product of the capitalist producer serves him directly as his own means of production, he figures as its seller to himself, and this transaction is so entered in his books. This part of the reproduction is not accomplished by the intervention of the circulation, but proceeds directly. But a part of the product thus re-employed as means of production replaces circulating, not fixed, capital, to the extent, (1) that its value passes wholly into the product, and (2) that it is itself wholly reproduced in its natural form by means of the new product.

Adam Smith, however, tells us what circulating and fixed capital consist of. He enumerates the things, the material elements, which form fixed, and those which form circulating capital, just as though this character were due to the natural substance of those things, instead of to their definite function within the capitalist process of production. And yet in book II, chapter I, he makes the remark that although a certain thing, for instance, a residence, which is reserved for direct consumption, "may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of the people can never be in the smallest degree increased by it." (Page 186.) Here, then, Adam Smith clearly states that the character of capital is not inherent in the things themselves, but is a function with which they may or may not be invested, according to circumstances. But what is true of capital in general, is also true of its subdivisions.

The same things form constituent parts of the circulating or fixed capital, according to whether they perform this or that function in the labor-process. A domestic animal, for instance, as a laboring animal (instrument of labor), represents the material mode of existence of fixed capital, while as stock for fattening (raw material) it is a constituent part of the circulating capital of the farmer. On the other hand, the same things serve either as constituent parts of productive capital, or belong to the fund for direct consumption. A house, for instance, when performing the function of a workshop, is a fixed part of productive capita; when serving as a residence, it is not at all a form of productive capital. The same instruments of labor may in many cases serve now as means of reproduction, now as means of consumption.

It was one of the errors following from the conception of Smith that the capacity of fixed and circulating capital was regarded as vested in the things themselves. The mere analysis of the labor-process on his part, in book I, chapter V, shows that the capacity of instruments of labor, materials of labor and products changes according to the different role played by one and the same thing in the process. The determination of what is fixed or circulating capital, in its turn, is based on the definite roles played by these elements in the labor-process, and therefore also in the process of the formation of value.

In the second place, in enumerating the things of which fixed and circulating capital may consist, Smith plainly discloses the fact that he jumbles together the distinction between fixed and circulating capital, applicable and justified only with reference to productive capital (capital in its productive form), with the distinction between productive capital and those of its forms which belong to the process of circulation, viz., commodity-capital and money-capital. He says in the same place (pages 187,188): "The circulating capital consists...of the provisions, materials, and finished work of all kinds that are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them, etc." Indeed, if we look closer, we observe that he has here, contrary to previous statements, used circulating capital as being equivalent to commodity-capital and money-capital, that is to say to two forms of capital which do not belong to the process of production at all, which are not circulating capital as opposed to fixed, but capital of circulation as opposed to productive capital. It is only in co-ordination with these that those constituents of productive capital, which are advanced in materials (raw materials or partly finished products) are actually embodied in the process of production, play a role. He says:

"...The third and last of the three portions into which the general stock of society naturally divides itself, is the circulating capital, of which the characteristic is, that it affords a revenue only by circulating or changing masters. This is composed likewise of four parts: first, of the money..." (but money is never a form of productive capital, of capital performing its function in the productive process; it is always merely one of the forms assumed by capital within its process of circulation.)..."secondly, of the stock of provisions which are in the possession of the butcher, the grazier, the farmer...and from the sale of which they expect to derive a profit... Fourthly and lastly, of the work which is made up and completed, but which is still in the hands of the merchant and manufacturer. And, thirdly, of the materials, whether altogether rude or more or less manufactured, of clothes, furniture, and buildings, which are not yet made up into any of those three shapes but which remain in the hands of the growers, the manufacturers, the mercers and drapers, the timber-merchants, the carpenters and joiners, the brick-makers, etc."

His second and fourth count contain nothing but products, which have been released by the process of production and must be sold; in short, they are products which now perform the function of commodities, or commodity-capital, and which, therefore, have a form and occupy a place in the process, in which they are not elements of productive capital, no matter what may be their destination, whether they answer their final purpose as use-values in individual or productive consumption. The products mentioned under secondly are foodstuffs, those under fourthly all other finished products, which in their turn consist only of finished instruments of labor or finished articles of consumption not included in the foodstuffs under count two.

The fact that Smith at the same time speaks of the merchant, shows his confusion. To the extent that the producer transfers his product to the merchant, it does no longer form any part of his capital. From the social point of view, it is indeed still a commodity-capital, although in other hands than those of its producer; but for the very reason that it is a commodity-capital, it is neither a circulating nor a fixed capital.

Under every mode of production not carried on for direct home-consumption the product must circulate as a commodity, that is to say, it must be sold, not in order to make a profit out of it, but that the producer may be able to live at all. Under the capitalist mode of production we have the further fact that the surplus-value embodied in a certain commodity is realized by its sale. In its capacity as a commodity, the product leaves the process of production and is, therefore, neither a fixed nor a circulating element of this process.

By the way, Smith here testifies against himself. The finished products, whatever may be their material form, their use-value, their utility, are all commodity-capital, that is to say capital in a form typical of the process of circulation. Being in this form, they are not constituent parts of any productive capital which their owner may have. Of course, this does not argue against the fact that, after their sale, they may become constituent parts of productive capital in the hands of their purchaser, and then represent either fixed or circulating capital. This shows that the same things, which at a certain time appear on the market as commodity-capital distinct from productive capital, may or may not perform the function of productive capital after they have been removed from the market.

The product of the cotton spinner, yarn, is the commodity-form of his capital, is a commodity-capital from his point of view. It cannot again perform the function of some constituent part of his productive capital, neither as raw material nor as an instrument of labor. But in the hands of the weaver who buys it, it is embodied in his productive capital as one of its circulating parts. For the spinner, on the other hand, the yarn is the bearer of the value of his fixed and circulating capital (not considering the surplus-value). So is a machine, the product of a machine maker, the commodity-form of his capital, commodity-capital from his point of view. And so long as it persists in this form, it is neither fixed nor circulating capital. But if it is sold to a manufacturer for use in his production, it becomes a fixed part of his productive capital. Even if a certain product re-enters as a use-value for the purpose of production into the same process from which it emanated, for instance coal in the production of coal, even then that part of the output of coal which is intended for sale represents neither fixed nor circulating capital, but commodity-capital.

On the other hand, the utility-form of a certain product may be such that it is incapacitated for service as an element of productive capital, either as raw material or an instrument of labor. This is the case, for instance, with articles of food. Nevertheless it is a commodity-capital for its producer, in which the value of his fixed as well as his circulating capital is incorporated; and it is the representative of the value of either the one or the other of these two forms according to whether the capital employed in its production has to be reproduced in full or partially, in other words, according to whether this capital transfers its full or its partial value to the product.

With Smith, in his count No. 3, the raw material (raw material, partly finished product, auxiliary material), does not figure as a part embodied in the productive capital, but merely as a special kind of use-values of which the social product generally consists, a mass of commodities existing apart from the other material elements, foodstuffs, etc., enumerated under Nos. 2 and 4. On the other hand, these materials are indeed incorporated in the productive capital and therefore also classed as its elements in the hands of the producer. The confusion arises from the fact that they are partly regarded as performing a function in the hands of the producer (in the hands of the growers, the manufacturers, etc.), and partly in the hands of merchants (mercers, drapers, timber-merchants), where they are merely commodity-capital, not elements of productive capital.

Indeed, Adam Smith forgets here, in the enumeration of the elements of circulating capital, all about the fact that the distinction of fixed and circulating capital applies only to the productive capital. He rather places commodity-capital and money-capital, the two forms of capital typical of the process of circulation, opposite of the productive capital, but quite unconsciously.

Finally, it is worthy of note that Adam Smith forgets to mention labor-power as one of the elements of productive capital. And there are two reasons for this.

We have just seen that, apart from money-capital, circulating capital is only another name for commodity-capital. But to the extent that labor-power circulates on the market, it is not capital, not a form of commodity-capital. It is not capital at all; the laborer is not a capitalist, although he brings his commodity to market, namely his own skin. Not until labor-power has been sold and incorporated in the process of production, in other words, until it has ceased to circulate as a commodity, does it became an element of productive capital, variable capital and the source of surplus-value, a circulating part of productive capital so far as the turn-over of the capital-value invested in it is concerned. Since Smith here confounds the circulating capital with commodity-capital, he cannot place labor-power under his category of circulating capital. Hence the commodity-capital here appears in the form of commodities which the laborer buys with his wages, that is to say, means of subsistence. In this form, the capital-value invested in wages is supposed to belong to the circulating capital. That which is incorporated in the process of production is labor-power, the laborer himself, not the means of subsistence by which the laborer maintains himself. True, we have seen in volume I, chapter XXIII, that, from the point of view of society, the reproduction of the laborer himself by means of his individual consumption belongs to the process of reproduction of social capital. But this does not apply to the individual and isolated process of production which we are studying here. The "acquired and useful abilities" which Smith mentions under the head of fixed capital, are on the contrary elements of circulating capital, when they are abilities of the wage-worker and have been sold by him with his labor.

It is a great mistake on the part of Smith to divide the entire social wealth into (1) a fund for immediate consumption, (2) fixed capital, and (3) circulating capital. According to this, wealth would have to be classified as (1) a fund for consumption, which would not represent a part of social capital engaged in the performance of its functions, although some parts of it may continually assist in this performance; and (2) as capital. In other words, a part of the wealth would be performing the functions of capital, another those of non-capital or a fund for consumption. And it seems that it is here an indispensable requirement for all capital to be either fixed or circulating, about in the same way that it is a natural necessity for a mammal to be either male or female. But we have seen that the distinction of being fixed or circulating applies solely to the elements of productive capital, that, therefore, there is also a considerable quantity of capital—commodity-capital and money-capital—existing in a form which does not permit of its being either fixed or circulating.

Seeing that the entire mass of social products, under capitalist production, circulates on the market as commodity-capital, with the exception of that part of the product which is directly consumed by the individual capitalist producers in its natural form as means of production without being sold or bought, it is evident that not only the fixed and circulating elements of productive capital, but also all the elements of the fund for consumption are derived from the commodity-capital. This is equivalent to saying that, on the basis of capitalist production, both means of production and of consumption first appear as commodity-capital, even though they are intended for later use as means of production or consumption. Labor-power itself is likewise found on the market as a commodity, if not as commodity-capital.

This accounts for the following confusion in Adam Smith: "Of these four parts" (meaning circulating capital, that is to say capital in its forms of commodity-capital and money-capital typical of the process of circulation, which Adam Smith transforms into four parts by making distinctions between the substantial parts of commodity-capital) "three—provisions, materials, and finished work, are either annually or in a longer or shorter period, regularly withdrawn from it, and placed either in the fixed capital, or in the stock reserved for immediate consumption. Every fixed capital is both originally derived from, and requires to be continually supported by, a circulating capital. All useful machines and instruments of trade are originally derived from a circulating capital, which furnishes the materials of which they are made and the maintenance of the workmen who make them. They require, too, a capital of the same kind to keep them in constant repair." (Page 188.)

With the exception of that part of the product which is immediately consumed as means of production, the following general rule applies to capitalist production: All products are taken to market as commodities and, therefore, circulate as capital in the form of commodities, as the commodity-capital of the capitalist, regardless of whether these products must or may serve in their natural form, as use-values, in the performance of their function as elements of productive capital in the process of production, in other words, as means of production and, therefore, as fixed or circulating parts of productive capital, or whether they can serve only as means of individual, not of productive, consumption. All products are thrown upon the market as commodities; all means of production or consumption, all elements of productive and individual consumption, must therefore be released from the market by purchasing them as commodities.

Of course, this truism is correct. It applies for this reason to the fixed as well as the circulating elements of productive capital, for instruments of labor as well as raw material in all its forms. (This, moreover, is leaving aside the fact that there are certain elements of productive capital which are furnished ready by nature and are not products.) A machine is bought on the market as well as cotton. But this implies by no means that every fixed capital comes originally from some circulating capital; it is only through the confusion, on the part of Smith, of capital of circulation with circulating capital, with capital that is not fixed, that this erroneous conclusion is reached. And to cap the climax, Smith refutes himself. According to him, machines, as commodities, form a part of No. 4, the circulating capital. To say that they come from the circulating capital means that they were performing the function of commodity-capital before they performed the function of machines, but that substantially they are derived from themselves; so is cotton, as the circulating element of some spinner's capital, derived from the cotton on the market. But as for deriving fixed capital from circulating capital for the reason that labor and raw material are required for the making of machines, as Adam Smith is doing in his further arguments, we say that in the first place, fixed capital is also required for the making of machines, and in the second place, fixed capital, such as machinery, is likewise required for the making of raw materials, since the productive capital always includes instruments of labor, but not always raw materials. He says himself immediately afterwards: "Lands, mines, and fisheries, require all both a fixed and circulating capital to cultivate them;"—thus he admits that not only circulating, but also fixed capital is required for the production of raw materials—"and"—renewed confusion at this point—"their produce replaces with a profit, not only those capitals, but all the others in society." (Page 188.) This is entirely wrong. Their produce furnishes the raw materials, auxiliary substances, etc., for all other branches of industry. But their value does not reproduce the value of all other social capitals; it reproduces merely the value of their own capital (plus the surplus-value). Adam Smith is here stampeded by his recollection of the physiocrats.

Socially speaking, it is true that that part of the commodity capital which consists of products available for immediate or later service as instruments of labor—unless they are produced uselessly and cannot be sold—must in fact perform this service whenever they cease to be commodities and become actual elements of the productive capital, in stead of being merely its prospective ones.

But there is a distinction arising from the natural form of the product.

A spinning machine, for instance, has no use-value, unless it is consumed in spinning, so that it performs its function as an element of production and, from the point of view of the capitalist, constitutes a fixed part of his capital. But a spinning machine is movable. It may be exported from the country in which it was produced and sold in a foreign country directly or indirectly, for raw materials, etc., or even for champagne. In that case it has served only as commodity-capital in the country in which it was produced, but never as fixed capital, not even after its sale.

But products which are localized by being imbedded in the soil, and therefore can be consumed only locally, such as factory buildings, railroads, bridges, tunnels, wharves, etc., improvements of the soil, etc., cannot be bodily exported. They are not movable. They are either useless, or they must serve as fixed capital, in the country that produced them, as soon as they have been sold. From the point of view of their capitalist producer, who builds factories or improves land for speculation and sale, these things are forms of his commodity-capital, or, according to Adam Smith, a form of circulating capital. But from the point of view of society, these things must finally serve in the same country as fixed capital in some process of production fixed by their own locality, unless they are to be useless. This does not imply by any means that immovable things are fixed capital of themselves. They may belong to the fund for consumption, for instance residence houses, and in that case they do not belong to the social capital at all, although they are an element of the social wealth, of which capital is only a part. The producer of these things, to use the language of Smith, makes a profit by their sale. In other words, circulating capital! Their user, their final purchaser, can use them only by utilizing them in the process of production. Therefore, fixed capital!

Titles to property, for instance railroad shares, may change hands every day, and their owner may even make a profit by their sale to foreign countries, so that the title may be exported, if not the railroad. But nevertheless these things themselves must either lie fallow in the country that produced them, or serve as a fixed part of some productive capital. In the same way the manufacturer A may make a profit by the sale of his factory to the manufacturer B, but this does not prevent the factory from serving as fixed capital, the same as before.

However, it does not follow that fixed capital necessarily consists of immovable things, because the locally fixed instruments of labor, which cannot be detached from the soil, must to all intents and purposes serve at some time as fixed capital in the same country, even though they may serve as commodity-capital for their producer and do not constitute any elements of his fixed capital, which is made up of the instruments of labor required by him for the building of factories, railroads, etc. A ship and a locomotive produce their effects only by motion; yet they serve as fixed capital for the owner who uses them, although not for him who produced them. On the other hand, some things which are very decidedly fixed in the process of production, which live and die in it and never leave it any more after they have entered it, are circulating parts of the productive capital. Such are, for instance, the coal consumed by the machine in the process of production, the gas used for lighting the factory, etc. They are circulating capital not because they bodily leave the process of production together with the product and circulate as commodities, but because their entire value is transferred to that of the product in whose production they assisted, so that their value must be entirely reproduced by the sale of the product.

In the last quotation from Adam Smith, notice must furthermore be taken of the following phrase: "A circulating capital which furnishes...the maintenance of the workmen who make them" (meaning machines, etc.).

In the works of the physiocrats, that part of capital which is advanced for wages figures correctly under the Avances annuelles as distinguished from the Avances primitives. On the other hand it is not the labor-power used as a part of the productive capital of the farmer which figures in their accounts, but the foodstuffs given to the farm laborers (the maintenance of workmen, as Smith calls it). This corresponds exactly to their specific doctrine. For according to them the value added to the product by labor (like the value added to the product by raw material, instruments of labor, etc., in short by all the substantial parts of constant capital) is equal only to the value of the articles of consumption paid to the laborers and necessary for the maintenance of their labor functions. Their doctrine stands in the way of their discovering the distinction between constant and variable capital. If it is labor that produces surplus-value in addition to the reproduction of its own price, then it does so in industry as well as in agriculture. But since, according to their system, surplus-value arises only in one branch of production, namely, agriculture, it does not come out of labor, but out of the special activity (assistance) of nature in this branch. And only for this reason agricultural labor is for them productive labor, as distinguished from other kinds of labor.

Adam Smith classes the maintenance of laborers among the circulating capital as distinguished from fixed.

1. Because he confounds circulating capital as distinguished from fixed with forms of capital belonging to the sphere of circulation, with capital of circulation; this mistake persisted after him without being criticized. He therefore confounds the commodity-capital with the circulating part of the productive capital, and in that case it is a matter of course that, whenever the social product assumes the form of commodities, the maintenance of the laborers as well as that of the non-laborers, the materials as well as the instruments of labor, must be taken out of the commodity-capital.

2. But the physiocratic conception likewise intermingles with the analysis of Smith, although it contradicts the esoteric—really scientific—part of his own deductions.

The advanced capital is universally converted into productive capital, that is to say it assumes the form of elements of production which are themselves the products of past labor. Labor-power is included in them. Capital can serve in the process of production only in this form. Now, if instead of labor-power itself we take the laborer's necessities of life into which the variable part of capital has been converted, it is evident that these necessities of life are not essentially different, so far as the formation of values is concerned, from the other elements of productive capital, from the raw materials and the food of the laboring cattle, with whom Smith, after the manner of the physiocrats, places the laborers on the same level, in one of the passages quoted above. The necessities of life cannot expand their own value or add any surplus-value to it. Their value, like that of the other elements, can re-appear only in that of the product. They cannot add any more to their value than they have themselves. They, like raw materials, partly finished articles, etc., differ from fixed capital composed of instruments of labor only in that they are entirely consumed in the product of the capitalist who pays for them and uses them in the manufacture of this product, so that their value must be entirely reproduced by this product, while in the case of the fixed capital this takes place gradually and piecemeal. The part of productive capital advanced for labor-power (or for the laborer's articles of consumption) differs here only in the matter of material from the other material elements of productive capital, not in the matter of the process of production or self-expansion. It differs only in so far as it falls into the same category, namely, that of circulating capital, with one part of the objective elements active in the formation of the product (materials, Adam Smith calls them), while another part of these belongs in the category of fixed capital.

The fact that the capital invested in wages belongs to the circulating part of productive capital and shares this circulating quality, as distinguished from the fixed character of productive capital, with a part of the material objects, the raw materials, etc., instrumental in creating the product, has nothing whatever to do with the role played by this variable part of capital in the process of self-expansion, as distinguished from the constant part of capital. It refers merely to the manner in which this part of the invested capital-value is reproduced out of the value of the product by way of the circulation. The purchase and repeated purchase of labor-power belongs in the process of circulation. But it is only within the process of production that the value invested in labor-power (not for the benefit of the laborer, but that of the capitalist) is converted from a definite constant into a variable magnitude, and only thus the advanced value is converted into capital-value, into self-expanding value. But by classing the value advanced for articles of consumption among the circulating elements of productive capital, as Smith does, instead of the value invested in labor-power, the understanding of the difference between variable and constant capital, and thus the understanding of the capitalist process of production in general, is rendered impossible. The mission of this part of capital of being variable as distinguished from the constant capital invested in material objects instrumental in production, is hidden under the mission of the capital invested in labor-power of serving in the turn-over as a circulating part of productive capital. And the obscurity is made complete by enumerating the laborer's maintenance among the elements of productive capital, instead of his labor-power. It is immaterial, whether the value of labor-power is advanced in money or immediately in articles of consumption. However, under capitalist production, the last-named eventuality can be but an exception.30

By thus emphasizing the role of the circulating capital as the determining element of the capital-value invested in labor-power, by using this physiocratic conception without the fundamental premise of the physiocrats, Adam Smith haply rendered the understanding of the role of variable capital as a determinant of capital invested in labor-power impossible for his followers. The more profound and correct analyses given by him in other places did not survive, but this mistake of his did. Other writers after him went even farther. They were not content to make it the essential characteristic of capital invested in labor-power to be circulating as distinguished from fixed capital; they rather made it an essential mark of circulating capital to be invested in articles of consumption for laborers. This resulted naturally in the doctrine of a labor fund of definite magnitude consisting of requirements of life, which on one side established a physical limit for the share of the laborers in the social product, and on the other had to be fully expended in the purchase of labor-power.

Part II, Chapter XI
THEORIES OF FIXED AND CIRCULATING CAPITAL. RICARDO.

Ricardo mentions the distinction between fixed and circulating capital merely for the purpose of illustrating the exceptions to the law of value, namely, in cases where the rate of wages affects the prices. The discussion of this point is reserved for volume III.

But the original confusion is apparent at the outset in the following indifferent parallel: "This difference in the degree of durability of fixed capital, and this variety in the proportions in which the two sorts of capital may be combined." (Principles, page 25.)

And if we ask him which two sorts of capital he is referring to, we are told: "The proportions too, in which the capital that is to support labor, and the capital that is invested in tools, machinery, and buildings, may be variously combined." (l. c.) In other words, fixed capital consists of instruments of labor, and circulating capital is such as is invested in labor. "Capital that is to support labor" is a senseless term culled from Adam Smith. On one hand, the circulating capital is here confounded with the variable capital, that is to say, with that part of productive capital which is invested in labor. On the other hand, twice confounded conceptions arise for the reason that the distinction is not between variable and constant capital and derived from the process of self-expansion, but from the process of circulation repeating the old confusion of Smith.

1. The difference in the degree of durability of fixed capital and the difference in the proportion in which constant and variable capital may be combined, are conceived as being of equal significance. But the last-named difference determines the difference in the production of surplus-value; the first-named, on the other hand, refers merely to the manner in which a given value is transferred from a means of production to the product, in so far as the process of self-expansion is concerned; and as for the process of circulation, this difference refers only to the period of the reproduction of the advanced capital, or, from another point of view, the time for which it has been advanced. Of course, if one looks upon the capitalist process of production in the light of a completed phenomenon, instead of seeing through its internal machinery, then these differences coincide. In the distribution of the social surplus-value among the various capitals invested in different lines of production, the proportions of the different periods of time for which capital has been advanced (for instance, the different durability of fixed capital) and the different organic composition of capital (and therefore also the different circulation of constant and variable capital) contribute equally toward an equalization of the general rate of profit and the conversion of values into prices of production.

From the point of view of the process of circulation, we have on one side the instruments of labor—fixed capital, on the other the materials of labor and wages—circulating capital. But from the point of view of the process of production and self-expansion, we have on one side means of production (instruments of labor and raw material)—constant capital; on the other, labor-power—variable capital. It is immaterial for the organic composition of capital (Book I, Chap. XXV, 2, page 683) whether the same quantity of constant capital consists of many instruments of labor and little raw material, or of much raw material and few instruments of labor, but everything depends on the proportion of the capital invested in means of production to that invested in labor-power. Vice versa, from the point of view of the process of circulation, of the difference between fixed and circulating capital, it is just as immaterial in what proportions a given amount of circulating capital is divided between raw material and wages. From one of these points of view the raw material is classed in the same category with the instruments of labor, as compared to the capital-value invested in labor-power; from the other the capital-value invested labor-power ranks with that invested in raw material, as compared to that invested in instruments of labor.

For this reason, the capital-value invested in materials of labor (raw and auxiliary materials) does not appear on either side. It disappears entirely. For it does not agree with the side of fixed capital, because its mode of circulation coincides entirely with that of the capital-value invested in labor-power. And on the other hand, it must not be placed on the side of circulating capital, because in that case the identification of the distinction between fixed and circulating capital with that of constant and variable capital, which had been carried over from Adam Smith and tacitly perpetuated, would abolish itself. Ricardo has too much logical instinct not to feel this, and for this reason that part of capital disappears entirely for him.

It is to be noted at this point that the capitalist, to use the language of political economy, advances the capital invested in wages for different periods, according to whether he pays these wages weekly, monthly, or quarterly. But in reality, the reverse takes place. The laborer advances his labor to the capitalist for one week, one month, or three months, according to whether he is paid by the week, by the month, or every three months. If the capitalist really were to buy labor-power, instead of only paying for it, in other words, if he were to pay the laborer in advance for a day, a week, a month, or three months, then he would be justified in claiming that he advanced wages for those periods. But since he does not pay until labor has lasted for days weeks, or months, instead of buying it and paying for the time which it is intended to last, we have here a confusion of terms on the part of the capitalist, who performs the trick of converting an advance of labor made to the capitalist by the laborer into an advance of money made to the laborer by the capitalist. It does not alter the case that the capitalist may not get any returns from his product by way of the circulation in the shape of a reproduction of his product or of its value (increased by the surplus value embodied in it) until after a certain length of time, according to the different periods required for its manufacture, or for its circulation. It does not concern the seller of a commodity what its buyer is going to do with it. The capitalist does not get a machine cheaper, because he must advance its entire value at one time, while this value returns to him only gradually and piecemeal by way of the circulation; nor does he pay more for cotton, because its value is assimilated fully by the product into which it is made over, and is therefore fully recovered at one time by the sale of the product.

Let us return to Ricardo.

1. The characteristic mark of variable capital is that a certain given, and to that extent constant, part of capital representing a given sum of values (supposed to be equal to the value of labor-power, although it is immaterial for this discussion whether wages are equal to the value of labor-power or higher or lower than it) is exchanged for a self-expanding power which creates value, namely, labor-power, which not only reproduces the value paid for it by the capitalist, but produces a surplus-value, a value not previously existing and not paid for by any equivalent. This characteristic mark of the capital-value advanced for wages, which distinguishes it as a variable capital from constant capital, disappears whenever the capital-value advanced for wages is considered solely from the point of view of the circulation, for then it appears as a circulating capital as distinguished from the fixed capital invested in instruments of labor. This is apparent from the simple fact that it is then classed under one head, namely, under that of circulating capital, together with a part of the constant capital, namely, that which is invested in raw materials, and thus distinguished from another part of constant capital, namely, that invested in instruments of labor. The surplus-value, the very fact which converts the advanced sum of values into capital, is entirely ignored under these circumstances. Furthermore, the fact is ignored that the value added to the product by the capital invested in wages is newly produced (and therefore actually reproduced), while the value transferred from the raw material to the product is not newly produced, not actually reproduced, but only preserved in the value of the product and merely reappears as a part of the value of the product. The distinction, as seen from the point of view of the contrast between fixed and circulating capital, consists now simply in this: The value of the instruments of labor used for the production of a certain commodity is transferred only partially to the value of the commodity and is therefore only partially recovered by its sale, is only partially and gradually returned. On the other hand, the value of the labor-power and materials of labor (raw materials, etc.) used in the production of a certain commodity is entirely assimilated by it, and is therefore entirely recovered by its sale. From this stand-point, and with reference to the process of circulation, one part of capital appears as fixed, the other as circulating. In both cases it is a matter of a transfer of definite advanced values to the product and of their recovery by the sale of the product. The only difference which is essential at this point is whether the transfer of values, and consequently their recovery, proceeds gradually or in one bulk. By this means the really decisive difference between the variable and constant capital is blotted out, the whole secret of the production of surplus-value and of capitalist production, namely, the circumstances which transform certain values and the things in which they are contained into capital, are obliterated. All constituent parts of capital are then distinguished merely by their mode of circulation (and, of course, circulation concerns itself solely with already existing values of definite size). And the capital invested in wages then shares a peculiar mode of circulation with a part of capital invested in raw materials, partly finished articles, auxiliary substances, as distinguished from another part of capital invested in instruments of labor.

It is, therefore, easy to understand why the bourgeois political economy instinctively clung to Adam Smith's confusion of the categories of "constant and variable capital" with the categories "fixed and circulating capital," and repeated it parrotlike from generation to generation for a century. The capital invested in wages is not in the least distinguished by bourgeois political economy from capital invested in raw materials, and differs only formally from constant capital to the extent that it is partially or in bulk circulated by the product. In this way the first requirement for an understanding of the actual movement of capitalist production, and thus of capitalist exploitation, is buried at one stroke. It is henceforth but a question of the reappearance of advanced values.

In Ricardo the uncritical adoption of the Smithian confusion is annoying, and not only more so than in the later apologetic writers, in whom the confusion of terms is rather otherwise than annoying, but also more than in Adam Smith himself, because Ricardo is comparatively more consistent and clear in his analysis of value and surplus-value, and indeed rescues the esoteric Adam Smith from the exoteric Adam Smith.

Among the physiocrats this confusion is not found. The distinction between avances annuelles and avances primitives refers only to the different periods of reproduction of the various parts of capital, especially of agricultural capital; while their ideas concerning the production of surplus-value form a part of their theory, apart from these distinctions, being upheld by them as the salient point of this theory. The formation of surplus-value is not explained out of capital as such, but only attributed to one special sphere of production of capital, namely, agriculture.

2. The essential point in the determination of variable capital—and therefore for the conversion of any sum of values into capital—is that the capitalist exchanges a definite given, and to that extent constant, magnitude of values for a power which creates values, a magnitude of values for a production, a self-expansion, of values. It does not alter this essential fact that the capitalist may pay the laborer either in money or in means of subsistence. This alters merely the mode of existence of the value advanced by the capitalist, seeing that in one case it has the form of money for which the laborer himself buys his means of subsistence on the market, in the other case that of means of subsistence which he consumes directly. A developed capitalist production rests indeed on the assumption that the laborer is paid in money and more generally on the assumption that the process of production is promoted by the process of circulation, in other words, by the monetary system. But the production of surplus-value—and consequently the capitalization of the advanced sum of values—has its source neither in the money-form, nor in the natural form, of wages, or of the capital invested in the purchase of labor power. It arises out of the exchange of value for a power creating value, the conversion of a constant into a variable magnitude.

The greater or smaller fixity of the instruments of labor depends on the degree of their durability, on their physical properties. According to the degree of their durability, other circumstances being equal, they will wear out fast or slowly, will serve a long or a short time as fixed capital. The raw material in metal factories is just as durable as the machines used in manufacturing, and more durable than many parts of these machines, such as leather, wood, etc. Nevertheless the metal serving as raw material forms a part of the circulating capital, while the instrument of labor, although probably built of the same metal, is a part of the fixed capital, when in use. Hence it is not the substantial physical nature, not its great or small durability, to which the same metal owes its place, now in the category of the fixed, now of the circulating capital. This distinction is rather due to the role played by it in the process of production, being an object of labor in one case, and an instrument of labor in another.

The function of an instrument of labor in the process of production requires generally, that is should serve for a longer or shorter period in ever renewed labor processes. Its function, therefore, determines the greater or lesser durability of its substance. But it is not the durability of the material of which it is made that gives to it the character of fixed capital. The same material, if in the shape of raw material, becomes a circulating capital, and among those economists who confound the distinction between commodity-capital and productive-capital with that between circulating and fixed capital the same material, the same machine, are circulating capital as products and fixed capital as instruments of labor.

Although it is not the durability of the material of which it is made that gives to an instrument of labor the character of fixed capital, nevertheless its role as such an instrument requires that it should be composed of relatively durable material. The durability of its material is, therefore, a condition of its function as an instrument of labor, and consequently the material basis of the mode of circulation which renders it a fixed capital. Other circumstances being equal, the greater or lesser durability of its material endows it in a higher or lower degree with the quality of fixedness, in other words, its durability is closely interwoven with its quality of being a fixed capital.

If the capital-value advanced for labor-power is considered exclusively from the point of view of circulating capital, in distinction from fixed capital, and if consequently the distinction between constant and variable capital is confounded with that between fixed and circulating capital, then it is natural to attribute the character of circulating capital, in distinction from fixed capital, to the substantial reality of the capital invested in labor-power, just as the substantial reality of the instrument of labor constitutes an essential element of its character of fixed capital, and to determine the circulating capital by the substantial reality of the variable capital.

The real substance of the capital invested in wages is labor itself, active, value creating, living labor, which the capitalist trades for dead, materialized labor and embodies in his capital, by which means alone the value in his hands is transformed into a self-expanding value. But this self expanding power is not sold by the capitalist. It is always solely a constituent part of his productive capital, the same as his instruments of labor; it is never a part of his commodity-capital, as, for instance, the finished product which he sells. Within the process of production, as parts of his productive capital, the instruments of labor are not distinguished from labor-power as fixed capital any more than the raw materials and auxiliary substances are identified with it as circulating capital. Labor confronts both of them as a personal factor, while they are objective things—speaking from the point of view of the process of production. Both of them stand opposed to labor-power, to variable capital, as constant capital—speaking from the point of view of the process of self-expansion. Or, if mention is to be made here of a difference in substance, so far as it affects the process of circulation, it is only this: It follows from the nature of value which is nothing but materialized labor, and from the nature of active labor-power which is nothing but labor in process of materialization, that labor-power continually creates value and surplus-value during the process of its function; that the thing which on the part of labor-power appears as motion and a creation of value, appears on the part of its product as rest and as a created value. If the labor-power has performed its function, then capital no longer consists of labor-power on one side, and means of production on the other. The capital value invested in labor is then value added with a surplus-value to the product. In order to respect the process, the product must be sold, and new labor-power must be bought with the money so obtained, in order to be once more embodied in the productive capital. It is this which then gives to the capital invested in labor-power, and to that invested in raw materials, etc., the character of circulating capital as distinguished from the capital remaining fixed in instruments of labor.

But if the secondary quality of the circulating capital, which it shares with a part of the constant capital (raw and auxiliary materials), is made the essential mark of capital invested in labor-power, to wit, the transfer of the full value invested in it to the product in whose manufacture it is consumed, instead of a gradual and successive transfer such as takes place in the case of the fixed capital, and the consequent total reproduction of this value by the sale of the product, then the value invested in wages must likewise consist, not of active labor-power, but of the material elements which the laborer buys with his wages, in other words, it must consist of that part of the social commodity-capital which passes into the individual consumption of the laborer, of means of subsistence. In that case, the fixed capital would consist of the more durable instruments of labor which are reproduced more slowly, and the capital invested in labor-power would consist of the means of subsistence, which must be more rapidly reproduced.

However, the boundaries of greater or smaller durability pass imperceptibly into one another.

"The food and clothing consumed by the laborer, the buildings in which he works, the implements with which his labor is assisted, are all of a perishable nature. There is, however, a vast difference in the time for which these different capitals will endure: a steam-engine will last longer than a ship, a ship than the clothing of the laborer, and the clothing of the laborer longer than the food which he consumes." (Ricardo, etc., page 27.)

Ricardo does not mention the house, in which the laborer lives, his tools of consumption, such as knives, forks, dishes, etc., all of which have the same quality of durability as the instruments of labor. The same things, the same classes of things, appear in one place as means of consumption, in another as instruments of labor.

The difference, as stated by Ricardo, is this: "According as capital is rapidly perishable and requires to be frequently reproduced or is of slow consumption, it is classed under the heads of circulating or fixed capital."

He remarks in addition thereto: "A division not essential, and in which the line of demarcation cannot be accurately drawn."

Thus we have once more arrived among the physiocrats, where the distinction between avances annuelles and avances primitives was one referring to the period of consumption, and consequently also to the different time of reproduction of the invested capital. Only, that which in their case constitutes a phenomenon important for society and for this reason is assigned in the Tableau Economique a place of interrelation with the process of circulation, becomes here, in Ricardo's own words, a subjective and unessential division.

As soon as the capital-value invested in labor-power differs from that invested in instruments of labor only by its period of reproduction and term of circulation, as soon as one part of capital consists of means of subsistence, another of instruments of labor, so that these differ from those only by the degree of their durability, which durability is further different for the various kinds of each class, it follows as a matter of course that all specific difference between the capital invested in labor-power and that invested in means of production is obliterated.

This runs very much counter to Ricardo's theory of value, likewise to his theory of profit, which is actually a theory of surplus-value. He does not consider the difference between fixed and circulating capital any further than is required by the way in which different proportions of both of them, in equal capitals invested in different branches of production, influence the law of value, particularly the extent to which an increase or decrease of wages in consequence of these conditions affects prices. But even within this restricted analysis, he commits the gravest errors on account of the confusion in the definitions of fixed and circulating, constant and variable capital. Indeed, he starts his analysis on an entirely wrong basis. In the first place, in so far as the capital-value invested in labor-power has to be considered under the head of circulating capital, he gives a wrong definition of circulating capital and misunderstands particularly the circumstances which place the capital-value invested in labor-power under this heading. In the second place, he confounds the definition, according to which the capital-value invested in labor-power is a variable capital, with that according to which it is circulating as distinguished from fixed capital.

It is evident from the beginning that the definition of capital-value invested in labor-power as circulating capital is a secondary one, obliterating its specific difference in the process of production. For on one hand, the values invested in labor-power are identified in this definition with those invested in raw materials. A classification which identifies a part of the constant capital with the circulating capital does not appreciate the specific difference of variable from constant capital. On the other hand, while the values invested in labor-power are indeed distinguished from those invested in instruments of labor, the distinction is based only on the fact that the values incorporated in them are transferred to the product in different periods of time, not on the fact that this transfer is significant for the radically different manner in which either of them passes into the production of values.

In all of these cases, it is a question of the manner in which a given value, invested in the process of production of commodities, whether the investment be made in wages, in the price of raw materials, or in that of instruments of labor, is transferred to the product, then circulated by it, and returned to its starting point by the sale of the product, or reproduced. The only difference lies here in the "how," in the particular manner of the transfer, and therefore also in the circulation of this value.

Whether the price of labor-power previously agreed upon by contract in each case is paid in money or in means of subsistence, does not alter in any way the fact that it is a fixed price. However, it is evident in the case of wages paid in money, that it is not the money which passes into the process of production in the way that the value as well as the material of the means of production do. But if the means of subsistence which the laborer buys with his wages are directly classed in the same category with raw materials, as the material form of circulating capital distinguished from instruments of labor, then the matter assumes a different aspect. While the value of these things, the instruments of labor, is transferred to the product in the process of production, the value of those things, the means of subsistence, reappears in the labor-power that consumes them and is likewise transferred to the product by the exertion of this power. In every one of these cases it is a question of the mere reappearance of the values invested in production by means of transfer to the product. The physiocrats for this reason took this aspect of the matter seriously and denied that industrial labor could create any values. This is shown by a previously quoted passage of Wayland, in which he say that it is immaterial in which form the capital reappears, and that the different kinds of food, clothing, and shelter which are required for the existence and well-being of man are likewise changed, being consumed in the course of time while their value reappears. (Elements of Political Economy, pages 31 and 32.) The capital-values invested in production in the form of means of production and means of subsistence both reappear in the value and means of subsistence both reappear in the value of the product. By this means the transformation of the capitalist process of production into a complete mystery is happily accomplished and the origin of the surplus-value incorporated in the product is entirely concealed.

At the same time, this perfects the fetishism typical of bourgeois political economy, which pretends that the social and economic character of things, arising from the process of social production, is a natural character due to the material substance of those things. For instance, instruments of labor are designated as fixed capital, a scholastic mode of definition which leads to contradictions and confusion. Just as we demonstrated in the case of the process of production (Vol. I, chapter VII), that it depends on the role, the function, performed by the various material substances in a certain process of production, whether they served as instruments of labor, raw materials, or products, just so we now claim that instruments of labor are fixed capital only in cases where the process of production is a capitalist process of production and the means of production are, therefore, capital and possess the economic form and social character of capital. And in the second place, they are fixed-capital only when they transfer their value to the product in a certain peculiar way. Unless they do so, they remain instruments of labor without being fixed-capital. In the same way, auxiliary materials, such as manure, if they transfer their value in the same peculiar manner as the greater part of the instruments of labor, become fixed capital, although they are not instruments of labor. It is not the definitions, which are essential in determining the character of these things. It is their definite functions which express themselves in definite categories.

If it is considered as one of the qualities exhibited by means of subsistence under all circumstances to be capital invested in wages, then it will also be a quality of this "circulating" capital "to support labor." (Ricardo, page 25.) If the means of subsistence were not "capital," then they would not support labor, according to this; while it is precisely their character of capital which endows them with the faculty of supporting capital by means of the labor of others.

If means of subsistence are of themselves capital circulating after being converted into wages, it follows furthermore that the magnitude of wages depends on the proportion of the number of laborers to the existing quantity of circulating capital—a favorite economic law—while as a matter of fact the quantity of means of subsistence withdrawn from the market by the laborer, and the quantity of means of subsistence available for the consumption of the capitalist, depend on the proportion of the surplus-value to the price of labor.

Ricardo as well as Barton31 everywhere confound the relation between variable and constant capital with that between circulating and fixed capital. We shall see later, to what extent this vitiates Ricardo's analyses concerning the rate of profit.

Ricardo furthermore identifies the distinctions which arise in the turn-over from other causes than the difference between fixed and circulating capital, with these same differences: "It is also to be observed that the circulating capital may circulate, or be returned to its employer, in very unequal times. The wheat bought by a farmer to sow is comparatively a fixed capital to the wheat purchased by a baker to make into loaves. The one leaves it in the ground, and can obtain no return for a year: the other can get it ground into flour, sell it as bread to his customers, and have his capital free, to renew the same, or commence any other employment in a week." (Pages 26 and 27.)

In this passage, it is characteristic that wheat, although not serving as a means of subsistence, but as raw material when used for sowing, is supposed in the first place to be circulating capital, because it is in itself a food, and in the second place a circulating capital, because its reproduction extends over one year. However, it is not so much the slow or rapid reproduction which makes a fixed capital of a means of production, but rather the manner in which it transfers its value to the product.

The confusion caused by Adam Smith has brought about the following results:

1. The distinction between fixed and circulating capital is confounded with that between productive capital and commodity-capital. For instance, a machine is said to be circulating capital when on the market as a commodity, and fixed capital when incorporated in the process of production. Under these circumstances, it is impossible to ascertain why one kind of capital should be more fixed or circulating than another.

2. All circulating capital is identified with capital invested, or about to be invested, in wages. This is the case with John Stewart Mill, and others.

3. The difference between variable and constant capital, which had been previously mistaken by Barton, Ricardo, and others, for that between circulating and fixed capital, is finally identified with this last-named difference, for instance by Ramsay, who calls all means of production, raw materials, etc., including instruments of labor, fixed capital, and only that which is invested in wages circulating capital. But on account of the reduction of the problem to this form, the real difference between variable and constant capital is not understood.

4. The latest English, and especially Scotch, economists, who look upon all things from the inexpressibly petty point of view of a bank clerk, such as MacLeod, Patterson, and others, transform the difference between fixed and circulating capital into one of money at call and money not at call.

Part II, Chapter XII
THE WORKING PERIOD.

Take two branches of production, with equal working days, for instance of ten hours each, one of them a cotton spinnery, the other a locomotive factory. In one of these branches, a definite quantity of finished product, cotton yarn, is completed daily, or weekly; in the other, the productive process may have to be repeated for three months in order that the finished product, a locomotive, may be ready. In one case, the product is made up of separate lots, and the same labor is repeated daily or weekly. In the other case, the labor process is continuous and extends over a prolonged number of daily labor-processes which, in their continuity, result in the finished product. Although the duration of the working day is the same in both cases, there is a marked difference in the duration of the productive act, that is to say, in the duration of the repeated labor-processes, which are required in order to complete the finished product, to get it ready for its role as a commodity on the market, in other words, to convert it from a productive into a commodity-capital. The difference between fixed and circulating capital has nothing to do with this. The difference just indicated would exist, even if the very same proportions of fixed and circulating capital were employed in both branches of production.

These differences in the duration of the productive acts are found not alone in two different spheres of production, but also within one and the same sphere of production, according to the volume of the intended product. An ordinary residence house is built in less time than a large factory and therefore requires a smaller number of consecutive labor-processes. While the building of a locomotive requires three months, that of an ironclad requires one year or more. The production of grain extends over nearly a year, that of horned cattle over several years, and the production of timber may require from twelve to one hundred years. A country road may be completed in a few months, while a railroad requires years. An ordinary carpet is made in about a week, while Gobelins requires years, etc. The differences in the duration of the productive act are, therefore, infinitely manifold.

It is evident that a difference in the duration of the productive act must beget a difference in the velocity of the turn-over, even if the invested capitals are equal, in other words, must make a difference in the time for which a certain capital is advanced. Take it that a cotton spinnery and a locomotive factory employ the same amount of capital, that the proportion between their constant and variable capital is the same, likewise that between fixed and circulating capital, and that finally their working day is of equal length and its division between necessary and surplus-labor the same. In order to eliminate, furthermore, all the external circumstances arising out of the process of circulation, we shall assume that both the yarn and the locomotive are made to order and will be paid on delivery of the finished product. At the end of the week, the cotton spinner recovers his outlay for circulating capital (making exception of surplus-value), likewise the wear and tear of fixed capital incorporated in the value of the yarn. He can, therefore, repeat the same cycle with the same capital. It has completed its turn-over. The locomotive manufacturer, on the other hand, must advance even new capital for wages and raw material every week for three months in succession, and it is only after three months, after the delivery of the locomotive, that the circulating capital gradually invested in one and the same productive act for the manufacture of one and the same commodity once more returns to a form in which it can renew its cycle. The wear and tear of his machinery is likewise covered only at the end of three months. The investment of the one is made for one week, that of the other is the investment of one week multiplied by twelve. All other circumstances being assumed as equal, the one must have twelve times more circulating capital at his disposal than the other.

It is, however, an immaterial condition that the capitals advanced weekly should be equal. Whatever may be the quantity of the invested capital, it is advanced for one week in one case, and for twelve weeks in the other, before the same operation can be repeated with it, or another inaugurated.

The difference in the velocity of the turn-over, or in the length of time for which the capital is advanced before the same capital-value can be employed in a new process of production or self-expansion, arises here from the following circumstances:

Take it that the manufacture of a locomotive, or of any other machine, requires 100 working days. So far as the laborers employed in the manufacture of yarn or of the locomotive are concerned, 100 working days constitute in either case a discontinuous magnitude, representing, according to our assumption, 100 consecutive, but separate labor-processes of ten hours each. But with reference to the product—the machine—these 100 working days are a continuous magnitude, a working day of 1,000 working hours, one single connected act of production. I call such a working day, which is formed by the succession of more or less numerous connected working days, a working period. If we speak of a working day, we mean the length of working time during which the laborer must daily spend his labor-power, must work day by day. But if we speak of a working period, then we mean a number of consecutive working days required in a certain branch of production for the completion of the finished product. In this case, the product of every working day is but a partial one, being elaborated from day to day and receiving its complete form only at the end of a longer or shorter period of labor, when it is at last a finished use-value.

Interruptions, disturbances of the process of social production, for instance, by crises, therefore have very different effects on labor products of a discontinuous nature and those that require for their completion a prolonged and connected working period. In one case, today's production of a certain mass of yarn, coal etc., is not followed by tomorrow's production of yarn, coal, etc. Not so in the case of ships, buildings, railroads, etc. It is not only the work which is interrupted, but also a connected working period. If the work is not continued, the means of production and labor so far expended in its manufacture are wasted. Even if work is resumed, a deterioration has taken place in the meantime.

For the entire duration of the working period, the value daily transferred to the product by the fixed capital accumulates successively until the product is finished. In this way, the difference between the fixed and circulating capital is revealed in its practical significance. The fixed capital is invested in the process of production for a long period, it need not be reproduced until after the expiration of, perhaps, a period of several years. Whether a steam-engine transfers its value daily to some yarn, which is the product of a discontinuous labor-process, or for three months to a locomotive, which is the product of a continuous process, is immaterial for the investment of the capital required for the purchase of the steam-engine. In the one case, its value is recovered in small doses, for instance, weekly, in the other case in larger quantities, for instance, quarterly. But in either case, the reproduction of the steam-engine may not take place until after twenty years. So long as every individual period which returns a part of the value of the steam engine by the sale of the product, is shorter than the lifetime of this engine, the same engine continues its service in successive working periods of the process of production.

It is different with the circulating portions of the invested capital. The labor-power bought for this week is consumed in the course of the same week and transferred to the product. It must be paid for at the end of this week. And this investment of capital in labor-power is repeated every week for three months without enabling the capitalist to use the investment of this part of capital in this week's labor-power for the purchase of next week's. Every week, additional capital must be invested for the payment of labor-power, and, leaving aside the question of credit, the capitalist must be able to advance wages for three months, even if he pays them only in weekly installments. It is the same with the other portion of circulating capital, the raw and auxiliary materials. One shift of labor after another is transferred to the product. It is not alone the value of the expended labor-power which is continually transferred to the product during the labor-process, but also surplus-value. This product, however, is unfinished, it has not yet the form of a finished commodity, it cannot yet circulate. This applies likewise to the capital-value transferred to the product by the raw and auxiliary materials.

According as the working period required by the specific nature of the product, or by the useful effect aimed at, is short or long, a continuous investment of additional circulating capital (wages, raw, and auxiliary materials) is required, none of its parts being in a from adapted for circulation and for the promotion of the repetition of the same operation. Every one of these parts is on the contrary held by the growing product as one of its parts in the sphere of production, in the form of productive capital. Now, the time of turn-over is equal to the sum of the time of production and the time of circulation. Hence a prolongation of the time of production reduces the velocity of the turn-over quite as much as the prolongation of the time of circulation. In the present case, the following must be furthermore noted:

1. The prolonged stay in the sphere of production. The capital invested, for instance, in the labor-power, raw, and auxiliary materials of the first week, the same as the portions of value transferred to the product by the fixed capital, are held in the sphere of production for the entire term of three months, and being incorporated in a growing and as yet unfinished product, cannot pass into the circulation of commodities.

2. Since the working period required for the completion of the productive act lasts three months, and forms one connected labor-process, a new quantity of circulating capital must be continually added week after week to the preceding quantity. The amount of the successively invested additional capital grows, therefore, with the length of the working period.

We have assumed that equal capitals are invested in the spinnery and the machine factory, that these capitals contain equal proportions of constant and variable, fixed and circulating capital, that the working days are equal, in short, that all circumstances are equal with the exception of the duration of the working period. In the first week, the outlay for both is the same, but the product of the spinner can be sold and the returns from the sale employed in the purchase of new labor-power and raw materials, in short, production can be resumed on the same scale. The machine manufacturer, on the other hand, cannot reconvert the circulating capital expended in the first week into money until at the end of three months, when his product is finished and he can begin operation afresh. There is, in other words, first a difference in the return of the same quantity of capital invested. But, in the second place, the same amount of productive capital is employed during the three months in the spinnery and in the machine factory, but the magnitude of the outlay of capital in the case of the yarn manufacturer is different from that of the machine manufacturer. For in the one case, the same capital is rapidly renewed and the same operation can be repeated, while in the other case, the capital is renewed by relatively slow degrees, so that ever new quantities of capital must be added to the old up to the time of the completion of the term of its reproduction. It is, therefore, not only the time of reproduction of definite portions of capital, or the time of investment, which is different, but also the quantity of the capital to be advanced according to the duration of the productive process, although the capital employed daily or weekly is the same. This circumstance is worthy of note for the reason that the time of investment may be prolonged, as we shall see in the cases treated in the next chapter, without thereby increasing the amount of the capital to be invested in proportion to this increase in time. The capital must be advanced for a longer time, and a larger amount of capital is held in the form of productive capital.

In undeveloped stages of capitalist production, enterprises requiring a long working period, and hence a large investment of capital for a long time, such as the building of streets, canals, etc., especially when they can be carried out only on a large scale, are either not managed on a capitalist basis at all, but rather at the expense of the municipality or state (in older times generally by means of forced labor, so far as labor-power was concerned); or, such products as require a long working period are manufactured only for the smaller part by the help of the private resources of the capitalist himself. For instance, in the building of a house, the private person for whose account the house is built advances money in instalments to the contractor. The owner thus pays for his house in instalments to the extent that his productive process proceeds. But in the developed capitalist era, when on the one hand masses of capital are concentrated in the hands of single individuals, while on the other hand associations of capitalists (stock companies) appear by the side of individual capitalists and the credit system is simultaneously developed, a capitalist contractor builds only in exceptional cases for the order of private individuals. He makes it his business to build rows of houses and sections of cities for the market, just as individual capitalists make it their business to build railroads as contractors.

To what extent capitalist production has revolutionized the building of houses in London, is shown by the testimony of a contractor before the banking committee of 1857. When he was young, he said, houses were generally built to order and the payments made in instalments to the contractor when certain stages of the building were completed. Very little was built on speculation. Contractors used to consent to this mainly to give their hands regular employment and thus keep them together. In the last forty years, all this has changed. Very little is now built for order. If a man wants a house, he selects one from among those built on speculation or still in process of building. The contractor no longer works for his customers, but for the market. Like every other industrial capitalist, he is compelled to have finished articles on the market. While fomerly a contractor had perhaps three or four houses at a time building for speculation, he must now buy a large piece of real estate (which, in continental language means rent it for ninety-nine years, as a rule), build from 100 to 200 houses on it, and thus engage in an enterprise which exceeds from twenty to fifty times his resources. The funds are secured by taking up mortgages, and money is placed at the disposal of the contractor to the extent that the building of the individual houses is progressing. Then, if a crisis comes along and interrupts the payment of the advance instalments, the entire enterprise generally collapses. In the best case, the houses remain unfinished until the coming of better times, in the worst case they are sold at auction at half-price. Without building on speculation, and that on a large scale, no contractor can get along nowadays. The profit from building itself is extremely small. The main profit of the contractor comes from raising the ground rent, by a careful selection and utilization of the building lots. By this method of speculation anticipating the demand for houses nearly the whole of Belgravia and Tyburnia, and the countless thousands of villas in the vicinity of London have been built. (Abbreviated from the Report of the Select Committee on Bank Acts. Part I, 1857, Evidence, Question 5413-18; 5535-36.)

The execution of enterprises with considerably long working periods and on a large scale does not fall fully within the province of capitalist production, until the concentration of capitals is very pronounced, and the development of the credit system offers, on the other hand, the comfortable expedient of advancing another's money instead of one's own capital and thus risking its loss. It goes without saying that the fact whether or not the capital advanced in production belongs to the one who uses it or to some one else has no influence on the velocity and time of turn-over.

The circumstances which augment the product of the individual working day, such as co-operation, division of labor, employment of machinery, shorten at the same time the working period of connected acts of production. Thus machinery shortens the building time of houses, bridges, etc., a mowing and threshing machine, etc., shorten the working period required to transform the ripe grain into a finished product. Improved shipbuilding reduces by increased speed the time of turn-over of capital invested in navigation. Such improvements as shorten the working period and thereby the time for which circulating capital must be advanced are, however, generally accompanied by an increased outlay for fixed capital. On the other hand, the working period in certain branches of production may be shortened by the mere extension of co-operation. The completion of a railroad is hastened by the employment of huge armies of laborers and the carrying on of the work in many places at once. The time of turn-over is in that case hastened by an increase of the advanced capital. More means of production and more labor-power must be combined under the command of the capitalist.

While the shortening of the working period is thus mostly accompanied by an increase of the capital advanced for this shortened time, so that the amount of capital advanced increases to the extent that the time for which the advance is made decreases, it must be noted that the essential point, apart from the existing amount of social capital, is the degree in which the means of production or subsistence, or their control, is scattered or concentrated in the hands of individual capitalists, in other words, the degree of concentration of capitals. Inasmuch as credit promotes the concentration of capital in one hand, it hastens and intensifies by its contribution the shortening of the working period and thereby of the time of turn-over.

In branches of production in which the working period is continually, or occasionally, determined by definite natural conditions, no shortening of the working period can take place by the above mentioned means. Says Walter Good, in his "Political, Agricultural, and Commercial Fallacies," (London, 1866, page 325): "The expression, 'more rapid turn-over' cannot be applied to grain crops, as only one turn-over per year is possible. As for cattle, we will simply ask: How is the turn-over of bi- or tri-ennial sheep, and of quardrennial and quinquennial oxen to be hastened?"

The necessity of securing ready money (for instance, for the payment of fixed tithes, such as taxes, groundrent, etc,.) solves this question by selling or killing cattle before they have reached the normal economic age, to the great detriment of agriculture. This also causes finally a rise in the price of meat. We read on pages 12 and 13 of the above named work that the people who formerly were mainly engaged in the raising of cattle for the purpose of supplying the pastures of the midland counties in summer, and the stables of the eastern counties in winter, have been so reduced by the fluctuations and sinking of the corn prices that they are glad to avail themselves of the high prices of butter and cheese; they carry the former every week to the market, in order to cover their running expenses, while they take advance payments on the cheese from some middleman who calls for its as soon as it can be transported and who, of course, makes his own prices. As a result of this, agriculture being ruled by the laws of political economy, the calves, which were formerly taken south from the dairy districts to be raised, are now sacrificed in masses, frequently when they are only eight or ten days old, in the stock yards of Birmingham, Manchester, Liverpool, and other neighboring cities. But if the malt were untaxed, the farmers would not only have made more profits and been able to keep their young cattle until they would have been older and heavier, but the malt would also have served instead of milk for the raising of calves by those who keep no cows: and the present appalling want of young cattle would have been avoided to a large extent. If the raising of calves is now recommended to those small farmers, they replay: "We know very well that it would pay to raise them on milk, but in the first place we should have to lay out money, and we cannot do that, and in the second place we should have to wait long for the return of our money, while in dairying we get returns immediately."

If the prolongation of the turn-over has such consequences for the smaller English farmers, it is easy to see what disadvantages it must produce for the small farmers of the continent.

To the extent that the working period lasts, and thus the period required for the completion of the commodity ready for circulation, the value successively yielded by the fixed capital accumulates and the reproduction of this value is retarded. But this retardation does not cause a renewed outlay of fixed capital. The machine continues its function in the process of production, no matter whether the reproduction of its wear and tear in the form of money takes place slowly or rapidly. It is different with the circulating capital. Not only must capital be tied up for a longer time in proportion as the working period extends, but new capital must also be continually advanced in the form of wages, raw and auxiliary materials. A retardation of the reproduction has therefore a different effect on either capital. No matter whether reproduction proceeds rapidly or slowly, the fixed capital continues its functions. But the circulating capital becomes unable to perform its functions, if the reproduction is retarded, if it is tied up in the form of unsold, or unfinished and as yet unsalable, products, and if no additional capital is at hand for its reproduction in natural form.

"While the farmer is starving, his cattle thrive. There had been considerable rain and the grass pasture was luxuriant. The Indian farmer will starve alongside of a fat ox. The precepts of superstition seem cruel for the individual, but they are preserving society; the preservation of the cattle secures the continuation of agriculture and thereby the sources of future subsistence and wealth. It may sound hard and sad, but it is so: In India a man is easier replaced than an ox." (Return, East Indian. Madras and Orissa Famine. No. 4, page 4.) Compare with the preceding the statement of Manara-Dharma-Sestra, chapter X, page 862; "The sacrifice of life without any reward, for the purpose of preserving a priest or a cow...can secure the salvation of these low-born tribes."

Of course, it is impossible to deliver a quinquennial animal before the lapse of five years. But a thing that is possible is the getting ready of the animals for their destination by changed modes of treatment. This was accomplished particularly by Bakewell. Formerly, English sheep, like the French as late as 1855, were not ready for slaughtering until after four or five years. By the Bakewell system, even a one year old sheep may be fattened, and in every case it is completely grown before the end of the second year. By means of careful sexual selection, Bakewell, a farmer of Dishley Grange, reduced the skeleton of sheep to the minimum required for their existence. His sheep are called the New Leicesters. "The breeder can now supply three sheep for the market in the same time that he formerly required for one, and at that with a broader, rounder, and larger development of the parts giving the most meat. Nearly their entire weight is pure meat." (Lavergne, The Rural Economy of England, etc., 1855, page 22.)

The methods which shorten the working periods are applicable to different branches of industry only to a very different degrees and do not compensate for the differences in the length of time of the various working periods. To stick to our illustration, the working period required for the building of a locomotive may be absolutely shortened by the employment of new implement machines. But if at the same time the finished product turned out daily or weekly by a cotton spinnery is still more rapidly increased, then the length of the working period in machine building, compared with that in spinning, has nevertheless been relatively lengthened.

Part II, Chapter XIII
THE TIME OF PRODUCTION.

The working time is always the time of production, that is to say, the time during which capital is held in the sphere of production. But vice versa, not all time during which capital is engaged in the process of production is necessarily a working time.

It is not in this case a question of interruptions of the labor-process conditioned on natural limitations of labor-power itself, although we have seen to what extent the mere circumstance that fixed capital, factory buildings, machinery, etc., are unemployed during pauses of the labor-process, became one of the motives for an unnatural prolongation of the labor-process and for day and night work. It is rather a question of an interruption independent of the length of the labor-process and conditioned on the nature and the production of the goods themselves, during which the object of labor is for a longer or shorter time subjected to lasting natural processes, causing physical, chemical, or physiological changes and suspending the labor-process entirely or partially.

For instance, grape juice, after being pressed, must ferment for a while and then rest for some time, in order to reach a certain degree of perfection. In many branches of industry the product must pass through a drying process, for instance in pottery, or be exposed to certain conditions which change its chemical nature, for instance in bleaching. Winter grain needs about nine months to mature. Between the time of sowing and harvesting the labor-process is almost entirely suspended. In timber raising, after the sowing and the incidental preliminary work are completed, the seed may require 100 years in order to be transformed into a finished product, and during all this time it requires very insignificant contributions of labor.

In all these cases, additional labor is contributed only occasionally during a large portion of the time of production. The condition described in the previous chapter, where additional capital and labor must be contributed to the capital already tied up in the process of production, is found here only in longer or shorter intervals.

In all these cases, therefore, the time of production of the advanced capital consists of two periods: One period, during which the capital is engaged in the labor-process; a second period, during which its form of existence—being that of an unfinished product—is surrendered to the influence of natural process, without being in the labor-process. It does not alter the case, that these two periods of time may cross and pervade one another here and there. The working period and the period of production do not coincide. The time of production is greater than the working period. But the product is not finished until the time of production is completed, only then it is mature and can be transformed from a productive into a commodity-capital. According to the length of the period of production not consisting of working time, the period of turn-over is likewise prolonged. In so far as the time of production in excess of the working time is not once and for all determined by definite natural laws, such as regulate the maturing of grain, the growth of an oak, etc., the period of turn-over may be more or less shortened by an artificial reduction of the time of production. Such instances are the introduction of chemical bleaching instead of lawn bleaching, the improvement of drying apparatus in drying processes. Or, in tanning, where the penetration of the tannic acid into the skins, by the old method, required from six to eighteen months, while the new method, by means of the air-pump, does it in one and a half to two months. (J. G. Courcelle-Seneuil, Traite theorique et pratique des Entreprises industrielles, etc., Paris, 1857, second edition.) The most magnificent illustration of an artificial abbreviation of the time of production which is taken up with natural processes is furnished by the history of the production of iron, more especially the conversion of raw iron into steel during the last 100 years, from the puddling process discovered about 1780 to the modern Bessemer process and the latest methods introduced since then. The time of production has been enormously abbreviated, but the investment of fixed capital has increased accordingly.

A peculiar illustration of the divergence of the time of production from the working time is furnished by the American manufacture of shoe-lasts. In this case, a considerable part of the expense is due to the fact that the wood must be stored for drying for as much as 18 months, in order that the finished last may not change its form by warping. During this time, the wood does not pass through any other labor-process. The period of turn-over of the invested capital is, therefore, not determined solely by the time required for the manufacture of the lasts, but also by the time during which the wood lies unproductive in the drying process. It is for 18 months in the process of production before it can enter into the labor-process proper. This illustration shows at the same time, how it is that the periods of turn-over of different parts of the total circulating capital may differ in consequence of conditions, which do not owe their existence to the sphere of circulation, but to that of production.

The difference between the time of production and the working time becomes especially apparent in agriculture. In our moderate climates, the land bears grain once a year. The abbreviation or prolongation of the period of production (for winter grain an average of nine months) is itself dependent on the change of good or bad seasons, and for this reason it cannot be as accurately determined before-hand and controlled as in industry properly so called. Only such by-products as milk, cheese, etc., are successively producible and saleable in short periods. On the other hand, the working time meets with the following conditions: "The number of working days in the various regions of Germany, with regard to the climatic and other determining conditions, will permit the assumption of the three following main working periods: For the spring period, from the middle of March or beginning of April to the middle of May, about 50 to 60 working days; for the summer period, from the beginning of June to the end of August, 65 to 80; and for the fall period, from the beginning of September to the end of October, or the middle or end of November, 55 to 75 working days. For the winter, only the chores customary for that time, such as the hauling of manure, wood, market goods, and building materials, are to be noted." (F. Kirchhoff, Handbuch der landwirthschaftlichen Betriebslehre. Dresden, 1852, page 160.)

To the extent that the climate is unfavorable, the working period of agriculture, and thus the outlay for capital and labor, is crammed into a short space of time. Take, for instance, Russia. In some of the northern regions of that country agricultural labor is possible only during 130 to 150 days per year. It may be imagined what would be the losses of Russia, if 50 out of its 65 million of European inhabitants would remain unemployed during six or eight months of the winter, when all field work must stop. Apart from the 200,000 farmers, who work in the 10,500 factories of Russia, local house industries have everywhere developed in the villages. There are some villages in which all farmers have been for generations weavers, tanners, shoemakers, locksmiths, knifemakers, etc. This is particularly the case in the provinces of Moscow, Vladimir, Kaluga, Kostroma, and Petersburg. By the way, this house-industry is being more and more pressed into the service of capitalist production. The weavers, for instance, are supplied with woof and web directly by merchants or middlemen. (Abbreviated from the Reports by H. M. Secretaries of Embassy and Legation, on the Manufactures, Commerce, etc., No 8, 1865, pages 86 and 87.) We see here that the divergence of the period of production from the working period, the latter being but a part of the former, forms the natural basis for the combination of agriculture with an agricultural side-industry, and that this side-industry, on the other hand, offers points of vantage to the capitalist, who intrudes first in the person of the merchant. When capitalist production later accomplishes the separation of manufacture and agriculture, the rural laborer becomes ever more dependent on accidental side-employment and his condition is correspondingly lowered. For the capital, all the differences are compensated in the turn-over. Not so for the laborer.

While in most branches of industry proper, of mining, transportation, etc., the work proceeds uniformly, the working time being the same from year to year, and the outlay for the capital passing daily into circulation being uniformly distributed, making exception of such abnormal interruptions as fluctuations of prices, business depressions, etc.; while furthermore also the recovery of the circulating capital, or its reproduction, is uniformly distributed throughout the year, provided the conditions of the market remain the same—there is, on the other hand, the greatest inequality in the outlay of circulating capital in such investments of capital, in which the working time constitutes only a part of the time of production, while the recovery of the capital takes place in bulk at a time determined by natural conditions. If such a business is managed on the same scale as one with a continuous working period, that is to say, if the amount of the circulating capital to be advanced is the same, it must be advanced in larger doses at a time and for longer periods. The durability of the fixed capital differs here considerably from the time in which it actually performs a productive function. Together with the difference between working time and time of production, the time of investment of the employed fixed capital is, of course, likewise continually interrupted for a longer or shorter time, for instance, in agriculture in the case of laboring cattle, implements and machines. In so far as this fixed capital consists of laboring cattle, it requires continually the same, or nearly the same, amount of expenditure for feed, etc., as it does during its working time. In the case of inanimate instruments of labor, disuse also implies a certain amount of depreciation. Hence there is an appreciation of the product in general, seeing that the transfer of value is not calculated by the time in which the fixed capital performs its function, but by the time in which it depreciates in value. In such branches of production as these, the disuse of the fixed capital, whether combined with current expenses or not, forms as much a condition of its normal employment as, for instance, the waste of a certain quantity of cotton in spinning; and in the same way the labor-power unproductively consumed in any labor-process under normal conditions, and inevitably so, counts as much as its productive consumption. Every improvement which reduces the unproductive expenditure of instruments of labor, raw material, and labor-power, also reduces the value of the product.

In agriculture, both the longer duration of the working period and the great difference between working period and productive period are combined. Hodgskin truly says with regard to this circumstance that the difference in the time (although he does not here distinguish between working time and productive time) required to get the products of agriculture ready and that required for the products of other branches of production is the main cause for the great dependence of farmers. They cannot market their goods in less time than one year. During this entire period they must borrow from the shoemaker, the tailor, the smith, the wagonmaker, and various other producers, whose articles they need, and which articles are finished in a few days or weeks. In consequence of this natural circumstance, and as a result of the more rapid increase of wealth in other branches of production, the real estate owners who have monopolized the land of the entire country, although they have also appropriated the monopoly of legislation, are nevertheless unable to save themselves and their servants, the tenants, from the fate of becoming the most dependent people in the land. (Thomas Hodgskin, Popular Political Economy, London, 1827, page 147, note.)

All methods by which partly the expenditures for wages and instruments of labor in agriculture are distributed more equally over the entire year, partly the turn-over is shortened by the raising of various products making different harvests possible during the course of the year, require an increase of the circulating capital invested in wages, fertilizers, seeds, etc., and advanced for purposes of production, This is the case, for instance, in the transition from the three plat system with fallow land to the system of crop rotation without fallow. It applies furthermore to the cultures dérobées of Flanders. "The root crops are planted in culture dérobée; the same field yields in succession first grain, flax, rape, for the wants of man, and after their harvest root crops are sown for the subsistence of cattle. This system, which permits the keeping of horned cattle in the stables without interruption, yields a considerable amount of manure and thus becomes the fulcrum of crop rotation. More than a third of the cultivated area in sandy districts is taken up with cultures dérobées; it is as though the cultivated area had been increased by one third." Apart from root crops, clover and other leguminous crops are likewise used for this purpose. "Agriculture, being thus carried to a point where it merges into horticulture, naturally requires a relatively considerable investment of capital. In England, a first investment of 250 francs per hectare is assumed. In Flanders, our farmers will probably consider a first investment of 500 francs far too low."(Emile de Laveleye, Essais sur L'Économie Rurale de la Belgique, Paris, 1863, pages 59, 60, 63.)

Take finally timber growing. "The production of timber differs from most of the other branches of production essentially by the fact that in it the force of nature is acting independently and does not require the power of man and capital in its natural propagation. Even in places where forests are artificially propagated the expenditure of human and capital power is inconsiderable compared to the action of natural forces. Besides, a forest will still thrive in soils and locations where grain does no longer give any yield or where its production does not pay. Forestry furthermore requires for its regular economy a larger area than grain culture, because small plats do not permit a system of felling trees in plats, prevents the utilization of by-products, complicates the production of the trees, etc. Finally, the productive process extends over such long periods that it exceeds the aims of private management and even surpasses the age limit of human life in certain cases. The capital invested in the purchase of the real estate" (in the case of communal production there is no capital needed for this, the question being simply how much land the community can spare from its cultivated and pasturing area for forestry) "will not yield returns until after a long period and is turned over gradually, but completely, with forests of certain kinds of wood, only after as much as 150 years. Besides, a consistent production of timber demands itself a supply of living wood which exceeds the annual requirements from ten to forty times. Unless a man has, therefore, still other sources of income and owns vast tracts of forest, he cannot engage in regular forestry." (Kirchhof, page 58.)

The long time of production (which comprises a relatively small amount of working time), and thus the length of the periods of turn-over, makes forestry little adapted for private, and therefore, capitalist enterprise, which is essentially private even if associated capitalists take the place of the individual capitalist. The development of civilization and of industry in general has ever shown itself so active in the destruction of forests, that everything done by it for their preservation and production, compared to its destructive effect, appears infinitesimal.

The following statement in the above quotation from Kirchhof is particularly worthy of note:"Besides, a consistent production of timber demands itself a supply of living wood which exceeds the annual requirements from ten to forty times." In other works, a turn-over occurs one in ten, forty, or more years.

The same applies to stock raising. A part of the herd (supply of cattle) remains in the process of production, while another part of the same is sold annually as a product. In this case, only a part of the capital is turned over every year, just as it is in the case of fixed capital, machinery, laboring cattle, etc. Although this capital is a fixed capital in the process of production for a long time, and thus prolongs the turn-over of the total capital, it is not a fixed capital in the strict definition of the term.

That which is here called a supply—a certain amount of living timber or cattle—serves in a relative sense in the process of production (being simultaneously instruments of labor and raw materials); on account of the natural conditions of its reproduction under normal circumstances of economy, a considerable part of this supply must always be available in this form.

A similar influence on the turn-over is exerted by another kind of supply, which productive capital only potentially, but which owing to the nature of its economy, must be accumulated in a more or less considerable quantity and advanced for purposes of production for a long term, although it is consumed in the actual process of production only gradually. To this class belongs, for instance, manure before it is hauled to the field, furthermore grain, hay, etc., and such supplied of means of subsistence as are employed in the production of cattle. "A considerable part of the productive capital is contained in the supplies of certain industries. But these may lose more or less of their value, if the precautions necessary for their preservation in good condition are not properly observed. Lack of supervision may even result in the total loss of a part of the supplies in the economy. For this reason, a careful inspection of the barns, feed and grain lofts, and cellars, becomes indispensable, the store rooms must always be well closed, kept clear, ventilated, etc. The grain, and other crops held in storage, must be thoroughly turned over from time to time, potatoes and beets must be protected against frost, rain, and fire." (Kirchhof, page 292.) "In calculating one's own requirements, especially for the keeping of cattle, and trying to regulate the distribution according to the nature of the product and its intended use, one must not only take into consideration the covering of one's demand, but also see to it that there is a proportionate reserve for extraordinary cases. If it is then found that the demand cannot be fully covered by one's own production, it becomes necessary to reflect first whether the missing amount cannot be covered by other products (substitutes), or by the cheaper purchase of such in place of the missing ones. For instance, if there should happen to be a lack of hay, this might be covered by root crops and straw. As a general rule, the natural value and market-price of the various crops must be kept in mind in such cases, and dispositions for the consumption must be made accordingly. If, for instance, oats are high, while pease and rye are relatively low, it will pay to substitute pease or rye for a part of the oats fed to horses and to sell the oats thus saved." (Ibidem, page 300.)

It has been previously stated, when discussing the question of the formation of a supply, that a definite, more or less considerable, quantity of potential productive capital is required, that is to say, of means of production intended for use in production, which must be available in proportionate quantities for the purpose of being gradually consumed in the productive process. It has been incidentally remarked, that, given a certain business or capitalist enterprise of definite proportions, the magnitude of this productive supply depends on the greater or lesser difficulties of its reproduction, the relative distance of the supplying markets, the development of means of transportation and communication, etc. All these circumstances influence the minimum of capital, which must be available in the form of a productive supply, hence they influence also the length of time for which the investment of capital must be made and the amount of capital to be advanced at one time. This amount, which affects also the turn-over, is determined by the longer or shorter time, during which a circulating capital is tied up in the form of a productive supply, of mere potential capital. On the other hand, in so far as this stagnation depends on the greater or smaller possibility of rapid reproduction, on market conditions, etc., it arises itself out of the time of circulation, out of circumstances connected with the circulation. "Furthermore, all such parts of the equipment or auxiliary pieces, as hand tools, sieves, baskets, ropes, wagon grease, nails, etc., must be so much the more available for immediate use, the less the opportunity for their rapid purchase is at hand. Finally, the entire supply of implements must be carefully overhauled in winter, and new purchases or repairs found to be necessary must be made at once. Whether or not a man is to keep a great or small supply of articles of equipment is mainly determined by local conditions. Wherever there are no artisans and stores in the vicinity, it is necessary to keep larger supplies than in places where these are in the locality or near it. But if the necessary supplies are purchased in large quantities at a time, then, other circumstances being equal, one profits as a rule by cheap purchases, provided the right time has been chosen for them. True, the rotating productive capital is thus curtailed by a so much larger sum, which cannot always be well spared in the business." (Kirchhof, page 301.)

The difference between the time of production and working time admits of many variations, as we have seen. The circulating capital may be in the period of production, before it enters into the working period proper (production of lasts); or, it is still in the period of production, after it has passed through the working period (wine, seed grain); or, the period of production is occasionally interrupted by the working period (agriculture, timber raising). A large portion of the product, fit for circulation, remains incorporated in the active process of production, while a much smaller part enters into the annual circulation (timber and cattle raising); the longer or shorter time for which a circulating capital must be invested in the form of potential productive capital, hence also the larger or smaller amount of this capital to be advanced at one time, depends partly on the nature of the productive process (agriculture), and partly on the proximity of markets, etc., in short on circumstances connected with the sphere of circulation.

We shall see later (Volume III), what senseless theories were advanced by MacCulloch, James Mill, etc., in the attempt of identifying the diverging time of production with the working time, an attempt which is due to a misinterpretation of the theory of value.

The cycle of turn-over, which we considered in the foregoing, is determined by the durability of the fixed capital advanced in the process of production. Since this process extends over a series of years, we have a series of annual, or less than annual, successive turn-overs of fixed capital.

In agriculture, such a cycle of turn-over arises out of the system of crop rotation. "The duration of the lease must certainly not be figured less than the time of rotation of the adopted system of crop succession. For this reason, one always calculates with 3, 6, 9, in the three plat system. In the three plat system with complete fallow, a field is cultivated only four times in six years, being planted with both winter and summer grain in the years of cultivation, and, if the condition of the soil permits it, wheat and rye, barley and oats, are likewise introduced into the rotation. Every species of grain, however, differs in its yields from others on the same soil, every one of them has a different value and is sold at a different price. For this reason, the yield of the same field is different in every year in which it is cultivated, and different in the first half of the rotation (the first three years) from that of the second. Even the average yield of one period of rotation is not equal to that of another, for its fertility does not depend merely on the good condition of the soil, but also on the weather of the various seasons, just as prices depend on a multitude of circumstances. Now, if one calculates the income from one field on the average of the crops for the entire rotation of six years and the average prices of those years, one finds the total income of one year in either period of rotation. But this is not so, if the income is calculated only for half of the period of rotation that is to say, for three years, for then the total yields would be unequal. It follows from the foregoing that the duration of a lease in a system of three fields must be chosen for at least six years. It would be still more desirable for tenants and owners that the duration of the lease should be a multiple of the duration of the lease (!), in other words, that it should be 12, 18, or more years instead of 6 years, in a system of three fields, and 14, 28 years instead of 7 in a system of seven fields." (Kirchhof, pages 117, 118.)

(The manuscript at this place contains the note: "The English system of crop rotation. Make a note here.")

Part II, Chapter XIV
THE TIME OF CIRCULATION.

All circumstances considered so far, which distinguish the periods of rotation of different capitals invested in different branches of industry and the periods for which capital must be advanced, have their source in the process of production itself, such as the difference between fixed and circulating capital, the difference in the working periods, etc. But the period of turn-over of capital is equal to the sum of its time of production plus its time of circulation. It is, therefore, a matter of course that a difference in the time of circulation changes the time of turn-over and to that extent the length of the period of turn-over. This becomes most plainly apparent, either in comparing the different investments of capital in which all circumstances modifying the turn-over are equal, except the time of circulation, or in selecting a given capital with a given composition of fixed and circulating parts, a given working time, etc., permitting only the time of circulation to vary hypothetically.

One of the sections of the time of circulation—relatively the most decisive—consists of the time of selling, the period during which capital has the form of commodity-capital. According to the relative length of this time, the time of circulation, and to that extent the period of turn-over, are lengthened or shortened. An additional outlay of capital may become necessary as a result of expenses of storage. It is evident from the outset that the time required for the sale of finished products may differ considerably for the individual capitalists in one and the same branch of industry; and this does not refer merely to the grand totals of capital invested in the various departments of industry, but also to the different individual capitals, which are in fact individual parts of the aggregate capital invested in the same department of production. Other circumstances remaining equal, the period of selling for the same individual capital will vary with the general fluctuations of the market conditions, or with their fluctuations in that particular business department. We do not tarry over this point any longer. We merely state the simple fact that all circumstances which produce differences in the periods of turn-over of the capitals invested in different business departments, also carry in their train differences in the turn-over of the various individual capitals existing in the same departments, provided these circumstances have any individual effects (for instance, if one capitalist has an opportunity to sell more rapidly than his competitor, if one employs more methods shortening the working periods than the other, etc.).

One cause which acts continuously in differentiating the time of selling, and thus the periods of turn-over in general, is the distance of the market, in which a commodity is finally sold from its regular place of sale. During the entire time of its trip to the market, capital finds itself fettered in the form of commodity-capital. If goods are made to order, this condition lasts up to the time of delivery; if they are not made to order, the time of the trip to the market is further increased by the time during which the goods are on the market waiting to be sold. The improvement of the means of communication and transportation abbreviates the wandering period of the commodities absolutely, but does not abolish the relative difference in the time of circulation of different commodity-capitals arising from their wanderings nor that of different portions of the same commodity-capital which wander to different markets. The improved sailing vessels and steamships, for instance, which shorten the wanderings of commodities, do so equally for near and for distant ports. But the relative differences may be altered by the development of the means of transportation and communication in a way that does not correspond to the natural distances. For instance, a railroad, which leads from a place of production to an inland center of population, may relatively or absolutely prolong the distance to a nearer point inland not connected with a railroad, compared to the one which is naturally more distant. In the same way, the same circumstances may alter the relative distance of places of production from the larger markets, which explains the running down of old and the rise of new places of production through changes in the means of communication and transportation. (In addition to these circumstances, there is the greater relative cheapness of transportation for long than for short distances.) Moreover, it is not alone the velocity of the movement through space, and the consequent reduction of distance in space, but also in time, which is brought about by the development of the means of transportation. It is not only the quantity of means of communication which is developed, so that, for instance, many vessels sail simultaneously for the same port, or several trains travel simultaneously on different railways between the same two points, but freight vessels may, for instance, clear on different successive days of the week from Liverpool for New York, or freight trains may start at different times of the day from Manchester to London. It is true, that the absolute velocity, or this part of the time of circulation, is not modified by this latter circumstance, a certain definite capacity of the means of transportation, being given. But successive quantities of commodities can start on their passage in shorter succession of time and thus reach the market one after another without accumulating as potential commodity-capital in large quantities before shipping. Hence the return movement likewise is distributed over shorter successions of time, so that a part is continually transformed into money-capital, while another circulates as commodity-capital. By means of this distribution of the return movement over several successive periods the total time of circulation is abbreviated and thereby also the turn-over. On one hand, the greater or lesser frequency of the function of means of transportation, for instance the number of railroad trains, develops first to the extent that a place of production produces more and becomes a greater center of production, and this development tends in the direction of the existing market, that is to say, toward the great centers of production and population, export places, etc. But on the other hand this special facilitation of traffic and the consequent acceleration of the turn-over of capital (to the extent that it is conditioned on the time of circulation) give rise to a hastened concentration of the center of production and of its market. Along with this hastened concentration of masses of men and capital, the concentration of these masses of capital in a few hands likewise progresses. Simultaneously there is a movement, which shifts and displaces the center of commercial gravity as a result of changes in the relative location of centers of production and markets caused by transformations in the means of communication. A place of production which once had a special advantage by its favored location on some highway or canal then finds itself set aside on a single side-track, which runs trains only at relatively long intervals, while another place, which formerly lay removed from the main roads of traffic, then finds itself located at the crossing point of several railroads. This second point is built up, the former goes down. A transformation in the means of transportation thus causes a local difference in the time of circulation of commodities, the opportunity to buy, to sell, etc., or an already existing local differentiation is distributed differently. The significance of this circumstance for the turn-over of capital is shown in the disputes of the commercial and industrial representatives of the various places with the railroad managers. (See, for instance, the above quoted bluebook of the Railway Committee.)

All branches of production which are dependent on local consumption by the nature of their product, such as breweries, are therefore developed to greatest dimensions in the main centers of population. The more rapid turn-over of capital compensates in this case for the eventual increase in the price of some elements of production, such as building lots, etc.

While on one hand, the development of the means of transportation and communication by the progress of capitalist production reduces the time of circulation for a given quantity of commodities, the same progress, on the other hand, coupled to the growing possibility of reaching more distant markets to the extent that the means of transportation and communication are improved, leads to the necessity of producing for ever more remote markets, in one word, for the world market. The mass of commodities in transit for distant places grows enormously, and with it also grows absolutely and relatively that part of social capital which remains constantly for longer periods in the stage of commodity-capital, within the time of circulation. Simultaneously that portion of social wealth increases, which, instead of serving as direct means of production, is invested in the fixed and circulating capital required for operating the means of transportation and communication.

The mere relative length of the transit of the commodities from their place of production to their market causes a difference, not only in the first part of the time of circulation, the selling time, but also in its second part, the reconversion of money into the elements of productive capital, the buying time. For instance, some commodities are shipped to India. This requires, say, four months. Let us assume that the selling time is equal to zero, that is to say, the commodities are made to order and are paid for on delivery to the agent of the producer. The return of the money (no matter what may be its form) requires again four months. Thus it takes eight months, before the same capital can again serve as productive capital and renew the same operations. The differences in the turn-over thus caused are one of the material bases of the various terms of credit. Trans-oceanic commerce in general, for instance in Venice and Genoa, is one of the sources of the credit system—strictly so called. The London Economist of July 16, 1866, wrote that the crisis of 1847 enabled the banking and trading business of that time to reduce the Indian and Chinese usage (for the running time of checks between those countries and Europe) from ten months after sight to six months, and the lapse of twenty years with its acceleration of the trip and the institution of telegraphs renders necessary a further reduction from six months after sight to four months after date as a preliminary step toward four months after sight. The trip of a sailing vessel from Calcutta around the cape of London lasts on an average less than 90 days. A usage of four months after sight would be equivalent to a running time of 150 days, approximately. The present usage of six months after sight is equivalent to a running time of 210 days. On the other hand, we read in the issue of June 30, 1866, of the same paper, that the Brazilian usage is still fixed at two and three months after sight, checks of Antwerp on London are drawn for three months after date, and even Manchester and Bradford draw on London for three months and longer dates. By a tacit understanding, the merchant is thus given sufficient opportunity to realize on his goods by the time the checks are due, if not before. For this reason, the usage of Indian checks is not excessive. Indian products, which are sold in London generally on three months' time, cannot be realized upon in much less than five months, if some time for the sale is allowed, while another five months pass on an average between the purchase in India and the delivery to an English warehouse. Here we have a period of ten months, while the checks drawn against the goods do not run above seven months. And again, on July 7, 1866, we read that, on July 2, 1866, five great London banks, dealing especially with India and China, and the Paris Comptoir d'Escompte, gave notice that, beginning with January 1, 1867, their branch banks and agencies in the Orient would buy and sell only such checks as were not drawn for more than four months after sight. However, this reduction miscarried and had to be revoked. (Since then the Suez canal has revolutionized all this.)

It is a matter of course that with the longer time of circulation the risk of a change of prices in the selling market increases, since it increases the period in which changes of price may take place.

A difference in the time of circulation, partly individually between the various individual capitals of the same branch of business, partly between different branches of business according to different usages, when payment is not made in spot cash, arises from the different dates of payment in buying and selling. We do not linger for the present over this point, which is important for the credit business.

Other differences in the period of turn-over arise from the size of contracts for the delivery of goods, and their size grows with the extent and scale of capitalist production. Such a contract, being a transaction between buyer and seller, is an operation belonging to the market, the sphere of circulation. The differences in the time of turn-over arising from it have their source for this reason in the sphere of circulation, but react immediately on the sphere of production, apart from all dates of payment and conditions of credit including cash payment. For instance, coal, cotton, yarn, etc., are discontinuous products. Every day supplies its quantity of finished product. But if the spinner or the mine owner accepts contracts for the delivery of large quantities, which require, say, a period of four or six weeks of successive working days, then this is the same, so far as the time of investment of advanced capital is concerned, as though a continuous working period of four or six weeks had been introduced in this labor-process. It is of course assumed in this case that the entire quantity ordered is to be delivered in one bulk, or at least is only paid after all of it has been delivered. Individually considered, every day had furnished its definite quantity of finished product. But this finished product is only a part of the quantity contracted for. Although the portion finished so far is no longer in the process of production, it is still in the warehouse as a potential capital.

Now let us take up the second epoch of the time of circulation, the buying time, or that epoch in which capital is converted from money back into the elements of productive capital. During this epoch, it must remain for a shorter or longer time in its condition of money-capital, so that a certain portion of the total capital advanced is all the time in the form of money-capital, although this portion consists of continually changing elements. For instance, of the total capital advanced in a certain business, n times 100 pounds sterling must be available in the form of money-capital, so that, while all the constituent parts of these n times 100 pounds sterling are continually converted into productive capital, this sum is nevertheless just as continually supplemented by new additions from the circulation, out of the realized commodity-capital. A definite part of the value of the advanced capital is, therefore, continually in the condition of money-capital, a form not belonging to its sphere of production, but to its sphere of circulation.

We have already seen that the prolongation of time caused by the distance of the market, by which capital is fettered in the form of commodity-capital, directly retards the return movement of the money and, consequently, the transformation of capital from its money into its productive form.

We have furthermore seen (chapter VI) with reference to the purchase of commodities, that the time of buying, the greater or smaller distance from the main sources of the raw material, makes it necessary to purchase raw material for a longer period and keep it on hand in the form of a productive supply, of latent or potential productive capital; in other words, that it increases the quantity of capital to be advanced at one time, and the time for which it must be advanced, the scale of production remaining otherwise the same.

A similar effect is produced in various businesses by the longer or shorter periods, in which large quantities of raw material are thrown on the market. In London, for instance, great auction sales of wool take place every three months, and the wool market is controlled by them. The cotton market, on the other hand, is on the whole restocked continuously, if not uniformly, from harvest to harvest. Such periods determine the principal dates of buying for these raw materials and affect especially the speculative purchases requiring longer or shorter advances of these elements of production, just as the nature of the produced commodities exerts an influence on the premeditated speculative retention of the product for a longer or shorter term in the form of potential commodity-capital. "The farmer must also be to a certain extent a speculator, and, therefore, hold back the sale of his products according to prevailing conditions..." Here follow a few general rules. "...However, in the sale of the products, success depends mainly on the personality, the product itself, and the locality. A man with sufficient business capital, won by ability and good luck (!), will not be blamed, if he keeps his grain crop stored for a year when prices happen to be unusually low. On the other hand, a man who lacks business capital, or enterprise in general (!), will try to get the average prices and be compelled to sell as soon and as often as opportunity presents itself. It will almost always bring losses to keep wool stored longer than a year, while grain and rape seed may be stored for several years without injury to their condition and quality. Such products as are generally subject to a large rise and fall in short intervals, for instance, rape seed, hops, teasel, etc., may be to good advantage stored during the years in which the market price is far below the price of production. It is least permissible to postpone the sale of such articles as require daily expenses for their preservation, such as fatted cattle, or which spoil easily, such as fruit, potatoes, etc. In some localities, a certain product has its lowest average price at a certain season, its highest at another. For instance, the average price of grain in some localities is lower about August than in the time between Christmas and Easter. Furthermore, some products sell well in certain localities only at certain periods, as is the case, for instance, with wool in the wool markets of those localities, where the wool trade is dull at other times, etc." (Kirchhof, page 302.)

In the study of the second half of the time of circulation, in which money is reconverted into the elements of productive capital, it is not only this conversion itself which is important in itself, not only the time in which the money flows back according to the distance of the market on which the product is sold. It is also above all the volume of that part of the advanced capital to be held always available in the form of money, in the condition of money-capital, which must be considered.

Making exception of all speculation, the volume of the purchases of those commodities which must always be available as a productive supply depends on the time of the renewal of this supply, in other words, on circumstances which in their turn depend on market conditions and which are, therefore, different for different raw materials. In these cases, money must be advanced from time to time in larger quantities in one sum. It flows back more or less rapidly, but always in instalments, according to the turn-over of capital. One portion, namely that invested in wages, is continually re-expended in short intervals. But another part, namely that which is to be reconverted into raw material, etc., must be accumulated for long periods, as a reserve fund to be used either for buying or paying. Therefore it exists in the form of money-capital, although the volume which it has as such changes.

We shall see in the next chapter that other circumstances, whether they arise from the process of production or circulation, necessitate this existence of a certain portion of the advanced capital in the form of money. In general it must be noted that economists are very prone to forger that a part of the capital required for business not only passes alternately through the three stages of money-capital, productive capital, and commodity-capital, but that different portions of it have continuously and simultaneously these forms, although the relative size of these portions varies all the time. It is especially the portion always available as money-capital which is forgotten by economists, although this circumstance is very important for the understanding of capitalist economy and makes its importance felt in practice.

Part II, Chapter XV
INFLUENCE OF THE TIME OF CIRCULATION ON THE MAGNITUDE OF AN ADVANCE OF CAPITAL.

In this chapter and in the next we shall treat of the influence of the time of circulation on the utilization of capital.

Take the commodity-capital which is the product of a certain working period, for instance, of nine weeks. Let us leave aside the question of that portion of value which is transferred to the product by the average wear and tear of the fixed capital, also that of the surplus-value added to it during the process of production. The value of this product is then equal to that of the circulating capital advanced for its production, that is to say, of the wages, raw and auxiliary materials consumed in its production. Let this value be 900 pounds sterling, so that the weekly outlay is 100 pounds sterling. The periodic time of production, which here coincides with the working time, is nine weeks. It is immaterial whether it is assumed that this working period produces a continuous product, or whether it is a continuous working period for a discontinuous product, so long as the quantity of discontinuous product, which is brought to market at one time, costs nine weeks of labor. Let the time of circulation be three weeks. Then the entire time of turn-over is twelve weeks. At the end of nine weeks, the advanced productive capital is converted into a commodity-capital, but now it exists for three weeks in the period of circulation. The new time of production, therefore, cannot commence until the beginning of the thirteenth week, and production would be at a standstill for three weeks, or for a quarter of the entire period of turn-over. It is again immaterial whether it is assumed that it takes so long on an average to sell the product, or that this term is conditioned on the distance of the market or on the terms of payment for the sold goods. Production would be at a standstill for three weeks every three months, or four times three, or twelve weeks, in a year, which means three months or one quarter of the annual period of turn-over. Hence, if production is to be continuous and to be carried along on the same scale week after week, there are only two possibilities.

Either the scale of production must be reduced, so that those 900 pounds sterling will suffice to keep the work going during the working period as well as during the time of circulation of the first turn-over. A second working period is then commenced with the tenth week, hence also a new period of turn-over, before the first period of turn-over is completed, for the period of turn-over is twelve weeks, the working period nine weeks. A sum of 900 pounds sterling distributed over twelve weeks makes 75 pounds per week. It is evident in the first place that such a reduced scale of business presupposes changed dimensions of the fixed capital, and therefore a general reduction of the entire business. In the second place, it is questionable whether such a reduction can take place at all, for the development of production in the various businesses establishes a normal minimum for the investment of capital, below which an individual business is unable to sustain competition. This normal minimum grows continually with the advance of capitalist production, hence it is not a fixed magnitude. There are numerous gradations between the existing normal minimum and the ever increasing normal maximum, and this intermediate gradation permits of many different degrees of capital investment. Within the limits of this intermediate scale, a reduction may take place, its lowest limit being the normal minimum.

In case of an obstruction of production, an overstocking of the markets, an increase in the price of raw materials, etc., there is a reduction of the normal outlay of circulating capital, compared to a given scale of fixed capital, by the reduction of the working time, work being carried on, say, for only half a day. On the other hand, in times of prosperity, the fixed capital, remaining the same, there is an abnormal expansion of the circulating capital, partly by the prolongation of the working time, partly by its intensification. In businesses which are adjusted from the outset to such fluctuations, recourse is either taken to the above-named measures, or a greater number of laborers are simultaneously employed, combined with an investment of reserve capital, such as reserve locomotives of railroads, etc. However, such abnormal fluctuations are not considered here, where we assume normal conditions.

In order to make production continuous, it is necessary, in the present case, to distribute the expenditure of the same circulating capital over a longer period, over twelve weeks instead of nine. In any section of time, a reduced productive capital is therefore employed. The circulating portion of the productive capital is reduced from 100 to 75, or one quarter. The total amount by which the productive capital serving for a working period of nine weeks is reduced is 9 times 25, or 225 pounds sterling, or one quarter of 900 pounds. But the proportion of the time of circulation to that of turn-over is likewise three twelfth, or one quarter. It follows, therefore: If production is not to be interrupted during the time of circulation of the productive capital transformed into commodity-capital, if it is rather to be continued parallel with circulation and continuously week after week, and if no special circulating capital is available, it can be done only by curtailing the productive operations, reducing the circulating portions of the productive capital in service. The portion of circulating capital thus set free for production during the time of circulation is proportioned to the total circulating capital invested as the time of circulation is to the time of turn-over. We repeat, that this applies only to branches of production in which the labor-process is continued on the same scale week after week, in other words, where no different amounts of capital are invested at different working periods as is done, for instance in agriculture.

If, on the other hand, we assume that the nature of the business excludes the idea of a reduction of the scale of production and thus of the circulating capital to be invested weekly, then the continuity of production can be secured only by additional circulating capital, in the above-named case of 300 pounds sterling. During the period of turn-over of twelve weeks, 1,200 pounds sterling are successively invested in twelve weeks, and 300 is one quarter of this sum as three weeks is of twelve. At the end of the working time of nine weeks, the capital-value of 900 pounds sterling has been converted from the form of productive into that of commodity-capital. Its working period is concluded, but it cannot be re-opened with the same capital. During the three weeks in which it exists in the sphere of circulation, performing the functions of commodity-capital, it is in a condition, so far as the process of production is concerned, as though it did not exist at all. We make exception, at present, of all conditions of credit, and assume that the capitalist operates only with his own money. But while the capital advanced for the first working period, having completed its process of production, remains for three weeks in the process of circulation, an additional capital of 300 pounds sterling enters into service, so that the continuity of the production is not interrupted.

Now, the following must be noted in this connection:

First: The working period of the capital first invested, of 900 pounds sterling, is completed at the close of nine weeks, and it does not flow back until after three weeks, that is to say, in the beginning of the thirteenth week. But a new working period is immediately begun with the additional capital of 300 pounds. By this means the continuity of production is secured.

Secondly: The functions of the original capital of 900 pounds sterling, and those of the additional capital of 300 pounds sterling added at the close of the first working period of nine weeks, inaugurating the second working period after the conclusion of the first, without any interruption, are clearly distinguished in the first period of turn-over, or at least they may be, while they cross one another in the course of the second period of turn-over.

Let us give this matter a tangible form.

First period of turn-over of 12 weeks: First working period of 9 weeks; the turn-over of the capital advanced for this is completed at the beginning of the 13th week. During the last 3 weeks, the additional capital of 300 pounds sterling performs its service, opening up the second working period of 9 weeks.

Second period of turn-over. At the beginning of the 13th week, 900 pounds sterling have flown back and are able to begin a new turn-over. But the second working period has already been opened by the additional 300 pounds in the 10th week. At the commencement of the 13th week, this capital has already completed one third of its working period and 300 pounds sterling have been converted from a productive capital into a product. Seeing that only 6 weeks are required for the completion of the second working period, only two-thirds of the returned capital of 900 pounds sterling, or 600 pounds, can take part in the productive process of the second working period. Thus 300 pounds of the original 900 are set free and may play the same role, which the additional capital of 300 pounds played in the first working period. At the close of the 6th week of the second period of turn-over, the second working period is completed. The capital of 900 pounds sterling advanced in it flows back after 3 weeks, or at the end of 9th week of the second period of turn-over which comprises 12 weeks. During the 3 weeks of its period of circulation, the free capital of 300 pounds sterling comes into action. This begins the third working period of a capital of 900 pounds sterling in the 7th week of the second period of turn-over, which is the 19th running week.

Third period of turn-over. At the close of the 9th week of the second period of turn-over, there is a new reflux of 900 pounds sterling. But the third working period has already commenced in the 7th week of the second period of turnover, and at the beginning of the third period of turn-over, 6 weeks of the third working period have already elapsed. The third working period, then, lasts only 3 weeks longer. Hence only 300 pounds of the returned 900 take part in the productive process of the second period of turn-over, while the next 300 close the last three weeks of the third working period and thus open the first three weeks of the third period of turn-over. The fourth working period fills out the remaining 9 weeks of this period of turn-over, and thus the 37th running week begins simultaneously the fourth period of turn-over and fifth working period.

In order to simplify this case for the calculation, we shall assume a working period of 5 weeks and a period of circulation of 5 weeks, making a period of turn-over of 10 weeks. Let the year be one of fifty working weeks, and the capital invested per week 100 pounds sterling. A working period then requires a circulating capital of 500 pounds sterling, and the period of turn-over an additional capital of 500 pounds sterling. The working periods and periods of turn-over then are as follows:

1. wrkg. prd. 1—5. week (500 p. stlg. of goods) returned end of 10.

2. wrkg. prd. 6—10. week (500 p. stlg. of goods) returned end of 15.

3. wrkg. prd. 11—15. week (500 p. stlg. of goods) returned end of 20.

4. wrkg. prd. 16—20. week (500 p. stlg. of goods) returned end of 25.

5. wrkg. prd. 21—25. week (500 p. stlg. of goods) returned end of 30. etc.

If the time of circulation is zero, so that the period of turn-over is equal to the working time, then the number of turn-overs is equal to the working periods of the year. In the case of a working period of 5 weeks, this would make 10 periods of turn-over per year, and the value of the capital turned over would be 500 times 10, or 5,000. In our table, in which we have assumed a time of circulation of 5 weeks, the total value of the commodities produced per year would also be 5,000 pounds sterling, but one tenth of this, or 500 pounds, would always be in the form of commodity-capital, which would not flow back until after 5 weeks. At the end of the year, the product of the tenth working period (the 46th to the 50th working week) would have completed its period of turn-over only by half, because its time of circulation would fall within the first five weeks of the year.

Now let us take a third illustration: Working period 6 weeks, time of circulation 3 weeks, weekly advance of capital 100 pounds sterling.

1.Working period: 1—6th week. At the end of the 6th week, a commodity-capital of 600 pounds sterling, returned at the end of the 9th week.

2. Working period: 7—12th week. During the 7—9th week 300 pounds sterling of additional capital is advanced. At the end of the 9th week, return of 600 pounds sterling. Of this, 300 pounds sterling are advanced during the 10—12th week. At the end of the 12th week, therefore, 300 pounds sterling are available, and 600 pounds sterling are in the form of commodity-capital, returnable at the end of the 15th week.

3. Working period: 13—18th week. During the 13—15th week, advance of above 300 pounds sterling, then reflux of 600 pounds, 300 of which are advanced for the 16—18th week. At the end of the 18th week, 300 pounds sterling available in cash, 600 on hand as commodity-capital, which flows back at the end of the 21st week. (See the detailed illustration of this case under II, farther along.)

In other words, during 9 working periods (54 weeks) a total of 600 times 9, or 5,400 pounds sterling is produced. At the end of the ninth working period, the capitalist has 300 pounds in cash and 600 pounds worth of commodities, which have not yet completed their time of circulation.

A comparison of these three illustrations shows first, that a successive release of capital I of 500 pounds sterling and of additional capital II of likewise 500 pounds sterling takes place only in the second illustration, so that these two portions of capital move independently of one another. But this is so only because we have made the exceptional assumption that the working time and the time of circulation are two equal halves of the period of turn-over. In all other cases, whatever may be the difference of the two terms of the period of turn-over, the movements of the two capitals cross one another, as they do in the first and third illustration, beginning with the second period of turn-over. The additional capital II, with a portion of capital I, then forms the capital serving in the second period of turn-over, while the remainder of capital I is set free for the original function of capital II. The capital serving during the time of circulation of the commodity-capital is not identical, in this case, with the capital II originally advanced for this purpose, but it is of the same value and forms the same aliquot portion of the advanced total capital.

Secondly: The capital which served during the working period, lies fallow during the time of circulation. In the second illustration, the capital performs its function during 5 weeks of the working period, and lies fallow during a circulation period of 5 weeks. The entire time during which capital I here lies fallow amounts to one-half of the year. During this time, the additional capital II takes the place of capital I, which in its turn lies fallow during the other half of the year. But the additional capital required for insuring the continuity of the production during the time of circulation is not determined by the aggregate volume, or the sum, of the times of circulation during the year, but only by the proportion of the time of circulation to the time of turn-over. (We assume, of course, that all the turn-overs take place under the same conditions.) For this reason, 500 pounds sterling are required in the second illustration, not 2,500 pounds. This is simply due to the fact that the additional capital enters just as well into the turnover as the capital originally advanced, and that it, therefore, reproduces its volume the same as the other by the number of its turn-overs.

Thirdly: It does not alter the circumstances here described, whether or not the time of production is longer than the working time. True, the aggregate of the periods of turn-over is prolonged thereby, but this prolongation does not imply any additional capital for the labor-process. The additional capital serves merely the purpose of filling up the fallow places left by the time of circulation. Its mission is simply to protect production against interruption by the time of circulation. Interruptions arising from the conditions of production itself are compensated for in another way, which we do not discuss at this point. There are, however, some businesses, in which work is carried on only in intervals and to order, so that there may be interruptions in the working periods. In such cases, the necessity of additional capital is eliminated to that extent. On the other hand, in most cases of season work, there is a limit for the time of reflux. The same work cannot be renewed next year with the same capital, if the time of circulation of this capital is not completed. Still, the time of circulation may be shorter than the intervals between two periods of production. In such an eventuality, capital lies fallow, unless it is employed otherwise in the meantime.

Fourthly: The capital advanced for a certain working period, for instance, the 600 pounds sterling in the third illustration, is invested partly in raw and auxiliary materials, in a productive supply for the working period, in constant circulating capital, partly in variable circulating capital, in the payment of labor itself. The portion invested in constant circulating capital may not exist for the same length of time in the form of a productive supply, the raw material, for instance, may not be on hand for the entire working period, coal may be purchased only every two weeks. However, credit being out of the question, according to our assumption, this portion of capital, to the extent that it is not available in the form of a productive supply, must be kept on hand in the form of money in order to be converted into a productive supply when needed. This does not alter the magnitude of the constant circulating capital-value advanced for 6 weeks. The wages, on the other hand, are generally paid weekly, making exception of the money supply for unforeseen expenses, the strict reserve fund for the compensation of disturbances. Unless the capitalist, therefore, compels the laborer to advance his labor for a longer time, the money required for the payment of wages must be on hand. During the reflux of the capital, a portion must, therefore, be reserved in the form of money for the payment of labor, while the remaining portion may be converted into a productive supply.

The additional capital is subdivided exactly like the original. But it is distinguished from capital I by the fact that (apart from conditions of credit), in order to be available for its own period of labor, it must be advanced during the entire duration of the first working period of capital I, in which it does not take part. During this time, it may be converted into constant circulating capital, at least in part, being advanced for the entire period of turn-over. To what extent it will assume this form, or persist in the form of additional money-capital, up to the time where this conversion becomes necessary will depend partly on the special conditions of production of definite lines of business, partly on the fluctuations in the prices of raw material, etc. Looking at it from the point of view of the aggregate social capital, there will always be a more or less considerable part of this additional capital for a rather long time in the form of money-capital. But as for that portion of capital II which is to be advanced for wages, it is always gradually converted into labor-power to the extent that small working periods are closed and paid for. This portion of capital II, then, is available in the form of money-capital for the entire working period, until it is converted into labor-power and thus takes part in the function of productive capital.

The advent of the additional capital required for the transformation of the time of circulation of capital I into a time of production increases not only the magnitude of the advanced capital and length of time for which the aggregate capital must be necessarily advanced, but it also increases specifically that portion of the advanced capital which exists in the form of a money-supply, which persists in the condition of money-capital, and has the form of potential capital.

The same takes also place, as concerns both the advance in the form of a productive supply and in that of a money supply, when the separation of capital into two parts required by the time of circulation, namely, capital for the first working period and reserve capital for the time of circulation, is not caused by the increase of the invested capital, but by a decrease of the scale of production. In proportion to the scale of production, the increase of the capital tied up in the form of money is apt to grow still more in this case.

It is the continuous succession of the working periods, the continuous function of an equal portion of the advanced capital as productive capital, which is insured by this separation of capital into an original productive and a reserve capital.

Let us look at the second illustration. The capital continuously employed in the process of production amounts to 500 pounds sterling. The working period being 5 weeks, it works ten times during a working year of 50 weeks. Hence its product, apart from surplus-value, is 10 times 500 or 5,000 pounds sterling. From the point of view of a directly and uninterruptedly working capital in the process of production, a capital-value of 500 pounds sterling, the time of circulation seems entirely eliminated. The period of turn-over coincides with the working period, the time of circulation being assumed as equal to zero.

But if the capital of 500 pounds sterling were interrupted in its productive activity by regular times of circulation covering 5 weeks, so that it could not become productively active until after the close of the entire period of turn-over of 10 weeks, we should have 5 turn-overs of ten weeks each in 50 running weeks. These would comprise 5 periods of production of 5 weeks each, or 25 productive weeks with a total product of 5 times 500, or 2,500 pounds sterling; and 5 times of circulation of 5 weeks each, or a total period of circulation of 25 weeks. If we say in this case that the capital of 500 pounds sterling has been turned over 5 times in the year, it is evident and obvious that this capital of 500 pounds sterling did not serve at all as a productive capital during one-half of each period of turn-over, and that, taking all in all, it performed its function only during one half of the year, while it did not serve at all during the other half.

In our illustration, the reserve capital of 500 pounds sterling comes to the rescue during those five periods of circulation, and the turn-over is thus expanded from 2,500 to 5,000 pounds. But now the advanced capital is 1,000 instead of 500 pounds sterling. Hence there are only five turn-overs instead of ten. This is indeed the way in which people count. But when it is said that the capital of 1,000 pounds has been turned over five times in the year, the recollection of the time of circulation disappears in the hollow skulls of the capitalists, and a confused idea is formed that this capital has served continuously in the process of production during the successive five turn-overs. As a matter of fact, if we say that the capital of 1,000 pounds has been turned over five times in a year, we include both the time of circulation and the time of production. For, indeed, if 1,000 pounds sterling had actually been continuously active in the process of production, the product would have to be 10,000 pounds sterling instead of 5,000, according to our assumptions. But in order to have 1,000 pounds sterling continuously in the process of production, 2,000 pounds would have to be advanced. The economists, who as a general rule have nothing clear to say in reference to the mechanism of the turn-over, always overlook this main point, to-wit, that only a part of the industrial capital can actually be engaged in the process of production, if production is to proceed uninterruptedly. While one part is busy in the process of production, another must always be engaged in the process of circulation. Or in other words, one part can perform the functions of productive capital only on condition that another part is withdrawn from production in the form of commodity or money-capital. In overlooking this, the significance and role of money-capital is entirely ignored.

We have now to ascertain to what extent differences in the turn-over are caused according to whether the two sections of the period of turn-over, the working period and the circulating period, are equal to one another, or the working period greater or smaller than the circulating period, and furthermore, what effect this has on the retention of capital in the form of money-capital.

We assume, that the capital advanced weekly is in all cases 100 pounds sterling, and the period of turn-over 9 weeks, so that the capital invested in each period of turnover is 900 pounds sterling.

I. The Working Period Equal to the Period of Circulation.

Although this case occurs in reality only accidentally, as an exception, it must serve as our point of departure in this analysis, because conditions here shape themselves in the simplest and most intelligible way.

The two capitals (capital I advanced for the first working period, and reserve capital II advanced during the time of circulation of capital I) relieve one another in their movements without crossing. With the exception of the first period, either of the two capitals is therefore advanced only for its own period of turn-over. Let the period of turnover be 9 weeks, as indicated in the two following illustrations, so that the working period and the time of circulation are each of them 4½ weeks. Then we have the following annual diagram:

Within the 50 weeks which we here assume to stand for one year, capital I has absolved six full working periods, making 6 times 450, or 2,700 pounds sterling, and capital II making in five full working periods 5 times 450, or 2,250 pounds sterling's worth of commodities. In addition there-to, capital II has produced, within the last one and a half weeks of the year (middle of the 50th to the end of the 51st week) an extra 150 pounds sterling's worth, making the aggregate product 5,100 pounds sterling. So far as the direct production of surplus-value is concerned, which is produced only during the working period, the aggregate capital of 900 pounds sterling would have been turned over 5 2-3 times (5 2-3 times 900 equal to 5,100 pounds sterling). But if we consider the actual turn-over, then capital I has been turned over 5 2-3 times, since at the close of the 51st week it still has to absolve 3 weeks of its sixth period of turn-over; 5 2-3 times 450 make 2,550 pounds sterling; and capital II turned over 5 1-6 times, since it has completed only 1 1-2 week of its sixth period of turn-over, so that 7 1-2 weeks of it fall within the next year; 5 1-6 times 450 make 2,325 pounds sterling; actual aggregate turn-over 4,875 pounds sterling.

Let us regard capital I and capital II as two capitals independent of one another. They are independent in their movements; these movements supplement one another merely because their working and circulating periods directly relieve one another. They may be regarded as two entirely independent capitals belonging to different capitalists.

Capital I has completed five full turn-overs and two-thirds of its sixth period of turn-over. At the end of the year it has the form of commodity-capital, which lacks three weeks of its normal realization. During this time, it cannot take part in the process of production. It performs the function of commodity-capital, it circulates. It has completed only two-thirds of its last period of turn-over. This is expressed in the words: It has been turned over only two-thirds, only two-thirds of its total value have completed their turn-over. We say that 450 pounds sterling complete their turn-over in 9 weeks, hence 300 do in 6 weeks. But in this expression, the organic conditions of the two specifically different portions of the period of turn-over are neglected. The exact meaning of the expression, that the advanced capital of 450 pounds sterling has made 5 2-3 turn-overs, is merely that it has completed five turn-overs fully and of the sixth only two-thirds. On the other hand, the expression that the turned-over capital is equal to 5 2-3 of the advanced capital, or, in the above case, 5 2-3 times 450 pounds sterling, making 2,550, is correct only in so far as it means that unless this capital of 450 pounds sterling were supplemented by another capital of 450 pounds sterling, one portion of it would have to be in the process of circulation while another is in the process of production. If the period of turn-over is to be expressed in the quantity of the turned-over capital, it can be expressed only in a quantity of existing values (embodied in the finished product). The fact that the advanced capital is not in a condition in which it may reopen the process of production is due to the circumstance that only a part of it is in a condition suitable for production, or that, in order to be in a condition suitable for continuous production, it would have to be divided into a portion which would be continually in the period of production and into another which would be continually in the period of circulation, according to the mutual relation of these periods. It is the same law which determines the quantity of the continually serving productive capital by the proportion of the time of circulation to the period of turn-over.

As for capital II, 150 pounds sterling of it are advanced in the production of unfinished goods at the close of the 51st running week, which we regard here as the last of the year. Another part exists in the form of circulation constant capital—raw materials, etc.,—that is to say, in a form, in which it can serve as productive capital in the process of production. But a third part of it exists in the form of money, namely at least the amount of the wages for the remainder of the working period (3 weeks), which is not paid, however, until the end of each week. Now, although this portion of capital, in the beginning of a new year, and of a new cycle of turn-over, is not in the condition of productive capital, but in that of money-capital, in which it cannot take part in the process of production, there is, nevertheless, circulating variable capital, namely labor-power, active in the process of production at the opening of the new cycle of turn-over. This is due to the fact that labor-power is not paid until at the end of the week, although it was bought at the beginning of the working period, say, per week, and so consumed. Money serves here as a means of payment. For this reason, it is still in the hands of the capitalist, while on the other hand labor-power is already busy in the process of production. so that the same capital-value here appears twice.

If we look merely at the working periods, then there has been produced:

By capital I, 5 2-3 times 450, or 2,550 pounds sterling,
By capital II, 5 1-3 times 450, or 2,400 pounds sterling,
Total, 5 2-3 times 900, or 5,100 pounds sterling.

Hence the advanced capital of 900 pounds sterling has performed the function of productive capital 5 2-3 times per year. It is immaterial for the production of surplus-value, whether there are always 450 pounds sterling in the process of production and always 450 pounds sterling in the process of circulation, or whether 900 pounds sterling serve 4 1-2 weeks in the process of production and 4 1-2 weeks in the process of circulation.

On the other hand, if we consider the periods of turn-over, there has been produced:

By capital I, 5 2-3 times 450, or 2,550 pounds sterling,
By capital II, 5 1-6 times 450, or 2,325 pounds sterling,

Or, by the aggregate capital, 5 5-12 times 900, or 4,875 pounds sterling, in the total turn-over. For the turn-over of the total capital is equal to the sum of the quantities turned over by capital I and II, divided by the sum of I and II.

It is to be noted, that capital I and II, if they were independent of one another, would nevertheless be merely different independent portions of the social capital advanced for the same sphere of production. Hence, if the social capital within this sphere of production were solely composed of I and II, the same calculation would apply to the turn-over of the social capital, which here applies to the two constituent parts I and II, of the same private capital. In a wider generalization, every portion of the entire social capital invested in any special sphere of production may be so calculated. But in the last analysis, the amount of the turn-over of the entire social capital is equal to the sum of the capitals turned over in the various spheres of production, divided by the sum of the capitals advanced in those spheres.

It must be further noted that just as the capitals I and II in the same private business have, strictly speaking, different years of turn-over (the cycle of turn-over of capital II beginning 4 1-2 weeks later than that of capital I, so that the year of capital I closes 4 1-2 weeks earlier than that of capital II), just so the various private capitals in the same sphere of production begin their activities at totally different sections of time and, therefore, conclude their years of turn-over at different times of the year. The same calculation of averages, which we employed above for capitals I and II, suffices also for the reduction of the years of turn-over of the various independent portions of the social capital to one uniform year of turn-over.

II. The Working Period Greater Than the Period of Circulation.

The working and circulating periods of capitals I and II cross one another instead of relieving one another. Simultaneously some capital is set free. This was not so in the previously considered case.

But this does not alter the fact that, as before, (1) the number of working periods of the advanced total capital is equal to the sum of the values of the annual products of both advanced portions of capital divided by the advanced total capital, and (2) the amount turned over by the total capital is equal to the sum of the two amounts turned over, divided by the sum of the two advanced capitals. Here, again, we must regard both portions of capital as though they performed movements of turn-over entirely independent of one another.

We assume once more, then, that 100 pounds sterling are advanced weekly in the working process. Let the working period last 6 weeks, requiring every time an advance of 600 pounds sterling (capital I). Let the time of circulation be 3 weeks, so that the period of turn-over is 9 weeks, as before. Let a capital of 300 pounds sterling step in as a substitute during the three weeks of the time of circulation of capital I. Considering both capitals as independent of one another, we find the diagram of the annual turn-over to be as follows:

The process of production continues uninterruptedly all year on the same scale. The two capitals I and II remain entirely separate. But in order to represent them thus as separate, we had to tear apart their actual interrelations and intersections, and thus also to change the amount of turnover. For according to the above diagram, the amounts turned over would be:

But this is not correct, for we shall see that the actual periods of production and circulation do not absolutely coincide with the above diagrams, in which it was mainly a question of presenting capitals I and II as independent of one another.

Now, in reality, capital II has no working and circulating periods separate and distinct from capital I. The working period is 6 weeks, the circulation period 3 weeks. Since capital II amounts to only 300 pounds sterling, it can fill out only a part of the working period. This is indeed the case. At the close of the 6th week, a product valued at 600 pounds sterling passes into circulation and flows back in money at the close of the 9th week. Then capital II begins its activity at the opening of the 7th week and responds to the requirements of the next working period for the 7th to 9th week. But according to our assumption, the working period is only half completed at the end of the 9th week. Hence, in the beginning of the 10th week, capital I of 600 pounds sterling, having just returned, comes once more into activity and advances 300 pounds sterling for the requirements of the 10th to 12th week. This completes the second working period. Products valued at 600 pounds sterling are once again in circulation and will return in money at the close of the 15th week. Furthermore, 300 pounds sterling are set free, equal to the original amount of capital II, and are enabled to serve in the first half of the following working period, that is to say, in the 13th to 15th week. After the lapse of these, the 600 pounds sterling flow back; 300 of them suffice for the remainder of the working period, 300 are set free for the following working period.

The course of events is, therefore, as follows:

I. Period of turn-over 1-9. week.

1. Working period: 1-6. week. Capital I, of 600 p. st., performs its function.

1. Period of circulation: 7-9. week. After the lapse of the 9th week, 600 p. st. flow back in money.

II. Period of turn-over: 7-15 week.

2. Working period: 7-12. week.

First half: 7-9. week. Capital II, of 300 p. st., performs its function. After the lapse of the 9th week, 600 p. st. (capital I) flow back in money.

Second half: 10-12. week. 300 p. st. of capital I perform their function. The other 300 p. st. of capital I remain free.

2. Period of circulation: 13-15. week.

After the close of the 15. week, 600 p. st. (one half belonging to capital I, the other to capital II) flow back in money.

III. Period of turn-over: 13-21. week.

3. Working period: 13-18. week.

First half: 13-15. week. The free 300 p. st. perform their function. After the close of the 15th week, 600 p. st. flow back in money.

Second half: 16-18. week, 300 of the returned 600 perform their function, the other 300 again remain free.

3. Period of circulation: 19-21. week. After the close of the 21st week, 600 p. st. flow back in money. In this amount of 600 p. st., capital I and II are amalgamated and indistinguishable.

In this way, there are eight full periods of turn-over of a capital of 600 p. st. (I: 1-9. week; II: 7-15. week; III: 13-21; IV: 19-27.; V: 25-33.; VI: 31-39.; VII: 37 -45.; VIII: 43-51) to the end of the 51st week. But as the 49-51st weeks fall within the eighth period of circulation, the 300 p. st., of free capital must step in and keep production moving. Thus the turn-over at the end of the year is as follows: 600 p. st. have completed their cycle eight times, making 4,800 p. st. In addition thereto we have the product of the last 3 weeks (49-51.), which, however, has completed but one third of its cycle of 9 weeks, so that it counts in the amount turned over only with one third of its value, 100 p. st. If, then, the annual product of 51 weeks is 5,100 p. st., the capital actually turned over is only 4,800 plus 100, or 4,900 p. st. The advanced total capital of 900 p. st. has, therefore, been turned over 5 4-9 times, somewhat more than in the first case.

In the present example, we had assumed a case, in which the working time was 2-3, the circulation time 1-3, of the period of turn-over, so that the working time was a simple multiple of the circulation time. The question is now, whether capital is likewise set free, in the same way as shown before, when this assumption is not made.

Let us assume a working time of 5 weeks, a circulation time of 4 weeks, and a capital advance of 100 p. st. per week.

I. Period of turn-over: 1-9. week.

1. Working period: 1-5. week. Capital I, of 500 p. st., performs its function.

1. Circulation period: 6-9. week. After the close of the 9th week, 500 p. st. flow back in money.

II. Period of turn-over: 6-14. week.

2. Working period: 6-10. week.

First section: 6-9. week. Capital II, of 400 p. st., performs its function. After the close of the 9th week, capital I, of 500 p. st., flows back in money.

Second section: 10. week. 100 of the returned 500 p. st. performs their function. The remaining 400 p. st. are set free for the following working period.

2. Circulation period: 11-14. week.

After the close of the 14. week, 500 p. st. flow back in money.

Up to the end of the 14th week (11-14.), the free 400 p. st. perform their function; 400 of the 500 p. st. then returned fill the requirements of the third working period (11-15. week), so that 400 p. st. are once more set free for the fourth working period. The same phenomenon is repeated in every working period; in its beginning, 400 p. st. are ready at hand, sufficing for the requirements of the first 4 weeks. After the close of the 4th week, 500 p. st. flow back in money, only 100 of which are needed for the last week, while the remaining 400 are set free for the next working period.

Let us furthermore assume a working period of 7 weeks, with a capital I of 700 p. st.; a circulation period of 2 weeks, with a capital II of 200 p. st.

In that case, the first period of turn-over lasts from the 1st to the 9th week; its first working period from the 1st to the 7th week, with an advance of 700 p. st., its first circulation period from the 8th to the 9th week. After the close of the 9th week, 700 p. st. flow back in money.

The second period of turn-over, from the 8th to the 16th week, contains the second working period of the 8th to 14th week. The requirements of the 8th and 9th week of this period are covered by capital II. After the close of the 9th week, the above 700 p. st. flow back. Up to the close of this working period (10-14.), 500 p. st. of this sum are used up. 200 p. st. remain free for the next working period. The second circulation period lasts from the 15th to the 16th week. After the close of the 16th week, 700 p. st. flow back once more. From now on, the same phenomenon is repeated in every working period. The demand in capital of the first two weeks is covered by the 200 p. st. set free at the close of the preceding working period; after the close of the second week, 700 p. st. flow back in money; but the working period lasts only 5 weeks longer, so that only 500 p. st. can be consumed; therefore, 200 p. st. always remain free for the next working period.

We find, then, that in this case, where the working period has been assumed greater than the circulation period, there is under all circumstances a money-capital set free at the close of each working period, and this money-capital is of the same magnitude as capital II, which is advanced for the circulation time. In our three illustrations, capital II was 300 p. st., in the first, 400 p. st., in the second, 200 p. st. in the third example. Corresponding thereto, the capital set free at the close of each working period was 300, 400, and 200 p. st.

III. The Working Period Smaller Than The Circulation Period.

We begin by assuming once more a period of turn-over of 9 weeks. Let the working period be 3 weeks, with an available capital I of 300 p. st. Let the circulation period be 6 weeks. For these 6 weeks, an additional capital of 600 p. st. is required. We may divide this in turn into two portions of 300 p. st. each, so that each portion meets the requirements of one working period. We have, then, three capitals of 300 p. st. each, 300 of which are always busy in production, while 600 are circulating.

We have, here, the exact opposite of case I, only with the difference that now three capitals relieve one another instead of two. There is no intersection or intermingling of capitals. Each one of them can be traced separately to the end of the year. Capital is no more set free in this instance than in case one, at the close of a working period. Capital I is entirely consumed at the end of the 3rd week, flows back entirely at the end of 9th, and resumes its functions in the beginning of the 10th week. Similarly in the case of capitals II and III. The regular and complete relief excludes any release of capital.

The total turn-over is calculated as follows:

Let us now choose also an illustration, in which the circulation period is not an exact multiple of the working period. For instance, let the working period be 4 weeks, the circulation period 5 weeks. The corresponding amounts of capital would then be: Capital I, 400 p. st.; capital II, 400 p. st.; capital III, 100 p. st. We present only the first three turn-overs.

There is in this case an intermingling of capitals to the extent that the working period of capital III, which has no independent working period, because it lasts only for one week, coincides with the first working period of capital I. On the other hand, an amount of 100 p. st., equal to capital III, is set free by capital I and II at the close of the working period. For when capital III fills out the first week of the second, and of all following working periods of capital I, and the entire capital I of 400 p. st. flows back at the close of this first week, then only 3 weeks and a corresponding capital of 300 p. st. remain for the rest of the working period of capital I. The 100 p. st. thus set free suffice for the first week of the immediately following working period of capital II; at the close of this week, the entire capital of 400 p. st. then flows back (capital II). But since the new working period can absorb only 300 p. st. more, there are once more 100 p. st. disengaged at its close. And so forth. There is, then, a setting free of capital at the close of a working period, as soon as the circulation period is not a simple multiple of the working period. And this released capital is equal to that portion of capital which has to fill out the excess of the circulating period over the working period, or over a multiple of working periods.

In all cases investigated by us it was assumed that both the working period and the circulation period remain the same throughout the year in any of the businesses selected. This assumption was necessary, if we wished to ascertain the influence of the time of circulation on the turn-over and advance of capital. It does not alter the matter, that this assumption is not borne out unconditionally in reality, and that it frequently does not apply at all.

In this entire section, we have discussed only the turn-overs of the circulating capital, not those of the fixed. The reason is that this question has nothing to do with the fixed capital. The means of production employed in the process of production form fixed capital only to the extent that their time of employment exceeds the period of turn-over of circulating capital, so long as the time during which these instruments of labor continue to serve in continually repeated labor processes, is greater than the period of turn-over of circulating capital, in other words, comprises n periods of turn-over of circulating capital. Whether the total time represented by these n periods of turn-over of circulating capital, is long or short, that portion of productive capital which was advanced for this time in fixed capital is not advanced anew during its course. It continues its functions in its old use-form. The difference is merely this: According to the different lengths of the individual working periods of each period of turn-over of circulating capital, the fixed capital yields a greater or smaller portion of its original value to the product of this working period, and according to the duration of the time of circulation of each period of turn-over, this value yielded by the fixed capital to the product flows back in money rapidly or slowly. The nature of the topic which we discuss in this section—the turn-over of the circulating portion of productive capital—is determined by the nature of this portion itself. The circulating capital employed in a working period cannot be invested in a new working period, until it has completed its turn-over, until it has been converted into commodity-capital, then into money-capital, and then back into productive capital. In order that the first working period may be immediately followed by a second, additional capital must be advanced and converted into the circulating elements of productive capital, and its quantity must be sufficient to fill out the void left by the circulation of the capital advanced for the first working period. This is the source of the influence exerted by the duration of the working period of the circulating capital over the scale of the process of production and the division of the advanced capital, or eventually the advance of new portions of capital. It is precisely this which we had to examine in this section.

IV. Conclusions

From the preceding analyses, it follows that,

A. The different portions, into which capital must be divided in order that one part of it may be continually in the working period while others are in the period of circulation, relieve one another like different independent private capitals, in two cases: First, when the working period is equal to the period of circulation, so that the period of turn-over is divided into two equal sections; secondly, when the period of circulation is longer than the working period, but at the same time represents a simple multiple of the working period, so that one period of circulation is equal to n working periods, in which case n must be a whole number. In these cases, no portion of the successively advanced capital is set free.

B. On the other hand, in all cases in which, (1) the period of circulation is longer than the working period without being a simple multiple of it, and (2) in which the working period is longer than the circulation period, a portion of the circulating total capital is continually set free periodically at the close of each working period, beginning with the second turn-over. This free capital is equal to that portion of the total capital which has been advanced to fill out the time of circulation, provided the working period is longer than the period of circulation, and equal to that portion of capital which has to fill out the excess of the time of circulation over one working period, or over a multiple of one working period, provided the time of circulation is longer than the working time.

C. It follows that for the aggregate social capital, so far as its circulating capital is concerned, the setting free of capital must be the rule, while the mere relieving of portions of capital following successively in the process of production must be the exception. For the equality of the period of work and circulation, or the equality of the period of circulation with a simple multiple of the working period, in other words, a similar proportion of the two portions of the period of turn-over has nothing to do with the nature of the case, and for this reason it cannot be found in general, but only in rare instances.

A very considerable portion of the social circulating capital, which is turned over several times per year, will therefore exist periodically in the form of released capital during the annual cycle of turn-over.

It is furthermore evident that, all other circumstances being equal, the magnitude of the released capital grows with the volume of the labor-process, or with the scale of production, or with the development of capitalist production in general. In the case cited under B (2), this will be so, because the advanced total capital increases, in B (1), because the length of the period of circulation grows with the development of capitalist production, hence the period of turn-over is lengthened in cases where the working period is extended, without a regular proportion between the two periods.

In the first case, for instance, we had to invest 100 p. st. per week. This required 600 p. st. for a working period of 6 weeks, 300 p. st. for a circulation period of 3 weeks, together 900 p. st. In that case, 300 p. st. are released continually. On the other hand, if 300 p. st. are invested weekly, we have 1,800 p. st. for the working period and 900 p. st. for the circulation period. Hence 900 instead of 300 p. st. are periodically released.

D. The total capital, for instance 900 p. st., must be divided into two portions, for instance, 600 p. st. for the working period and 300 p. st. for the period of circulation. That portion, which is really invested in the labor-process, is thus reduced by one third, or from 900 to 600 p. st. The scale of production is thus reduced by one third. On the other hand, the 300 p. st. perform their function only to make the working period continuous, in order that 100 p. st. may be invested every week of the year in the labor-process.

Abstractly speaking, it is the same, whether 600 p. st. work during 6 times 8, or 48 weeks (product 4,800 p. st.), or whether the total capital of 900 p. st. is expended during 6 weeks in the labor-process and then kept fallow during the period of circulation of 3 weeks. In the latter case, it would be working, in the course of the 48 weeks, 5 1-3 times 6, or 32 weeks (product 5 1-3 times 900, or 4,800 p. st.), and be fallow for 16 weeks. But, apart from the greater decay of the fixed capital during the fallow of 16 weeks, and apart from the appreciation of labor, which must be rapid during the entire year, although it is employed only during a part of it, such a regular interruption of the process of production is irreconcilable with the operations of modern great industry. This continuity is itself a productive power of labor.

Now, if we take a closer look at the released, or rather suspended, capital, we find that a considerable part of it must always be in the form of money-capital. Let us adhere to our illustration: Working period 6 weeks, period of circulation 3 weeks, expenditure per week 100 p. st. In the middle of the second working period, after the close of the 9th week, 600 p. st. flow back, and 300 of them must be invested for the remainder of the working period. After the close of the second working period, 300 p. st. are then released. In what condition are these 300 p. st.? We will assume that 1-3 is invested for wages, 2-3 for raw materials and auxiliary substances. Then 200 of the returned 600 p. st. exist in the form of money for wages, and 400 p. st. in the form of a productive supply, in the form of elements of the constant circulating productive capital. But since only one half of this productive supply is required for the second half of the second working period, the other half is for 3 weeks in the form of a surplus, that is to say, of a productive supply exceeding the requirements of one working period. The capitalist, on the other hand, knows that he needs only one-half (200 p. st.) of this portion (400 p. st.) of the returned capital for the current working period. It will, therefore, depend on market conditions, whether he will immediately reconvert these 200 p. st. entirely or partially into a surplus productive supply, or reserve them entirely or partially in the form of money in the expectation that the conditions of the market will improve. It goes without saying, that the portion of capital to be used for the payment of wages (200 p. st.) is reserved in the form of money. The capitalist cannot store labor-power in warehouses after he has bought it, as he may do with the raw material. He must incorporate it in the process of production and he pays for it at the end of the week. At least these 100 p. st. of the released capital of 300 p. st. will, therefore, have the form of money not required for the working period. The capital released in the form of money-capital must therefore be at least equal to the variable portion of capital invested in wages. At a maximum, it may comprise the entire released capital. In reality it fluctuates continually between this minimum and maximum.

The money-capital released by the mere mechanism of the movement of turn-over (together with the successive reflux of fixed capital and the money-capital required in every labor-process for variable capital) must play an important role, as soon as the credit system develops, and must at the same time be one of its foundations.

Let us assume that the time of circulation in our illustration is contracted from 3 weeks to 2. This is not to be a normal change, but due, say, to prosperous times, shortened terms of payment, etc. The capital of 600 p. st., which is expended during the working period, flows back one week earlier than needed, it is therefore released for this week. Furthermore, in the middle of the working period, as before, 300 p. st. are released (a portion of those 600 p. st.), but in this case for 4 weeks instead of 3. There are then on the money market 600 p. st. for one week, and 300 p. st. for 4 weeks instead of 3. As this concerns not one capitalist alone, but many, and occurs at various periods in different businesses, it brings more available money-capital on the market. If this condition last for a long time, production will be expanded, wherever feasible. Capitalists working with borrowed money will bring less demand to bear on the money-market, whereby it is relieved as much as it is by an increased supply. Or, finally, the sums made superfluous by the mechanism are thrown definitely on the money-market.

In consequence of the contraction of the period of turnover from 3 weeks to 2, and thus of the period of turn-over from 9 weeks to 8, one ninth of the advanced total capital becomes superfluous. The working period of 6 weeks can now be kept going as continuously with 800 p. st. as formerly with 900. One portion of the value of the commodity-capital, equal to 100 p. st., therefore persists in the form of money-capital without performing any more functions as a part of the capital advanced for the process of production. While production is continued on the same scale and with other conditions, such as prices, etc., remaining equal, the value of the advanced capital is reduced from 900 to 800 p. st. The remainder of the originally advanced value, to the amount of 100 p. st., is released in the form of money-capital. As such it passes over into the money-market and forms an additional portion of the capitals serving in that capacity.

This shows the way in which a plethora of money may arise—quite apart from the reason that the supply of money may be greater than the demand for it; this eventuality causes always but a relative plethora, which occurs, for instance, in the "melancholy period" opening a new cycle after a commercial crisis. In our case we speak of a plethora in the sense that a definite portion of the capital advanced for the promotion of the entire process of social reproduction, including the process of circulation, becomes superfluous and is, therefore, released in the form of money-capital. This plethora comes about by the mere contraction of the period of turn-over, while the scale of production and prices remain the same. The amount of money in the circulation, whether great or small, did not exert the least influence on this.

Let us assume, on the other hand, that the period of circulation is prolonged from 3 weeks to 5. In that case, the reflux of the advanced capital takes place 2 weeks too late at the very next turn-over. The last part of the process of production of this working period cannot be carried on, the mechanism of the turn-over of the advanced capital itself interfering. In case of a longer duration of this condition, a contraction of the process of production, a reduction of its volume, might take place, just as an extension did in the previous case. But in order to continue the process on the same scale, the advanced capital would have to be increased by 2-9, or 200 p. st., for the entire duration of the prolongation of the circulation period. This additional capital can be obtained only from the money-market. If, then, the prolongation of the period of circulation applies to one or more great lines of business, it may cause a pressure on the money-market, unless this effect is compensated by some counter-effect from some other direction. In this case likewise it is evident and obvious that such a pressure is not in the least due to a change in the prices of the commodities nor to the quantity of the existing means of circulation.

(The preparation of this chapter for publication has given me no small amount of difficulties. Expert as Marx was in algebra, the handling of figures in arithmetic nevertheless gave him a great deal of trouble and he lacked especially the practice of commercial calculation, although he left behind a ponderous volume of computations in which he had practiced by many examples the entire variety of commercial reckoning. But a knowledge of the various modes of calculation and a practice in the daily practical calculations of the merchant are by no means the same. Consequently Marx entangled himself to such an extent in his computation of turn-overs, that the result, so far as he completed his work, contained various errors and contradictions. In the diagrams given above, I have preserved only the simplest and arithmetically correct data, and my reason for so doing was mainly the following:

The indefinite results of this tedious calculation have led Marx to attribute an undeserved importance to a circumstance, which, in my opinion, has actually little significance. I refer to that which he calls the "release" of money-capital. The actual state of affairs, based on the above premises, is this:

No matter what may be the proportion in the magnitude of the working and circulation periods, or of capital I and II, there is returned to the capitalist, in the form of money, at the end of the first turn-over, in regular intervals of the duration of one working period, the capital required for each working period, a sum equal to capital I.

If the working period is 5 weeks, the circulation period 4 weeks, and capital I 500 p. st., then a sum of money equal to 500 p. st. flows back periodically at the end of the 9th, 14th, 19th, 24th, 29th, etc., week.

If the working period is 6 weeks, the circulation period 3 weeks, and capital I 600 p. st., then 600 p. st. flow back periodically at the end of the 9th, 15th, 21st, 27th, 33rd, etc., week.

Finally, if the working period is 4 weeks, the circulation period 5 weeks, and capital I 400 p. st., then 400 p. st. are periodically returned at the end of the 9th, 13th, 17th, 21st, 25th, etc., week.

Whether any of this returned money is superfluous, and thus released, for the current working period, and how much of it, makes no difference. It is assumed that production continues uninterruptedly on the same scale, and in order that this may be possible, money must be available and must, therefore, flow back, whether "released" or not. If production is interrupted, release stops likewise.

In other words: There is indeed a release of money, a formation of latent, or merely potential, capital in the form of money. But it takes place under all circumstances, and not only under the conditions enumerated especially in the above analysis; and it takes place on a larger scale than that assumed there. So far as circulating capital I is concerned, the industrial capitalist, at the end of each turn-over, is in the same situation as at the establishment of his business: he has all of it in his hands in one bulk, while he can convert it only gradually back into productive capital.

The essential point in the above analysis is the demonstration that, on one hand, a considerable portion of the industrial capital must always be available in the form of money, and, on the other hand, a still more considerable portion must temporarily assume the form of money. This proof is, if anything, still more emphasized by these additional remarks of mine.—F. E.)

V. The Effect of a Change of Prices

We had assumed that prices remained the same and the scale of production remained unaltered, while, on the other hand, the time of circulation was either contracted or expanded. Now let us assume, on the contrary, that the period of turn-over remains the same, likewise the scale of production, while prices change, that is to say, either the prices of the raw materials, auxiliaries, and labor-power rise or fall, or those of the two first-named elements alone. Take it, that the price of raw materials, auxiliaries, and labor-power falls by one half. In that case, the capital to be advanced in our above examples would be 50 instead of 100 p. st. per week, and that for the period of turn-over of 9 weeks, 450 p. st., instead of 900. A sum of 450 p. st. of the advanced capital is released in the form of money-capital, but the process of production continues on the same scale and with the same period of turn-over, and with the same sub-division as before. The quantity of the annual product likewise remains the same, but its value has fallen by one half. This change, which is at the same time accompanied by a change in the demand and supply of money-capital, is due neither to an acceleration of the turn-over, nor to a change in the quantity of money in circulation. On the contrary. A fall in the value, or price, of the elements of productive capital by one half would first have the effect of reducing by one half the capital-value to be advanced for the continuation of the business of X in the same scale, so that only one half of the money would have to be thrown on the market by the business of X, since the business of X advances this capital-value first in the form of money, of money-capital. The amount of money thrown into circulation would have decreased, because the prices of the elements of production had fallen. This would be the first effect.

In the second place, one half of the originally advanced capital of 900 p. st. or 450 p. st., which (a) passed alternately through the forms of money-capital, productive capital, and commodity-capital, and (b) existed simultaneously and continuously side by side partly in the form of money-capital, partly in the form of productive capital, partly in the form of commodity-capital, would be eliminated from the rotation of the business of X, and thus come into the money market as an additional capital, affecting it as such. These released 450 p. st. serve as money-capital, not because they have become superfluous for the operation of the business of X, but because they were a constituent portion of the original capital-value, so that they are intended for further service as capital, not as mere means of circulation. The next form in which they may serve as capital is that of money on the money-market. Or, the scale of production (apart from fixed capital) might be doubled. In that case a productive process of double the previous volume would be carried on with a capital of 900 p. st.

If, on the other hand, the prices of the circulating elements of productive capital were to increase by one half, it would require 150 p. st. per week instead of 100 p. st., or 1,350 instead of 900 p. st. An additional capital of 450 p. st. would be needed to carry on production on the same scale, and this would exert a pressure to that extent, according to the condition of the money-market, on the quotations of money. If all the capital available on this market were then engaged, there would be an increased competition for available capital. If a portion of it were unemployed, it would to that extent be called into action.

But, in the third place, given a certain scale of production, the velocity of the turn-over and the prices for the circulating elements of productive capital remaining the same, the price of the product of the business of X may rise or fall. If the price of the commodities supplied by the business of X falls, the price of his commodity-capital of 600 p. st., which it threw continually into circulation, sinks, for instance, to 500 p. st. In that case, one sixth of the value of the advanced capital does not flow back from the process of circulation, (the surplus-value contained in the commodity-capital is not considered here), and it is lost in circulation. But since the value, or price, of the elements of production remains the same, this reflux of 500 p. st. suffices only to replace 5-6 of the capital of 600 p. st. engaged in the process of production. It requires therefore an addition of 100 p. st. of money-capital to continue production on the same scale.

Vice versa, if the price of the product of the business of X were to rise, then the price of the commodity-capital of 600 p. st. would be increased, say to 700 p. st. One seventh of this price, or 100 p. st., does not come from the process of production, has not been advanced in it, but flows from the process of circulation. But only 600 p. st. are needed to replace the elements of production. Therefore 100 p. st. are set free.

It does not fall within the scope of the present analysis to ascertain why, in the first case, the period of turn-over is abbreviated or prolonged, why, in the second case, the prices of raw materials and auxiliaries, in the third case, those of the products supplied by the business, rise or fall.

But the following points fall under this analysis:

I. CASE.—A CHANGE IN THE PERIOD OF CIRCULATION, AND THUS OF TURN-OVER, WHILE THE SCALE OF PRODUCTION, AND THE PRICES OF THE ELEMENTS OF PRODUCTION AND OF PRODUCTS REMAIN THE SAME.

According to the assumptions of our example, one ninth less of the advanced total capital is needed after the contraction of the period of circulation, so that the total capital is reduced from 900 to 800 p. st. and 100 p. st. of money-capital are released.

The business of X supplies the same as ever a six weeks' product of the same value of 600 p. st., and as work continues without interruption during the entire year, the same quantity of products, valued at 5,100 p. st., is supplied in 51 weeks. There is, then, no change so far as the quantity and price of the product thrown into circulation by this business are concerned, nor in the terms of time in which it throws its product on the market. But 100 p. st. are released, because the requirements of the productive process are satisfied with 800 instead of 900 p. st., after the contraction of the period of circulation. The released 100 p. st. of capital exist in the form of money-capital. But they do not by any means represent that portion of the advanced capital, which would have to serve continually in the form of money-capital. Let us assume that 4-5, or 480 p. st. of the advanced circulating capital are continually invested in material elements of production, and 1-5, or 120 p. st., in labor-power. Then the weekly investment in materials of production would be 80 p. st., and in labor-power 20 p. st. Of course, capital II, of 300 p. st., must also be divided into 4-5, or 240 p. st., for materials of production, and 1-5, or 60 p. st., for wages. The capital invested in wages must always be advanced in the form of money. As soon as the commodity-product to the amount of 600 p. st. has been reconverted into money, 480 p. st. of it may be transformed into materials of production (productive supply), but 120 p. st. retain their money-form, in order to serve in the payment of wages for six weeks. These 120 p. st. are the minimum of the returning capital of 600 p. st., which must always be renewed in the form of money-capital and so replaced, and therefore this minimum must always be kept on hand as that portion of the advanced capital which serves in its money-form.

Now, if 100 p. st. of the capital of 300 p. st. periodically released for three weeks, and likewise divided into 240 p. st. of a productive supply and 60 p. st. of wages, are entirely eliminated in the form of money-capital by the contraction of the circulation time, if they are completely removed from the mechanism of the turn-over, where does the money for these 100 p. st. of money-capital come from? This amount consists only one fifth of money-capital periodically released within the turn-overs. But four fifths, or 80 p. st., are already replaced by an additional productive supply of the same value. In what manner is this additional productive supply converted into money, and whence comes the money for this conversion?

If the contraction of the period of circulation has become a fact, then only 400 p. st. of the above 600, instead of 480, are reconverted into a productive supply. The other 80 p. st. are retained in their money-form and constitute, together with the above 20 p. st. for wages, the 100 p. st. eliminated from the process. Although these 100 p. st. come from the circulation by means of the purchase of the 600 p. st. of commodity-capital and are now withdrawn from it, because they are not re-invested in wages and materials of production, yet it must not be forgotten that, in their money-form, they are once more in that form in which they were originally thrown into circulation. In the beginning 900 p. st. were invested in a productive supply and wages. Now only 800 p. st. are required in order to carry along the same productive process. The 100 p. st. thus withdrawn in money now form a new money-capital seeking investment, a new constituent part of the money-market. True, they were previously periodically in the form of released money-capital and of additional productive capital, but these latent forms were the conditions for the promotion and continuity of the process of production. Now they are no longer needed for this purpose, and for this reason they form a new money-capital and a constituent part of the money-market, although they are neither an additional element of the existing social money-supply (for they existed at the beginning of the business and were thrown by it into the circulation), nor a newly accumulated hoard.

These 100 p. st. are now indeed withdrawn from circulation inasmuch as they are a portion of the advanced money-capital and are no longer employed in the same business. But this withdrawal is possible only because the conversion of the commodity-capital into money, and of this money into productive capital, in the metamorphosis C'—M—C, is accelerated by one week, so that the circulation of the money engaged in this process is likewise hastened. This sum is withdrawn from circulation, because it is no longer needed for the turn-over of the capital of X.

It has been assumed here, that the capital belongs to him who invests it. But if he had borrowed it, nothing would be altered in these conditions. With the contraction of the period of circulation, he would need only 800 p. st. of borrowed money instead of 900. This sum of 100 p. st., if returned to the lender, forms nevertheless 100 p. st. of new money-capital, only in the hands of Y instead of X. If the capitalist X receives his materials of production to the amount of 480 p. st. on credit, so that he has only to advance 120 p. st. for wages out of his own pocket, then he would now have to purchase 80 p. st.'s worth of goods less on credit, so that this sum would constitute an excess of commodity-capital for the capitalist giving it on credit, while the capitalist X would have released 20 p. st. of his money.

The additional supply for production is now reduced by one-third. It consisted of 240 p. st.'s worth of goods, constituting four-fifths of additional capital II of 300 p. st., but now it consists only of 160 p. st.'s worth of goods. It is an additional productive supply for 2 instead of 3 weeks. It is now renewed every 2 weeks, instead of every 3, but only for the next 2 instead of the next 3 weeks. The purchases, for instance, on the cotton market, are repeated more frequently and in smaller portions. The same portion of cotton is withdrawn from the market, for the quantity of the product remains the same. But the withdrawal is distributed differently in time, extending over a longer period. Take it that it is a question of 3 months or 2. If the annual consumption of cotton amounts to 1,200 bales, the sales in the first case will be:

January 1, 300 bales, remaining in storage 900 bales.
April 1, 300 bales, remaining in storage 600 bales.
July 1, 300 bales, remaining in storage 300 bales.
October 1, 300 bales, remaining in storage 0 bales.

But in the second case, the situation would be:

January 1, sold 200, remaining in storage 1,000 bales.
March 1, sold 200, remaining in storage 800 bales.
May 1, sold 200, remaining in storage 600 bales.
July 1, sold 200, remaining in storage 400 bales.
September 1, sold 200, remaining in storage 200 bales.
November 1, sold 200, remaining in storage 0 bales.

In other words, the money invested in cotton flows back completely one month later, in November instead of October. If, therefore, one-ninth of the advanced capital, or 100 p. st., is eliminated in the form of money by the contraction of the period of circulation, and if these 100 p. st. are composed of 20 p. st. of periodically released money-capital for the payment of wages, and of 80 p. st. existing periodically as a released productive supply for one week, then the reduction of the productive supply in the hands of the manufacturer, so far as these 80 p. st. are concerned, corresponds to an increase of the cotton supply in the hands of the cotton dealer. The same cotton retains as much longer in his warehouse the form of a commodity as it stays a shorter time in the hands of the manufacturer under the form of a productive supply.

Hitherto we assumed that the contraction of the time of circulation was due to the fact that X sold his articles more rapidly, received his money for them in a shorter time, or, in the case of credit, that his time of payment was reduced. In that case, the contraction was attributed to the sale of the commodities, to the conversion of commodity-capital into money-capital, C'—M, the first phase of the process of circulation. But it might also be due to the second phase, M—C, and hence to a simultaneous change, either in the working period, or in the time of circulation of the capitals Y, Z, etc., which supply the capitalist X with the elements of production of his circulating capital.

For instance, if cotton, coal, etc., with the old methods of transportation, are three weeks in transit from their place of production or storage to the location of the factory of the capitalist X, then the minimum supply of X up to the arrival of new transports must last for three weeks. So long as cotton and coal are in transit, they cannot serve as means of production. They are then rather an object of labor in the transportation industry and of the capital invested in it, they represent for the producer of coal or the dealer in cotton a commodity-capital in process of circulation. Now let improvements in transportation reduce the transit to two weeks. Then the productive supply can be transformed from a three-weekly into a fortnightly supply. This releases the additional capital of 80 p. st. set aside for the purchase of the weekly supply, and likewise the 20 p. st. for wages, because the turned-over capital of 600 p. st. returns one week earlier.

On the other hand, if the working period of the capital invested in raw materials is contracted (examples of this case were given in the preceding chapter), so that the possibility of renewing the productive supply in a shorter time is given, then the productive supply may be reduced, the interval between the periods of renewal being shortened.

If, vice versa, the time of circulation and thus the period of turn-over are prolonged, then advance of additional capital is necessary. This must come out of the pockets of the capitalist himself, provided he has any additional capital. If he has, it will be invested in some way, in some portion of the money-market. In order to make it available, it must be detached from its old form, for instance, stocks must be sold, deposits withdrawn, so that there is indirectly an effect on the money-market, also in this case. Or, he must borrow it. As for that portion of the additional capital which is to be invested in wages, it must under normal conditions always be advanced in the form of money, and the capitalist X exerts to that extent his share of a direct pressure on the money-market. But so far as that portion is concerned which must be invested in materials of production, money is indispensable only if he must pay for them in cash. If he can get them on credit, this does not exert any direct influence on the money-market, because the additional capital then is directly advanced in the form of a productive supply, not in the first instance in money. But if the lender throws the note received from X directly on the market and discounts it, this would to that extent influence the money-market indirectly.

II. CASE.—A CHANGE IN THE PRICE OF MATERIALS OF PRODUCTION, ALL OTHER CIRCUMSTANCES REMAINING THE SAME.

We just assumed that the total capital of 900 p. st. was four-fifths invested in materials of production (720 p. st.) and one-fifth in wages (180 p. st.).

If the price of the materials of production drops by one-half, then a working period of 6 weeks requires only 240 p. st. instead of 480 for their purchase, and an additional capital of only 120 p. st. instead of 240 p. st. Capital I is then reduced from 600 p. st. to 240 plus 120, or 360 p. st., and capital II from 300 to 120 plus 60, or 180 p. st. The total capital of 900 is therefore reduced to 360 plus 180, or 540 p. st. A sum of 360 p. st. is eliminated.

This eliminated and now unemployed capital, which seeks investment in the money-market, is nothing but a portion of the originally advanced capital of 900 p. st. This portion has become superfluous by the fall in the price of the materials of production, so long as the business is carried along on the same scale and not expanded. If this fall in prices is not due to accidental circumstances, such as a rich harvest, over-supply, etc., but to an increase of productive power in the line which supplies the raw materials, then this money-capital is an absolute addition to the money-market, or in general to the capital available in the form of money-capital, because it no longer constitutes an integral portion of the capital already invested.

III. CASE.—A CHANGE IN THE MARKET PRICE OF THE PRODUCTS THEMSELVES.

In this case, a fall in prices means a loss of a portion of capital, which must be made good by a new advance of additional money-capital. This loss of the seller may be recovered by the buyer. It is recovered by the buyer directly, if the market price of the product has fallen merely through an accidental fluctuation of the market and rises once more to its normal level. It is recovered indirectly, if the change of prices is caused by a change of value reacting on the product, and if this product passes as an element of production into another sphere of production and there releases capital to that extent. In either case, the capital lost by X, for the replacement of which he touches the money-market, may be introduced by his business friends as a new additional capital. Then there is a simple transfer of capital.

If, on the other hand, the price of the product rises, then a portion of the capital which was not advanced is taken away from the circulation. This is not an organic portion of the capital advanced in this process of production and constitutes, therefore, eliminated money-capital, unless production is expanded. As we assumed that the prices of the elements of production were fixed before the product came upon the market, an actual change of value might have caused the rise of prices to the extent that it is retroactive, causing a subsequent rise in the price of raw material. In such an eventuality, the capitalist X would realize a gain on his product circulating as a commodity-capital and on his available productive supply. This gain would give him an additional capital, which would be needed for the continuation of his business with the new and higher prices of the elements of production.

Or, the rise of prices is but temporary. To the extent that additional capital is then needed on the side of the capitalist X, the same amount is released on another side, inasmuch as his product is an element of production for other lines of business. What the one has lost, the other wins.

Part II, Chapter XVI
THE TURN-OVER OF THE VARIABLE CAPITAL.

I. THE ANNUAL RATE OF SURPLUS-VALUE.

We start out with a circulating capital of 2500 p. st., four-fifths of which, or 2000 p. st., are constant capital (materials of production), and one-fifth of which, or 500 p. st., is variable capital invested in wages.

Let the period of turn-over be 5 weeks; the working period 4 weeks, the period of circulation 1 week. Then capital I is 2000 p. st., consisting of 1600 p. st. of constant capital and 400 p. st. of variable capital; capital II is 500 p. st., 400 of which are constant and 100 variable. In every working week, a capital of 500 p. st. is invested. In a year of 50 weeks an annual product of 50 times 500, or 25,000 p. st., is manufactured. The capital I, continuously invested in one working period and amounting to 2000 p. st., is turned over 12½ times. 12½ times 2000 make 25,000 p. st. Of this sum of 25,000 p. st., four-fifths, or 20,000 p. st., are constant capital invested in materials of production, and one-fifth, or 5000 p. st., is variable capital invested in wages. The total capital of 2500 p. st. is turned over 10 times, which is 25,000 divided by 2500.

The variable circulating capital expended in production can serve afresh in the process of circulation only to the extent that the product in which its value is reproduced is sold, converted from a commodity-capital into a money-capital, in order to be once more expended in the payment of labor-power. But the same is true of the constant circulating capital invested in production for materials, the value of which reappears as a portion of the value of the product. That which is common to these two portions of the circulating capital, the variable and constant capital, and which distinguishes them from the fixed capital, is not that the value transferred from them to the product is circulated by the commodity-capital, circulated as a commodity through the circulation of the product. For one portion of the value of the product, and thus of the product circulating as a commodity, the commodity-capital, always consists of the wear of the fixed capital, that is to say, of that portion of the value of the fixed capital which is transferred to the product during the process of production. The difference is rather this: The fixed capital continues to serve in the process of production in its old natural form for a longer or shorter cycle of periods of turn-over of the circulating capital (which consists of constant circulating plus variable circulating capital), while every single turn-over is conditioned on the reproduction of the entire circulating capital passing from the sphere of production in the form of commodity-capital into the sphere of circulation. The constant and variable circulating capital both have in common the first phase of the circulation, C'—M'. But in the second phase they separate. The money, into which the commodity is reconverted, is in part transformed into a productive supply (constant circulating capital). According to the different terms of purchase of this material, a portion may be sooner, another later, converted from money into materials of production, but finally it is wholly consumed that way. Another portion of the money realized by the sale of the commodity is held in the form of a money-supply, in order to be gradually expanded in the payment of labor-power incorporated in the process of production. This portion constitutes the variable circulating capital. Nevertheless the entire reproduction of either portion is due to the turn-over of the capital, to their conversion into a product, from a product into a commodity, from a commodity into money. This is the reason why, in the preceding chapter, the turn-over of the circulating constant and variable capital was discussed separately and simultaneously without any regard to the fixed capital.

For the purposes of the question which we have to discuss now, we must go a step farther and proceed with the variable portion of the circulating capital as though it constituted the circulating capital by itself. In other words, we leave out of consideration the constant circulating capital which is turned over together with it.

A sum of 2500 p. st. has been advanced, and the value of the annual product is 25,000 p. st. But the variable portion of the circulating capital is 500 p. st. The variable capital contained in 25,000 p. st. therefore amounts to 25,000 divided by 5, or 5000 p. st. If we divide these 5000 p. st. by 500, we find that 10 is the number of turn-overs, just as it is in the case of the total capital of 2500 p. st.

Here, where it is only a question of the production of surplus-value, it is quite correct to make this average calculation, according to which the value of the annual product is divided by the value of the advanced capital, not by the value of that portion of this capital which is employed continually in one working period (in the present case not by 400, but by 500, not by capital I, but by capital I plus II). We shall see later, that, from another point of view, this is not quite exact. In other words, this calculation serves well enough for the practical purposes of the capitalist, but it does not express exactly or appropriately all the real circumstances of the turn-over.

We have hitherto ignored one portion of the commodity-capital, namely the surplus-value contained in it, which was produced during the process of production and incorporated in the product. We have now to direct our attention to this.

Take it, that the variable capital of 100 p. st. expended weekly produces a surplus-value of 100%, or 100 p. st., then the variable capital of 500 p. st., advanced for a period of turn-over of 5 weeks, produces 500 p. st. of surplus-value, in other words, one-half of the working day consists of surplus-labor.

If 500 p. st. of variable capital produce a surplus-value of 500 p. st., then 5000 p. st. produce ten times 500, or 5000 p. st. of surplus-value. The proportion of the total quantity of surplus-value produced during one year to the value of the advanced variable capital is what we call the annual rate of surplus-value. In the present case, this is as 5000 to 500, or 1000%. If we analyze this rate more closely, we find that it is equal to the rate of surplus-value produced by the advanced variable capital during one period of turn-over, multiplied by the number of turn-overs of the variable capital (which coincides with the number of turn-overs of the entire circulating capital).

The variable capital advanced in the present case for one period of turn-over is 500 p. st. The surplus-value produced during this period is likewise 500 p. st. The rate of surplus-value for one period of turn-over is, therefore, as 500 s to 500 v, or 100%. This 100%, multiplied by 10, the number of turn-overs in one year, makes 1000%, a rate of 5000 to 500.

This applies to the annual rate of surplus-value. As for the quantity of surplus-value obtained during a certain period of turn-over, it is equal to the value of the variable capital advanced for this period, in the present case 500 p. st., multiplied by the rate of surplus-value, in the present case, therefore, 500 times 100-100, or 500 times 1, or 500 p. st. If the advanced variable capital were 1500 p. st., with the same rate of surplus-value, then the quantity of surplus-value would be 1500 times 100-100, or 1500 p. st.

The variable capital of 500 p. st., which is turned over ten times per year, producing a surplus-value of 5000 p. st., and thus having a rate of surplus-value amounting to 1000%, shall be called capital A.

Now let us assume that another variable capital, B, of 5000 p. st., is advanced for one whole year (that is to say for 50 working weeks), so that it is turned over only once a year. We assume furthermore that, at the end of the year, the product is paid for on the same day that it is finished, so that the money-capital, into which it is converted, flows back on the same day. The circulation time is then zero, the period of turn-over equal to the working period, that is to say, one year. As in the preceding case, so there is now in the labor-process of each week a variable capital of 100 p. st., or of 5000 p. st., in 50 weeks. Let the rate of surplus-value be likewise the same, or 100%, that is to say, one-half of the working day of the same length as before consists of surplus-labor. If we study a period of 5 weeks, then the advanced variable capital is 500 p. st., the rate of surplus-value 100%, the quantity of surplus-value produced in 5 weeks likewise 500 p. st. The quantity of labor-power, which is here exploited, and the intensity of its exploitation, are assumed to be the same as those of capital A.

In each week, the invested variable capital of 100 p. st. produces a surplus-value of 100 p. st., hence in 50 weeks the total invested capital produces a surplus-value of 50 times 100, or 5000 p. st. The quantity of the surplus-value produced per year is the same as in the previous case, 5000 p. st., but the annual rate of surplus-value is entirely different. It is equal to the surplus-value produced in one year, divided by the advanced variable capital, that is to say it is as 5000 s to 5000 v, or 100%, while in the case of capital A it was 1000%.

In the case of both capitals A and B, we have invested a variable capital of 100 p. st. per week. The rate of surplus-value per week, or the intensity of self-expansion, is likewise the same, 100%, so is the magnitude of the variable capital the same, 100 p. st. The same quantity of labor-power is exploited, the volume and intensity of exploitation are equal in both cases, the working days are the same and subdivided in the same way in necessary labor and surplus-labor. The quantity of variable capital employed in the course of the year is 5000 p. st. in either case, sets the same amount of labor in motion, and extracts the same amount of surplus-value from the labor power set in motion by these two equal capitals, namely 5000 p. st. Nevertheless, there is a difference of 900% in the annual rate of surplus-value of the two capitals A and B.

This phenomenon makes indeed the impression as though the rate of surplus-value were not only dependent on the quantity and intensity of exploitation of the labor-power set in motion by the variable capital, but also on inexplicable influences arising from the process of circulation. It has actually been so interpreted, and has completely routed the Ricardian school since the beginning of the twenties of the 19th century, at least in its more complicated and disguised form, that of the annual rate of profit, if not in the simple and natural form indicated above.

The strangeness of this phenomenon disappears at once, when we place capital A and B in exactly the same conditions, not seemingly, but actually. These equal circumstances are present only when the variable capital B is expended in the payment of labor-power in its entire volume and in the same period of time as capital A.

In that case, the 5000 p. st. of capital B are invested for 5 weeks. 1000 p. st. per week makes an investment of 50,000 p. st. per year. The surplus-value is then likewise 50,000 p. st., according to our assumption. The turned-over capital of 50,000 p. st., divided by the advanced capital of 5000 p. st., makes the number of turn-overs 10. The rate of surplus-value, 5000 to 5000, or 100%, multiplied by the number of turn-overs, 10, makes the annual rate of surplus-value as 50,000 to 5000, or 10 to 1, or 1000%. Now the annual rates of surplus-value for A and B are alike, namely 1000%, but the quantities of surplus-value are 50,000 p. st. in the case of B, and 5000 p. st. in the case of A. The quantities of the produced surplus-values now are proportioned to one another as the advanced capital-values of B and A, to-wit: as 50,000 to 5000, or 10 to 1. But at the same time, capital B has set in motion ten times as much labor-power as capital A has in the same time.

It is only the capital actually invested in the working process which produces any surplus-value and for which all laws relating to surplus-value are in force including for instance the law according to which the quantity of surplus-value is determined by the relative magnitude of the variable capital if the rate of surplus-value is given.

The labor-process itself is determined by the time. If the length of the working period is given (as it is here, where we assume all circumstances relating to A and B to be equal, in order to elucidate the difference in the annual rate of surplus-value), the working week consists of a certain number of working days. Or, we may consider any working period, for instance this working period of 5 weeks, as one single working day of 300 hours, if the working day has 10 hours and the working week 6 days. We must further multiply this number with the number of laborers who are employed every day simultaneously in the same labor-process. If there were 10 laborers, there would be 60 times 10, or 600 working hours in one week, and a working period of 5 weeks would have 600 times 5, or 3000 working hours. Variable capitals of equal magnitude are, therefore, employed, the rate of surplus-value and the working days being the same if equal quantities of labor-power are set in motion in the same time (a labor-power of the same price multiplied with the same number).

Let us now return to our original illustrations. In both cases, A and B, equal variable capitals, of 100 p. st. per week, are invested every week during the year. The invested variable capitals actually serving in the labor-process are, therefore, equal, but the advanced variable capitals are very unequal. For A, 500 p. st. are advanced for every 5 weeks, and 100 p. st. of this are consumed every week. In the case of B, 5000 p. st. must be advanced for first period of 5 weeks, but only 100 p. st. per week, or 500 in 5 weeks, or one-tenth of the advanced capital is employed. In the second period of 5 weeks, 4500 p. st. must be advanced, but only 500 of this is employed, etc. The variable capital advanced for a certain period of time is converted into employed, actually serving and active, variable capital only to the extent that it actually steps into the period of time taken up by the labor-process, to the extent that it actually takes part in it In the intermediate time in which a certain portion of this capital is advanced, with a view to being employed at a later time, this portion is practically non-existing for the labor-process and has, therefore, no influence on the formation of either value or surplus-value. Take, for instance, capital A, of 500 p. st. It is advanced for 5 weeks, but only 100 p. st. enter successively week after week into the labor process. In the first week, one-fifth of this capital is employed; four-fifths are advanced without being employed, although they must be available, and therefore advanced, for the labor-processes of the following 4 weeks.

The circumstances which differentiate the relations of the advanced to the employed capital, influence the production of surplus-value—the rate of surplus-value being given—only to the extent that they differentiate the quantity of variable capital which can be actually employed in a certain period of time, for instance in one week, 5 weeks, etc. The advanced variable capital serves as variable capital only for the time that it is actually employed, not for the time in which it is held available without being employed. But all the circumstances which differentiate the relations between the advanced and the employed variable capital, are comprised in the difference of the periods of turn-over (determined by the difference in the working period, the circulation period or both). The law of the production of surplus-value decrees that equal quantities of employed variable capital produce equal quantities of surplus-value, if the rate of surplus-value is the same. If, then, equal quantities of variable capitals are employed by the capitals A and B in equal periods of time with an equal rate of surplus-value, they must produce equal quantities of surplus-value in equal periods of time, no matter what may be the proportion of this variable capital, employed during definite periods of time to the variable capital advanced for the same time and no matter, therefore, what may be the proportion of the quantities of surplus-value produced, not to the employed, but to the total advanced variable capital in general. The difference of this proportion, so far from contradicting the laws of the production of surplus-value demonstrated by us, rather corroborates them and is one of their inevitable consequences.

Let us consider the first productive section of 5 weeks of capital B. At the end of the fifth week, 500 p. st. have been employed and consumed. The value of the product is 100 p. st., hence the rate as 500 s to 500 v or 1100%, the same as in the case of capital A. The fact that, in the case of capital A, the surplus-value is realized together with the advanced capital, while in the case of B it is not, does not concern us here, where it is merely a question of the production of surplus-value and of its proportion to the variable capital advanced during its production. But if we calculate the proportion of surplus-value in B, not as compared to that portion of the advanced capital of 5000 p. st. which has been employed and consumed in its production, but to this total advanced capital itself, we find that it is as 500 s to 5000 v, or as 1 to 10, or 10%. In other words, it is 10% for capital B and 100% for capital A, ten times more. If any one were to say that this difference in the rate of surplus-value for equal capitals, setting in motion equal quantities of labor which is equally divided into paid and unpaid labor, is contrary to the laws of the production of surplus-value, then the answer would be simple and prompted by the mere inspection of the actual conditions: In the case of A, the actual rate of surplus-value is expressed, that is to say, the proportion of a surplus-value of 500 p. st., to a variable capital of 500 p. st., which produced it in 5 weeks. In the case of B, on the other hand, we are dealing with a calculation which has nothing to do either with the production of surplus-value, or with the determination of its corresponding rate of surplus-value. For the 500 p. st., of surplus-value produced by a variable capital of 500 p. st. are not calculated with reference to the 500 p. st. of variable capital advanced in their production, but with reference to a capital of 5000 p. st., nine-tenths of which, or 4500 p. st., have nothing whatever to do with the production of this surplus-value of 500 p. st., but are rather intended for gradual service in the following 45 weeks, so that they do not exist at all so far as the production of the first 5 weeks is concerned, which is alone significant in this instance. Under these circumstances, the difference in the rate of surplus-value of A and B is no problem at all.

Let us now compare the annual rates of surplus-value for capitals A and B. For B it is as 5000 s to 5000 v, or 100%; for A it is as 5000 s to 500 v, or 1000%. But the proportion of the rates of surplus-value toward one another is the same as before. There we had

(Rate of Surplus-Value of Capital B)/(Rate of Surplus-Value of Capital A) = 10%/100%.

Now we have

(Annual Rate of Surplus-Value of Capital B)/(Annual Rate of Surplus-Value of Capital A) = 100%/1000%

But 10% is to 100% as 100% is to 1000%, so that the ratio is the same.

But now the problem is reversed. The annual rate of capital B is as 5000 s to 5000 v, or 100%, offering not the slightest deviation, nor even the semblance of a deviation, from the laws of production known to us and the rate of surplus-value corresponding to this production. 5000 v have been advanced and consumed productively during the year, and they have produced 5000 s. The rate of surplus-value is, therefore the same as shown in the above proportion, 5000 s to 5000 v, or 100%. The annual rate agrees with the actual rate of surplus-value. In this case, it is not capital B, but capital A, which presents an anomaly that is to be explained.

In the case of A, we have the rate of surplus-value as 5000 s to 500 v, or 1000%. But while in the case of B, a surplus-value of 500 p. st., the product of 5 weeks, was calculated with reference to an advanced capital of 5000 p. st., nine-tenths of which were not employed in its production, we have now a surplus-value of 5000 s calculated on a variable capital of 500 v, that is to say, on only one-tenth of the variable capital of 5000 p. st. actually employed in the production of 5000 s. For the 5000 s are the product of a variable capital of 5000 v, productively consumed during 50 weeks, not that of a capital of 500 p. st. productively consumed in one working period of 5 weeks. In the former case, the surplus-value produced in 5 weeks had been calculated for a capital advanced for 50 weeks, a capital ten times larger than the one consumed during the 5 weeks. In the present case, the surplus-value produced in 50 weeks is calculated for a capital advanced for only 5 weeks, a capital ten times smaller than the one consumed in 50 weeks.

Capital A, of 500 p. st., is never advanced for more than 5 weeks. At the end of this time it has flown back and may repeat the same process in the course of the year ten times, by ten turn-overs. Two conclusions follow from this:

First. The Capital advanced in the case of A is only five times larger than that portion of capital which is continually employed in the productive process of one week. Capital B, on the other hand, which is turned over only once in 50 weeks, is fifty times larger than that one of its portions which can be used only in continuous successions of one week. The turn-over, therefore, modifies the relations of the capital advanced during the year for the process of production to the capital employed continuously for a certain period of production, say, for one week. And this is illustrated by the first case, in which the surplus-value of 5 weeks is not calculated for the capital employed during these 5 weeks, but for a capital ten times larger and employed for 50 weeks.

Second. The period of turn-over of 5 weeks of capital A comprises only one-tenth of the year, so that one year contains ten such periods of turn-over, in which capital A of 500 p. st. is successively reinvested. The employed capital is here equal to the capital advanced for 5 weeks, multiplied by the number of periods of turn-over per year. The capital employed during the year is 500 times 10, or 5000 p. st. The capital advanced during the year is 5000 divided by 10, or 500 p. st. Indeed, although the 500 p. st. are always re-employed, the sum advanced for 5 weeks never exceeds these same 500 p. st. On the other hand, in the case of capital B, it is true that only 500 p. st. are employed for 5 weeks and advanced for these 5 weeks. But as the period of turn-over is in this case 50 weeks, the capital employed in one year is equal to the capital advanced for 50 weeks, not to that advanced for every 5 weeks. But the annual quantity of surplus-value depends, given the rate of surplus-value, on the capital employed during the year, not on the capital advanced for the year. Hence it is not larger for this capital of 5000 p. st., which is turned over once a year, than it is for the capital of 500 p. st., which is turned over ten times per year. And it has this size only because the capital turned over once a year is ten times larger than the capital turned over ten times per year.

The variable capital turned over during one year—and hence that portion of the annual product, or of the annual expenditure, which is equal to that portion—is the variable capital employed and productively consumed during the year. It follows that, assuming the variable capital A turned over annually and the variable capital B turned over annually to be equal, and to be employed under equal conditions of investment, so that the rate of surplus-value is the same for both of them, the quantity of surplus-value produced annually must likewise be the same for both of them. Hence the annual rate of surplus-value must also be the same for them so far as it is expressed by the formula

(Quantity of Surplus-Value Produced Annually)/(Variable Capital Turned-Over Annually.)

Or, generally speaking: Whatever may be the relative magnitude of the turned over variable capitals, the rate of the surplus-value produced by them in the course of the year is determined by the rate of surplus-value at which the respective capitals have been employed in average periods (for instance the average of a week or a day).

This is the only result following from the laws of the production of surplus-value and the determination of the rate of surplus-value.

Let us now consider what is expressed by the ratio of the

(Capital Turned-Over Annually)/(Capital Advanced)

taking into account, as we have said before, only the variable capital. The division shows the number of turn-overs made by the capital advanced in one year.

In the case of capital A, we have:

(5000 p. st. of Capital Turned-Over Annually)/(500 p. st. of Capital Advanced)

In the case of capital B, we have:

(5000 p. st. of Capital Turned Over Annually)/(5000 p. st. of Capital Advanced)

In both ratios, the numerator expresses the capital advanced multiplied by the number of turn-overs, in the case of A, 500 times 10, in the case of B 5000 times 1. Or, it may be multiplied by the inverted time of turn-over calculated for one year. The time of turn-over for A is 1-10 year; the inverted time of turn-over is 10-1 year, hence we have 500 times 10-1, or 5000. In the case of B, 5000 times 1-1. The denominator expresses the turned over capital multiplied by the inverted number of turn-overs; in the case of A, 5000 times 1-10, in the case of B, 5000 times 1-1.

The respective quantities of labor (the sum of the paid and unpaid labor), which is set in motion by the two variable capitals turned over annually, are equal in this case, because the turned-over capitals themselves are equal and their rate of self-expansion is likewise equal.

The ratio of the variable capital turned over annually to the variable capital advanced indicates (1) the ratio of the capital intended for investment to the variable capital employed during a definite working period. If the number of turn-overs is 10, as in the case of A, and the year is assumed to have 50 working weeks, then the period of turn-over is 5 weeks. For these 5 weeks, variable capital must be advanced, and the capital advanced for 5 weeks must be 5 times as large as the variable capital employed during one week. That is to say, only one-fifth of the advanced capital (in this case of 500 p. st.) can be employed in the course of one week. On the other hand, in the case of capital B, where the number of turn-overs is 1-1, the time of turn-over is 1 year of 50 weeks. The ratio of the advanced capital to the capital employed weekly is, therefore, as 50 to 1. If matters were the same for B as they are for A, then B would have to invest 1000 p. st. per week instead of 100. (2). It follows, that B has employed ten times as much capital (5000 p. st.) as A, in order to set in motion the same quantity of variable capital and, the rate of surplus-value being the same, of labor (paid and unpaid), and thus to produce the same quantity of surplus-value during one year. The current rate of surplus-value expresses nothing but the ratio of the variable capital employed during a certain period to the surplus-value produced in the same time; or, the quantity of unpaid labor set in motion by the variable capital employed during this time. It has absolutely nothing to do with that portion of the variable capital which is advanced for a time in which it is not employed. Hence it has nothing to do, in the case of different capitals, with the ratio, determined and differentiated by the period of turn-over, of that portion of capital which is advanced for a definite time and that portion which is employed in the same time.

The essential result of the preceding analysis is that the annual rate of surplus-value coincides only in one single case with the current rate of surplus-value which expresses the intensity of exploitation, namely in the case that the advanced capital is turned over only once a year, so that the capital advanced is equal to the capital turned over in the course of the year, so that the ratio of the quantity of surplus-value produced during the year to the capital employed during the year in this production coincides with and is identical with the ratio of the quantity of surplus-value produced during the year to the capital advanced during the year.

(A) The annual rate of surplus-value is equal to
(the Quantity of Surplus-Value Produced during the Year)/(Variable Capital Advanced)

But the quantity of the surplus-value produced during the year is equal to the current rate of surplus-value multiplied by the variable capital employed in its production. The capital employed in the production of the annual quantity of surplus-value is equal to the advanced capital multiplied by the number of its turn-overs, which we shall call n in the present case. Substituting these terms in formula (A) we obtain:

(B) The annual rate of surplus-value is equal to the
(Cur. Rate of Surpl.Val. mltpl.b. the Var.Cap. Adv. mltpl. b n)/(Var. Cap. Adv.)

For instance, in the case of capital B, we should have

(100 times 5000 times 1)/5000, or 100%.

Only when n is equal to 1, that is to say when the variable capital advanced is turned over once a year, so that it is equal to the capital employed or turned over, the annual rate of surplus-value is equal to the current rate of surplus-value.

Let us call the annual rate of surplus-value S', the current rate of surplus-value s', the advanced variable capital v, the number of turn-overs n. Then

S' is equal to s'vn/v, or s'n.

In other words, S' is equal to s'n, and it is equal to s' only when n is 1, so that then S' is s' times 1, or s'.

It follows furthermore that the annual rate of surplus-value is always equal to s'n, that is to say, always equal to the current rate of surplus-value produced in one period of turn-over by the variable capital consumed during that period multiplied by the number of turn-overs of this variable capital during one year, or, what amounts to the same, multiplied with its inverted time of turn-over calculated for one year. (If the variable capital is turned over ten times per year, then its time of turn-over is 1-10 year, its inverted time of turn-over therefore 10-1 year, or 10 years.)

We have seen that S' is equal to s', when n is 1. S' is greater than s', when n is greater than 1, that is to say, when the advanced capital is turned over more than once a year, or the turned-over capital is greater than the capital advanced.

Finally, S' is smaller than s', when n is smaller than 1, that is to say, when the capital turned over during one year is only a part of the advanced capital, so that the period of turn-over is longer than one year.

Let us linger a moment over this last case.

We retain all the premises of our former illustration, only the period of turn-over is to be 55 weeks instead of 50 weeks. The labor-process requires a variable capital of 100 p. st. per week, so that 5500 p. st. are needed for the period of turn-over, and every week 100 s is produced, s' is, therefore, smaller than 100%. Indeed, if the annual rate turn-overs, n, is then 50/55 or 10/11, because the time of turn-over is 1 plus 1-10 year (of 50 weeks), or 11-10 year.

S' is equal to

(100% times 5500 times 10-11)/5500

equal to 100 times 10-11, or 1000-11, or 90 10-11%. It is, therefore, smaller than 100%. Indeed, if the annual rate of surplus-value were 100%, then 5500 v would have to produce 5500 s, while 11-10 years are required for that. The 5500 v produce only 5000 s during one year, therefore the annual rate of surplus-value is (5000 s)/(5500 v), or 10-11, or 90 10-11%.

The annual rate of surplus-value, or the comparison between the surplus-value produced during one year and the variable capital advanced (as distinguished from the variable capital turned over during one year), is therefore not merely a subjective matter, but the actual movement of capital causes this juxtaposition. So far as the owner of capital A is concerned, his advanced variable capital of 500 has returned to him at the end of the year, and it has produced 5000 p. st. of surplus-value in addition. It is not the quantity of capital employed by him during the year, but the quantity returning to him periodically, that expresses the magnitude of his advanced capital. It is immaterial for the present question, whether the capital exists at the end of the year partly in the form of a productive supply, or partly in that of money or commodity-capital, and what may be the proportions of these different parts. On the other hand, so far as the owner of capital B is concerned, his advanced capital of 5000 p. st. has returned to him, with an additional surplus-value of 5000 p. st. And as for the owner of capital C (the last mentioned 5500 p. st.), surplus-value to the amount of 5000 p. st. has been produced for him (advanced 5000 p. st., rate of surplus-value 100%), but his advanced capital has not yet returned to him nor has he pocketed his surplus-value.

The formula S' equal to s'n indicates that the rate of surplus-value in force for the employed variable capital, to wit,

(Quantity of S.-V. produced in one Period of T.-O.)/(Var. Cap employed in one Period of T.-O.)

must be multiplied with the number of periods of turn-over, or of the periods of reproduction of the advanced variable capital, that number of periods in which it renews its cycle.

We have seen already in volume I, chapter IV (The Transformation of Money into Capital), and furthermore in volume I, chapter XXIII (Simple Reproduction), that the capital value is not all spent, but advanced, as this value, having passed through the various phases of its cycle, returns to its point of departure, enriched by surplus-value. This fact shows that it has been merely advanced. The time consumed from the moment of its departure to the moment of its return is the one for which it was advanced. The entire rotation of capital-value, measured by the time from its advance to its return, constitutes its turn-over, and the duration of this turn-over is a period of turn-over. When this period has elapsed and the cycle is completed, the same capital-value can renew the same rotation, can expand itself some more, create some more surplus-value. If the variable capital is turned over ten times in one year, as in the case of capital A, then the same advance of capital creates in the course of one year, ten times the quantity of surplus-value created in one period of turn-over.

One must come to a clear conception of the nature of this advance from the standpoint of capitalist society.

Capital A, which is turned over ten times in one year, is advanced ten times during one year. It is advanced anew for every new period of turn-over. But at the same time, A never advances more than this same capital-value of 500 p. st., and disposes never of more than these 500 p. st. for the productive process considered by us. As soon as these 500 p. st. have completed one cycle, A starts them once more on the same cycle. In short, capital by its very nature preserves its character as capital only by means of continued service in successive processes of production. In the present case, it was never advanced for more than 5 weeks. If the turn-over lasts longer, this capital is inadequate. If the turn-over is contracted, a portion of this capital is released. Not ten capitals of 500 p. st. are advanced, but one capital of 500 p. st. is advanced ten times in successive intervals. The annual rate of surplus-value is, therefore, not calculated on ten advances of a capital of 500 p. st., not on 5000 p. st., but on one advance of a capital of 500 p. st. It is the same in the case of one dollar which circulates ten times and yet represents never more than one single dollar in circulation, although it performs the function of 10 dollars. But in the hand, which holds it after each change of hands, it remains the same value of one dollar as before.

Just so the capital A indicates at each successive return, and likewise at its return at the end of the year that its owner has operated always with the same capital-value of 500 p. st. Hence only 500 p. st. flow back into his hand at each turn-over. His advanced capital is never more than 500 p. st. Hence the advanced capital represents the denominator of the fraction which expresses the annual rate of surplus-value. We had for it the formula

S' equal to s'vn/v, or s'n.

As the current rate of surplus-value, s', is equal to s/v, equal to the quantity of surplus-value divided by the variable capital which produced it, we may substitute the value of s' in s'n, that is to say s/v, in our formula, thus making it

S' equal to sn/v.

But by its tenfold turn-over, and thus the tenfold renewal of its advance, the capital of 500 p. st. performs the function of a ten times larger capital, of a capital of 5000 p. st., just as 500 dollar coins, which circulate ten times per year, perform the same function as 1000 dollar coins which circulate once a year.

II. THE TURN-OVER OF THE INDIVIDUAL VARIABLE CAPITAL.

"Whatever the form of the process of production in a society, it must be a continuous process, must continue to go periodically through the same phases...When viewed, therefore, as a connected whole, and as flowing on with incessant renewal, every social process of production is, at the same time, a process of reproduction...As a periodic increment of the capital advanced, or periodic fruit of capital in process, surplus-value acquires the form of a revenue flowing out of capital." (Volume I, chapter XXIII, pages 619, 620.)

In the case of capital A, we have 10 periods of turn-over of 5 weeks each. In the first period of turn-over, 500 p. st. of variable capital are advanced, that is to say, 100 p. st. are converted into labor-power every week, so that 500 p. st., have been converted into labor power at the end of the first period of turn-over. These 500 p. st., originally a part of the total capital advanced, have then ceased to be capital. They are paid out in wages. The laborers in their turn pay them out in the purchase of means of subsistence, consuming subsistence to the amount of 500 p. st. A quantity of commodities of that value is therefore annihilated (what the laborer may save up in money, etc., is not capital). This quantity of commodities has been consumed unproductively from the standpoint of the laborer, except in so far as it preserves his labor-power, an indispensable instrument of the capitalist. In the second place, these 500 p. st. have been converted, from the standpoint of the capitalist, into labor-power of the same value (or price). Labor-power is consumed by him productively in the labor-process. At the end of 5 weeks, a product valued at 1,000 p. st. has been created. Half of this, or 500 p. st., is the reproduced value of the variable capital paid out for wages. The other half, or 500 p. st., is newly produced surplus-value. But 5 weeks of labor-power, by the consumption of which a portion of a capital was transformed into variable capital, is likewise expended, consumed, although productively. The labor which was active yesterday is not the one which is active today. Its value, together with that of the surplus-value created by it, exists now as the value of a thing separate from labor-power, to wit, a product. But by converting the product into money, that portion of it, which is equal to the value of the variable capital advanced, may once more be transformed into labor-power and thus perform again the functions of variable capital. It is immaterial that the same laborers, that is to say, the same bearers of the labor-power may be employed not only with the reproduced, but also with the reconverted capital-value in the form of money. It might be possible that the capitalist might hire different laborers for the second period of turn-over.

It is, therefore, a fact that a capital of 5,000, and not of 500 p. st., is paid out for labor-power in the ten periods of turn-over of 5 weeks each. The capital of 5,000 p. st. so advanced is consumed. It does not exist any more. On the other hand, labor-power to the value of 5,000, not of 500, p. st. is incorporated successively in the productive process and reproduces not only its own value of 5,000 p. st., but also a surplus value of 5,000 p. st. over and above its value. The variable capital of 500 p. st., which is advanced for the second period of turn-over, is not the identical capital of 500 p. st., which had been advanced for the first period of turn-over. This has been consumed, expended in labor-power. But it is replaced by new variable capital of 500 p. st., which was produced in the first period of turn-over in the form of commodities and reconverted into money. This new money-capital is, therefore, the money-form of the quantity of commodities newly produced in the first period of turn-over. The fact that an identical sum of 500 p. st. is again in the hands of the capitalist, apart from the surplus-value, a sum equal to the one which he had originally advanced, disguises the circumstance that he now operates with a newly produced capital. (As for the other constituents of value of the commodity-capital, which replace the constant parts of capital, their value is not newly produced, but only the form is changed in which this value exists.) Let us take the third period of turn-over. Here it is evident that the capital of 500 p. st., advanced for a third time, is not an old, but a newly produced capital, for it is the money-form of the quantity of commodities produced in the second, not in the first, period of turn-over that is to say, of that portion of this quantity of commodities, whose value is equal to that of the advanced variable capital. The quantity of commodities produced in the first period of turn-over is sold. Its value, to the extent that it was equal to the variable portion of the value of the advanced capital, was transformed into the new labor-power of the second period of turn-over and produced a new quantity of commodities, which were sold in their turn and a portion of whose value constitutes the capital of 500 p. st. advanced for the third period of turn-over.

And so forth during the ten periods of turn-over. In the course of these, newly produced quantities of commodities are thrown upon the market every 5 weeks, in order to incorporate ever new labor-power in the progress of production. (The value of these commodities, to the extent that it replaces variable capital, is likewise newly produced, and does not merely appear so, as in the case of the constant circulating capital.)

That which is accomplished by the tenfold turn-over of the advanced variable capital of 500 p. st., is not that this capital can be productively consumed ten times, nor that a capital lasting for 5 weeks can be employed for 50 weeks. Ten times 500 p. st. of variable capital are rather employed in those 50 weeks, and the capital of 500 p. st. lasts only for 5 weeks at a time and must be replaced at the end of the 5 weeks by a newly produced capital of 500 p. st. This applies equally to capital A and B. But at this point, the difference begins.

At the end of the first period of 5 weeks, a variable capital of 500 p. st. has been advanced and expended by both capitalists A and B. Both B and A have transformed its value into labor-power and replaced it by that portion of the value of the new product created by this labor-power which is equal to the value of the advanced variable capital of 500 p. st. And for both B and A, the labor-power has not only reproduced the value of the expended variable capital of 500 p. st. by a new value of the same amount, but also added a surplus-value, which, according to our assumption, is of the same magnitude.

But in the case of B, the product which replaces the advanced variable capital and adds a surplus-value to it, is not in the form in which it can serve once more as a productive, or a variable, capital. On the other hand, it is in such a form in the case of A. B, however, does not possess the variable capital consumed in the first 5 and every subsequent 5 weeks up to the end of the year, although it has been reproduced by newly created value with a superadded surplus-value, in the form in which it may once more perform the function of productive, or variable, capital. Its value is indeed replaced, or reproduced, by new value, but the form of its value (in this case the absolute form of value, its money-form) is not reproduced.

For the second period of 5 weeks (and so forth for every succeeding 5 weeks of the year), 500 p. st. must again be available, the same as for the first period. Making exception of the conditions of credit, 5,000 p. st. must, therefore, be available at the beginning of the year as a latent advanced capital, although they are expended only gradually for labor-power in the course of the year.

But in the case of A, the cycle, the turn-over of the advanced capital, being completed, the reproduced value is after the lapse of 5 weeks in the precise form in which it may set new labor-power in motion for another term of 5 weeks, in its original money-form.

Both A and B consume new labor-power in the second period of 5 weeks and expend a new capital of 500 p. st. for the payment of this labor-power. The means of subsistence of the laborer paid with the first 500 p. st. are gone, their value has in every case disappeared from the hands of the capitalist. With the second 500 p. st., new labor-power is bought, new means of subsistence withdrawn from the market. In short, it is a new capital of 500 p. st. which is expended, not the old. But in the case of A, this new capital of 500 p. st. is the money-form of the newly produced substitute for the value of the formerly expended 500 p. st.; while in the case of B, this substitute is in a form, in which it cannot serve as variable capital. It is there but not in the form of variable capital. For the continuation of the process of production for the next 5 weeks, an additional capital of 500 p. st. must, therefore, be available in the form of money, which is indispensable in this case, and must be advanced. Thus both A and B expend an equal amount of variable capital, pay for and consume an equal quantity of labor-power, during 50 weeks. Only, B must pay for it with an advanced capital equal to its total value of 5,000 p. st., while A pays for it successively by the ever renewed money-form of the substitute produced in every 5 weeks for the capital of 500 p. st. advanced for every 5 weeks. In no case more capital is advanced by A than is required for 5 weeks, that is to say, 500 p. st. These 500 p. st. last for the entire year. It is, therefore, evident that, the intensity of exploitation and the current rate of surplus-value being the same for the two capitals, the annual rates of A and B must hold an inverse ratio to one another than the magnitudes of the variable money-capitals, which had to be advanced in order to set in motion the same quantity of labor-power during the year. The rate of A is as 5,000 s to 500 v, or 1,000%; that of B is as 5,000 s to 5,000 v, or 100%. But 500 v is to 5,000 v as 1 to 10, or as 100% to 1,000%.

The difference is due to the difference of the periods of turnover, that is to say, to the period in which the substitute for the value of a certain variable capital employed for a certain time can renew its function of capital, can serve as a new capital. In the case of both B and A, the same reproduction of value of the variable capital employed during the same periods take place. There is also the same increment of surplus-value during the same periods. But in the case of B, while there is every 5 weeks a reproduction of the value of 500 p. st. and a surplus-value of 500 p. st., these values do not yet make a new capital, because they are not in the form of money. In the case of A, on the other hand, the value of the old capital is not only reproduced by a new value, but it is rehabilitated in its money-form, so that it may at once assume the functions of a new capital.

So far as the mere production of surplus-value is concerned, the rapid or slow transformation of the substitute for the value advanced into money, and thus into the form in which the variable capital is advanced, is an insignificant circumstance. This production depends on the magnitude of the employed variable capital and the intensity of exploitation. But the more or less rapid transformation referred to does modify the magnitude of the money-capital which must be advanced in order to set a definite quantity of labor-power in motion during the year, and therefore it determines the annual rate of surplus-value.

III. THE TURN-OVER OF THE VARIABLE CAPITAL, CONSIDERED FROM THE POINT OF VIEW OF SOCIETY.

Let us look for a moment at this matter from the point of view of society. Let the wages of one laborer be 1 p. st. per week, the working day 10 hours. Both A and B employ 100 laborers per week (100 p. st. for 100 laborers per week, or 500 p. st. for 5 weeks, or 5,000 p. st. for 50 weeks), and each one of them works 60 hours per week of 6 days. Then 100 laborers work 6,000 hours per week, and 300,000 hours in 50 weeks. This labor-power is engaged by A and B, and cannot be expended by society for anything else. To this extent, the matter is the same socially that it is in the case of A and B. Furthermore: Both A and B pay their respective 100 laborers 5,000 p. st. in wages per year (or together for 200 laborers 10,000 p. st.) and withdraw from society means of subsistence to that amount. So far, the matter is socially likewise the same as in the case of A and B. Since the laborers in either case are paid by the week, they weekly withdraw their means of subsistence from society and throw in either case a weekly equivalent in money into the circulation. But here the difference begins.

First. The money, which the laborer of A throws into the circulation, is not only, as it is for the laborer of B, the money-form for the value of the labor-power (an actual payment for labor already performed); it is also, beginning with the second period of turn-over since the opening of the business, the money form of the value of his own product (price of labor-power plus surplus-value) created during the first period of turn-over, by which his labor during the second period of turn-over is paid. This is not the case with the laborer of B. The money is here indeed a medium of payment for labor already performed by the laborer, but this labor is not paid for with its own product turned into money (the money-form of the value produced by itself). This cannot be done until the beginning of the second year, when the laborer of B is paid with the money-form of the value of his product of the preceding year.

The shorter the period of turn-over of capital—the shorter, therefore, the intervals in which the periods of reproduction are renewed—the quicker is the variable portion of the capital, advanced by the capitalist in the form of money, transformed into the money-form of the product (including surplus-value) created by the laborer in place of the variable capital; the shorter is the time for which the capitalist must advance money out of his own funds, the smaller is the capital advanced by him compared to the given scale of production; and the greater is the proportionate quantity of surplus-value which he realizes with a given rate of surplus-value during the year, because he can buy the laborer so much more frequently with the money-form of the product created by the labor of that laborer and set his labor into motion.

Given the scale of production, the absolute magnitude of the advanced variable capital (and of the circulating capital in general) decreases in proportion as the period of turn-over is shortened, and so does the annual rate of surplus-value increase. Given the magnitude of the advanced capital, and the rate of surplus-value, the scale of production and the absolute quantity of surplus-value created in one period of turnover increases simultaneously with the rise in the annual rate of surplus-value due to the contraction of the periods of reproduction. It follows in general from the preceding analysis that, according to the different length of the periods of turn-over, money-capital of considerably different quantity must be advanced, in order to set in motion the same quantity of productive circulating capital and the same quantity of labor-power with the same intensity of exploitation.

Second. It is due to the first difference, that the laborers of B and A pay for the means of subsistence which they buy with the variable capital that has been transformed into a medium of circulation in their hands. For instance, they do not only withdraw wheat from the market, but also leave in its place an equivalent in money. But since the money, with which the laborer of B pays for his means of subsistence and draws them from the market is not the money-form of the value of a product which he has thrown on the market during the year, as it is in the case of the laborer of A, he supplies the seller of his means of subsistence only with money, but not with products—be they materials of production or means of subsistence—which this seller might buy with the money received from the laborer, as he may in the case of the laborer of A. The market is therefore stripped of labor-power, means of subsistence for this labor-power, fixed capital, in the form of instruments of production used by B, and materials of production, and an equivalent in money is thrown on the market in their place, but no product is thrown on the market during the year by which the material elements of productive capital withdrawn from it might be replaced. If we assumed that society were not capitalistic, but communistic, then the money-capital would be entirely eliminated, and with it the disguises which it carries into the transactions. The question is then simply reduced to the problem that society must calculate beforehand how much labor, means of production, and means of subsistence it can utilize without injury for such lines of activity as, for instance, the building of railroads, which do not furnish any means of production or subsistence, or any useful thing, for a long time, a year or more, while they require labor, and means of production and subsistence out of the annual social production. But in capitalist society, where social intelligence does not act until after the fact, great disturbances will and must occur under these circumstances. On one hand there is a pressure on the money-market, while on the other an easy money-market creates just such enterprises in mass, that bring about the very circumstances by which a pressure is later on exerted on the market. A pressure is exerted on the money-market, since an advance of money-capital for long terms is always required on a large scale. And this is so quite apart from the fact that industrials and merchants invest the money-capital needed for the carrying on of their business in railroad speculation, etc., and reimburse themselves by borrowing in the money-market. On the other hand, there is a pressure on the available productive capital of society. Since elements of productive capital are continually withdrawn from the market and only an equivalent in money is thrown on the market in their place, the demand of cash payers for products increases without supplying any elements for purchase. Hence a rise in prices, of means of production and of subsistence. To make matters worse, swindling operations are always carried on at this time, involving a transfer of great capitals. A band of speculators, contractors, engineers, lawyers, etc., enrich themselves. They create a strong demand for consumption on the market, wages rising at the same time. So far as means of subsistence are concerned, it is true that agriculture is thus stimulated. But as these means of subsistence cannot be suddenly increased within the year, their importation increases, as does the importation of exotic food stuffs, such as coffee, sugar, wine, and articles of luxury. Hence we then have a surplus importation and speculation in this line of imports. Furthermore, in those lines of business in which production may be rapidly increased, such as manufacture proper, mining, etc., the rise in prices causes a sudden expansion, which is soon followed by a collapse. The same effect is produced on the labor-market, where large numbers of the latent relative over-population, and even of the employed laborers, are attracted toward the new lines of business. In general, such enterprises on a large scale as railroad building withdraw a certain quantity of labor-powers from the labor-market, which can come only from such lines of business as agriculture, etc., where strong men are needed. This still continues even after the new enterprises have become established lines of business and the wandering class of laborers needed for them has already been formed. A case in point is the temporary increase in the scale of business of railroads beyond the normal. A portion of the reserve army of laborers who kept wages down is absorbed. Wages rise everywhere, even in the hitherto engaged parts of the labor-market. This lasts until the inevitable crash throws the reserve army of labor out of work, and wages are once more depressed to their minimum or below it.33

To the extent that the greater or smaller length of the period of turn-over depends on the working period, strictly so called, that is to say on the period which is required to get the product ready for the market, it rests on the existing material conditions of production of the various investments of capital. In agriculture, they partake more of the character of natural conditions of production, in manufacture and the greater part of the extractive industry they vary with the social development of the process of production itself.

Furthermore, to the extent that the length of the working period is conditioned on the size of the orders (the quantitative volume in which the product is generally thrown upon the market), this point depends on conventions. But convention itself depends for its material basis on the scale of production, and it is accidental only when considered individually.

Finally, so far as the length of the period of turn-over depends on that of the period of circulation, the latter is, indeed, conditioned on the incessant change of market combinations, the greater or smaller ease of selling, and the resulting necessity to throw a part of the product to more or less remote markets. Apart from the volume of the general demand, the movement of prices plays here one of the main roles, since sales are intentionally restricted when prices are falling, while production proceeds; vice versa, production and sale keep step, when prices are rising, and sales may even be made in advance. But we must consider the actual distance of the place of production from the market as the real material basis.

For instance, English cotton goods or yarn are sold to India. The export merchant may pay the English cotton manufacturer. (The export merchant does so willingly only when the money-market stands well. If the manufacturer replaces his money-capital by operating credit on his own part, matters are already in a bad state). The exporter sells his cotton goods later in the Indian market, whence his advanced capital is returned to him. Until the time of this return the case is identical with the one in which the length of the working period necessitates the advance of new money-capital, in order to maintain the process of production on a certain scale. The money-capital with which the manufacturer pays his laborers and renews the other elements of his circulating capital, is not the money-form of the yarn produced by him. This cannot be the case until the value of this yarn has returned to England in the form of money or products. It is additional capital as before. The difference is only that it is advanced by the merchant instead of the manufacturer, and that it reaches the merchant by means of manipulations of credit. Furthermore, before this money is thrown on the market, or simultaneously with it, no additional product has been thrown on the English market, to be bought with this money and to be consumed productively or individually. If this condition occurs for a long period on a large scale, it must cause the same effects as a prolongation of the working period, previously mentioned.

Now it may be that the yarn is sold even in India on credit. With this credit, products are bought in India and sent back to England, or drafts are remitted to this amount. If this condition is prolonged, there is a pressure on the Indian money-market, and its reaction may cause a crisis in England. This crisis, even if combined with an export of precious metals to India, causes a new crisis in that country on account of the bankruptcy of English business houses and their Indian branch houses, who had received credit from the Indian banks. Thus a crisis occurs simultaneously on the market which is credited with the balance of trade and on the one which is charged with it. This phenomenon may be still more complicated. Take it, for instance that England has sent silver ingots to India, but the English creditors of India now collect their debts in that country, and India will soon after have reshipped its silver ingots to England.

It is possible that the export trade to India and the import trade from India might approximately balance one another, although the imports (with the exception of peculiar circumstances, such as arise in the price of cotton), will be determined as to their volume and stimulated by the export trade. The balance of trade between England and India may seem to be squared, or may show but slight fluctuations on either side. But as soon as the crisis appears in England it is seen that unsold cotton goods are stored in India (and have not been transformed from commodity capital into money-capital—an overproduction to this extent), and that, on the other hand, there are in England not only unsold supplies of Indian goods, but that a considerable portion of the sold and consumed goods is not yet paid for. Hence, that which appears as a crisis on the money-market, is in reality an expression of abnormal conditions in the process of production and reproduction.

Third. So far as the employed circulating capital (constant and variable) is concerned, the length of the period of turn-over, to the extent that it is due to the working period, makes this difference: In the case of several turn-overs during one year, an element of the variable or constant circulating capital may be supplied by its own product, for instance in the production of coal, the tailoring business, etc. Otherwise, this cannot take place, at least not within the same year.

Part II, Chapter XVII
THE CIRCULATION OF SURPLUS-VALUE.

We have just seen that a difference in the period of turn-over causes a difference in the annual rate of surplus-value, even if the quantity of the annually produced surplus-value is the same.

But there is furthermore necessarily a difference in the capitalization of surplus-value, the accumulation, and to that extent also in the quantity of surplus-value produced during the year, while the rate of surplus-value remains the same.

To begin with, we remark that capital A (in the illustration of the preceding chapter) has a current periodical revenue, so that with the exception of the period of turn-over beginning the business, it pays for its own consumption within the year out of its production of surplus-value, and need not cover it by advances out of its own funds. But B has to do this. While he produces as much surplus-value in the same time as A, he does not realize on it and cannot consume it either productively or individually. So far as individual consumption is concerned, the surplus-value is discounted in advance. Funds for that purpose must be advanced.

One portion of the productive capital, which is difficult to classify, namely the additional capital required for the repair and maintenance of the fixed capital, is now likewise seen in a new light.

In the case of A, this portion of capital—in full or for the greater part—is not advanced at the beginning of production. It need not be available, or even in existence. It comes out of the business itself by a direct transformation of surplus-value into capital by its direct employment as capital. One portion of the surplus-value which is not only periodically produced but also realized may cover the expenditures required for repairs, etc. A portion of the capital needed for carrying on the business on its original scale is thus produced in the course of business by the business itself by means of capitalization of a portion of surplus-value. This is impossible for the capitalist B. This portion of capital must in his case form a part of the capital originally advanced. In both cases this portion will figure in the books of the capitalists as an advanced capital, which it really is, since according to our assumption it is a part of the productive capital required for maintaining the business on a certain scale. But it makes a great difference out of which funds it is advanced. In the case of B, it is actually a part of the capital to be originally advanced or held available. On the other hand, in the case of A, it is a part of the surplus-value, if used as capital. This last case shows that not only the accumulated capital, but also a portion of the originally advanced capital, may be capitalized surplus-value.

As soon as the development of credit interferes, the relation between originally advanced capital and capitalized surplus-value is still more complicated. For instance, A borrows a portion of the productive capital, with which he starts his business and continues it during the year, from banker C, not having sufficient capital of his own for this purpose. Banker C lends him the required sum, which consists only of surplus-value deposited with the banker by capitalists D; E, F, etc. From the standpoint of A, there is as yet no question of any accumulated surplus-value. But from the point of view of D, E, F, etc., A is merely their agent capitalizing surplus-value appropriated by them.

We have seen in volume I, chapter XXIV, that accumulation, the conversion of surplus-value into capital, is substantially a process of reproduction on an enlarged scale, no matter whether this expansion is expressed extensively in the form of an addition of new factories to the old ones, or intensively by the expansion of the existing scale of production.

The expansion of the scale of production may proceed in small portions, a part of the surplus-value being used for improvements which either increase simply the productive power of the labor employed, or permit at the same time of its more intensive exploitation. Or, in places where the working day is not legally restricted, an additional expenditure of circulating capital (in materials of production and wages) suffices to expand production without an extension of the fixed capital, whose daily time of employment is thus merely lengthened, while its period of turn-over is correspondingly abbreviated. Or, capitalized surplus-value may, under favorable market combinations, permit of speculation in raw materials, an operation for which the capital originally advanced would not have been sufficient, etc.

However, it is evident that in cases, where the greater number of the periods of turn-over carries with it a more frequent realization of surplus-value within the year, there will be periods, in which there can be neither a prolongation of the working day, nor an introduction of improvements in details, while, on the other hand, there is only a limited scope in which it is possible to expand the entire business on a proportional scale, partly, by a reorganization of the entire plan of business, buildings, etc., partly by an expansion of the funds for labor, as in agriculture, and a volume of additional capital is required, such as can be supplied only by several years of accumulation of surplus-value.

Along with the actual accumulation, or conversion of surplus-value into productive capital, (and a corresponding reproduction on an enlarged scale), there is, then, an accumulation of money, a hoarding of a portion of the surplus-value in the form of latent money-capital, which is not intended for service as additional productive capital until later.

This is the aspect of the matter from the point of view of the individual capitalist. But simultaneously with the development of capitalist production, the credit system also develops. The money-capital, which the capitalist cannot as yet employ in his own business, is employed by others, who pay him an interest for its use. It serves for him as money-capital in its specific meaning, that is to say as a kind of capital distinguished from productive. But it serves as capital in another's hands. It is plain, that, with the more frequent realization of surplus-value and the rising scale on which it is produced, there must also be an increase in the proportion of new money-capital, or money in the form of capital, thrown upon the money-market and withdrawn from it for the purpose of expanding production.

The simplest form, in which the additional latent money-capital may be represented, is that of a hoard. It may be that this hoard is additional money or silver, secured directly or indirectly in exchange with countries producing precious metals. And only in this manner does the hoarded money in a country grow absolutely. On the other hand, it may be—and is so in the majority of cases—that this hoard is nothing but money withdrawn from inland circulation and has assumed the form of a hoard in the hands of individual capitalists. It is furthermore possible that this latent money-capital consists only of tokens of value—we ignore credit money at this point—or of mere claims (titles) on third persons conferred by legal documents. In all such cases, whatever may be the form of this additional money-capital, it represents, so far as it is prospective capital, nothing but additional and reserved legal titles of capitalists on future additional products of society.

"The mass of the actually accumulated wealth, considered as to magnitude,...is absolutely insignificant compared to the productive forces of society to which it belongs, whatever may be its stage of civilization; or even compared to the actual consumption of this same society in the course of but a few years; so insignificant, that the attention of the legislators and political economists should be mainly directed to the forces of production and their free development in the future, not, as heretofore, to the mere accumulated wealth which strikes the eye. By far the greater part of the so-called accumulated wealth is only nominal and does not consist of actual objects, such as ships, houses, cotton goods, real estate improvements, but of mere legal titles, claims on the future annual productive forces of society titles generated and perpetuated by the devices or institutions of insecurity...The use of such articles (accumulations of physical things, or actual wealth) as a mere means of appropriating for their owners a wealth which the future productive forces of society are as yet to create, this use would be gradually withdrawn from them without any force by the natural laws of distribution; with the assistance of co-operative labor, it would be withdrawn from them within a few years." (William Thompson, Inquiry into the Principles of the Distribution of Wealth, London, 1850, page 453. This book appeared for the first time in 1827.)

"It is little understood, nor even suspected by most people, what an utterly insignificant portion, whether it be in quantity or effectiveness, the actual accumulations of society constitute of the human productive forces, yea, even of the ordinary consumption of a single generation of men during a few years. The reason for this is obvious, but the effect is very injurious. The wealth which is consumed annually, disappears as it is being used; it stands before the eye only for a moment, and makes an impression only while it is enjoyed or consumed. But the slowly consumable portion of wealth, furniture, machines, buildings, from our childhood to our age they are standing before our eyes, lasting monuments of human exertion. By virtue of the ownership of this fixed, lasting, slowly consumed portion of public wealth—of the soil and the raw materials on which, the instruments with which, work is done, the houses which give shelter while the work is being done—by virtue of this ownership the owners of these objects control for their own advantage the annual productive forces of all really productive laborers of society, insignificant as those objects may be in proportion to the ever recurring products of this labor. The population of Great Britain and Ireland is 20 millions; the average consumption of every man, woman, and child is about 20 p. st., making a total wealth of 400 million p. st., the product of labor annually consumed. The total amount of the accumulated capital of those countries does not exceed, according to estimates, 1,200 million p. st., or thrice the annual product of labor; if equally divided, 60 p. st. of capital per capita. We have here to deal more with the proportion than with the more or less inaccurate absolute amounts of these estimated sums. The interest on this total capital would suffice to maintain the total population in its present style of living for about two months of one year, and the entire accumulated capital (if buyers could be found for it) would maintain them without labor for a whole three years! At the end of which time, without houses, clothing, and food, they would have to starve, or become the slaves of those who have maintained them during these three years. As three years are to the life time of one healthy generation, say to 40 years, so the magnitude and importance of the actual wealth, the accumulated capital of even the richest country, is to its productive forces, to the productive forces of a single human generation; not to what they might really produce under intelligent institutions of equal security, and especially with co-operative labor, but to what they are actually producing under the imperfect and discouraging makeshifts of insecurity.... And in order to maintain this apparently tremendous mass of existing capital, or rather the control and monopoly of the annual product of labor in its present condition of compulsory division this entire machinery the vices, the crimes, the sufferings of insecurity, are to be perpetuated. Nothing can be accumulated, unless the necessary wants are first satisfied, and the great current of human desires flows after enjoyment; hence the comparatively insignificant amount of actual wealth of society at any given moment. It is an eternal circulation of production and consumption. In this immense mass of annual production and consumption, the handful of actual accumulation would hardly be missed, and yet attention has been mainly directed, not to that mass of productive forces, but to this handful of accumulation. But this handful has been appropriated by a few, and transformed into an instrument for the appropriation of the ever recurring annual products of the labor of the great masses. Hence the vital importance of such an instrument for these few.... About one-third of the annual national product is now taken from the producers under the name of public taxes, and unproductively consumed by people that do not give any equivalent for it, that is to say, none that is accepted as such by the producer.... The eye of the crowd looks with astonishment upon the accumulated masses, especially when they are concentrated in the hands of a few. But the annually produced masses, like the eternal and innumerable waves af a mighty stream, roll by and are lost in the forgotten ocean of consumption. And yet this eternal consumption determines not alone all enjoyments, but the very existence of the human race. The quantity and distribution of this annual product should above all be made the object of study. The actual accumulation is of secondary importance, and receives even this importance almost exclusively by its influence on the distribution of the annual product...The actual accumulation and distribution is here (in Thompson's work) always considered in reference and subordination to the productive forces. In almost all other systems, the productive forces have been considered with reference and in subordination to accumulation and to the perpetuation of existing mode of distribution. Compared with the conservation of this existing mode of distribution, the ever recurring suffering or welfare of the entire human race is not considered worthy of a glance. To perpetuate the results of force, of fraud, and of accident, this has been called security, and for conservation of this lying security, all the forces of production of the human race have been mercilessly sacrificed." (Ibidem, pages, 440-443.)

For the reproduction, only two normal cases are possible, apart from disturbances, which interfere with reproduction even on a given scale.

There is either reproduction on a simple scale.

Or, there is a capitalization of a surplus-value, accumulation.

I. SIMPLE REPRODUCTION.

In the case of simple reproduction, the surplus-value produced or realized annually, or by several turn-overs during the year, is consumed individually, that is to say unproductively, by its owner, the capitalist.

The fact that the value of the product consists in part of surplus-value, in part of that portion of value which is formed by the variable capital reproduced through it plus the constant capital consumed by it, does not alter anything, either in the quantity, or in the value of the total product, which continually passes into circulation and is just as continually withdrawn from it, in order to pass into productive or individual consumption, that is to say, to serve as means of production or consumption. Making exception of the constant capital, only the distribution of the annual product between the laborers and the capitalists is thereby affected.

Even if simple reproduction is assumed, a portion of the surplus-value must, therefore, always exist in the form of money, not of products, because it could otherwise not be converted for purposes of consumption from money into products. This conversion of the surplus-value from its original commodity-form into money must be further analyzed at this place. In order to simplify the matter, we assume the most elementary form of the problem, namely the exclusive circulation of metal coin, of money which is a real equivalent.

According to the laws of the simple circulation of commodities (developed in volume I, chapter III), the mass of the metal coin existing in a country must not only be sufficient for the circulation of the commodities, but must also suffice for the fluctuations of the circulation of money, which arise partly from fluctuations in the velocity of the circulation, partly from a change in the prices of commodities, partly from the various and varying proportions in which the money serves as a medium of payment or as the typical medium of circulation. The proportion in which the existing quantity of money is divided into a hoard and money in circulation, varies continually, but the quantity of money is always equal to the sum of the money hoarded and the money circulating. This quantity of money (quantity of precious metal) is a gradually accumulated hoard of society. To the extent that a portion of this hoard is consumed by wear, it must be replaced annually, the same as any other product. This takes place in reality by a direct or indirect exchange of a part of the annual product of a country for the product of countries producing gold and silver. However, this international character of the transaction disguises its simple course. In order to reduce the problem to its simplest and most transparent expression, it must be assumed that the production of gold and silver takes place in the same country in which the other products are created, so that the production of gold and silver constitutes a part of the total social production within every country.

Apart from the gold and silver produced for articles of luxury, the medium of their annual production must be equal to the wear of metal coin annually occasioned by the circulation of money. Furthermore, if the value of the annually produced and circulating quantity of commodities increases, the annual production of gold and silver must likewise increase, unless the growth of the value of the circulating commodities and the quantity of money required for their circulation (and the corresponding formation of a hoard) is accompanied by a greater velocity in the circulation of money and a more extensive function of money as a medium of payment, that is to say, by a greater mutual balancing of purchases and sales without the intervention of actual money.

A portion of the social labor power and a portion of the social means of production must, therefore, be expended annually in the production of gold and silver.

The capitalists, who are engaged in the production of gold and silver, and who, according to our assumption of simple reproduction, carry on their production only within the limits of the annual average wear and the resulting average consumption of gold and silver, throw their surplus-value, which they consume annually, according to our assumption, without capitalizing any of it, directly into circulation in the form of money, which is the natural form for them, not, as in the case of the other capitalists, the converted form of their product.

Furthermore, as concerns wages, the money form in which the variable capital is advanced, it is not replaced in this case by the sale of the product, by a conversion into money, but by a product whose natural form is from the outset that of money.

Finally, the same applies also to that portion of the product in precious metals which is equal to the value of the periodically consumed constant capital, both the constant circulating and the constant fixed capital consumed during the year.

Let us study the rotation, or the turn-over, of the capital invested in the production of precious metals first in the form of M—C—P—M'. So far as the C in M—C does not only consist of labor-power and materials of production, but also of fixed capital, only a part of whose value is consumed by P, it is evident that the product, M', is a sum of money equal to the variable capital invested in wages plus the circulating constant capital invested in materials of production plus a portion of the value of the fixed constant capital plus a surplus-value. If the sum were smaller, the general value of gold remaining the same, then the mine would be unproductive, or, if this is generally the case, the value of gold, compared with the value of commodities that remains unchanged, would rise; that is to say, the prices of commodities would fall, so that henceforth the amount of money invested in M—C would be smaller.

If we consider at first only the circulating portion of capital advanced in M, the starting point of M—C...P...M', we find that it is a certain sum of money advanced and thrown into circulation for the payment of labor-power and the purchase of materials of production. But this sum is not withdrawn from circulation, by the rotation of this capital, in order to be thrown into it anew. The product is money even in its natural form, there is no need of transforming it into money by means of exchange, by a process of circulation. It passes from the process of production into the process of circulation, not in the form of commodity-capital which has to be converted into money-capital, but as a money-capital which is to be reconverted into productive capital, which is to be fresh labor-power and materials of production. The money-form of the circulating capital consumed in labor-power and materials of production is replaced, not by the sale of the product, but by the natural form of the product itself; not by once more withdrawing its value from circulation in the form of money, but by additional, newly produced money.

Let us assume that this circulating capital is 500 p. st., the period of turn-over is 5 weeks, the working period 4 weeks, the period of circulation only 1 week. From the outset, money must be partly advanced for a productive supply, partly available, for 5 weeks, in order to be paid out gradually for wages. At the beginning of the 6th week, 400 p. st. have flown back and 100 p. st. have been released. This is continually repeated. Here, as in previous cases, 100 p. st. will always find themselves released during a certain time of the turn-over. But they consist of additional, newly produced, money, the same as the other 400 p. st. We have in this case 10 turn-overs per year and the annual product is 5,000 p. st. in gold. (The period of circulation does not arise, in this case, from the time required for the conversion of commodities into money, but for the conversion of money into the elements of production.)

In the case of every other capital of 500 p. st., turned over under the same conditions, it is the ever renewed money-form which is exchanged for the produced commodity capital and thrown into the circulation every 4 weeks and which resumes this form in every new interval by sale, that is to say, by a periodical withdrawal of the quantity of money which entered originally into the process. But here a new additional quantity of money to the amount of 500 p. st. is thrown into circulation by the process of production itself, in order to withdraw from it continually materials of production and labor-power. This money thrown into circulation is not withdrawn from it by the rotation of this capital, but rather continually increased by newly produced quantities of gold.

Let us look at the variable portion of this circulating capital, and assume that it is, as before, 100 p. st. Then these 100 p. st. would be sufficient in the ordinary production of commodities, with 10 turn-overs, to pay continually for the required labor-power. Here, in the production of money, the same amount is likewise sufficient. But the 100 p. st. of the reflux, with which the labor-power is paid every 5 weeks are not a converted form of its product, but a portion of this ever renewed product itself. The producer of gold pays his laborers directly with a portion of the gold produced by them. Thus the 1,000 p. st. invested annually in labor-power and thrown by the laborers into the circulation do not return by the way of this circulation to their starting point.

Furthermore, so far as the fixed capital is concerned, it requires the investment of a large money-capital at the opening of the business, and this capital is thus thrown into the circulation. Like all fixed capital it flows back only piece by piece in the course of years. But it flows back as an immediate portion of the product, of the gold, not by the sale of the product and its consequent monetization. In other words, it receives gradually its money-form, not by a withdrawal of money from circulation, but by an accumulation of a corresponding portion of the product. The money-capital so replaced is not a quantity of money gradually withdrawn from circulation for a compensation of the sum originally thrown into it for fixed capital. It is an additional sum of new money.

Finally, as concerns the surplus-value, it is likewise equal to a certain portion of the new product of gold, which is thrown into circulation in every period of turn-over in order to be unproductively consumed according to our assumption, in means of subsistence and articles of luxury.

But according to our assumption, the entire annual production of gold—which continually withdraws labor-power and materials of production, but no money, from the market, while adding fresh quantities of money to it—replaces only the money worn out during the year, keeps only the quantity of social money complete which exists continually, although it consists in varying portions of the two forms, hoarded money and money in circulation.

According to the law of the circulation of commodities, the quantity of money must be equal to the amount of money required for circulation plus a certain amount held in the form of a hoard, which increases or decreases according to the contraction or expansion of circulation and serves especially for the formation of the reserve funds required as means of payment. That which must be paid in gold—to the extent that there is no balancing of accounts—is the value of the commodities. The fact that a portion of these commodities represents a surplus value, that is to say, did not cost the seller anything, does not alter the matter in any way. Take it that the producers are all independent owners of their means of production, so that circulation takes place between the immediate producers themselves. Apart from the constant portion of their capital, their annual surplus-product might then be divided into two parts, analogous with capitalist conditions: Part a, replacing the necessary means of subsistence, and part b, consumed partly for articles of luxury, partly for an expansion of production. Part a then plays the role of the variable capital, part b that of the surplus-value. But this division would remain without influence on the magnitude of the sum of money required for the circulation of the total product. Other circumstances remaining equal, the value of the circulating mass of commodities would be the same, and thus also the amount of money required for its circulation. The capitalists would also have to keep on hand the same money reserve, the division of the periods of turn-over remaining the same that is to say, the same portion of their capital would have to be held in the form of money, because their production, according to our assumption, would be a production of commodities, the same as before. Hence the fact that a portion of the value of the commodities consists of surplus-value, would change absolutely nothing in the quantity of the money required for the running of the business.

An opponent of Tooke, who clings to the formula M—C—M', asks him how the capitalist manages to always withdraw more money from circulation than he threw into it. Mark well! It is not here a question of the formation of surplus-value. This, the only secret, is a matter of course from the capitalist standpoint. The quantity of value employed would not be capital, if it did not secure an increment of surplus-value. But as it is capital, according to our assumption, there must be surplus-value as a matter of course.

The question, then, is not—where does the surplus-value come from? It is rather: Whence comes the money for which it is exchanged?

But in bourgeois political economy, the existence of surplus-value is self-understood. It is not only assumed, but also connected with the assumption that a portion of the commodities thrown into circulation is a surplus product, which was not thrown into circulation together with the capital of the capitalist. In other words, it is assumed by bourgeois political economists, that the capitalist throws a surplus over and above his capital into the circulation with his product, and that he recovers this surplus from it.

The commodity-capital, which the capitalist throws into the circulation, has a greater value than the productive capital which he withdrew from the circulation in the form of labor-power and means of production (it is neither explained nor understood by the bourgeois economists where this greater value comes from, but it is considered by them as an accomplished fact). On the basis of this assumption it is evident by what means not only the capitalist A, but also B, C, D, etc., manage to always withdraw more value from the circulation by means of the exchange of their commodities than the value of the capital originally and repeatedly advanced by them. A, B, C, D, continually throw a greater value into the circulation in the form of commodity-capital, than they withdraw from it in the form of productive capital—this operation is as manysided as the various independent capitals in action. Hence they have continually to divide among themselves a sum of values (that is to say, every one withdaws from circulation a productive capital) equal to the sum of values of their respective productive capitals; and they furthermore divide among themselves just as continually a sum of values which they all throw into circulation in the form of commodities, representing the excess of the commodity-capital over its elements of production.

But the commodity-capital must be monetized before its conversion into productive capital, or before the surplus-value contained in it can be spent. Where does the money for this purpose come from? This question seems difficult at the first glance, and neither Tooke nor any one else has answered it so far.

The circulating capital of 500 p. st. advanced in the form of money-capital, whatever may be its period of turn-over, may now stand for the total capital of society, that is to say, of the capitalist class. Let the surplus-value be 100 p. st. How can the entire capitalist class manage to draw continually 600 p. st. out of the circulation, when they continually throw only 500 p. st. into it?

After the money-capital of 500 p. st has been converted into productive capital, it transforms itself, within the process of production, into commodities worth 600 p. st. and throws into circulation, not only commodities valued at 500 p. st., equal to the money-capital originally advanced, but also a newly produced surplus-value of 100 p. st.

This additional surplus-value of 100 p. st. is thrown into circulation in the form of commodities. There is no doubt about that. But this same operation does not by any means supply the additional money for the circulation of this new additional value.

It should not be attempted to evade this difficulty by plausible subterfuges.

For instance: So far as the constant circulating capital is concerned, it is obvious that not all invest it simultaneously. While the capitalist A sells his commodities, so that his advanced capital assumes the form of money, there is on the other hand, the available money-capital of the buyer B which assumes the form of his means of production which A is just producing. The same transaction, which restores that of B to its productive form, transforms it from money into materials of production and labor-power; the same amount of money serves in the twosided process as in every simple purchase C—M. On the other hand, when A reconverts his money into means of production, he buys from C, and this man pays B with it, etc., and thus the transaction would be explained.

But none of the laws referring to the quantity of the circulating money, which have been analyzed in the circulation of commodities (volume I, chapter III), are in any way changed by the capitalist character of the process of production.

Hence, when we have said that the circulating capital of society, to be advanced in the form of money, amounts to 500 p. st., we have already accounted for the fact that this is on the one hand the sum simultaneously advanced, and that, on the other hand, it sets in motion more productive capital than 500 p. st., because it serves alternately as the money fund of different productive capitals. This mode of explanation, then, assumes that money as existing whose existence it is called upon to explain.

It might be furthermore said: Capitalist A produces articles which capitalist B consumes unproductively, individually. The money of B therefore monetizes the commodity-capital of A, and thus the same amount serves for the monetization of the surplus-value of B and the circulating constant capital of A. But in that case, the solution of the question to be solved is still more directly assumed, the question: Whence does B get the money for the payment of his revenue? How did he himself monetize this surplus portion of his product?

It might also be answered that that portion of the circulating variable capital, which A continually advances to his laborers, flows back to him continually from the circulation, and only an alternating part stays continually tied up for the payment of wages. But a certain time elapses between the expenditure and the reflux, and mean-while the money paid out for wages might, among other uses, serve for the monetization of surplus-value. But we know, in the first place, that, the greater the time, the greater must be the supply of money which the capitalist A must keep continually in reserve. In the second place, the laborer spends the money, buys commodities for it, and thus monetizes to that extent the surplus-value contained in them. Without penetrating any further into the question at this point, it is sufficient to say that the consumption of the entire capitalist class, and of the unproductive persons dependent upon it, keeps step with that of the laboring class; so that, simultaneously with the money thrown into circulation by the laboring class, the capitalists must throw money into it, in order to spend their surplus-value as revenue. Hence money must be withdrawn from circulation for it. This explanation would merely reduce the quantity of money required, but not do away with it.

Finally, it might be said: A large amount of money is continually thrown into circulation when fixed capital is first invested, and it is not recovered from the circulation until after the lapse of years, by him who threw it into circulation. May not this sum suffice to monetize the surplus-value? The answer to this is that the employment as fixed capital, if not by him who threw it into circulation, then by some one else, is probably implied in the sum of 500 p. st. (which includes the formation of a hoard for needed reserve funds). Besides, it is already assumed in the amount expended for the purchase of products serving as fixed capital, that the surplus-value contained in them is also paid, and the question is precisely, where the money for this purpose came from.

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, 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 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 labor-power. 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 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 surplus-value 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 circulation, 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 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 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 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 capitalists 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 capital-value advanced for its production, it re-appears in the form of money (or a product in general) only through the annual 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 assumption, in the mass of circulating commodities. In this case, there should be indeed an 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 themselves buy articles of luxury, 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, 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 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,34 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 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-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 wage-labor 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 surplus-value 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.

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 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.

"In order that money should flow continuously as coin, coin must constantly coagulate as money. The continuous flow of coin depends on its constant accumulation in the form of reserve funds of coin which spring up throughout the sphere of circulation and form sources of supply; the formation, distribution, disappearance, and reformation of these reserve funds is constantly changing, their existence constantly disappears, their disappearance constantly exists. Adam Smith expressed this never-ceasing transformation of coin into money and of money into coin by saying that every owner of commodities must always keep in supply, aside from the particular commodity which he sells, a certain quantity of the universal commodity with which he buys. We saw, that in the process C—M—C the second member M—C splits up into a series of purchases which do not take place at once, but at intervals of time, so that one part of M circulates as coin while the other rests as money. Money is in that case only suspended coin and the separate parts of the circulating mass of coins appear now in one form, now in another, constantly changing. This first transformation of the medium of circulation into money represents, therefore, but a technical aspect of money-circulation." (Karl Marx, "A Contribution to the Critique of Political Economy," 1859, page 167-168.)—("Coin" as distinguished from money is here employed to indicate the function of money as a mere medium of circulation as compared to its other functions.)

When all these measures do not suffice, an additional production of gold must take place, or, what amounts to the same, one portion of the additional product is directly or indirectly exchanged for gold—the product of countries in which precious metals are mined.

The entire amount of labor-power and social means of production expended in the annual production of gold and silver, so far as they serve as instruments of circulation, constitutes a bulky item of the dead expense of the capitalist mode of production, or of the production of commodities in general. It deprives social economy of a corresponding amount of potential additional means of production and consumption, that is to say, of actual wealth. To the extent that the cost of this expensive machinery of circulation is decreased at a given scale of circulation or a given scale of its extension, the productive power of society is increased. Hence, so far as the auxiliary means developed with the credit system have any influence in that direction, they increase the social wealth directly, either by running a large portion of the social labor-process without intervention of actual money, or by raising the capacities of the money already in circulation.

This disposes also of the absurd question, whether capitalist production in its present volume would be possible without the credit system (even if analyzed only from this point of view), that is to say, if it were possible with the circulation of metallic coin alone. Evidently this is not the case. It would have found the barriers of the limited production of precious metals in its way. On the other hand, one must not entertain any myths as to the productive power of the credit system, so far as it supplies or releases money-capital. The further analysis of this question is out of place here.

We have now to study the case, in which no actual accumulation, that is to say, no immediate expansion of the scale of production, takes place, but a portion of the realized surplus-value is accumulated for a longer or shorter time as a money reserve, in order to be employed later on as productive capital.

To the extent that money so accumulating is additional money, the matter needs no explanation. It can only be a portion of the surplus-gold imported from gold producing countries. In this connection it must be remembered that the national product, in exchange for which this gold is imported, is no longer in this country. It has been exported to foreign countries in exchange for gold.

But if we assume that the same amount of money is still in the country the same as before, then the accumulated and accumulating money has accrued from the circulation. Only its function is changed. It is converted from circulating money into a gradually accruing latent money capital.

The money which is accumulated in this case is the money-form of sold commodities, and represents that portion of its value which constitutes surplus-value for its owner. (The credit system is not supposed to exist in this case.) The capitalist who accumulates this money has sold to that extent without buying.

If we look upon this transaction merely as a limited phenomenon, there is nothing to explain. A part of the capitalists keep the money realized by the sale of their products without drawing products out of the market in return for it. Another part of them, on the other hand, transform all their money into products, with the exception of the constantly recurring money-capital required for the promotion of production. One portion of the products thrown upon the market as bearers of surplus-value consists of means of production, or of the actual elements of variable capital, the necessary means of subsistence. It can serve immediately for the expansion of production. For it has not been assumed that one part of the capitalists accumulates capital, while the other consumes its surplus-value entirely, but only that one part is engaged in the accumulation of money, in the formation of latent money-capital, while the other part accumulates actually, that is to say, expands the scale of production, really adds to its productive capital. The available quantity of money remains sufficient for the requirements of circulation, even if one part of the capitalists accumulates money, while another expands production, and vice versa. Moreover, the accumulation of money on one side may proceed without cash money by the mere accumulation of outstanding claims.

But the difficulty arises when we assume, not a partial, but a general accumulation of money-capital on the part of the capitalist class. Apart from this class, there is, according to or assumption—the general and exclusive domination of capitalist production—no other class but the working class. All that the working class buys is equal to the sum total of its wages, equal to the sum total of the variable capital advanced by the entire capitalist class. This money flows back to the capitalist class by the sale of their product to the working class. The variable capital thus resumes its money-form. Let the sum total of the variable capital be x times 100 p. st., that is to say, the sum total of the variable capital actually employed, not merely advanced for the current year. It does not alter the question fundamentally, whether we know how much or how little money is actually advanced in this variable capital-value during the year, according to the velocity of the turn-over. The capitalist buys with these x times 100 p. st. a certain amount of labor power, or pays wages to a certain number of laborers—first transaction. The laborers buy with this same amount a certain quantity of commodities from the capitalists, where-by the same x times 100 p. st. flow back into the hands of the capitalist class—second transaction. And this is continually repeated. This amount of x times 100 p. st., then, can never enable the working class to buy that portion of its product in which the constant capital is embodied, much less that in which the surplus-value of the capitalist class is incorporated. The laborers can never buy more with these x times 100 p. st. than a portion of the social product, and the value of this portion is equal to that value of the social product in which the advanced variable capital is embodied.

Apart from the case, in which this universal accumulation of money expresses nothing but the distribution of the additional incoming precious metal, in whatever proportion, among the various individual capitalists, how can the entire capitalist class accumulate money under such circumstances?

They would all have to sell a portion of their product without buying anything in return. It is not at all mysterious that they should all have a certain fund of money which they throw into circulation for their consumption, and a certain portion of which flows back to each one of them. But this fund of money, as a fund for circulation, arises precisely through the monetization of surplus-value and is not by any means latent money-capital.

If we view the matter as it takes place in reality, we find that the latent money-capital, which is accumulated for future use, consists:

(1). Of deposits in banks; and it is a comparatively insignificant sum which is really at the disposal of the bank. Money-capital is but nominally accumulated there. What is actually accumulated are outstanding claims on money which can be monetized (so far as they are really monetized) only because there is a certain balance between the money drawn and the money deposited. It is a relatively small sum that is in the hands of the banker as money.

(2). Of public bonds. These are not capital at all, but mere claims on the annual product of the nation.

(3). Of stocks. So far as they are not bogus, they are titles of ownership of some actual capital belonging to some corporation and drafts on the surplus-value flowing from it.

There is no accumulation of money in any of these cases. What appears on the one side as an accumulation of money-capital, appears on the other as a continual and actual expenditure of money. It does not alter the case, whether the money is expended by its owner, or by others who are his debtors.

On the basis of capitalist production, the formation of a hoard is never an end in itself, but the result, either of a clogging of the circulation—larger amounts of money than is generally the case assuming the form of a hoard—or of accumulations conditioned on the turn-over; or, finally, the hoard is merely a formation of latent money-capital held temporarily and intended for future employment as productive capital.

Hence, while a portion of the money realized in surplus-value is on the one hand always withdrawn from circulation and accumulated as a hoard, another part of the surplus-value is at the same time continually converted into productive capital. With the exception of the distribution of additional precious metals among the members of the capitalist class, accumulation in the form of money never takes place simultaneously at all points.

That which is true of the other portion of the annual product, is also true of that portion of it which represents surplus-value in the form of commodities. A certain sum of money is required for its circulation. This sum of money belongs to the capitalist class quite as much as the annually produced quantity of commodities which represent surplus-value. It is originally thrown into circulation by the capitalist class itself. It is constantly redistributed among them by means of circulation itself. Just as in the case of the circulation of coin in general, so is there a clogging of a portion of this mass at ever varying points, while another portion is continually circulating. Whether a part of this accumulation is made intentionally for the purpose of forming money-capital, or not, does not alter the matter.

Exception has been made here of those adventures of circulation by which one capitalist grasps a portion of the surplus-value, or even of the capital, of another, thereby causing a onesided accumulation and centralization of money-capital as well as of productive capital. For instance, a portion of the appropriated surplus-value accumulated by A as money-capital may be a portion of the surplus-value of B which does not flow back to him.

[25.]On account of the difficulty of determining what constitutes the distinguishing mark of fixed and circulating capital, Mr. Lorenz Stein thinks that this distinction is suitable only for lighter study.

[26.]End of Manuscript IV, beginning of Manuscript II.

[27.]The quotations market R. C. are from the work: Royal Commission of Railways. Minutes of Evidence taken before the commissioners. Presented to both house of Parliament, London, 1867. The questions and answers are numbered, as indicated above.

[28.]"Municipal production is bound to a cycle of days, agricultural production to one of years." (Adam G. Mueller, Die Elemente der Staatskunst. Berlin, 1809, II, page, 178.) This is the naive conception of industry and agriculture held by the romantic school.

[29.]Compare with regard to Quesnay the Analyse du Tableau Economique in Physiocrates, edition of Daire, part I, Paris 1846. There we read, for instance, that the annual advances consist of the expenses incurred annually for the work of cultivation; these advances must be distinguished from the primitive ones, which form the funds for the establishment of the farming business." (Page 59.) In the works of the later physiocrats, these advances are sometimes termed capital, for instance by Dupont de Nemours in his Origine et Progres d'une Science Nouvelle, 1767, Daire edition, I, page 291, where he speaks of "capital or advances," furthermore by Le Trosne: "As a result of the longer or shorter duration of the employment of manual labor, a nation possesses a considerable fund of wealth independent of its annual reproduction, and this fund is a capital accumulated in long periods and originally paid by productive acts, which are always continued and increased." (Daire, II, page 928.) Turgot employs the term capital more regularly for advances, and identifies the advances of the manufacturers still more with those of the tenants of land. (Turgot, Reflexions sur la Formation et la Distribution des Richesses, 1766.)

[30.]To what extent Adam Smith has blocked his own way to an understanding of the role of labor-power in the process of self-expansion is proven by the following sentence, which places the labor of human laborers on the same level with that of laboring cattle, after the manner of the physiocrats. "Not only his (the farmer's) laboring servants, but his laboring cattle are productive laborers." (Book II, chap. V, p. 243.)

[31.]Observations on the Circumstances Which Influence the Condition of the Labouring Classes of Society, London, 1817.

[33.]In the manuscript, the following note is here inserted for future elaboration: "Contradiction in the capitalist mode of production; the laborers as buyers of commodities are important for the market. But as sellers of their own commodity—labor-power—capitalist society tends to depress them to the lowest price. Further contradiction: The epochs in which capitalist production exerts all its forces are always periods of overproduction, because the forces of production can never be utilized to such a degree that more value is not only produced but also realized; but the sale of commodities, the realization on the commodity-capital, and thus on surplus-value, is limited, not by the consumptive demand of society in general, but by the consumptive demand of a society in which the majority are poor and must always remain poor. However, this belongs into the next part."

[34.]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, Problems 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.)