The Online Library of Liberty

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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 III.
The Reproduction and Circulation of the Aggregate Social Capital.

Part III, Chapter XVIII.35
INTRODUCTION.

I. THE OBJECT OF THE ANALYSIS.

The immediate process of production of capital is its labor process and self-expansion, the process whose result is the commodity-product, and whose compelling motive is the production of surplus-value.

The process of reproduction of capital comprises this immediate process of production as well as the two phases of the process of circulation, strictly so called, in other words, it comprises the entire cycle, which, as a periodic process, constantly repeated at definite intervals, constitutes the turnover of capital.

No matter whether we study the rotation in the form of M—M' or that of P—P, the immediate process of P itself always forms but one link in the chain of this rotation. In the one form it appears as a promoter of the process of circulation, in the other the process of circulation appears as its promoter. Its continual renewal, the continual rehabilitation of capital as productive capital, is in either case conditioned on its metamorphoses in the process of circulation. On the other hand, the continually renewed process of production is the condition of the metamorphoses which the capital traverses ever anew in the sphere of circulation, its alternate incarnation as money-capital and commodity-capital.

However, every individual capital forms but an individual fraction, endowed with individual life, as it were, of the aggregate social capital, just as every individual capitalist is but an individual element of the capitalist class. The movement of the social capital consists of the totality of the movements of its individualized fractional parts, the turnovers of the individual capitals. Just as the metamorphosis of the individual commodity is a link in the series of metamorphoses of the commodity-world—the circulation of commodities—so the metamorphosis of the individual capital, its turn-over, is a link in the rotation of the social capital.

This total process comprises both the productive consumption (the immediate process of production) together with the metamorphoses (materially considered, exchanges) which promote it, and the individual consumption together with its corresponding metamorphoses, or exchanges. It includes on the one hand the conversion of variable capital into labor-power, and thus the incorporation of labor-power in the process of capitalist production. Here the laborer appears as the seller of his commodity, labor-power, and the capitalist as its buyer. But on the other hand the sale of the commodities implies their purchase by the working class, in other words, their individual consumption. Here the working class appear as buyers and the capitalists as sellers of commodities to the laborers.

The circulation of the commodity-capital implies the circulation of surplus-value, hence also the purchases and sales, by which the capitalists promote their individual consumption, the consumption of surplus-value.

The rotation of individual capitals, then, in their aggregation as social capital, but in their totality, comprises not only the circulation of capital, but also the general circulation of commodities. The last named can originally consist of only two parts: (1) The rotation of the capital itself, and (2) the rotation of the commodities which pass into individual consumption, the commodities for which the laborer expends his wages and the capitalist his surplus-value (or a part of it). True, the rotation of capital comprises also the circulation of surplus-value, so far as it is a part of the commodities, and likewise the conversion of the variable capital into labor-power, the payment of wages. But the expenditure of this surplus-value and wage for commodities does not form a link in the circulation of capital, although at least the expenditure of wages is a requirement for this circulation.

In volume I the process of capitalist production was analyzed as an individual transaction as well as a process of reproduction, the production of surplus-value as well as the production of capital. The changes of form and substance experienced by capital in the sphere of circulation were assumed without lingering over them. It was assumed that, on one hand, the capitalist sells the product at its value, and on the other, that he finds within the sphere of circulation the material means of production required for the renewal or continuation of the process. The only transaction within the sphere of circulation over which we had lingered in the first volume was the sale and purchase of labor-power as the fundamental condition of the capitalist mode of production.

In the first part of volume II, the various forms were considered which capital assumes in its rotation, and the various forms of this rotation itself.

In the second part of this volume, the rotation of capital was studied as a periodical process, as a turn-over. It was shown on one side, in what manner the various constituent parts of capital (fixed and circulating) accomplish the rotation of forms in different periods of time and different ways; and, on the other side, the circumstances were analyzed on which the different duration of the working period and the period of circulation is conditioned. We observed the influence of the period of turn-over and of the different proportions of its component parts upon the volume of the process of production and upon the annual rate of surplus-value. Indeed, while it was the successive forms continually assumed and discarded by capital in its rotation which were studied in part I of volume II, it was shown in part II of this volume, how a capital of a given magnitude is simultaneously divided, within this flow and succession, into the different forms of productive capital, money-capital, and commodity-capital, in varying proportions, so that they do not only relieve one another, but that different portions of the total capital-value are continually side by side and serve in these different forms. Especially money-capital was revealed in its peculiarities, which had not been shown in volume I. Certain laws were found, according to which certain portions of different size of a given capital must be continually advanced and renewed in the form of money-capital, according to the conditions of the turn-over, in order to maintain in service a productive capital of a certain volume.

But in both the first and second parts of this volume, it was only a question of some individual capital, of the movement of some individualized part of social capital.

However, the turn-overs of individual capitals intermingle, are mutually conditioned on one another, are their mutual premises, and form precisely in this interrelation the movement of social capital. Just as in the simple circulation of commodities the total metamorphosis of a certain commodity appeared as a link in the series of metamorphoses of the world of commodities, so now the metamorphosis of individual capital appears as a link in the series of a metamorphoses of the aggregate social capital. But while the simple circulation of commodities did not necessarily imply the rotation of capital—since it may take place on the basis of non-capitalist production—the rotation of the aggregate social capital, as we have seen, implies also the circulation of commodities not belonging to the rotation of some individual capital, in other words, the circulation of commodities which do not represent any capital.

We have now to study the process of circulation of individual capitals in their capacity as component parts of the aggregate social capital (which circulation constitutes in its entirety the process of reproduction), that is to say, the process of rotation of this aggregate social capital.

II. THE ROLE OF MONEY-CAPITAL.

(Although the following belongs in a later part of this section, we shall analyze it immediately, namely, the money-capital considered as a constituent part of the aggregate social capital.)

In the study of the turn-over of the individual capital, the money-capital revealed two sides.

In the first place, it is the form in which every individual capital appears upon the scene and opens its process as capital. It therefore appears as the prime promoter, giving the first impetus to the entire process.

In the second place, according to the different durations of the periods of turn-over and the different proportion of its two parts—the working period and the period of circulation—that portion of the advanced capital-value which must be continually advanced and renewed in the form of money maintains a different proportion to the productive capital which it sets in motion, or in other words, to the continuous scale of production. But whatever may be this proportion, that portion of the active capital-value which can continually serve as productive capital is limited under any circumstances by that portion of the advanced capital-value which must exist continually beside the productive capital in the form of money. It is here merely a question of a normal turn-over, an abstract average. Exception is made of the additional money-capital required for the compensation of the interruptions of the circulation.

In regard to the first point, we have seen that the production of commodities implies the circulation of commodities, and the circulation of commodities implies the materialization of commodities in money, the circulation of money; the duplication of commodities in commodities and money is a law of the transformation of products into commodities. The capitalist production of commodities likewise implies—whether considered socially or individually—that capital in the form of money, or money-capital, is the prime motor of every new business and its continual motor. Especially the circulating capital implies the continuous reappearance of money-capital in short intervals as a motor. The entire advanced capital-value, that is to say, all the elements of capital composed of commodities, labor-power, instruments and materials of production, must be continually bought with money and again bought with money. What is true of the individual capital, is also true of the social capital which functions only in the form of many individual capitals. But, as we showed in volume I, this does not imply that the field of activity of capital, the scale of production, even on a capitalist basis, depends absolutely for its extension on the amount of the money-capital in service.

Elements of production are incorporated in the capital whose expansion within certain limits is independent of the magnitude of the advanced money-capital. The payment of labor-power remaining the same, it can yet be exploited more or less extensively or intensively. If the money-capital is increased with this greater exploitation, that is to say, if wages are raised, it is not proportionately, or, in other words, they are not actually raised.

The productively exploited materials of nature—the soil, the seas, ore, forests, etc.—which do not constitute an element in the value of capital, are intensively or extensively better exploited with an increasing exertion of the same labor-power, without requiring an additional advance of money-capital. The actual elements of productive capital are thus multiplied without requiring a greater advance of money-capital. But so far as such an advance is required for additional auxiliary materials, the money-capital, in which the capital-value is advanced, is not increased proportionately to the augmented effectiveness of the productive capital, so that in reality it is not increased.

The same instruments of labor, and thus the same fixed capital, may be more effectively used by a prolongation of their daily use and by greater intensity of employment, without an additional investment of money for fixed capital. There is, in that case, only a more rapid turn-over of the fixed capital, but the elements of its reproduction are also supplied more rapidly.

Apart from materials of nature, it is possible to incorporate natural forces which do not cost anything as agents of the productive progress with more or less heightened effect. The degree of their effectiveness depends on the methods and scientific progress which do not cost the capitalist anything.

The same is true of the social combination of labor-power in the process of production and of the accumulated skill of the individual laborers. Carey calculates that the real estate owner never receives enough, because he is not paid for all the capital or labor which have been put into the soil since time immemorial in order to give it its present productivity. (Of course, no mention is made of the productivity of which the soil is robbed.) According to this argument, the laborer would have to be paid according to the work which had to be done by the entire human race in order to develop a savage into a modern mechanic. One should rather think: If all the unpaid labor embodied in the soil and appropriated by the real estate owner is counted, then all the capital ever invested in this soil has been paid over and over with usury, so that society has long ago bought the real estate over and over.

The increase in the productive powers of labor, so far as it does not imply an additional investment of capital-value, augments in the first analysis indeed only the quantity of the product, not its value, except the extent to which it is enabled to produce more constant capital with the same labor and thus to preserve its value. But it forms at the same time new material for capital, hence the basis for an increased accumulation of capital.

So far as the organization of social labor itself, and thus the increase in the social productivity of labor, requires a production on a large scale and thus the advance of large quantities of money-capital on the part of individual capitalists, we have shown in volume I that this is accomplished in part by the centralization of capitals in a few hands, without necessarily implying an increase in the volume of the actively engaged capital-values, and consequently in the volume of the money-capital, in which they are advanced.

Finally, we have shown in the preceding part that a contraction of the period of turn-over permits of setting in motion the same productive capital with less money-capital, or to set in motion more productive capital with the same money-capital.

But evidently all this has nothing to do with the real question of money capital. It shows only that the advanced capital, a given sum of values consisting in its free form, in its value-form, of a certain sum of money after its conversion into productive capital, includes productive potentialities whose limits are confined within those of its values, but which may exert themselves extensively or intensively with in a certain playroom. If the prices of the elements of production—the materials of production and labor-power—are given, the magnitude of the money-capital required for the purchase of a definite quantity of these elements of production in the form of commodities is determined. Or, the magnitude of the value of the capital to be advanced is determined. But the extent to which this capital acts as a creator of values and products is elastic and variable.

Now we come to the second point. It is a matter of course, that that portion of the social labor and means of production, which must be annually expended for the production or purchase of money, in order to make up for the wear and tear of coin, is to that extent a reduction of the volume of social production. But as for the money-value which functions partly as a medium of circulation, partly as a hoard, it exists, having once been acquired, it is present apart from the labor-power, the finished means of production, and the natural sources of wealth. It cannot be regarded as a barrier of production. By its transformation into elements of production, by its exchange with other nations, the scale of production might be extended. This implies, however, that the money plays its role as international money the same as ever.

According to the duration of the period of turn-over, a greater or smaller amount of money-capital is required in order to set the productive capital in motion. We have also seen that the division of the period of turn-over into a working period and a period of circulation requires an increase of the capital latent or suspended in the form of money.

So far as the period of turn-over is determined by the duration of the working period, it is determined, other conditions remaining equal, by the material nature of the process of production, not by the specific social character of this process of production. However, on the basis of capitalist production, extensive operations of a long duration require large advances of money-capital for a long time. Production in such spheres is, therefore, dependent on the limits within which the individual capitalist has money-capital at his disposal. This barrier is broken down by the credit system and associations, connected with it, for instance, stock companies. Disturbances in the money-market, therefore, set such businesses out of action, while they, on the other hand cause disturbances in the money-market themselves.

On the basis of capitalist production, it must be ascertained, on what scale those operations which withdraw labor and means of production from it for a long time without furnishing in return any useful product, can be carried on without injuring those lines of production which do not only withdraw continually, or at several intervals, labor-power and means of production from it, but also supply it with means of subsistence and of production. Under social or capitalist production, the laborers in lines with short working periods will always withdraw products only for a short time without giving any products in return; while lines of business with long working periods withdraw products for a long time without any returns. This circumstance, then, is due to the material conditions of the respective labor process, not to its social form. In the case of socialized production, the money-capital is eliminated. Society distributes labor-power and means of production to the different lines of occupation. The producers may eventually receive paper checks, by means of which they withdraw from the social supply of means of consumption a share corresponding to their labor-time. These checks are not money. They do not circulate.

We see, then, that, so far as the need of money-capital is due to the length of the working period, it is determined by two things: First, that money is the general form in which every individual capital (apart from credit) must make its entry in order to transform itself into productive capital; this follows from the nature of capitalist production, or of commodity-production in general. Second: The magnitude of the required money advance is due to the fact that labor-power and means of production must continually be withdrawn from society for a long time without any return of products convertible into money. The first requirement, namely that capital must be advanced in the form of money, is not suspended by the form of this money itself, regardless of whether it is metal-money, credit-money, token-money, etc. The second circumstance is in no way affected by the money-medium or the form of production by means of which labor, means of subsistence, and means of production are withdrawn, without the return of some equivalent into the circulation.

Part III, Chapter XIX.36
FORMER DISCUSSIONS OF THE SUBJECT.

I. THE PHYSIOCRATS.

Quesnay's Tableau Economique shows in a few broad outlines, how the result of national production in a certain year, amounting to some definite value, is distributed by means of the circulation in such a way, that, other circumstances remaining the same, simple reproduction can take place, that is to say, reproduction on the same scale. The starting point of this period of production is fittingly last years's crop. The innumerable individual acts of circulation are at once viewed in their characteristic social mass movement—the circulation between great social classes distinguished by their economic functions. We are especially interested in the fact that a portion of the total product—which, like every other portion of it is a new result of last year's labor and intended for use—is at the same time the bearer of old capital-values re-appearing in their natural form. It does not circulate, but remains in the hands of its producers, the class of capitalist farmers, in order to begin its service as capital once more for them. In this constant portion of the capital of one year's product, Quesnay includes also some elements that do not belong to it, but he sees the main thing, thanks to the limits of his horizon, in which agriculture is the only productive sphere of investment where human labor produces surplus-value, hence the only productive one from the capitalist point of view. The economic process of reproduction whatever may be its specific social character, intermingles in this sphere of agriculture always with a natural process of reproduction. The obvious conditions of the latter throw light on those of the former, and keep off a confusion of thought, which is due only to the witchery of circulation.

The label of a system differs from that of other articles, among other things, by the fact that it cheats not only the buyer, but often also the seller. Quesnay himself and his immediate disciples believed in their feudal shop sign. So did our school scientists to this day. But as a matter of fact, the system of the physiocrats is the first systematic conception of capitalist production. The representative of capitalist production, the class of capitalist farmers, directs the entire economic movement. Agriculture is carried on capitalistically, that is to say, it is the enterprise of a capitalist farmer on a large scale; the immediate cultivator of the soil is the wage laborer. Production creates not only articles of use, but also their value; its compelling motive is the production of surplus-value, whose birth-place is the sphere of production, not that of circulation. Among the three classes which figure as the bearers of the process of reproduction promoted by the circulation the immediate exploiter of "productive" labor, the producer of surplus-value, the capitalist farmer, is distinguished from those who merely appropriate surplus-value.

The capitalist character of the system of the physiocrats excited opposition even during its flourishing period, on one side on the part of Linguet and Mably, on the other that of the champions of the freeholders of small farms.

The retrogression of Adam Smith37 in the analysis of the process of reproduction is so much more remarkable, as he manipulates other correct analyses of Quesnay, for instance, by generalizing the "avances primitives" and "avances annuelles" into "fixed" and "circulating" capital,38 and even relapses entirely into physiocratic errors in some places. For instance, in order to demonstrate that the capitalist farmer produces more value than any other class of capitalists, he says: "No other capital sets a greater quantity of productive labor in motion than that of the capitalist farmer. Not only his laboring servants, but also his laboring cattle, consist of productive laborers." (Fine compliment for the laboring servants!) "In agriculture, nature works as well as human beings; and although its labor does not require any expense, its product nevertheless has a value, the same as that of the most expensive laborer. The most important operations of agriculture seem to aim, not so much to increase the fertility of nature—although they do that, too—as to direct it toward the production of the plants most useful to mankind. A field grown up in thorns and weeds often enough furnishes as large a quantity of plant growth as the best tilled vineyard or corn field. Planting and cultivation serve frequently more to regulate than to stimulate the active fertility of nature; and after those have exhausted all their labors, there still remains a great deal of work to do for the latter. The laborer and the laboring cattle (!) employed in agriculture, therefore, do not only effect, like the laborers in the manufactures, the reproduction of a value which is equal to their own consumption and the capital employing them together with the profit of the capitalist, but that of a far greater value. Over and above the capital of the farmer and all his profits they effect regularly the reproduction of the rent of the land owner. The rent may be regarded as the product of the forces of nature, the use of which the land owner lends to the farmer. It is larger or smaller according to the estimated degree of these forces, in other words, according to the estimated natural or artificially insured fertility of the soil. It is the work of nature which remains after deducting or replacing all that which may be regarded as the work of man. It is rarely less than one quarter and frequently more than one third of the total product. No other equal quantity of labor, employed in manufacture, can ever effect so large a reproduction. In manufacture nature does nothing, man everything; and reproduction must always be proportional to the strength of the agencies that carry it on. Therefore the capital invested in agriculture does not only set in motion a greater quantity of productive labor than any equal capital employed in manufacture; but it also adds, in proportion to the quantity of productive labor employed by it, a far greater value to the annual product of the soil and to the labor of a certain country, to the actual wealth and income of its inhabitants." (Book II, chapter 5, page 242.)

Adam Smith says in Book I, Chapter 6, page 42: "In value of the sowings is likewise a fixed capital in the proper meaning of the word." Here, then, capital is the same as capital-value; it exists in a "fixed" form. "Although the seed passes back and forth between the soil and the barn, yet it never changes owners and therefore does not circulate in reality. The farmer does not make his profit by its sale, but by its increase." (Page 186.) The absurdity lies here in the fact that Smith does not, like Quesnay before him, notice the reappearance of the value of constant capital in a new form, an important element of the process of reproduction, but merely another illustration, and a wrong one at that, of his distinction between circulating and fixed capital. In Smith's translation of "avances primitives" and "avances annuelles" into "fixed capital" and "circulating capital," the progress consists in the term "capital," whose meaning is generalized and made independent of the special consideration for the "agricultural" application of the physiocrats; the retrogression consists in the fact that the terms "fixed" and circulating" are regarded as the fundamental distinction and so maintained.

II. ADAM SMITH.

(1.) THE GENERAL POINT OF VIEW OF ADAM SMITH

Adam Smith says in Book I, Chapter 6, page 42: "In every society the price of every commodity finally dissolves into one or the other of these three parts (wages, profit, ground rent), or into all three of them; and in every advanced society all three of them pass more or less as component parts into the price of by far the greater part of the commodities."39 Or, as he continues, page 63: "Wages, profit, and ground rent are the three final sources of all income as well as of all exchange value." We shall discuss further along this doctrine of Smith concerning the "component parts of the prices of commodities," or of "all exchange value."

He says furthermore: "As this is true of every single commodity individually, it must also be true of all commodities as a whole, constituting the entire annual product of the soil and the labor of every country. The total price or exchange-value of this annual product must dissolve into the same three parts, and be distributed among the different inhabitants of the land, either as wages of their labor, or as profit of their capital, or as rent of their real estate." (Book II, chapter 2, page 190.)

After Adam Smith has thus dissolved the price of all commodities individually as well as "the total price or exchange-value...of the annual product of the soil and the labor of every country" into three sources of revenue for wage-workers, capitalists, and real estate owners, he must needs smuggle a fourth element into the problem by a circuitous route, namely the element of capital. This is accomplished by the distinction between a gross and a net income. "The gross income of all inhabitants of a large country comprises the entire annual product of their soil and their labor; the net income that portion which remains at their disposal after deducting the cost of maintenance, first of fixed, and second, of their circulating capital; or that portion which they can place in their supply for consumption, or expend for their maintenance, comfort, and pleasure, without touching their capital. Their actual wealth likewise is proportional, not to their gross, but to their net income." (Ibidem, page 190.)

We make the following comment:

(1). Adam Smith expressly deals here only with simple reproduction, not reproduction on an enlarged scale, or accumulation. He speaks only of expenses for maintaining the capital in process. The "net" income is equal to that portion of the annual product, whether of society, or of the individual capitalist, which can pass into the "fund for consumption," but the size of this fund must not encroach upon capital in process. One portion of the value of both the individual and social product, then, is dissolved neither in wages, nor in profit, nor in ground rent, but in capital.

(2). Adam Smith flees from his own theory by means of a word play, the distinction between a gross and net revenue. The individual capitalist as well as the entire capitalist class, or the so-called nation, receive in place of the consumed capital a quantity of commodities, whose value—represented by the proportional parts of this product—replaces on one hand the invested capital-value and thus forms an income, or revenue, but, mark well, a capital revenue; on the other hand, portions of value which are "distributed among the different inhabitants of the land, either as wages of their labor, or as profits of their capital, or as rent of their real estate," a thing commonly called income. Hence the value of the entire product, whether of the individual capitalist, or of the whole country, yields an income for somebody; but it is on one hand an income of capital, on the other a "revenue" different from it. In other words, the thing which is eliminated by the analysis of the commodity in its component parts is brought back through a side door, the ambiguity of the term "revenue." But only such portions of the value of a product can be taken in as previously existed in it. If the capital is to come in as revenue, capital must first have been expended.

Adam Smith says furthermore: "The lowest ordinary rate of profits must always amount to a little more than is sufficient to make good the losses incidental to every investment of capital. It is this surplus alone which represents the clear, or net, profit." (Which capitalist understands by profit necessary investment of capital?) "That which people call gross profit comprises frequently not only this surplus, but also the portion retained for such extraordinary losses." (Book I, chapter 9, page 72.) This means nothing else but that a portion of the surplus-value, considered as a part of the gross profit, must form an insurance fund for the production. This insurance fund is created by a portion of the surplus-labor, which to that extent produces capital directly, that is to say, the fund intended for reproduction. As regards the expense for the "maintenance" of the fixed capital (see the above quotations), the replacement of the consumed fixed capital by a new one is not a new investment of capital, but only a renewal of the value of the old capital. And as far as the repair of the fixed capital is concerned, which Adam Smith counts likewise among the cost of maintenance, this expense belongs to the price of the capital advanced. The fact that the capitalist, instead of investing this all at one time, invests it gradually according to the requirements during the process of capital in service, and that he may invest it out of profits already pocketed, does not change the source of this profit. The portion of value of which it consists proves only that the laborer produces surplus-value for the insurance fund as well as for the repairing fund.

Adam Smith then tells us that he excludes from the net revenue, that is to say, from the revenue in its specific meaning, the entire fixed capital, furthermore that entire portion of the circulating capital which is required for the maintenance and repair of the fixed capital, and for its renewal; as a matter of fact, all capital not in the natural form intended for the fund for consumption.

"The entire expenditure for the maintenance of the fixed capital must evidently be excluded from the net revenue of society. Neither the raw materials by means of which the machines and tools of industry must be kept in condition nor the product of the labor required for the transformation of these raw materials into their intended form can ever constitute a portion of this revenue. The price of this labor may indeed form a portion of that revenue, as the laborers so employed may invest the entire value of their wages in their immediate fund for consumption. But in other kinds of labor the price" (that is to say, the wages paid for this labor) "as well as the product" (in which this labor is incorporated) "enter into the fund for consumption; the price into that of the laborers, the product into that of other people, whose subsistence, comfort, and pleasure are increased by the labor of these workmen." (Book II, chapter 2, page 190, 191.)

Adam Smith here comes upon a very important distinction between the laborers employed in the immediate production of means of production and those employed in the immediate production of articles of consumption. The value of the commodities produced by the first-named contains a part which is equal to the sum of the wages, that is to say, equal to the value of the amount of capital invested in the purchase of labor-power. This value exists bodily as a certain share of the means of production produced by these laborers. The money received by them as wages is their revenue, but their labor has not produced any goods which are consumable, either for them or for others. Hence these products are not an element of that portion of the annual product which is intended for a social fund for consumption, in which a "net revenue" can alone be realized. Adam Smith forgets to add here that the same thing which applies to wages is also true for that portion of the value of the means of production, which forms the revenue (in the first hand) of the industrial capitalist under the categories of profit and rent. These portions of value likewise exist in means of production, articles which cannot be consumed. They cannot secure out of the articles of consumption produced by the second kind of laborers a quantity corresponding to their price until they have been sold; only then can they transfer those articles to the individual fund for consumption of their owner. But so much more Adam Smith should have seen that this excludes the value of the means of production serving within the sphere of production—the means of production which produce means of production—a portion of value equal to the value of the constant capital employed in this sphere and excluded from the portions of value forming a revenue, not only by the natural form in which it exists, but also by its function as capital.

The statements of Adam Smith regarding the second kind of laborers—who produce immediately articles of consumption—are not quite exact. He says that in this kind of labor, both the price of labor and the product go to the fund for immediate consumption, "the price" (that is to say, the money received in wages) "to the stock for the consumption of the laborers, and the product to that of other people, whose subsistence, comfort, and pleasure are increased by the labor of these workmen." But the laborer cannot consume the "price" of his labor directly, the money in which his wages are paid; he makes use of it by buying articles of consumption with it. These may in part consist of classes of commodities produced by himself. On the other hand, his own produce may be such as goes only into the consumption of the exploiters of labor.

After Adam Smith has thus entirely excluded the fixed capital from the "net revenue" of a certain country, he continues:

"While the entire expense for maintaining the fixed capital is thus necessarily excluded from the net revenue of society, the same is not the case with the expense of maintaining the circulating capital. Of the four parts which go to make up this last named capital, money, means of subsistence, raw materials, and finished products, the last three, as we have said, are regularly taken out of it and transferred either to the fixed capital of society, or to the fund intended for immediate consumption. That portion of the consumable articles which is not employed for the maintenance of the former" (the fixed capital) "passes wholly into the latter" (the fund for immediate consumption) "and forms a part of the net revenue of society. Hence the maintenance of these three parts of the circulating capital does not diminish the net revenue of society by any other portion of the annual product than that required for maintaining the fixed capital." (Book II, chapter 2, page 192.)

This is but a tautology, to the effect that that portion of the circulating capital, which does not serve for the production of means of production, passes into that of means of consumption, in other words, passes into that part of the annual product, which is to serve as a fund for the social consumption. However, the immediately following passage is important:

"The circulating capital of society is different in this respect from that of an individual. That of an individual is wholly excluded from his net revenue, and can never form a part of it; it can consist only of his profit. But although the circulating capital of each individual goes to make up a portion of the circulating capital of the society to which he belongs, it is nevertheless not absolutely excluded for this reason from the net revenue of society, and may form a part of it. While all the commodities in the store of some small dealer must not by any means be placed in the supply for his own immediate consumption, still they may belong in the fund for consumption of other people, who, by means of a revenue secured by other funds, may regularly make good for him their value together with his profit, without thereby causing a reduction of either his or their capital." (Ibidem.)

We learn, then, the following facts from him:

(1). Just as the fixed capital, and the circulating capital required for its reproduction (he forgets the function) and maintenance, are absolutely excluded from the net revenue of the individual capitalist which can consist only of his profit, so is also the circulating capital employed in the production of means of consumption. Hence that portion of his commodity-product which reproduces his capital cannot be dissolved into portions of value which yield any revenue for him.

(2). The circulating capital of each individual capitalist constitutes a part of the circulating capital of society, the same as every individual fixed capital.

(3). The circulating capital of society, while representing only the sum of the individual circulating capitals, has a different character than the circulating capital of every individual capitalist. The circulating capital of the individual capitalist can never be a part of his own revenue; but a portion of the circulating capital of society (namely, that consisting of means of consumption) may at the same time be a portion of the revenue of society, or, as he expressed it in the preceding quotation, it must not necessarily reduce the net revenue of society by a portion of the annual product. Indeed, that which Adam Smith here calls circulating capital, consists in the annually produced commodity-capital, which is thrown into circulation annually by the capitalists producing it. This entire annual commodity-product of theirs consists of consumable articles and, therefore, forms the fund in which the net revenue of society (including wages) is realized or expended. Instead of choosing for his illustration the commodities in the store of the small dealer, Adam Smith should have selected the masses of commodities stored away in the warehouses of the industrial capitalists.

Now if Adam Smith had summed up the snatches of thought which forced themselves upon him, first in the study of the reproduction of that which he calls fixed, then of that which he calls circulating capital, he would have arrived at the following result:

I. The annual product of society consists of two divisions; one of them comprises the means of production, the other the means of consumption. Both must be treated separately.

II. The aggregate value of the annual product consisting of means of production is divided as follows: One portion of the value represents but the value of the means of production consumed in the creation of these means of production; it is but capital-value reappearing in a renewed form; another portion is equal to the value of the capital invested in labor-power, or equal to the sum of the wages paid by the capitalists of this sphere of production. A third portion of value, finally is the source of profits, including ground rent, of the industrial capitalists in this sphere.

The first portion of value, according to Adam Smith the reproduced portion of the fixed capital of all the individual capitals employed in this first section, is "evidently excluded and can never form a part of the net revenue," either of the individual capitalist or of society. It always serves as capital, never as a revenue. To that extent the "fixed capital" of each individual capitalist is in no way different from the fixed capital of society. But the other portions of the annual product of society consisting of means of production,—portions of value which also exist in the aliquot parts of this mass of means of production—form indeed revenues for all agents engaged in this production, yielding wages for the laborers, profits and ground rent for the capitalists. But so far as society is concerned, they are capital, not revenue, although the annual product of society consists only of the sums of the products of the individual capitalists belonging to it. These things are generally fit only for service as means of production by their very nature, and even those which may eventually serve as means of consumption are intended for service as raw or auxiliary materials of new production. But they serve as such—as capital—not in the hands of their producers, but in those of their purchasers, namely,

III. The capitalists of the second category, the direct producers of means of consumption. These things reproduce for these capitalists the capital consumed in the production of means of consumption (so far as this capital is not converted into labor-power, so that it consists in the sum of the wages of the laborers of this second class), while this consumed capital, which now exists in the form of means of consumption in the hands of the capitalists producing them, constitutes in its turn—from the point of view of society—the fund intended for consumption, in which the capitalists and laborers of the first category realize their revenue.

If Adam Smith had continued his analysis to this point, then he would have lacked but little for the complete solution of the problem. He was almost on the point of solving it, for he had already observed, that certain values of one kind (means of production) of the commodity-capitals constituting the total product of society yield indeed a revenue for the laborers and capitalists engaged in production, but do not contribute anything toward the revenue of society; while another part of value of another kind (means of consumption), although it is capital for its individual owners, that is to say, for the capitalists engaged in this sphere, is only a part of the social revenue.

So much is evident from the foregoing:

First: Although the social capital is but made up of the sum of the individual capitals, and for this reason the annual product in commodities (or the commodity-capital) equal to the sum of commodities produced by these individual capitals; and although the analysis of the value of commodities into its component parts, applicable to every individual commodity-capital, must also apply to the entire social commodity-capital, and actually does so result in the end, nevertheless the forms which these different component parts assume, when incorporated in the aggregate process of social production, differ.

Second: Even on the basis of simple reproduction, there is not merely a production of wages (variable capital) and surplus-value, but a direct production of new constant capital, although the working day consists only of two parts, one in which the laborer reproduces the variable capital, an equivalent for the purchase price of his labor-power, and another in which he produces surplus-value (profit, rent, etc.). For the daily labor, which is expended in the reproduction of means of production—and whose value is composed of wages and surplus-value—realizes itself in new means of production that take the places of the constant parts of capital consumed in the production of means of consumption.

The main difficulties, the greater part of which has been solved in the preceding analyses, are not offered by a study of accumulation, but by that of simple reproduction. For this reason, Adam Smith (book II) as well as Quesnay (Tableau Economique) take their departure from simple reproduction, whenever it is a question of the movements of the annual product of society and of its reproduction by means of circulation.

II. SMITH RESOLVES EXCHANGE-VALUE INTO V PLUS S.

The dogma of Adam Smith, to the effect that exchangeable value, or the price of any commodity—and therefore of all commodities constituting the annual product of society (since he justly assumes everywhere the existence of capitalist production)—is made up of three component parts, or resolves itself into wages, profit, and rent, may be reduced to the fact that the value of a commodity is equal to v plus s, that is to say, equal to the value of the advanced variable capital plus the surplus-value. And we may undertake this reduction of profit and rent to a common unit called s with the expressed permission of Adam Smith, as shown by the following quotations, in which we leave aside all minor points, especially any actual or apparent deviation from his dogma that the value of the commodities resolves itself exclusively into those elements which we call v plus s.

In manufacture: "The value which the laborers add to the material resolves itself...into two parts, one of which pays their wages, and the other the profit of their employer on the entire capital advanced by him in materials and wages." (Book I, chapter 6, page 41.) "Although the manufacturist gets his wages advanced by his master, he does not cost the latter anything in reality, since as a rule the value of these wages is preserved together with a profit, in the increased value of the object to which the labor was applied." (Book II, chapter 3, page 221). That portion of the stock which is invested "in the maintenance of productive labor...after it has served him (the employer) in the function of a capital...forms a revenue for them" (the laborers). (Book II, chapter 3, page 223.)

Adam Smith says explicitly in the chapter just quoted: "The entire annual product of the soil and the labor of each country...naturally resolves itself into two parts. One of them, and frequently the greater, is intended primarily to replace capital and to reproduce the means of subsistence, raw materials and finished products obtained from some capital; the other is intended to form a revenue either for the owner of this capital, as a profit on his capital, or for some one else, as a rent of his real estate." (Page 222.) Only a portion of the capital, so Adam Smith informed us just awhile ago, also forms a revenue for some one, namely that which is invested in the purchase of productive labor. This portion—the variable capital—performs first "the function of capital" for its employer and in his hands, and then it "forms a revenue" for the productive laborer himself. The capitalist transforms a portion of the value of his capital into labor-power and thereby into variable capital; it is only due to this transformation that not alone this portion of capital, but his entire capital, serve as industrial capital. The laborer—the seller of his own labor-power—receives its value in the form of wages. In his hands, labor-power is but a saleable commodity, a commodity whose sale keeps him alive, which is the sole source of his revenue; laborpower serves as a variable capital only in the hands of its buyer, the capitalist, and the capitalist advances its purchase price only apparently, since its value has been previously supplied to him by the laborer.

After Adam Smith has thus shown that the value of a product in manufacture is equal to v plus s (s standing for the profit of the capitalist), he tells us that, in agriculture, the laborers effect, aside from "the reproduction of a value which is equal to their own consumption and the (variable) capital employing them plus the profit of the capitalist," furthermore, "over and above the capital of the farmer and all his profit regularly the reproduction of the rent of the owner of the real estate." (Book II, chapter 5, page 243.) The fact that the rent passes into the hands of the real estate owner, is immaterial for the question under consideration. Before it can pass into his hands, it must be in those of the farmer, that is to say, of the industrial capitalist. It must form a part of the value of the product, before it can become a revenue for any one. Rent as well as profit are but component parts of surplus-value, even in the opinion of Adam Smith himself, and the productive laborer reproduces them continually together with his own wages, that is to say, with the value of the variable capital. Hence rent and profit are parts of the surplus-value s, and thus, with Adam Smith, the price of all commodities resolves itself into v plus s.

The dogma, that the price of all commodities (also of the annual product in commodities) resolves itself into wages plus profit, plus ground rent, assumes in the interspersed esoteric portion of Smith's work quite naturally the form that the value of every commodity, hence also that of the annual social product in commodities, is equal to v plus s, or equal to the value of the capital invested in labor-power and continually reproduced by the capitalist plus the surplus-value added by the labor of the laborers.

This outcome of the analysis of Adam Smith reveals at the same time—see farther along—the source of this one-sided analysis of the component parts into which the value of a commodity resolves itself. But the determination of the magnitude of these component parts and of the limit of their value has no bearing on the circumstance that they are at the same time different sources of revenue for different classes engaged in production.

Various inconsistencies are jumbled together when Adam Smith says: "Wages, profit, and ground rent are the three primary sources of all revenue as well as all exchange-value. Every other revenue is derived, in the last instance, from one of these." (Book I, chapter 6, page 48.)

(1). All members of society not directly engaged in reproduction, with or without labor, can obtain their share of the annual product of commodities—in other words, their articles of consumption—primarily only out of the hands of those classes who are the first to handle the product, that is to say, productive laborers, industrial capitalists, and real estate owners. To that extent their revenues are substantially derived from wages (of the productive laborers), profit, and ground rent, and appear as indirect derivations when compared to these primary sources of revenue. But, on the other hand, the recipients of these revenues, thus indirectly derived, draw them-by grace of their social functions, for instance that of a king, priest, professor, prostitute, soldier, etc., and they may regard these functions as the primary sources of their revenue.

(2). Here the ridiculous mistake of Adam Smith reaches its climax. After having taken his departure from a correct determination of the component parts of the value of commodities and the sum of values of the product incorporated in them, and having demonstrated that these component parts form so many different sources of revenue;40 after having in this way deducted the revenues from the value, he proceeds in the opposite way—and this remains the ruling conception with him—and makes of the revenues "primary sources of all exchange-value" instead of "component parts," thereby throwing the doors wide open to vulgar economy. (See, for instance, our Roscher.)

III. THE CONSTANT PORTION OF CAPITAL.

Let us now see, how Adam Smith tries to spirit away the constant portion of the value of commodities.

"In the price of corn, for instance, one portion pays the rent of the land owner." The origin of this portion of value has no more to do with the circumstance that it is paid to the land owner and forms for him a revenue in the shape of rent than the origin of the other portions of value has to do with the fact that they constitute sources of revenue as profit and wages.

"Another portion pays the wages and subsistence of the laborers" (and of the laboring cattle, as he adds) "employed in its production, and the third portion pays the profit of the capitalist farmer. These three portions seem" (they seem indeed) "to constitute either directly, or in the last instance, the entire price of corn."41 This entire price, that is to say, the determination of its magnitude, is absolutely independent of its distribution among three kinds of people. "A fourth portion may seem necessary in order to reproduce the capital of the farmer, or the wear of his laboring cattle and of his other implements. But it must be considered that the price of any agricultural implement, for instance of a laboring horse, is in its turn composed of the above three parts: the rent of the land on which it is bred, the labor of breeding, and the profit of the farmer who advances both the rent of this land and the wages of this labor. Hence, although the price of the corn may reproduce the price as well as the cost of maintenance of the horse, the entire price still resolves itself, directly or in the last instance, into the same three parts: ground rent, labor," (he means wages) "and profit." (Book I, chapter 6, page 42.)

This is verbatim all that Adam Smith has to say in support of his surprising doctrine. His proof consists simply in the repetition of the same contention. He admits, for instance, that the price of corn does not only consist of v plus s, but contains also the price of the means of production consumed in the production of corn, in other words, the value of a capital not invested in labor-power by the farmer. But, says he, the prices of all these means of production likewise resolve themselves into v plus s, the same as the price of corn. He forgets, however, to add in this case, that they also contain the prices of the means of production consumed in their production. He refers us from one line of production to another, and from that to a third. The contention that the entire price of commodities resolves itself "immediately" or "ultimately" into v plus s would not be a specious subterfuge in the sole case that he could demonstrate that the product in commodities, the price of which resolves itself immediately into c (price of consumed means of production) plus v plus s, is ultimately compensated by products which reproduce those "consumed means of production" completely and which are themselves produced by the investment of mere variable capital, by a mere investment of capital in labor-power. The price of these last products would then be v plus s. And in that case the price of the first products, represented by c plus v plus s, where c stands for the constant portion of capital, could be ultimately resolved into v plus s. Adam Smith himself did not believe that he had furnished such a proof by his example of the collectors of Scotch pebbles, who, according to him, do not produce any surplus-value, but produce only their own wages, and who, in the second place, do not employ any means of production (they do, however, employ them, such as baskets, sacks, and other means of carrying the stones).

We have already seen that Adam Smith later on throws his own theory over, without, however, being conscious of his contradictions. But the source of these is found precisely in his scientific premises. The capital converted into labor produces a greater value than its own. How does it do that? It is due, says Adam Smith, to the laborers, who impregnate, during the process of production, the things on which they work with a value which forms not only an equivalent for their own purchase price, but also a surplus-value, appropriated, not by them, but by their employers (profit and rent). That is all they accomplish, and all that they can accomplish. And what is true of the industrial labor of one day, is true of the labor set in motion by the entire capitalist class during one year. Hence the aggregate mass of the annual social product in values can resolve itself only into v plus s, into an equivalent by which the laborers reproduce the value of the capital expended for the purchase of their labor-power, and into an additional value which they must deliver over and above their own value to their employers. These two elements of value form at the same time sources of revenue for the various classes engaged in reproduction: The first is the source of wages, the revenue of the laborers; the second that of surplus-value, a portion of which is retained by the industrial capitalist in the form of profit, while another is given up by him as rent, the revenue of the real estate owners. Whence, then, should come another element of value, since the value of the annual product contains no other elements but v plus s? We are working on the basis of simple reproduction. Since the entire quantity of annual labor resolves itself into labor required for the reproduction of the value of the capital invested in labor-power, and labor required for the creation of surplus-value, where would the labor required for the production of the value of a capital not invested in labor-power come from?

The situation is as follows:

(1). Adam Smith determines the value of a commodity by the quantity of labor which the wage worker adds to the object of labor. He calls it materials of labor, since he is dealing with manufacture, which is working up products of other labor. But this does not alter the matter. The value which the laborer adds to a thing (and this "adds" is an expression of Adam Smith) is entirely independent of the fact whether or not this thing, to which value is added, had itself any value before this addition took place. The laborer creates a product of value in the form of a commodity; this, according to Adam Smith, is partly an equivalent for his wages, and this part, then, is determined by the value of his wages; according to whether his wages are high or low, he has to add more or less value in order to produce or reproduce an equivalent for his wages. On the other hand, the laborer adds more labor over and above the limit so drawn, and this constitutes the surplus value for the capitalist who employs him. Whether this surplus-value remains entirely in the hands of the capitalist or is yielded by him in portions to third persons, does not alter the qualitative fact that the additional labor of the laborer is surplus-value, not the quantity of this additional value. It is value the same as any other portion of the value of the product, but it differs from other portions by the fact that the laborer has not received any equivalent for it, nor will receive any later on, because it is appropriated by the capitalist without any equivalent. The total value of a commodity is determined by the quantity of labor expended by the laborer in its production; one portion of this total value is determined by the fact that it is equal to the value of the wages, an equivalent for them. The second portion, the surplus-value, is, therefore, likewise determined, for it is equal to the total value of the product minus that portion which is equivalent to the wages; it is equal to the excess of the value created in the manufacture of the product over that portion which is an equivalent for the wages.

(2). That which is true of a commodity produced in some individual industrial establishment by any individual laborer is true of the annual product of all lines of business together. That which is true of the day's work of some individual productive laborer is true of the entire year's work realized by the entire class of productive laborers. It "fixes" (expression of Adam Smith) in the annual product a total value determined by the quantity of the annual labor expended, and this total value resolves itself into one portion determined by that part of the annual labor which reproduces the equivalent of its annual wages, or these wages themselves; and into another portion determined by the additional labor by which the laboring class creates surplus-value for the capitalist class. The value contained in the annual product then consists of but two elements, namely the equivalent of the wages received by the laboring class, and the surplus-value annually created for the capitalist class. Now, the annual wages are the revenue of the working class, and the annual quantity of surplus-value the revenue of the capitalist class; both of them represent the relative shares in the annual fund for consumption (this view is correct when simple reproduction is the premise) and are realized in it. There is, then, no room left anywhere for the value of the constant capital, for the reproduction of the capital serving in the form of means of production. And Adam Smith states explicitly in the introduction of his work that all portions of the value of commodities which serve as revenue coincide with the annual product of labor intended for a social fund for consumption: "In what the revenue of the people consisted generally, or what was the nature of the fund, which...supplied their annual consumption, to explain this is the purpose of these first four books." (Page 12.) And in the very first sentence of the introduction we read: "The annual labor of every nation is the fund, which supplies them originally with all the subsistence which they consume in the course of the year, and which always consist either of the immediate product of this labor, or in articles bought with this product from other nations." (Page 11.)

The first mistake of Adam Smith consists in identifying the value of the annual product with the annual product in values. The latter is only the product of labor of the current year, the former includes furthermore all elements of value consumed in the making of the annual product, but which have been produced in the preceding or even in earlier years, means of production whose value merely re-appears, but which have been neither produced nor reproduced by the labor expended in the current year. By this mistake, Adam Smith spirits away the constant portion of the value of the annual product. His mistake rests on another error in his fundamental conception: He does not distinguish the two-fold nature of labor itself, of labor which creates exchange-value by the expenditure of labor-power, and labor which creates articles of use (use-values) as a concrete, useful, activity. The total quantity of the commodities made annually, in other words, the total annual product, is the product of the useful labor active during the the past year; all these commodities exist only because socially employed labor has been spent in a systematized network of many kinds of useful labor; it is due to this fact alone that the value of the means of production consumed in their production, re-appearing in a new natural form, is contained in their total value. The total annual product, then, is the result of the useful labor expended during the year; but only a portion of the value of the annual product has been created during the year; this portion is the annual product in values, in which the quantity of labor set in motion during the year itself is represented.

Hence, if Adam Smith says in the just cited passage: "The annual labor of every nation is the fund, which supplies them originally with all the subsistence which they consume in the course of the year, etc.," he places himself one-sidedly upon the standpoint of mere useful labor, which has indeed given all these means of subsistence their consumable form. But he forgets that this was impossible without the assistance of instruments and materials of labor supplied by former years, and that, therefore, the "annual labor," so far as it has created any values, did not create all the value of the products finished by it; that the product in values is smaller than the value of the products.

While we cannot reproach Adam Smith for going in this analysis no farther than all his successors (although a step toward a correct solution is already found among the physiocrats), he loses himself, on the other hand, in a chaos further along, mainly because his "esoteric" conception of the value of commodities in general is constantly vitiated by exoteric ideas, which on the whole prevail with him, while his scientific instinct permits his esoteric conception to reappear from time to time.

IV. CAPITAL AND REVENUE IN ADAM SMITH.

That portion of the value of every commodity (and therefore also of the annual product) which is but an equivalent of the wages is equal to the capital advanced by the capitalist for labor-power, in other words, equal to the variable portion of the total capital advanced. The capitalist recovers this portion of the value of his advanced capital through a portion of the value of a commodity newly supplied by the wage laborer. Whether the variable capital is advanced in such a way that the capitalist pays the laborer his share in a product which is not yet ready for sale, or which, though ready, has not yet been sold by the capitalist, or whether he pays him with money obtained by the sale of commodities previously supplied by the laborer, or whether he has drawn this money in advance by means of credit—in all these cases the capitalist expends variable capital, which passes into the hands of the laborer in the form of money, and at the same time he possesses the equivalent of this value of his capital in that portion of the value of his commodities by which the laborer reproduces his share of its total value, in other words, by which he reproduces his own wages. Instead of giving him this portion of the value in its natural form, that of his own product, the capitalist pays him in money. The capitalist then holds the variable portion of his advanced capital in the form of commodities, while the laborer has received the equivalent for his sold labor-power in the form of money.

Now while that portion of the capital advanced by the capitalists, which has been converted by the purchase of labor-power into variable capital, serves in the process of production itself as laboring power and is produced as a new value, or reproduced, by the expenditure of this force, in the form of commodities,—hence a reproduction, or new production of capital—the laborer spends the value or price of his sold labor-power in means of subsistence, in means for the reproduction of his labor-power. A quantity of money equal to the variable capital forms his revenue, which lasts only so long as he can sell his labor-power to the capitalist.

The commodity of the wage laborer—his labor-power—serves as a commodity only to the extent that it is incorporated in the capital of the capitalist and acts as capital; on the other hand, the capital expended by the capitalist as money-capital in the purchase of labor-power serves as a revenue in the hands of the seller of labor-power, the wage laborer.

Various processes of circulation and production intermingle here, which Adam Smith does not clearly distinguish.

First: Processes belonging to circulation. The laborer sells his commodity—labor-power—to the capitalist; the money with which the capitalist buys it is from his point of view money invested for gain, in other words, money-capital; it is not spent, but advanced. (This is the real meaning of "advance"—avance in the language of the physiocrats—no matter where the capitalist gets the money. Every value which the capitalist pays out for the purposes of the productive process, is advanced from his point of view, regardless of whether this takes place before or after the fact; it is advanced for the process of production.) The same takes place here as in every other sale of commodities: The seller gives away a use-value (in this case his labor-power) and receives its value (realizes its price) in money; the buyer gives away his money and receives in turn the commodity itself—in this case labor-power.

Secondly: In the process of production, the purchased labor-power now forms a part of the acting capital, and the laborer himself serves here merely as one particular natural form of this capital, distinguished from the elements existing in the natural form of means of production. During the process, the laborer adds value to the means of production which he converts into products, by expending labor-power to the amount of his wages (without surplus-value); he reproduces for the capitalist that portion of his capital in the form of commodities which has been, or has to be, advanced for wages; hence he produces for the capitalist that capital which he can "advance" once more for the purchase of labor-power.

Thirdly: In the sale of the commodities, one portion of their selling price reproduces the variable capital advanced by the capitalist, whereby he, on the one hand, is enabled to buy more labor-power, and the laborer, on the other hand, to sell more.

In all purchases and sales of commodities—so far as these transactions are merely regarded by themselves,—it is quite immaterial what becomes of the money in the hands of the seller received for his commodities, and what becomes of the article of use in the hands of the buyer received in exchange for this money. Hence, so far as the mere process of circulation is concerned, it is quite immaterial that the labor-power bought by the capitalist reproduces the value of capital for him, and that, on the other hand, the money received by the laborer as a purchase-price of his labor-power serves as his revenue. The magnitude of the value of the commodity of the laborer, his labor-power, is not affected either by serving as a revenue for him or by reproducing, through its use, on the part of the buyer, the value of the capital of the buyer.

Since the value of the labor-power—that is to say, the adequate selling price of this commodity—is determined by the quantity of labor required for its reproduction, and this quantity of labor itself is here determined by that required for the necessary subsistence of the laborer, the wages become a revenue on which the laborer has to live.

It is entirely wrong, when Adam Smith says (page 223): "That portion of capital which is invested in the maintenance of productive labor...after it has served him" (the capitalist) "in the function of a capital...forms a revenue for them" (the laborers). The money with which the capitalist pays for the labor-power purchased by him, "serves him in the function of a capital," to the extent that he thereby incorporates labor-power in the material elements of his capital and thus enables his capital to serve as productive capital. We make this distinction: The labor-power is a commodity, not a capital, in the hands of the laborer, and it constitutes for him a revenue, so long as he can repeat its sale; it serves as capital, after its sale, in the hands of the capitalist, during the process of production itself. That which here serves twice is labor-power; as a commodity which is sold at its value, in the hands of the laborer; as a power creating exchange-values and use-values, in the hands of the capitalist who has bought it. But the money which the laborer receives from the capitalist is not given to him until after he has given the capitalist the use of his labor-power, after it has already been realized in the value of the product of labor. The capitalist holds this value in his hands, before he pays for it. Hence it is not the money which serves twice here; first, as the money-form of the variable capital, and then as wages. It is labor-power which has served twice; first, as a commodity in the sale of labor-power (in stipulating the amount of wages to be paid, the money serves merely as an ideal measure of value and need not even be in the hands of the capitalist); secondly, in the process of production, in which it serves as capital, in other words, as an element in the hands of the capitalist creating exchange-value and use-values. Labor-power first supplies, in the form of commodities, the equivalent which is to be paid to the laborer, and then only is it paid by the capitalist to the laborer in money. In other words, the laborer himself creates the fund out of which the capitalist pays him. But this is not all.

The money, which the laborer receives, is spent by him for the maintenance of his labor-power, or—looking upon the capitalist class and working class as an aggregate mass—is spent to preserve for the capitalist an instrument by means of which alone he can remain a capitalist.

The continuous purchase and sale of labor-power, then, perpetuates on one hand labor-power as an element of capital, by the the grace of which it appears as the creator of commodities, use-values having an exchange-value, by means of which, furthermore, that portion of capital which buys labor-power is continually reproduced by its own product, so that the laborer himself creates the fund of capital out of which he is paid. On the other hand, the sale of labor-power becomes the ever renewed source for the maintenance of the laborer and makes of his labor-power that faculty through which he secures his revenue, by which he lives. Revenue in this case signifies nothing else but an appropriation of values by means of ever repeated sales of a commodity (labor-power), these values serving merely for the continual reproduction of the commodity to be sold. And to this extent Smith is right when he says that that portion of the value of the laborer's product, for which the capitalist pays him an equivalent in the form of wages, becomes a source of revenue for the laborer. But this does not alter the nature or magnitude of this portion of value of the commodity any more than the value of the means of production is changed by the fact that they serve as capital-values, or the nature and magnitude of a straight line are changed by the fact that it serves as a basis for some triangle or as a diameter of some ellipse. The value of labor-power remains quite as independent as that of those means of production. This portion of the value of a commodity neither consists of a revenue as one of its independent constituent factors, nor does it resolve itself into revenue. Because this value, ever renewed by the laborer, constitutes a source of revenue for him, that is no reason why his revenue, on the other hand, should be an element of the new values produced by him. The magnitude of his share in the new value created by him determines the volume of the value of his revenue, not vice versa. The fact that this portion of the new value forms a revenue for him indicates merely what becomes of it, shows the character of its employment, and has no more to do with its formation than with that of any other value. The fact that my receipts are ten dollars a week changes nothing in the nature of the value of the ten dollars nor in the magnitude of their value. As in the case of every other commodity so in that of labor-power its value is determined by the labor necessary for its reproduction; that the quantity of this labor is determined by the value of the necessary subsistence of the laborer, in other words, that it is equal to the labor required for the reproduction of his own life's conditions, is peculiar for this commodity (labor-power), but no more peculiar than the fact that the value of laboring cattle is determined by the subsistence necessary to produce this subsistence.

But it is this category of "revenue" which is to blame for all the confusion in Adam Smith over this question. The various kinds of revenue constitute with him the "component parts" of the annually produced new values of commodities, while, vice versa, the two portions into which these values resolve themselves for the capitalist form sources of revenue—namely the equivalent of his variable capital advanced for the purchase of labor-power and the other portion of value, the surplus-value, which likewise belongs to him but did not cost him anything. The equivalent of the variable capital is once more advanced for labor-power and to that extent forms a revenue for the laborer in the shape of wages; the other portion, the surplus-value, which does not reproduce any advance of capital for the capitalist, may be spent by him in articles of consumption (whether necessary or luxuries), it may be consumed by him as a revenue, instead of forming capital-value of some kind. The first condition of this revenue is the value of the commodities itself, and its component parts differ from the point of view of the capitalist only to the extent that they are an equivalent for, or an excess over the variable portion of the value of the capital advanced by him. Both of them consist of nothing but labor expended and materialized during the production of commodities. They consist of an expenditure, not of an income or revenue—an expenditure of labor.

After this reversion of facts, by which a revenue becomes the source of the value of commodities instead of the value of commodities being the source of revenue, the value of commodities has the appearance of being "composed" of various kinds of revenue; these revenues are determined independently of one another, and the total value of commodities is determined by the addition of the values of these revenues. But now the question is: How is the value of each of these revenues determined, which are supposed to be the sources of the values of commodities? In the case of wages it is done, for wages are the value of the commodity labor-power, and this is determined (the same as that of all other commodities) by the labor required for its reproduction. But surplus-value, or as Adam Smith has it, profit and ground rent, how are they determined? Here Adam Smith has but empty phrases to offer. He either represents wages and surplus-value (or wages and profit) as component parts of the value, or price, of commodities, or, sometimes in the same breath, as component parts into which the price of commodities resolves itself; but this means precisely the reverse of his contention and makes of the value of commodities the primary thing, different parts of which fall as different revenues to the share of different persons engaged in the productive process. This is by no means identical with the composition of value of these three "component parts." If I determine the magnitude of three different straight lines independently and then form a fourth straight line out of these three lines as "component parts" equal to their sum, it is by no means the same process as if I have some given straight line before me and "resolve" it, so to say, into three different parts for some purpose. In the first case, the magnitude of the line changes throughout with the magnitude of the three lines whose sum it is; in the second case, the magnitude of three parts of the line is from the outset limited by the fact that they are parts of a line of given magnitude.

However, if we keep in mind that part of the analysis of Smith which is correct, namely, that the value newly created by the annual labor and contained in the annual social product in commodities (the same as in every individual commodity, or every daily, weekly, etc., product) is equal to the value of the variable capital advanced (in other words, equal to the value intended for the purchase of new labor-power) plus the surplus-value which the capitalist can realize in means of his individual consumption—simple reproduction being assumed, and other circumstances remaining the same, if we keep furthermore in mind that Adam Smith confounds labor which creates values and is an expenditure of labor-power with labor which creates articles of use and is expended in a useful, appropriate, manner, then the entire conception amounts to this: The value of every commodity is the product of labor; hence this is also true of the value of the product of annual labor, or of the value of the annual product of society in commodities. But since all labor resolves itself, (1), into necessary labor time, in which the laborer reproduces merely an equivalent for the capital advanced in the purchase of his labor-power, and, (2), into surplus-labor, by which he supplies the capitalist with a value for which the latter does not give any equivalent, in other words, a surplus-value, it follows that all value of commodities can resolve itself only into these two component parts, so that ultimately it forms a revenue for the laboring class in the form of wages, and for the capitalist class in the form of surplus-value. As for the constant value of the capital, in other words, the value of the means of production consumed in the production of the annual product, it cannot be explained how this value gets into that of the new product (unless we accept the phrase that the capitalist charges the buyer with it in the sale of his goods), but ultimately, seeing that the means of production are themselves products of labor, this portion of value can consist only of an equivalent for variable capital and surplus-value, of a product of necessary labor and surplus-labor. The fact that the values of these means of production serve in the hands of their employers as capital-values does not prevent them from resolving themselves "originally," even though in some other hands, if we go to the bottom of the matter, and at some previous time, into the same two portions of value, hence into two different sources of revenue.

One point is correct in this conception, namely, that the matter has a different aspect from the point of view of the movement of social capital, in other words, of the totality of individual capitals, that it has from the standpoint of the individual capital, considered by itself, or from the standpoint of each individual capitalist. For these, the value of commodities resolves itself, (1), into a constant element (a fourth one, as Adam Smith says), and (2), into the sum of wages and surplus-value, or wages, profit, and ground rent. But from the point of view of society, the fourth element of Adam Smith, the constant value of capital, disappears.

(5). RECAPITULATION.

The absurd formula that the three revenues, wages, profit, and ground rent, form the three "component parts" of the value of commodities, is due in the case of Adam Smith to the more plausible idea that the value of commodities resolves itself into these three parts. However, this is likewise incorrect, even granted that the value of commodities is only divisible into an equivalent of the consumed labor-power and surplus-value created by it. But the mistake rests here again on a deeper and truer basis. The capitalist mode of production is conditioned on the fact that the productive laborer sells his own labor-power, as a commodity, to the capitalist, in whose hands it then serves merely as an element of his productive capital. This transaction, taking place in the circulation,—the sale and purchase of labor-power—does not only inaugurate the process of production, but also determines implicitly its specific character. The production of a use-value, and even that of a commodity (for this can be done eventually by independent productive laborers), is here only a means of producing absolute or relative surplus-value for a capitalist. For this reason we have seen in the analysis of the process of production, that the production of absolute and relative surplus-value determines, (1), the duration of the daily labor-process, (2), the entire social and technical formation of the capitalist process of production. Within this process, there is realized the distinction between the mere conservation of value (the value of the constant capital), the actual reproduction of advanced value (an equivalent of labor-power), and the production of surplus-value, that is to say, of value for which the capitalist has neither advanced an equivalent nor will advance one subsequently.

The appropriation of surplus-value—a value in excess of the equivalent advanced by the capitalist—although it is inaugurated by the purchase and sale of labor-power, is a transaction taking place within the process of production itself, and forms an essential part of it.

The introductory transaction taking place in the circulation, the purchase and sale of labor-power, is itself conditioned on a distribution of the elements of production, which is the premise and prelude of the distribution of the social products, and implies the separation of labor-power, as a commodity of the laborer, from the means of production, as the property of non-laborers.

However, this appropriation of surplus-value, or this separation of the production of values into a reproduction of advanced values and a production of new values (surplus-values) which do not offset any equivalent, does not alter in any way the substance of value itself nor the nature of the production of values. The substance of value is and remains nothing but expended labor-power—labor independent of the specific, useful, character of this labor—and the production of values is nothing but the process of this expenditure. A serf, for instance, expends his labor-power for six days, labors for six days, and the fact of this expenditure is not altered by the circumstances, that he may be working three days for himself, on his own field, and three days for his lord, on the field of the latter. Both his voluntary labor for himself and his compulsory labor for his lord are equally labor; so far as this labor is considered with reference to the values, or even the useful articles, created by it, there is no difference in his six days of labor. The difference refers merely to the distinct conditions by which the expenditure of his labor-power during each half of his labor-time of six days is affected. The same applies to the necessary and surplus-labor of the wage worker.

The process of production ends in a commodity. The fact that labor-power has been expended in its creation now is manifest in its attribute of value; the magnitude of this value is measured by the quantity of labor expended in it; the value of a commodity resolves itself into nothing else and is not composed of anything else. If I have drawn a straight line of definite length, I have "produced" a straight line (true, only symbolically, as I know beforehand) by means of a certain mode of drawing which is determined by certain laws independent of myself. If I divide this line into three sections (which may correspond to a certain problem), every one of these sections remains a straight line, and the entire line, whose sections they are, does not resolve itself, by this division, into anything different from a straight line, for instance, a curve of some kind. Neither can I divide a line of a given magnitude in such a way, that the sum of its divisions is greater than the undivided line itself; hence the magnitude of the undivided line is not determined by any arbitrary division of its parts. Vice versa, the relative magnitudes of these divisions are limited from the outset by the size of the line whose parts they are.

A commodity produced by a capitalist does not differ in itself from that produced by an independent laborer, or by a laboring commune, or by slaves. But in the present case, the entire product of labor as well as its value belong to the capitalist. Like every other producer, he has to convert his commodity by sale into money, before he can manipulate it further; he must convert it into the form of the universal equivalent.

Let us look at the product in commodities before it is converted into money. It belongs wholly to the capitalist. On the other hand, as a useful product of labor, a use-value, it is entirely the product of a past labor-process. Not so its value. One portion of this value is but the value of means of production consumed in the production of the commodities and re-appearing in a new form; this value has not been produced during the process of production of this commodity; for the means of production possessed this value before this process of production, independently of it; they entered into this process as the bearers of their value; it is only the external form of this value which has been renewed and changed. This portion of the value of the commodity serves the capitalist as an equivalent of the constant value of the capital advanced by him and consumed in the production of the commodity. It existed previously in the form of means of production; it exists now as a component part of the value of the newly-produced commodity. As soon as this commodity has been turned into money, the value then existing in the form of money must be reconverted into means of production, into its original form determined by the process of production and its function in it. Nothing is altered in the character of the value of a commodity by the function of this value as capital.

A second portion of the value of a commodity is the value of the labor-power which the wage-worker sells to the capitalist. It is determined, the same as that of the means of production, independently of the process of production into which labor-power is to enter, and it is fixed in a transaction of the circulation, the purchase and sale of labor-power, before it goes to the process of production. By means of his function—the expenditure of labor-power—the wage-laborer produces a value of the commodity equal to the value which the capitalist has to pay him for the use of his labor-power. He gives this value to the capitalist in commodities, and is paid for it in money. The fact that this portion of the value of commodities is for the capitalist but an equivalent for the capital which he has to advance in wages does not alter in any way the truth that it is a value of commodities newly created during the process of production and consisting of nothing but past expenditure of labor, the same as the surplus-value. Neither is this truth affected by the fact that the value paid by the capitalist to the laborer assumes the form of a revenue for the laborer, and that not only labor-power is continually reproduced thereby, but also the class of wage-laborers itself, and thus the basis of the entire capitalist production.

However, the sum of these two portions of value does not constitute all there is to the value of commodities. There remains an excess over both of them, the surplus-value. This, like that portion of value which reproduces the variable capital advanced in wages, is a value newly created by the laborer during the process of production—materialized labor. But it does not cost the owner of the entire product, the capitalist, anything. This circumstance permits the capitalist to consume the surplus-value entirely as his revenue, unless he has to give up some portions of it to other claimants—such as ground rent to land owners, in which case such portions constitute a revenue of third persons. This same circumstance was also the compelling motive, which induced the capitalist to engage in the first place in the manufacture of commodities. But neither his original benevolent intention of securing some surplus-value, nor its subsequent expenditure as revenue, by him or others, affect the surplus-value as such. They do not impair the fact that it is coagulated, unpaid, labor, nor the magnitude of this surplus-value, things which are determined by entirely different conditions.

However, if Adam Smith wanted to occupy himself, as he did, with an analysis of the role of different constituent parts of value in the total process of reproduction, even while he was investigating the question of the value of commodities, then it was evident that, while some particular portions of value served as a revenue, others served just as continually as capital—and, according to his logic, these would likewise have to be regarded as constituent parts of the value of commodities, or parts into which this value resolves itself.

Adam Smith identifies the production of commodities in general with capitalist production; the means of production are to him from the outset "capital," labor is wage-labor, and therefore "the number of the useful and productive laborers is always...proportional to the quantity of capital stock which is employed in setting them to work." (Introduction, page 12.) In short, the various elements of the productive process—both objective and subjective ones—appear from the first with the masks characteristic of the process of capitalist production. The analysis of the value of commodities, therefore, coincides with the reflection, to what extent this value is, on the one hand, a mere equivalent for invested capital, and, on the other, to what extent it forms "free" value, that is to say, value not reproducing any advance of capital, or surplus-value. The proportions of value compared from this point of view transform themselves clandestinely into its independent "component parts," and finally into the "sources of all value." A further consequence of this method is the alternate composition or dissolution of the value of commodities into revenues of various kinds, so that the revenues do not consist of values of commodities, but rather the value of commodities consists of revenues. But the fact that the value of a commodity may serve as a revenue for this or that man does not change the nature of value as such any more than the fact that the value of a commodity as such, or of money as such, may serve as capital changes their nature. The commodity with which Adam Smith is dealing represents from the outset a commodity-capital (which consists of the value of the capital consumed in production plus a surplus-value), it is a commodity produced by capitalist methods, a result of the capitalist process of production. It would have been necessary, then, to analyze first this process, and this would have implied an analysis of the process of self-expansion and of the formation of value, which it includes. Since this process is in its turn conditioned on the circulation of commodities, its description requires also a previous and independent analysis of a commodity. However, even where Adam Smith hits "esoterically" upon the correct thing in a haphazard way, he refers to the formation of values only in the analysis of commodities, that is to say, in the analysis of commodity-capital.

III. THE ECONOMISTS AFTER SMITH.42

Ricardo reproduces the theory of Smith almost verbatim: "It is agreed that all products of a certain country are consumed, but it makes the greatest imaginable difference, whether they are consumed by those who reproduce another value, or by those who do not. When we say that revenue is saved up and added to the capital, we mean that the portion of revenue added to the capital is consumed by productive laborers, instead of unproductive ones." (Principles, Page 163.)

In fact, Ricardo fully accepted the theory of Adam Smith concerning the separation of the price of commodities into wages and surplus-value (or variable capital and surplus-value). The points in which he differs from him are, 1) the composition of the surplus-value; Ricardo eliminates ground rent as one of its necessary elements; 2), Ricardo starts out from the price of commodities and dissects it into these component parts. In other words, the magnitude of value is his point of departure. The sum of its parts is assumed as given, it is the starting point, while Adam Smith frequently subverts this order and proceeds contrary to his deeper insight, by producing the quantity of value subsequently by an addition of its component parts.

Ramsay makes the following remark against Ricardo: "Ricardo forgets that the total product is not only divided into wages and profits, but that a portion is also required for the reproduction of the fixed capital." (An Essay on the Distribution of Wealth. Edinburgh, 1836, page 174.) Ramsay means by fixed capital the same thing which I call constant capital, for he says on page 53: "Fixed capital exists in a form in which it contributes toward the production of the commodity in process of formation, but not toward the maintenance of laborers."

Adam Smith refuses to accept the logical outcome of his dissolution of the value of commodities, and therefore of the value of the annual product of social labor, into wages and surplus-value, or into mere revenue. This logical outcome would be that the entire annual product might be consumed in that case. It is never the original thinkers that draw the absurd conclusions. They leave that to the Says and Mac-Cullochs.

Say takes the matter indeed easy enough. That which is an advance of capital for one, is, or was, a revenue and net product for another. The difference between the gross and the net product is purely subjective, "and thus the total value of all products in a society is divided as revenue." (Say, Traité d'Economie Politique, 1817, II, page 69.) "The total value of every product is composed of the profits of the land owners, the capitalists, and the industrious people (wages figure here as profits des industrieux!) who have contributed toward its production. This makes the revenue of society equal to the gross value produced, not equal to the net products of the soil, as was claimed by a sect of economists" (the physiocrats). (Page 63.)

Among others, Proudhon has appropriated this discovery of Say.

Storch, however, who likewise accepts the doctrine of Smith in principle, finds that Say's application of it does not hold water. "If it is admitted, that the revenue of a nation is equal to its gross product, so that no capital" (that is to say, no constant capital) "is to be deducted, then it must also be admitted that this nation may consume unproductively the entire value of its annual product, without in the least reducing its future revenue.... The products which represent the" (constant) "capital of a nation are not consumable." (Storch, Considérations sur la nature du revenu national. Paris, 1824, page 150.)

However, Storch forgot to tell us how the existence of this constant portion of capital agrees with the analysis of prices by Smith, which he has accepted, and according to which the value of commodities consists only of wages and surplus-value, but not of any constant capital. He realizes only through Say that this analysis of prices leads to absurd results, and his own opinion of it is "that it is impossible to dissolve the necessary price into its simplest elements." (Cours d' Economie Politique, Petersburg, 1815, II, page 140.)

Sismondi, who occupies himself especially with the relation of capital and revenue, and makes the peculiar formulation of this relation the specific difference of his Nouveaux Principes, did not say one scientific word, did not contribute one atom toward a clarification of this problem.

Barton, Ramsay and Cherbuliez attempted to surpass the formulation of Smith. They failed, because they conceive the problem in a onesided way, by not making clear the distinction of constant and variable capital-value from fixed and circulating capital.

John Stuart Mill likewise reproduces, with his usual pomposity, the doctrine handed down by Adam Smith to his followers.

As a result, the Smithian confusion of thought persists to this hour, and his dogma is one of the orthodox articles of faith of political economy.

Part III, Chapter XX
SIMPLE REPRODUCTION.

I. THE FORMULATION OF THE QUESTION.

If we study the annual function of social capital43 —of the total capital whose fractional parts are the individual capitals, the movements of which are simultaneously their individual movements and links in the movements of the total capital—and its results, that is to say, if we study the product in commodities put forth by society during the year, then it must become apparent how the process of reproduction of the social capital proceeds, what characteristics distinguish this process of reproduction from that of an individual capital, and what characteristics are common to both. The annual product includes those portions of the social product which reproduce capital, the social reproduction, as well as those which go to the fund for consumption, which are consumed by capitalists and laborers, in other words, productive and individual consumption. It comprises the reproduction (maintenance) of the capitalist and working classes, and thus the reproduction of the capitalist character of the entire process of production.

It is evidently the circulation formula

which we have to analyze, and the consumption necessarily plays a role in it. For the point of departure, C' equal to C plus c, the commodity-capital, comprises the constant and variable capital as well as the surplus-value. Its movements, therefore, include both the individual and productive consumption. In the cycles M—C...P...C'—M', and P...C'—M'—C...P, the movement of the capital is the starting and finishing point. And this implies consumption, for the commodity, the product, must be sold. When these premises are accepted, it is immaterial for the movement of the individual capitals, what becomes of these commodities subsequently. On the other hand, in the movement of C'...C' the conditions of social reproduction are precisely different in this point, since it must be shown what becomes of every portion of value of this total product of C'. In this case, the total process of reproduction includes the process of consumption by way of the circulation quite as much as the process of reproduction of the capital itself.

This process of reproduction, now, must be considered for the purposes of our study both from the point of view of the reproduction of the value and of the substance of the individual component parts of C'. We cannot rest satisfied any longer, as we did in the analysis of the value of the product of the individual capital, with the assumption that the individual capitalist must first convert the component parts of his capital into money by the sale of his commodities, before he is able to reconvert it into productive capital by renewed purchase of the elements of production in the commodity market. Those elements of production, so far as they consist of things, constitute as much a portion of the social capital as the individual finished product, which is exchanged for them and reproduced by them. On the other hand, the movement of that portion of the social product in commodities, which is consumed by the laborer in the expenditure of his labor-power, and by the capitalist in spending his surplus-value, does not only form an integral part of the movement of the total product, but also intermingles with the movements of the individual capitals, and this process cannot be explained by merely assuming it.

The question which we have to face immediately, is this: How is the value of the capital consumed in production re-produced out of the annual product, and how does the movement of this reproduction intermingle with the consumption of surplus-value by the capitalists and of wages by the laborers? We are dealing, then, first with reproduction on a simple scale. It is furthermore assumed that products are exchanged at their value, and that no revolution in the value of the elements of productive capital takes place. Should there be any divergence of prices from values, this would not exert any influence on the movements of social capital. On the whole, there is the same exchange of the same quantity of products, although the individual capitalists would be taking shares in it which would no longer be proportional to their respective advances and to the quantities of value produced by each one. As for revolutions of value, they do not alter anything in the proportions of the elements of value of the various component parts of the total annual product, provided they are universally and uniformly distributed. To the extent that they are limited and unevenly distributed, they are disturbances, which, in the first place, can be understood only as divergences from equal proportions of value; and, in the second place, given the law according to which one portion of the annual product reproduces constant, and another variable capital, a revolution either in the value of the constant or variable capital would not alter this law. It would change merely the relative magnitude of the portions of value which serve in the one or the other capacity, seeing that other values would have taken the places of the original ones.

So long as we looked upon the production of value and the value of products from the point of view of individual capital, it was immaterial for the analysis which was the natural form of the product in commodities, whether it was, for instance that of a machine, of corn, or of looking glasses. It was always but a matter of illustration, and any line of production could serve that purpose. What we had to consider was the immediate process of production itself, which presented itself at every point as the process of some individual capital. So far as reproduction was concerned, it was sufficient to assume that that portion of the product in commodities, which represented capital in the sphere of circulation, found an opportunity to reconvert itself into its elements of production and thus into its form of productive capital. It likewise sufficed to assume that both the laborer and the capitalist found in the market those commodities for which they spend their wages and surplus-value. This merely formal manner of presentation does not suffice in the study of the total social capital and of the value of its products. The reconversion of one portion of the value of the product into capital, the passing of another portion into the individual consumption of the capitalist and working classes, form a movement within the value of the product itself which is created by the total capital; and this movement is not only a reproduction of value, but also of material, and is, therefore, as much conditioned on the relative proportions of the elements of value of the total social product as on its use-value, its material substance.44

Simple reproduction on the same scale appears as an abstraction; inasmuch as the absence of all accumulation or reproduction on an enlarged scale is an irrelevant assumption in capitalist society, and, on the other hand, conditions of production do not remain exactly the same in different years (as was assumed). The assumption is that a social capital of a given magnitude produces the same quantity of value in commodities this year as last, and supplies the same quantity of wants, although the forms of the commodities may be changed in the process of reproduction. However, while accumulation does take place, simple reproduction is always a part of it and may, therefore, be studied in itself, being an actual factor in accumulation. The value of the annual product may decrease, although the quantity of use-values may remain the same; or, the value may remain the same, although the quantity of the use-values may decrease; or, the quantity of value and of use-values may decrease simultaneously. All this amounts to saying that reproduction takes place either under more favorable conditions than before, or under more difficult ones, which may result in an imperfect reproduction. But all this can refer only to the quantitative side of the various elements of reproduction, not to the role which they are playing as a reproducing capital, or as a reproduced revenue, in the entire process.

II. THE TWO DEPARTMENTS OF SOCIAL PRODUCTION.45

The total product, and therefore the total production, of society, is divided into two great sections:

1. Means of Production, commodities having a form in which they must, or at least may, pass over into productive consumption.

II. Means of Consumption, commodities having a form in which they pass into the individual consumption of the capitalist and working classes.

In each of these two departments, all the various lines of production belonging to them form one single great line of production, the one that of the means of production, the other that of articles of consumption. The aggregate capital invested in each of these two departments of production constitutes a separate section of the entire social capital.

In each department, the capital consists of two parts:

(1) Variable Capital. This capital, so far as its value is concerned, is equal to the value of the social labor-power employed in this line of production, in other words equal to the sum of the wages paid for this labor-power. So far as its substance is concerned, it consists of the active labor-power itself, that is to say, of the living labor set in motion by this value of capital.

(2) Constant Capital. This is the value of all the means of production employed in this line. These, again, are divided into fixed capital, such as machines, instruments of labor, buildings, laboring animals, etc., and circulating capital, such as materials of production, raw and auxiliary materials, half-wrought articles, etc.

The value of the total annual product created with the capital of each of the two great departments of production consists of one portion representing the constant capital c consumed in the process of production and transferred to the product, and of another portion added by the entire labor of the year. This latter portion, again, consists of one part re-producing the advanced variable capital v, and of another representing an excess over the variable capital, the surplus-value s. And just as the value of every individual commodity, so that of the entire annual product of each department consists of c plus v plus s.

The portion c of the value, representing the constant capital consumed in production, is not identical with the value of the constant capital invested in production. It is true that the materials of production are entirely consumed and their values completely transferred to the product. But of the invested fixed capital, only a portion is consumed and its value transferred to the product. Another portion of the fixed capital, such as machines, buildings, etc., continues to exist and serve the same as before, merely depreciating to the extent of the annual wear and tear. This persistent portion of the fixed capital does not exist for us, when we consider the value of the product. It is a portion of the value of capital existing independently beside the new value in commodities produced by this capital. This was shown previously in the analysis of the value of the product of some individual capital (volume I, chapter VI). However, for the present we must leave aside the method of analysis employed there. We saw in the study of the value of the product of individual capital that the value withdrawn from the fixed capital by wear and tear was transferred to the product in commodities created during the time of wear, no matter whether any portion of this fixed capital is reproduced in its natural form out of the value thus transferred or not. At this point, however, in the study of the social product as a whole and of its value, we must for the present leave out of consideration that portion of value which is transferred from the fixed capital to the annual product by wear and tear, unless this fixed capital is reproduced in natura during the year. In one of the following sections of this chapter we shall return to this point.

We shall base our analysis of simple reproduction on the following diagram, in which c stands for constant capital, v for variable capital, and s for surplus-value, the rate of surplus-value between v and s being assumed at 100 per cent. The figures may indicate millions of francs, marks, pounds sterling, or dollars.

I. Production of Means of Production.
Capital...4000 c+1000 v=5000.
Product in Commodities...4000 c+1000 v+1000 s=6000.

These exist in the form of means of production.

II. Production of Means of Consumption.
Capital...2000 c+500 v=2500.
Product in Commodities...2000 c+500 v+500 s=3000.

These exist in articles of consumption.

Recapitulation: Total annual product in commodities:

I. 4000 c+1000 v+1000 s=6000 means of production.
II. 2000 c+ 500 v+ 500 s=3000 articles of consumption.

Total value 9000, exclusive of the fixed capital persisting in its natural form, according to our assumption.

Now, if we examine the transactions required on the basis of simple reproduction, where the entire surplus-value is unproductively consumed, leaving aside for the present the mediation of the money circulation, we obtain at the outset three great points of vantage.

(1) The 500 v, representing wages of the laborers, and 500 s, representing surplus-value of the capitalists, in department II, must be spent for articles of consumption. But their value exists in the articles of consumption to the amount of 1000, held by the capitalists of department II, which reproduce the 500 v and represent the 500 s. The wages and surplus-value of department II, then, are exchanged within this department for products of this same department. By this means, a quantity of articles of consumption equal to 1000 (500 v plus 500 s) disappear out of the total product of department II.

(2) The 1000 v and 1000 s of department I must likewise be spent for articles of consumption, in other words, for some of the products of department II. Hence they must be exchanged for the remaining 2000 c of constant value, which is equal in amount to them. Department II receives in return an equal quantity of means of production, the product of I, in which the value of 1000 v and 1000 s of I is incorporated. By this means, 2000 c of II and (1000 v + 1000 s) of I disappear out of the calculation.

(3) Nothing remains now but 4000 c of I. These consist of means of production which can be used up only in department I. They serve for the reproduction of its consumed constant capital, and are disposed of by the mutual exchange between the individual capitalists of I, just as are the (500 v + 500 s) in II by an exchange between the capitalists and laborers, or between the individual capitalists, of II.

This may serve for the present to render easier the understanding of the following statements.

III. THE TRANSACTIONS BETWEEN THE TWO DEPARTMENTS.46
I (v + s) versus II c.

We begin with the great exchange between the two departments. The values of (1000 v + 1000 s), consisting of the natural form of means of production in the hands of their producers, are exchanged for 2000 c of II, for values consisting of articles of consumption in their natural form. The capitalist class of II thereby reconverts its constant capital of 2000 from the form of articles of consumption into that of means of production of articles of consumption. In this form it may serve once more as a factor in the labor-process as the value of constant capital in the process of self-expansion. On the other hand, the equivalent of the labor-power of I (1000 v) and of the surplus-value of the capitalists of I (1000 s) is realized in articles of consumption; both of them are converted from their natural form of means of production into a natural form in which they may be consumed as revenue.

Now, this mutual transaction is accomplished by means of a circulation of money, which facilitates it as much as it renders its understanding difficult, but which is of fundamental importance, because the variable portion of capital must ever resume the form of money, of money-capital converting itself from the form of money into labor-power. The variable capital must be advanced in the form of money in all lines of production carried on simultaneously, regardless of whether they belong to department I or II. The capitalist buys the labor-power before it enters into the process of production, but does not pay for it except at stipulated terms, after it has been expended in the production of use-values. He owns, with the remainder of the value of the product, also that portion of it which is an equivalent for the money expended in the payment of labor-power, in other words, that portion of the value of the product which represents variable capital. By this portion of value the laborer has supplied the capitalist with the equivalent for his own wages. But it is the reconversion of commodities into money by their sale which restores to the capitalist his variable capital in the form of money-capital, which he may advance once more for the purchase of labor-power.

In department I, then, the aggregate capitalist has paid 1000 pounds sterling (I use the term pounds sterling merely to indicate that it is value in the form of money), equal to 1000 v, for the v-portion of the already existing value of product I, that is to say, of the means of production created by him. The laborers buy with these 1000 pounds sterling articles of consumption of the same value from the capitalists II, thereby converting one-half of the constant capital II into money; the capitalists II, in their turn, buy with these 1000 pounds sterling means of production, valued at 1000, from the capitalists I; the variable capital-value of 1000 v, which consisted, in the natural form of the product of capitalists I, of means of production, is thus reconverted for them into money and may serve anew in their hands as money-capital, which is transformed into labor-power, the most essential element of productive capital. In this way, their variable capital returns to them in the form of money, as a result of the realization on some of their commodity-capital.

As for the money which is required for the exchange of the s portion of commodity-capital I for the second half of constant capital II, it may be advanced in various ways. In reality, this circulation implies innumerable small purchases and sales of the individual capitals of both departments, the money coming under all circumstances from these capitalists, since we have already disposed of the money thrown into circulation by the laborers. It may be that one of the capitalists of department II buys, with the money-capital he has aside from his productive capital, means of production from capitalists of department I, or that, vice versa, one of the capitalists of department I buys, with funds reserved for individual expenses, not for capital investment, articles of consumption from capitalists of department II. A certain supply of money, to be used either for investment as capital or for expenditure as revenue, must be assumed to exist beside the productive capital in the hands of the capitalists, under all circumstances, as we have shown in section I and II. Let us assume—it is immaterial what proportion we select for our purpose—that one-half of the money is advanced by the capitalists of department II in the purchase of means of production intended for the reproduction of their constant capital, while the other half is spent by the capitalists of department I for articles of consumption. For instance, let department II advance 500 pounds sterling for the purchase of means of production from department I, thereby reproducing (inclusive of the 1000 pounds sterling coming from the laborers of department I) three-quarters of its constant capital in its natural form; department I buys with the 500 pounds sterling so obtained articles of consumption from II, thus completing for one-half of the s-portion of its commodity-capital the circulation c—m—c and realizing on its product in a supply of articles of consumption. By means of this second transaction, the 500 pounds sterling return to the hands of the capitalists of department II, in the form of money-capital existing beside its productive capital. On the other hand, department I expends money to the amount of 500 pounds sterling, in anticipation of the realization on the other half of the s-portion of its still unsold commodity-capital, for the purchase of articles of consumption from department II. With the same 500 pounds sterling, department II buys from I means of production, thereby reproducing in natural form its entire constant capital (1000 + 500 + 500 = 2000), while I realizes its entire surplus-value in articles of consumption. The entire transaction would represent a transfer of commodities valued at 4000 pounds sterling with a circulation of 2000 pounds sterling in money. This last amount is sufficient only because we have assumed that the entire annual product is sold in bulk in a few large transactions. The important point is here that department II has not only reconverted its constant capital, which had been reproduced in the form of articles of consumption, into the form of means of production, but has also recovered the 500 pounds sterling which it had thrown into circulation for the purchase of means of production; and that in the same way department I possesses once more not only its variable capital, which it had produced in the form of means of production, in the form of money-capital, readily convertible into labor-power, but also the 500 pounds sterling expended in the purchase of articles of consumption previously to the sale of the s-portion of its capital in anticipation of its realization. It recovers these 500 pounds sterling, not by this expenditure, but by the subsequent sale of one-half of the s-portion of its commodity-capital.

In both cases, it is not merely the constant capital of department II which is reconverted from the form of a product into the natural form of means of production, in which it can alone serve as capital; nor is it merely the variable portion of the capital of I which is reconverted into its money-form, nor the surplus-portion of the means of production of I which is transformed into its consumable form of revenue. It is also the 500 pounds sterling of money-capital, advanced by department II in the purchase of means of production previously to the sale of the corresponding portion of the value of its constant capital, which return to II; and the 500 pounds sterling expended by I for means of consumption previously to the realization of its surplus-value. The fact that the money advanced by II at the expense of the constant portion of its commodities, and by I at the expense of the surplus-portion of its commodities, returns to them is due to the circumstance that one class of capitalists throws 500 pounds sterling into circulation over and above the constant capital existing in the form of commodities in department II, and another class a like amount over and above the surplus-value existing in the form of commodities in department I. In the last analysis, the two departments have mutually paid one another in full by the exchange of equivalents in the form of their respective commodities. The money thrown into circulation by each department in excess of the value of their commodities, as a means of transacting the exchange of these commodities, returns to each one of them out of the circulation at the same rate in which they had contributed to it. Neither has grown any richer thereby. Department II possessed a constant capital of 2000 in the form of articles of consumption plus 500 pounds sterling in money; now it possesses 2000 in means of production plus 500 pounds sterling in money, the same as before; in the same way, department I possesses, as before, a surplus-value of 1000 (consisting of commodities in the form of means of production, now converted into a supply of articles of consumption) plus 500 pounds sterling. The general conclusion is this: The money which the industrial capitalists throw into circulation for the purpose of accomplishing the mutual exchange of their commodities, either in account with the constant value of the commodities, or in account with the surplus-value existing in the commodities, to the extent that it is spent as revenue, returns into the hands of the respective capitalists in proportion to the amount advanced by them for the circulation of money.

As for the reconversion of the variable capital of department I into the form of money, this capital exists, after the capitalists of I have invested it in wages, first in the form of the commodities produced by the laborers. The capitalists have paid this capital in the form of money to these laborers as the price of their labor-power. The capitalists have to this extent paid for that portion of the value of their commodities, which is equal to the variable capital expended in the form of money. They are, for this reason, the owners of this portion of the commodity-product. But that portion of the working class which is employed by them does not buy the means of production created by it; these laborers buy articles of consumption produced by department II. Hence the variable capital advanced by the capitalists of I in the payment of labor-power does not return to these capitalists directly. It passes by means of the purchases of the laborers of I into the hands of the capitalist producers of the requirements of life of the laborer, or of other commodities accessible to them; in other words, it passes into the hands of capitalists of II. And not until these expend this money in the purchase of means of production does it return by this circuitous route into the hands of the capitalists of department I.

It follows that, on the basis of simple reproduction, the sum of the values of v plus s of the commodity-capital of I (and therefore a corresponding proportional part of the total product in commodities of I) must be equal to the constant capital c of department II, which is likewise disposed of as a proportional part of the entire product in commodities of department II; or I (v + s) = II c.

IV. TRANSACTIONS WITHIN DEPARTMENT II. NECESSITIES OF LIFE AND ARTICLES OF LUXURY.

It remains for us to analyze the portion v plus s of the value of the commodities of department II. This analysis has nothing to do with the most important question which occupies our attention in this chapter, namely the question, to what extent the separation of the value of every individual capitalist product in commodities into c plus v plus s applies also to the value of the entire annual product in commodities, even though this separation may be based on different forms. This question is solved by the transaction between I (v + s) and II c, and, on the other hand, by the analysis of the reproduction of I c in the annual product in commodities of I, to be analyzed later on.

Since II (v + s) exists in the natural form of articles of consumption; since, furthermore, the variable capital advanced in the payment of the labor-power of the laborers is mostly spent by them for articles of consumption; and since, finally, the s-portion of the value of commodities, on the basis of simple reproduction, is practically spent as revenue for articles of consumption, it is evident at the first glance that the laborers of II buy back, with the money received as wages from the capitalists of II, a portion of their own product, corresponding in value to the money-value represented by these wages. The capitalist class of II thereby reconvert the money-capital advanced by them in the payment of labor-power into the form of money. It is as though they had paid the laborers in mere checks on commodities. As soon as the laborers realize on these checks by the purchase of a portion of the commodities produced by them, but belonging to the capitalists, these checks return into the hands of the capitalists. Only, these checks do not merely represent value, but they are actually embodied in gold or silver. We shall analyze later on this sort of reflux of variable capital by means of a process in which the laborer appears as a purchaser and the capitalist as a seller. Here, however, it is a question of a different point, which must be discussed on the occasion of the return of this variable capital to its point of departure.

Department II of the annual production of commodities consists of a great variety of lines of production, which may, however, be divided into two great subdivisions according to their products.

(a) Articles of consumption required for the maintenance of the laboring class, and to the extent that they are material requirements of life, also forming a portion of the consumption of the capitalist class, although they are frequently different in quality and value. We may, for our purposes, comprise this entire subdivision under the name of necessary articles of consumption, regardless of whether a product of this class, such as tobacco, is really a necessary article of consumption from the physiological standpoint or not. It is sufficient that it may be habitually in demand.

(b) Articles of luxury, which are consumed only by the capitalist class, being purchased only with the surplus-value, which never falls to the share of the laborer.

It is obvious that the variable capital advanced in the production of the commodities of the class (a) must flow back directly to that portion of the capitalist class of II (in other words the capitalists of IIa) who have produced these material requirements of life. They sell them to their own laborers to the amount of the variable capital paid to them in wages. This reflux takes place in a direct way, so far as this entire subdivision (a) of the capitalist class of department II is concerned, no matter how numerous may be the transactions between the capitalists of the various lines of industry interested in this department, by means of which the returning variable capital is distributed pro rata. These transactions are processes of circulation, whose means of circulation are supplied directly by the money expended by the laborers. It is different with subdivision IIb. The entire portion of the values produced in this subdivision, IIb (v + s), exists in the natural form of articles of luxury; that is to say, articles which the laborer can buy no more than the value of the commodities Iv existing in the form of means of production, notwithstanding the fact that both articles of luxury and means of production are the products of the working class. Hence the reflux by which the variable capital advanced in this subdivision restores to the capitalist producers its value in the form of money cannot take place directly, but must be promoted indirectly, similarly as in the case of Iv.

Let us assume, for instance, that v stands for 500 and s also for 500, as they did in the case of the entire class II; but let the division of the variable capital and of the corresponding surplus-value be as follows:

(Subdivision a) Necessities of Life: v equal to 400 and s equal to 400; hence a total quantity of necessities of life valued at 400 v plus 400 s, equal to 800, in other words, IIa (400 v+400 s).

(Subdivision b) Articles of Luxury: Valued at 100 v plus 100 s, equal to 200, or IIb (100 v + 100 s).

The laborers of IIb have received 100 in money as payment of their labor-power, or say 100 pounds sterling. They buy with this money articles of consumption from the capitalists of IIa to the same amount. This class of capitalists buys with the same money 100 p. st. worth of the commodities of IIb, thereby returning to the capitalists of IIb their variable capital in the form of money.

In IIa there are available once more 400 v in money, in the hands of the capitalists, obtained by exchange with their laborers. Furthermore, the fourth part of the product representing surplus-value has been transferred to the laborers of IIb, and IIb (100v) have been purchased in the form of articles of luxury.

Now, assuming that the capitalists of IIa and IIb divide the expenditure of their revenue in the same proportion between necessities of life and luxuries—for instance, three-fifths for necessities and two-fifths for luxuries—the capitalists of IIa will spend their revenue from surplus-value, amounting to 400 s, three-fifths, or 240, for their own product of necessities of life, and two-fifths, or 160, for articles of luxury. The capitalists of subdivision IIb will divide their surplus-value of 100 s in the same way: three-fifths, or 60, for necessities, and two-fifths, or 40, for articles of luxury, these being produced and exchanged in their own sub-division.

The 160 in articles of luxury received by IIa for its surplus-value, pass into the hands of the capitalists of IIa in the following manner: Of the 400 s of IIa, we have seen that 100 were exchanged in the form of necessities of life for an equal amount of articles of luxury of IIb, and furthermore 60, consisting of necessities of life, for 60 s of IIb, consisting of luxuries. The total calculation then stands as follows:

IIa: 400 v plus 400 s; IIb: 100 v plus 100 s.

(1) 400 v of (a) are consumed by the laborers of IIa, a part of whose product is represented by that amount in necessities of life; the laborers buy these necessities from the capitalist producers of their own subdivision. These capitalists thereby recover 400 p. st., in money, which is the value of the variable capital paid by them to these same laborers. They can now buy more labor-power with it.

(2) One portion of the 400 s of (a), equal to the 100 v of (b); in other words, one-quarter of the surplus-value of (a) is exchanged for luxuries in the following way: The laborers of (b) received from the capitalists of their subdivision 100 p. st. in wages. With this amount these laborers bought one-quarter of the surplus-value of (a), in other words, commodities consisting of necessities of life. The capitalists of (a) buy with this same money articles of luxury to the same amount, which equals 100 v of (b), or one-half of the entire product in luxuries of (b). In this way the capitalists of (b) recover their variable capital in the form of money and are enabled to resume reproduction after having invested this amount once more in labor-power, since the entire constant capital of the whole department II has been reproduced by the exchange between I (v+s) and IIc. The labor-power of the laborers of IIb, the producers of articles of luxury, is under these circumstances, only saleable because the product created by them as an equivalent for their own wages is consumed by the capitalists of IIa. (The same applies to the sale of the labor-power of I, since the IIc for which I (v + s) is exchanged, consists of both articles of luxury and necessities of life, and that which is reproduced by means of I (v + s) consists of the means of production of both luxuries and necessities.)

(3) We now come to the exchange between a and b, to the extent that it is merely a transaction between the capitalists of these two subdivisions. So far we have disposed of the variable capital (400) v and of one portion of the surplus-value (100) s in (a), and of the variable capital (100) v in (b). We had furthermore assumed that the average proportion of the expenditure of the capitalist revenue was in both classes two-fifths for luxuries and three-fifths for necessities. Apart from the 100 thus expended for luxuries, the entire department therefore still has to spend 60 for luxuries in (a) and the same proportion, or 40, in (b).

(IIa) is then divided into 240 for necessities and 160 for luxuries, or 240 + 160=400 s (IIa).

(IIb) s is divided into 60 for necessities and 40 for luxuries; 60 + 40 = 100s (IIb). The last 40 are consumed by this class out of its own product (two-fifths of its surplus-value); the 60 for necessities are obtained by this class through the exchange of 60 of its surplus-value for 60 s of a.

We have, then, for the entire capitalist class of II, the following situation (v plus s in subdivision (a) consisting of necessities, in subdivision (b) of luxuries):

IIa (400 v + 400 s) +IIb (100 v + 100 s) = 1000; by this transaction there is realized 500 v (a + b) + 500 s (a + b) = 1000; the first member in this equation being realized in 400 v of (a) and 100 s of (b), the second in 300 s of (a) plus 100 v of (b) plus 100 s of (b).

Considering a and b, each by itself, we have the transaction:

If we retain, for the sake of simplicity, the same proportion between the variable and constant capital of each subdivision (which, by the way, is not at all necessary), we obtain for 400 v (a) a constant capital of 1600, and for 100 v (b) a constant capital of 400, and we have the following two subdivisions a and b in department II:

(IIa) 1600 c + 400 v + 400 s = 2400
(IIb) 400 c + 100 v + 100 s = 600

making together

2000 c + 500 v + 500 s = 3000.

Accordingly, 1600 of the 2000 IIc in articles of consumption, which are exchanged for 2000 I (v + s), are disposed of for means of production of necessities of life, and 400 for means of production of luxuries.

The 2000 I (v + s), then, would be divided into (800 v + 800 s) I, for the 1600 means of production of necessities of life in section a, and (200 v + 200 s) I, for the 400 means of production of luxuries in b.

A considerable part of the instruments of labor, strictly so called, as well as of the raw and auxiliary materials, etc., is homogeneous for both departments. But so far as the transaction of the exchanges of the various portions of value of the total product I (v + s) are concerned, such a division would be immaterial. Both the above named 800 v of I and 200 v of I are realized by the spending of wages for articles of consumption 1000 c of II, and the money-capital advanced for this purpose is uniformly distributed, on its return, among the capitalist producers of I, reproducing their variable capital in money at the rate advanced by them. On the other hand, so far as the realization of the 1000 s of I is concerned, the capitalists will likewise draw uniformly, in proportion to the magnitude of their surplus-value, 600 IIa and 400 IIb out of the entire second half of IIc, equal to 1000; in other words, those who make up for the constant capital of IIa will draw 480, or three-fifths, out of 600 c of IIa, and 320, or two-fifths, out of 400 c of IIb, a total of 800; while those who make up for the constant capital of IIb will draw 120, or three-fifths out of 600 c of IIa and 80, or two-fifths out of 400 c of IIb, a total of 200. Grand total, 1000.

That which is arbitrary in this case is the proportion of the variable to the constant capital of both I and II and so is the uniformity of this proportion for I and II and their subdivisions. As for this uniformity, it has been assumed merely for the sake of simplifying the matter, and it would not alter in any way the fundamental conditions of the problem and its solution, if we had assumed different proportions. However, the necessary result of all this, on the basis of simple reproduction, is the following:

(1) That the new product in values created by the labor of one year in the natural form of means of production, divisible into v plus s, must be equal to the value of the constant capital c of the product in values created by the other part of annual labor, reproduced in the form of articles of consumption. If it were smaller than IIc, it would be impossible for II to reproduce its entire constant capital; if it were greater, a surplus would remain unused. In either case, the assumption of simple reproduction would be violated.

(2) That in the case of annual product which is reproduced in the form of articles of consumption, the variable capital v advanced in the form of money can be realized by its recipients, to the extent that they are laborers producing luxuries, only in that portion of the necessities of life which embodies for its capitalist producers primarily their surplus-value; so that v, invested in the production of luxuries, is equal in value to a corresponding portion of s produced in the form of necessities, and must be smaller than the whole of this s, which is s of IIa; and that, finally, the variable capital of the capitalist producers of luxuries returns to them in the form of money only by means of the realization of that v in this portion of s. This phenomenon is quite analogous to the realization of I (v +s) in IIc; only that in the second case, it is the v of IIb which is realized in a portion of s of IIa of the same value. These conditions determine the proportions of the various quantities in every distribution of the total annual product, to the extent that it actually enters into the process of the annual reproduction promoted by circulation. I (v+s) can be realized only in IIc, and IIc can renew its function as a component part of productive capital only by means of this realization; in the same way, the v of IIb can be realized only in a portion of s of IIa, and v of IIb can only thus be reconverted into the form of money-capital. Of course, all this applies only to the extent that it is a result of the process of reproduction itself, so that the capitalists of IIb do not, for instance, take up money-capital for v by credit from others. So far as mere quantity is concerned, the transactions for the exchange of the various portions of the annual product can take place only in the way indicated above, so long as the scale and the conditions determining value remain stationary, and so long as these strict conditions are not altered by the commerce with foreign countries.

Now, if we were to say after the manner of Adam Smith that I(v + s) resolves itself in IIc, and IIc resolves itself into I(v + s), or, as he says more frequently and more absurdly, I (v + s) constitutes the component parts of the price (or value in exchange, as he has it) of IIc, and IIc constitutes the entire component part of the value of I (v + s), then we could and should say that the v of IIb resolves itself into s of IIa, or the s of IIa into the v of IIb, or the v of IIb forms a component part of the s of IIa, or, vice versa, the surplus-value thus resolves itself into wages, or into variable capital, and the variable capital forms a component part of the surplus-value. This absurdity is indeed found in Adam Smith, since according to him wages are determined by the value of the necessities of life, and the values of these commodities in their turn by the value of the wages (variable capital) and surplus-value contained in them. He is so absorbed in the fractional parts, into which the product in values of one working day is divided on the basis of capitalist production—namely into v plus s—that he quite forgets that it is immaterial in the simple exchange of commodities, whether the equivalents existing in various natural forms consist of paid or unpaid labor, since their production costs in either case the same amount of labor; and that it is also immaterial, whether the commodity of A is a means of production and that of B an article of consumption, and whether one commodity has to serve as a component part of capital after its sale, while another passes into the fund for consumption and is consumed, according to Adam, as revenue. The use to which the buyer puts his commodity does not fall within the scope of the exchange of commodities, does not concern the circulation, and does not affect the value of the commodity. This fact is not in the least affected by the truth that, in the analysis of the circulation of the annual social product as a whole, the definite use for which it is intended, the mode of consumption of the various component parts of that product, must be taken into consideration.

In mentioning the fact that the conversion of the v of IIb into a portion of the s of IIa of the same value, and the further transactions between the s of IIa and the s of IIb, it is by no means assumed that either the individual capitalists of IIa and IIb or their respective totalities divide their surplus-value in the same proportion between necessities of life and articles of luxury. The one may spend more in this consumption, the other more in that. On the basis of simple reproduction we have merely assumed that a sum of values equal to the entire surplus-value is realized in a fund for consumption. The limits are thus given. Within each department, the one may do more in a, the other in b. But this may compensate itself mutually, so that the capitalist classes of a and b, each taken as a whole, each participate in the same proportion in both of them. The proportions of value—the proportional share of the two classes of producers, a and b, in the total value of the product of II—and with them a definite quantitative proportion between the departments of production supplying those products, are necessarily given in any concrete case; only a proportion chosen as an illustration is a hypothetical one. It does not alter the qualitative elements of the proposition, if we select another illustration; only the quantitative determinations would be altered. But if any circumstances cause an actual change in the proportional magnitude of a and b, then the conditions of simple reproduction would likewise be changed correspondingly.

Since the v of IIb is realized in an equivalent portion of the s of IIa, it follows that to the extent that the portion of the annual product consisting of luxuries grows, absorbing an increasing share of the labor-power in the production of luxuries, to the same extent is the reconversion of variable capital advanced by IIb into money conditioned on the prodigality of the capitalist class, who spend a considerable portion of their surplus-value in articles of luxury. It is by this means that the reconversion of this variable capital into money is promoted, and thereby the existence and reproduction of the laborers employed in IIb, by supplying them with the articles of consumption necessary for their life.

Every crisis momentarily lessens the consumption of luxuries. It retards and checks the reconversion of the v of IIb into money-capital, permitting it only partially and thus throwing a certain number of the laborers employed in the production of luxuries out of employment, while it on the other hand clogs by this means the sale of the necessary articles of consumption and reduces it. And there are, besides, the unproductive laborers who are dismissed at the same time, laborers who receive for their services a portion of the funds spent by the capitalists for luxuries (these laborers are themselves luxuries), and who take part to a very considerable extent in the consumption of necessities of life, etc. The reverse takes place in periods of prosperity, particularly during the times of bogus prosperity, in which the relative value of money, expressed in commodities, decreases primarily for other reasons (without any other actual revolution in values), so that the price of commodities rises independently of their own value. It is not alone the consumption of necessities of life which increases at such times. The working class, actively re-inforced by its entire reserve army, also enjoys momentarily articles of luxury ordinarily out of its reach, articles which at other times constitute for the greater part "necessities" only for the capitalist class. This contributes to a rise in prices from this quarter.

It is purely a tautology to say that crises are caused by the scarcity of solvent consumers, or of a paying consumption. The capitalist system does not know any other modes of consumption but a paying one, except that of the pauper or of the "thief." If any commodities are unsaleable, it means that no solvent purchasers have been found for them, in other words, consumers (whether commodities are bought in the last instance for productive or individual consumption). But if one were to attempt to clothe this tautology with a semblance of a profounder justification by saying that the working class receive too small a portion of their own product, and the evil would be remedied by giving them a larger share of it, or raising their wages, we should reply that crises are precisely always preceded by a period in which wages rise generally and the working class actually get a larger share of the annual product intended for consumption. From the point of view of the advocates of "simple" (!) common sense, such a period should rather remove a crisis. It seems, then, that capitalist production comprises certain conditions which are independent of good or bad will and permit the working class to enjoy that relative prosperity only momentarily, and at that always as a harbinger of a coming crisis.47

We saw a while ago that the proportion between the production of necessities of life and that of luxuries requires the division of II (v + s) into IIa and IIb, and thus of IIc into (IIa) c and (IIb) c. Hence this division touches the character and the quantitative conditions of production to their very roots, and is an essential factor in its general conformation.

Simple reproduction is essentially directed toward consumption as an end, although the securing of surplus-value appears as the compelling motive of the individual capitalists; but surplus-value in this case, whatever may be its proportional magnitude, is supposed to serve merely for the individual consumption of the capitalist.

So far as simple reproduction is a part, and the most important one at that, of annual reproduction on an enlarged scale, consumption remains as a motive accompanying the accumulation of wealth as an end and distinguished from it. In reality, the matter appears more complicated, because some partners in the loot, the surplus-value of the capitalist, figure as consumers independently of him.

V. THE PROMOTION OF THE TRANSACTIONS BY THE CIRCULATION OF MONEY.

So far as we have analyzed circulation up to the present, it proceeded between the various classes of producers as indicated in the following diagrams:

(1) Between class I and class II:
I. 4000 c + 1000 v + 1000 s.
II....2000 c...+ 500 v + 500 s.

This disposes of the circulation of IIc (2000), which is exchanged for I (1000 v + 1000 s).

Leaving aside for the present the 4000 c of I, there still remains the circulation of v + s within class II. Now II (v + s) is subdivided between the subclasses IIa and IIb in the following manner:

(2) II. 500 v + 500 s=a (400 v + 400 s) + b (100 v + 100 s).

The 400 v of a circulate within their own subclass; the laborers paid with these wages buy with them articles of consumption, produced by themselves, from their employers, the capitalists of IIa.

Since the capitalists of both subclasses spend three-fifths of their surplus-value in products of IIa (necessities) and two-fifths in products of IIb (luxuries), the three-fifths of the surplus-value of a, or 240, are consumed within the subclass IIa itself; likewise two-fifths of the surplus-value of b (produced in the form of articles of luxury and existing as such) within the subclass IIb.

There remains to be exchanged between IIa and IIb: On the side of IIa: 160 s; on the side of IIb: 100 v + 60 s. These compensate one another. The laborers of IIb buy with their 100 in the form of money necessities of life to that amount from IIa. The capitalists of IIb likewise buy necessities from IIa to the amount of three-fifths, or 60, of their surplus-value. The capitalists of IIa thus obtain the money required for investing, as above assumed, two-fifths of their surplus-value, or 160 s, in luxuries produced by IIb (100 v held by the capitalists of IIb as a product reimbursing them for the wages paid by them, and 60 s). The diagram for this transaction is

the brackets indicating the amounts circulated and consumed within their own subclass.

The direct reflux of the money-capital advanced in variable capital, which takes place only in the case of the capitalist class of IIa who produce necessities of life, is but an expression, modified by special conditions, of the previously mentioned general law, that money advanced to the circulation by producers of commodities returns to them in the normal circulation of commodities. Consequently, if a money capitalist stands behind the producer of commodities and advances to the industrial capitalist money-capital (using this term in its strictest meaning, that is to say, capital-value in the form of money), the final point of reflux for this money is the pocket of this money-capitalist. In this way the mass of the circulating money belongs to that department of money-capital which is concentrated and organized in the form of banks, etc., although the money circulates more or less through all hands. The way in which this department advances its capital necessitates continually the final reflux to it in the form of money, although this takes place by way of the reconversion of the industrial capital into money-capital.

The circulation of commodities always requires two things: Commodities which are thrown into circulation, and money which is likewise thrown into it. "The process of circulation...does not, like direct barter of products, become extinguished upon the use-values changing places and hands. The money does not vanish on dropping out of the circuit of the metamorphosis of a given commodity. It is constantly being precipitated into new places in the arena of circulation vacated by other commodities," etc. (Volume I, chapter III, page 126.)

For instance, in the circulation between IIc and I (v + s) we assumed that 500 pounds sterling in gold had been advanced for it. In the innumerable processes of circulation, into which the circulation between great social groups resolves itself, now this, now that producer will first appear in one or the other group as a buyer, throwing money into circulation. Quite aside from individual circumstances, this is conditioned on the difference of the periods of production and thus of the turn-overs of the various commodity-capitals. Now II buys with these 500 pounds sterling means of production of the same value from I, and I buys from II articles of consumption valued at 500 pounds sterling. Hence the money flows back to II, but this department does not in any way increase its wealth by this reflux. It had thrown 500 pounds sterling in money into circulation and drew the same amount out of it in commodities; then it sells 500 pounds sterling worth of commodities and draws out of circulation the same amount in money; thus the 500 pounds sterling flow back to it. As a matter of fact, II has thrown into circulation 500 pounds sterling in money and 500 pounds sterling in commodities, a total of 1000 pounds sterling. It draws out of the circulation 500 pounds sterling in commodities and 500 pounds sterling in money. The circulation requires for the handling of 500 pounds sterling in commodities of I and 500 pounds sterling in commodities of II only 500 pounds sterling in money; and whoever has first advanced money in the purchase of commodities from other producers, recovers it when selling his own. Hence, if department I had been the first to buy commodities from II for 500 pounds sterling, and to sell later on to II commodities valued at 500 pounds sterling, these 500 pounds sterling would have returned to I instead of II.

In class I, the money invested in wages, in other words, the variable capital advanced in the form of money, does not return directly in this form, but indirectly by a detour. But in II, the 500 pounds sterling return directly from the laborers to the capitalists, and this return is always direct in the case where purchase and sale takes place repeatedly between the same persons in such a way that they are acting alternately as buyers and sellers of commodities. The capitalist of II pays for the labor-power in money; he thereby incorporates his labor-power in his capital and assumes the role of an industrial capitalist over his laborers as wage earners only by means of this transaction in circulation, which is for him merely a conversion of money-capital into productive capital. Thereupon the laborer, who is in the first instance a seller of his own labor-power, assumes in the second instance the role of a buyer, a possessor of money, while the capitalist acts now as a seller of commodities. In this way the capitalist recovers the money invested by him in wages. Unless this sale of his commodities implies cheating, etc., and remains but an exchange of equivalents in money and commodities, it is not a process by which the capitalist enriches himself. He does not pay the laborer twice, first in money, and then in commodities. His money returns to him as soon as the laborer exchanges it for his commodities.

Now, the money-capital converted into variable capital, the money advanced for wages, plays a prominent role in the circulation of money itself. For the laborer must live from hand to mouth and cannot give the industrial capitalists any credit for long periods. Hence variable capital in the form of money must be advanced simultaneously at innumerable localities in the social production in certain short intervals, such as weeks, etc., whatever may be the various periods of turn-over of the capitals in the different lines of industry. These intervals succeed one another with relative rapidity, and the shorter they are, the smaller is relatively the total amount of money thrown into circulation through this channel. In every country with a capitalist production the money-capital so advanced constitutes a proportionately influential share of the total circulation, so much more so as the same money, before its return to its point of departure, roams through many channels and serves as a medium of circulation for innumerable other businesses.

Now let us consider the circulation between I (v + s) and IIc from a different point of view.

The capitalists of I advance 1000 pounds sterling in the payment of wages. The laborers buy with this money 1000 pounds sterling's worth of commodities from the capitalists of II. These in turn buy with the same money means of production from the capitalists of I. These capitalists of I thereby recover their variable capital in the form of money, while the capitalists of II have reconverted one-half of their constant capital from the form of commodities into that of productive capital. The capitalists of II advance 500 pounds sterling more for the purchase of means of production from the capitalists of I. The capitalists of I spend this money in articles of consumption of II. These 500 pounds sterling thus return to the capitalists of II. They advance this amount again, in order to reconvert the last quarter of their constant capital, existing in the form of commodities, into means of production of I, its natural productive form. This money flows back to I, and once more withdraws from II articles of consumption to the same amount, returning 500 pounds sterling to II. The capitalists of II are then once more in possession of 500 pounds sterling in money and 2000 pounds sterling of constant capital, the latter having been reconverted from the form of commodity-capital into that of productive capital. By means of 1500 pounds sterling, a quantity of commodities valued at 5000 pounds sterling has been circulated. (1) I paid 1000 pounds sterling to his laborers for their labor-power of the same value; (2) the laborers bought with these same 1000 pounds sterling articles of consumption from II; (3) II bought with the same money means of production from I, thereby restoring to I its variable capital of 1000 pounds sterling in the form of money; (4) II buys 500 pounds sterling's worth of means of production from I; (5) I buys with the same 500 pounds sterling articles of consumption from II; (6) II buys with the same 500 pounds sterling means of production from I; (7) I buys with the same 500 pounds sterling articles of consumption from II. Thus 500 pounds sterling have returned to II, which it had thrown into circulation aside from its 2000 pounds sterling in commodities and for which it did not withdraw any equivalent from circulation.48

The exchange, therefore, follows this course:

(1) I pays 1000 pounds sterling in money for labor-power, or, in short, commodities at 1000 pounds sterling.

(2) The laborers buy with their wages amounting to 1000 pounds sterling articles of consumption from II; therefore we have again commodities at 1000 pounds sterling.

(3) II buys with the 1000 pounds sterling received from the laborers means of production to the same amount; hence, once more, commodities at 1000 pounds sterling.

By this transaction the 1000 pounds sterling have returned to I in the money-form of its variable capital.

(4) II buys 500 pounds worth of means of production from I, or, commodities at 500 pounds sterling.

(5) I buys with the same 500 pounds sterling articles of consumption from II; or, commodities at 500 pounds sterling.

(6) II buys with the same 500 pounds sterling means of production from I; or, commodities at 500 pounds sterling.

(7) I buys with the same 500 pounds sterling articles of consumption from II; or, commodities at 500 pounds sterling.

Total amount of value of commodities converted: 500 pounds sterling.

The 500 pounds sterling advanced by II in its first additional purchase have returned to it.

This, then, is the result:

(1) I possesses variable capital in the form of money to the amount of 1000 pounds sterling, which it had originally advanced to the circulation. It has furthermore expended 1000 pounds sterling for its individual consumption, in the shape of its product in commodities; that is to say, has spent money which it had originally received for the sale of means of production to the amount of 1000 pounds sterling.

On the other hand, the natural form in which variable capital existing in the form of money must be incorporated in order to be preserved, in other words, labor-power, has been maintained by consumption, and having been reproduced exists once more as the sole commodity which its owners have for sale in order to make a living. The relation of wage workers and capitalists, then, has likewise been reproduced.

(2) The constant capital of II is reproduced in its natural form, and the 500 p. st. advanced by the same department to the circulation have likewise returned to its hands.

So far as the laborers of I are concerned, the circulation takes place according to the simple schedule C—M—C. Labor-power1 C—1000 p. st. as the money-form of the variable capital of I; M2—necessities of life to the amount of 1000 p. st.; C3—these 1000 p. st. monetize to the same amount the constant capital of II existing in the form of commodities, of necessities of life.

From the point of view of the capitalists of II, the process is C—M, the transformation of a portion of their product into money, from which it is reconverted into the elements of productive capital, namely into a portion of the means of production required by them.

In the case of the advance of money of 500 p. st., made by the capitalists of II in the purchase of an additional portion of means of production, the money-form of that portion of IIc which exists as yet in the form of commodities, of articles of consumption, is anticipated, in the transaction M—C, in which II buys with M, and C is sold by I, the money (II) is converted into a portion of productive capital, while C (I) passes through the transaction C—M, changes itself into money, which, however, does not represent any component part of productive capital for I, but merely monetized surplus-value expended solely for articles of consumption.

In the circulation M—C..P..C1—M1, the first act, M—C, is that of one capitalist, the last C1—M1, of another (or at least in part); whether this C, by which M is converted into productive capital, represents an element of constant capital, variable capital, or surplus-value for the seller of C (who exchanges this C for money), is immaterial for the circulation of commodities itself.

Class I, so far as concerns the portion v plus s of its product in commodities, draws more money out of circulation than it threw in. In the first place, its 1000 p. st. of variable capital are restored to it; in the second place, it sells means of production valued at 500 p. st. (see above transaction No. 4); one-half of its surplus-value is thus monetized; then it sells once more 500 p. st.'s worth of means of production (transaction No. 6), the second half of its surplus-value, and thus its entire surplus-value is withdrawn from circulation in the shape of money. The successive transactions, then, have been (1) a reconversion of variable capital into money, to the amount of 1000 p. st.; (2) a monetization of one-half of the surplus-value, to the amount of 500 p. st.; (3) a monetization of the other half of the surplus-value, to the amount of 500 p. st., altogether 1000 v plus 1000 s that have been monetized, or 2000 p. st. Although department I threw only 1000 p. st. into circulation (aside from those transactions which promote the reproduction of Ic, and which we shall analyze later), it has withdrawn double that amount from it. Of course, the surplus-value passes into another hand, that of II, as soon as it has been converted into money, by being spent for articles of consumption. The capitalists of I withdrew only as much value in money as they threw into circulation in the form of commodities; the fact that this value is surplus-value, that is to say, that it does not cost the capitalists anything, does not alter the value of these commodities in any way; so far as the exchange of values in circulation is concerned, that fact is entirely irrelevant. The monetization of surplus-value is, of course, a transient act, the same as all other phases through which the advanced capital passes in its metamorphoses. It lasts no longer than the interval between the conversion of the commodities of I into money and the subsequent conversion of the money of I into commodities of II.

If the turn-overs had been assumed to be shorter—or, from the point of view of the simple circulation of commodities, the number of turn-overs of the circulating money more rapid—even less money would be required for the circulation of the exchanged values of commodities; the amount is always determined—if the number of successive transactions is given—by the sum of the prices, or the sum of values, of the circulating commodities. It is immaterial for this question what proportion of this sum of values consists of surplus-value or of capital-value.

If the wages of I, in our illustration, were paid four times per year, we should have 4 times 250, or 1000. In other words, 250 p. st. would suffice for the circulation between Iv and ½ of IIc, and for that between the variable capital of I and the labor-power of the same department. Furthermore, if the circulation between Is and IIc were to take place in four turn-overs, it would require only 250 p. st. in money, or in the aggregate a sum of money, or a money-capital, or 500 p. st. for the circulation of commodities worth 5000 p. st. In that case, the surplus-value would be converted into money by four successive transactions, monetizing one-fourth each time, instead of two transactions of one-half each time.

If department I instead of II, should assume the role of buyer in transaction No. 4 by expending 500 p. st. for articles of consumption of the same value, II would buy means of production with the same 500 p. st. in transaction No. 5, I would then buy articles of consumption with the same 500 p. st. in transaction No. 6; II would then buy means of production with the same 500 p. st. in transaction No. 7; so that the 500 p. st. would finally return to I, the same as they did in our previous illustration to II. The surplus-value is converted into money, in this second case, by means of an expenditure of money for articles of individual consumption on the part of its capitalist producer, and this expenditure of money discounts beforehand the revenue to be derived from the monetization of the surplus-value still contained in the unsold commodities. The surplus-value is not monetized by the reflux of the 500 p. st.; for aside from 1000 p. st. in the form of commodities of Iv, department I threw 500 p. st. in money into circulation at the close of transaction No. 4, and this was additional money, so far as we know, not money obtained by the sale of commodities. In recovering this money, department I merely pockets once more the additional money advanced by it. It has not monetized its surplus-value by this means. The monetization of the surplus-value of I takes place only by the sale of the commodities of Is, in which it is incorporated, and lasts only so long as the money obtained by the sale of the commodities is not expended in the purchase of new articles of consumption.

Department I buys with an additional amount of 500 p. st. in money articles of consumption from II; after spending this money, I holds its equivalent in commodities of II; the money returns for the first time by the purchase, on the part of II, of commodities to the amount of 500 p. st. from I; in other words, it returns as the equivalent of the commodities sold by I, but these commodities do not cost I anything, they constitute surplus-value for I, and thus the money thrown into circulation by this very department monetizes its own surplus-value. On buying for the second time, in transaction No. 6, I has likewise obtained its equivalent in commodities of II. Take it, now, that II would not buy means of production from I. In that case, I would have actually paid 1000 p. st. for articles of consumption, it would have consumed its entire surplus-value as revenue, namely 500 in its own commodities (means of production) and 500 in money; on the other hand, it would still have 500 p. st. in commodities (means of production) in stock, and would have gotten rid of 500 p. st. in money.

Department II, again, would have reconverted three-fourths of its constant capital from the form of commodity-capital into that of productive capital; but one-fourth, or 500 p. st., would be held by it in money, which, having interrupted its function and waiting for conversion, would be unproductive for the time being. If this condition of things should last for any length of time, II would have to cut down its scale of reproduction by one-fourth.

However, the 500 in means of production, which I has on its hands, are not surplus-value existing in the form of commodities; they occupy the place of the 500 p. st. advanced in money, which I possessed aside from its 1000 p. st. in commodities. In the form of money, they would be always convertible, as commodities they are momentarily unsalable. So much is evident, that simple reproduction—in which every element of productive capital must be reproduced in both II and I—remains possible in this case only, if the 500 golden birds, which I first sent flying, return to it.

If a capitalist (we have only industrial capitalists to deal with here, who are the representatives of all others) spends money for articles of consumption, it passes out of his life, it goes the way of the flesh. If it returns to him, it can do so only to the extent that he draws it out of circulation by means of his commodity-capital. The value of his entire annual product in commodities (which represents his commodity-capital) the same as that of every one of its elements, that is to say, of every individual commodity, resolves itself, from his point of view, into constant capital, variable capital, and surplus-value. The monetization of every individual commodity (each constituting an element of the product in commodities) is at the same time a monetization of a certain portion of the surplus-value contained in the entire product. In the cited case, then, it is literally true that the capitalist himself threw the very money into circulation by which his surplus-value is monetized, and he did so in the purchase of articles of consumption. Of course, it is not a question of the identical pieces of money, but rather of a certain amount of genuine money equal to the one (or an equal portion of the one) which he had previously thrown into circulation to satisfy his own individual wants.

In practice this is done in two ways: If the business has been opened in the current year, it will take quite a while before the capitalist will be enabled to use any portion of the receipts of his business for the satisfaction of his individual consumption. But he does not suspend his consumption for all that for a single moment. He advances to himself (immaterial whether out of his own pocket or by means of credit from others) money in anticipation of surplus-value to be realized by him. If the business has been running regularly for a period longer than the current year, payments and receipts are distributed over different terms of the year. But one thing continues uninterruptedly, namely the consumption of the capitalist, which anticipates a definite portion of the customary or estimated revenue and is calculated on a certain proportion of it. With every portion of commodities sold, a portion of the annually produced surplus-value is also realized. But if only as much of the produced commodities were sold during the entire year as is required to reproduce the values contained in the constant and variable capitals, or if prices were to fall to such an extent that only the value of the capital contained in it should be realized by the sale of the entire annual product in commodities, then the anticipatory character of the expenditure of money in expectation of future surplus-value would be clearly revealed. If our capitalist fails, then his creditors and the court investigate whether his anticipated private expenditures were reasonably proportionate to the volume of his business and to the receipts of surplus-value usually or normally corresponding to it.

So far as the entire capitalist class are concerned, the statement that they must themselves throw into circulation the money required for the realization of their surplus-value (eventually for the circulation of their constant and variable capital) is not only no paradox, but is the necessary premise of the entire mechanism. For there are only two classes in this case, the working class disposing of their labor-power, and the capitalist class owning the social means of production and the money. It would rather be a paradox if the working class were to advance in the first instance out of its own pockets the money required for the realization of the surplus-value contained in the commodities. But the individual capitalist makes this advance only by acting as a buyer, expending money in the purchase of articles of consumption, or advancing money in the purchase of elements of his productive capital. He never parts with his money unless he gets an equivalent for it. He advances money to the circulation only in the same way that he advances commodities to it. He acts in both instances as the point of departure of their circulation.

The actual transaction is obscured by two circumstances:

(1) The fact that merchant's capital (the first form of which is always money, since the merchant as such does not create any "product" or "commodity") and money-capital are manipulated by a special class of capitalists in the process of circulation of industrial capital.

(2) The division of surplus-value—which must always be first in the hands of the industrial capitalist—into various categories, represented, aside from industrial capitalists, by the land owner (for ground rent), the usurer (for interest), etc., furthermore by the government and its officials, by people living on their income, etc. This gentry appear as buyers as compared to the industrial capitalist, and to that extent as monetizers of his commodities; they likewise throw "money" into circulation on their part and the industrial gets it from them. But in that case, it is always forgotten from what source they derived it originally, and continue deriving it ever anew.

VI. THE CONSTANT CAPITAL OF DEPARTMENT I.49

It remains for us to analyze the constant capital of department I, amounting to 4000 c. This value is equal to that of the means of production consumed in the creation of the commodity-product of I and incorporated in it. This re-appearing value, which was not produced in the process of production of I, but entered into it during the preceding year in the form of constant capital, representing the definite value of his means of production, exists now in the entire quantity of commodities not absorbed by department II. And the value of this quantity of commodities thus left in the hands of the capitalists of I equals two-thirds of the value of their entire annual commodity-product. In the case of the individual capitalist producing some particular means of production, we were enabled to say: He sells his commodity-product; he converts it into money. By converting it into money, he has also reconverted into money the constant portion of the value of his product. With this portion of value, thus converted into money, he then buys his means of production once more from other sellers of commodities, or transforms the constant portion of the value of his product into its natural form, in which it can resume its function of productive constant capital. But now this supposition becomes impossible. The capitalist class of I comprises all the capitalists producing means of production. Besides, the commodity-product of 4000, which is left on their hands, is a portion of the social product which cannot be exchanged for any other portion, because no other portion of the annual product remains. With the exception of these 4000, all the remainder of the product has been disposed of. One portion has been absorbed by the social fund for consumption, and another portion has to reproduce the constant capital of department II, which has already bargained for everything which it can exchange with I.

The difficulty is solved very easily, when we remember that the entire product of I in its natural form consists of means of production, that is to say, of material elements of the constant capital itself. We meet here the same phenomenon which we witnessed under II, only under a different aspect. In the case of II, the entire product consisted of articles of consumption. Hence one portion of it, measured by the wages plus surplus-value contained in this product, could be consumed by its own producers. Here, in the case of I, the entire product consists of means of production, such as buildings, machinery, tanks, raw and auxiliary materials, etc. One portion of them, namely that reproducing the constant capital employed in this sphere, can, therefore, be immediately set to work in its natural form to serve once more as an element of productive capital. So far as it goes into circulation, it circulates within department I. While a portion of the commodity-product of II is individually consumed in its natural form by its own producers, a portion of the commodity-product of I is productively consumed in its natural form by its capitalist producers.

In these 4000c of the commodity-product of I, the constant capital-value consumed in this category re-appears in its natural form in which it can immediately resume its services as a productive constant capital. In department II, that portion of the commodity-product of 3000 whose value is equal to the wages plus the surplus-value of 1000, passes directly into the individual consumption of the capitalists and laborers of II, while, on the other hand, the constant value of this commodity-product, equal to 2000, cannot re-enter into the productive consumption of the capitalists of II, but must be reproduced by exchange with I.

But in department I, that portion of its commodity-product of 6000, whose value is equal to the wages plus the surplus-value, or 2000, does not pass into the individual consumption of its producers, and could not on account of its natural form. It must first be exchanged with department II. On the other hand, the constant portion of the value of this product, or 4000, exists in a natural form, in which it can immediately resume its services as the constant capital of the capitalist class of I, taking this class as an aggregate. In other words, the entire product of department I consists of use-values which, on account of their natural form, can serve only as elements of constant capital, in a capitalist system of production. One third of this product of 6000, then, reproduces the constant capital of department II, or 2000, and the other two thirds the constant capital of department I.

The constant capital of I consists of a number of different groups of capital invested in the various lines of production of means of production, so much in iron works, so much in coal mines, etc. Every one of these groups of capital, or every one of these social capital groups, is in its turn composed of a larger or smaller number of independently functioning individual capitals. In the first place, the capital of society, for instance 7500 (millions, or any other denomination) is composed of various groups of capital; the social capital of 7500 is divided into separate parts, every one of which is invested in a special line of production, each portion invested in some particular line of production consists, so far as its natural composition is concerned, partly of means of production required in that special sphere of production, partly of the labor-power employed in that business and adapted to its requirements. This labor-power is modified by division of labor, according to the specific labor to be performed in each individual sphere of production. Each portion of social capital invested in any particular line of production in its turn consists of the sum of all individual capitals invested in it. This, of course, applies equally to departments I and II.

As for the value of the constant capital re-appearing in the form of the commodity-product of I, it re-enters in part as means of production into the particular sphere whose product it is (or even into the individual business), for instance, corn into the production of corn, coal into the production of coal, iron in the form of machines into the production of iron, etc.

However, the partial products constituting the value of the constant capital of I, so far as they do not return directly to their particular or individual sphere of production, merely change their place. They pass in their natural form to some other sphere of production of department I, while the product of other spheres of production of department I replaces them in their natural state. It is merely a change of place of the products. All of them become once more the elements in the reproduction of constant capital of I, only in another group of I instead of the same one. To the extent that an exchange takes place between the individual capitalists of I, it is an exchange of one natural form of constant capital for another, one kind of means of production for another. It is an exchange of the different individual constant parts of capital of I among themselves. Unless the products serve directly as means of production in their own line, they are transferred to another line and thus naturally replace one another. In other words (similarly to what we saw in the case of the surplus value II), every capitalist of I draws on this constant capital of 4000, of which he is part owner, to the extent of his share, in means of production required by him. If production were socialized, instead of capitalistic, it is evident that these products of department I would just as regularly be redistributed as means of production to the various lines of production of this department, for purposes of reproduction, one portion remaining directly in that sphere of production which created it, another passing over to other lines of production of the same department, thereby entertaining a constant mutual exchange between the various lines of production of this department.

VII. VARIABLE CAPITAL AND SURPLUS-VALUE IN BOTH DEPARTMENTS.

The total value of the articles of consumption annually produced is equal to the value of the variable capital of II produced during the year plus the newly created surplus-value of II (in other words, equal to the value newly produced by II during the year) plus the value of the variable capital of I reproduced during the year and the newly produced surplus-value of I (in other words, plus the value created by I during the year).

On the assumption of simple reproduction, then, the total value of the annually produced articles of consumption is equal to the annual product in values, in other words, equal to the total value produced during that year by social labor. And it must be so, for the reason that this entire value is consumed, on the basis of simple reproduction.

The total social working day is divided into two parts: (1) Necessary labor, which creates in the course of the year a value of 1500 v; (2), surplus labor, which creates an additional value, or surplus-value, of 1500 s. The sum of these values, 3000, is equal to the value of the annually produced articles of consumption of 3000. The total value of articles of consumption produced during the year is therefore equal to the total value produced by the social working day during the year, equal to the value of the variable social capital plus the social surplus-value, equal to the total new product of the year.

But we know that the total value of the commodities of II, the articles of consumption, is not produced in this department of social production, although these two classes of value are identical. They are identical, because the value of the constant capital re-appearing in department II is equal to the value newly produced by I (value of variable capital plus surplus value); so that I (v+s) can buy that portion of the product of II which represents the value of the constant capital of the producers in department II. This shows why the value of the product of the capitalists of II, from the point of view of society, may be resolved into v + s, although from their standpoint it is divided into c + v + s. It is because IIc is equal to I (v + s), and because these two elements of the social product are mutually exchanged in their natural forms, so that after this exchange IIc exists once more in means of production, and I (v + s) in articles of consumption.

And it is this circumstance which induced Adam Smith to claim that the value of the annual product resolves itself into v + s. But this is not true, in the first place, except for that part of the annual product which consists of articles of consumption; and in the second place, it does not apply in the sense that this total value is entirely produced by department II, so that its value in products would be equal to the variable capital advanced by II plus the surplus-value produced by II. It is true only in the sense that II (c + v + s) is equal to II (v + s) +I (v + s), or because IIc is equal to I (v + s).

It follows, furthermore:

Although the social working day (that is to say, the labor expended by the entire working class during the whole year), like every individual working day, is divided only in two parts, namely into necessary labor and surplus-labor, and although the value produced by this working day like-wise resolves itself into but two parts, namely into the value of variable capital, or that portion with which the laborer buys his own means of reproduction, and the surplus-value which the capitalist may spend for his own individual consumption, nevertheless, from the point of view of society, one portion of the social working day is exclusively devoted to the production of new constant capital, namely of products exclusively intended for service as means of production in the labor-process and thus as constant capital in the accompanying process of self-expansion. According to our assumption, the total social working day is represented by a money-value of 3000, only one third of which, or 1000, is produced in department II, which manufactures articles of consumption, that is to say, commodities in which the entire value of the variable capital and the entire surplus-value of society is finally realized. According to this assumption, two thirds of the social working day are employed in the production of new constant capital. Although, from the standpoint of the individual capitalists and laborers of department I, these two thirds of the social working day serve merely for the production of variable capital plus surplus-value, the same as the last third of the social working day in department II, nevertheless, from the point of view of society, and of the use-value of the product, these two thirds of the social working day serve only for the reproduction of constant capital in process of productive consumption or already so consumed. From the individual point of view, these two thirds of the working day, while producing a total value equal only to the value of the variable capital plus surplus-value, so far as its producer is concerned, nevertheless do not produce any use-values of the kind on which wages or surplus-value could be expended; for their products are means of production.

It must be noted, in the first place, that no portion of the social working day, whether in I or in II, serves for the production of the value of the constant capital employed and serving in these two great spheres of production. They produce only additional value, namely 2000 I (v + s) + constant capital, represented by 4000 Ic + 2000 IIc. The 1000 II (v + s), an addition to the existing value of the new value produced in the form of means of production is not yet constant capital. It merely is intended to be used as such in the future.

The entire product of II, the articles of consumption, viewed concretely as a use-value, in its natural form, is a creation of the one third of the social working day contributed by II. It is the product of labor in its concrete form, such as the labor of weaving, baking, etc., performed in this department as the subjective element of the labor process. But the constant portion of the value of this product of II re-appears only in a new use-value, in a new natural form, namely that of articles of consumption, while it existed previously in the form of means of production. Its value has been transferred by the labor-process from its old natural form to its new natural form. But this value of these two thirds of the product, or 2000, has not been produced in this year's productive process of II.

Just as, from the point of view of the labor-process, the product of II is the result of the function of new living labor and means of production previously given to it, which are the material objects in which it incorporates itself, so, from the point of view of the process of reproduction, the value of the product of II, or 3000, is composed of the new value (500 v + 500 s = 1000) produced by the newly added one third of the social working day and of a constant value, in which two thirds of a previous social working day are embodied, which passed away before the present process of production of II. This portion of the value of the product of II is materialized in a portion of the product itself. It exists in a quantity of articles of consumption valued at 2000, or two thirds of a social working day. This is the new use-form in which it re-appears. The exchange of a portion of the articles of consumption of 2000 IIc for means of production of I equal to I (1000 v + 1000 s) represents, therefore, indeed an exchange of two thirds of a social working day which do not constitute any portion of this year's labor, but passed away previously to this year, for two thirds of the social working day newly added this year. Two thirds of this year's social working day could not serve in the production of constant capital and yet at the same time constitute variable capital plus surplus-value for their own producers, unless they were compelled to exchange with a portion of the value of the annually consumed articles of consumption, in which two thirds of a working day spent and realized, not this year, but previously, are incorporated. It is an exchange of two thirds of this year's working day with two thirds of a preceding working day, an exchange of this year's labor with that of a previous year. This, then explains the riddle, how it is that the product in values of an entire social working day may resolve itself into variable capital plus surplus-value, although two thirds of this working day were not expended in the production of articles, in which variable capital or surplus-value can be realized, but rather in the production of means of production for the replacement of capital consumed during this year. The explanation is simply that two thirds of the value of the product of II, in which the capitalists and laborers of I realize the value of the variable capital and surplus-value produced by them (and which constitute two thirds of the value of the entire annual product), are, so far as their value is concerned, the product of two thirds of a social working day passed previously to this year.

The sum of the social product of I and II, comprising means of production and articles of consumption, so far as its concrete use-value in its natural form is concerned, is indeed the result of this year's labor, but only to the extent that this labor is regarded as useful and concrete, not as an expenditure of labor-power and creator of values. And even so, it is concrete labor only in the sense that the means of production have transformed themselves into this year's new product by dint of the living labor operating on them. On the other hand, it is also true that this year's labor could not have transformed itself into products without the help of means of production, of instruments of production and materials, which existed independently of it.

VIII. THE CONSTANT CAPITAL IN BOTH DEPARTMENTS.

The analysis of the total value of the product of 9000, and of the categories into which it is divided, does not present any greater difficulties than that of the value produced by some individual capital. It is rather identical with it.

In the present instance, the entire social product of this year contains three social working days, each of one year. The value represented by each one of these working days is 3000, so that the value of the total product is 3 × 3000, or 9000.

Furthermore, the following portions of this working time belong to a period previous to that of the process of production which we now analyze: In department I, four thirds of a working day (with a product valued at 4000), and in department II, two thirds of a working day (with a product valued at 2000), making a total of two social working days with a product valued at 6000. For this reason, 4000 Ic + 2000 IIc = 6000 c figure as the value of the means of production, or value of the constant capital, re-appearing in the total product of society.

Furthermore, one third of the social working day of one year newly added by department I is necessary labor, or labor reproducing the value of the variable capital of 1000 Iv and paying the price of the labor employed by I. In the same way, one sixth of the social working day of II is necessary labor valued at 500. Hence we have 1000 I v + 500 II v = 1500 v, expressing the value of one half of the social working day, the value of the first half of the working day added this year and consisting of necessary labor.

Finally, in department I, one third of the social working day of this year, with a product valued at 1000, is surplus-labor, and one sixth of one working day in department II, with a product valued at 500, is likewise surplus-labor. Together they constitute the other half of the newly added social working day, with a total value of surplus-labor amounting to 1000 I s + 500 II s = 1500 s.

This, then, is the situation:

Constant portion of capital in terms of the value of the social product (c): Two working days expended previously to the present process of production, worth 6000 in value.

Necessary labor (v) expended during the present year: One half of one working day expended during the present year, worth 1500 in value.

Surplus-labor (s) expended during the present year: One-half of one working day expended during the present year, worth 1500 in value.

Product in values of annual labor (v + s), 3000.

Total value of product (c + v + s), 9000.

The difficulty, then, does not consist in the analysis of the social product in values. It arises in the comparison of the component parts of the value of the social product with its material elements.

The constant, merely re-appearing, portion of value is equal to the value of that part of this product which consists of means of production, and it is incorporated in that part.

The product in values of the current year, equal to v + s, is equal to the value of that part of this product, which consists of articles of consumption, and is incorporated in it.

But with the exception of cases immaterial for this analysis, means of production and articles of consumption are vastly different kinds of commodities, products of widely different natural forms and use-value, and, therefore, products of radically different classes of concrete labor. The labor which employs machinery in the production of necessities of life is vastly different from the labor which makes machinery. The entire working day of the current year, which is 3000 in terms of value, figures as an expenditure in the production of articles of consumption valued at 3000, in which no portion of any constant value re-appears, since these 3000, equal to 1500 v + 1500 s, resolve themselves only into variable capital-value and surplus-value. On the other hand, the constant capital-value of 6000 re-appears in a class of products quite different from articles of consumption, namely in means of production, while as a matter of fact no portion of the present annual working day figures as an expenditure in the production of these new products. It appears rather that this entire working day consists only of classes of labor which do not result in means of production, but in articles of consumption. We have already solved this mystery. The product in values of the labor of the present year is equal to the value of the products of department II, the total value of the newly produced articles of consumption. But the value of these products is greater by two thirds than that portion of the annual labor which has been expended in the production of articles of consumption (department II). Only one third of the annual labor has been expended in their production. Two thirds of this annual labor have been expended in the production of means of production, that is to say, in department I. The value of the product created during this time in I, equal to the variable capital-value plus surplus-value produced in I, is equal to the constant capital-value of II re-appearing in articles of consumption of II. Hence they may be mutually exchanged and take one another's place in their natural form. The total value of the articles of consumption of II is, therefore, equal to the sum of the new product in values of I and II, or II (c + v + s) is equal to I (v + s) + II (v + s), in other words, equal to the sum of the new values produced by the labor of the current year in the form of v + s.

On the other hand, the total value of the means of production of I is equal to the sum of the constant capital-values re-appearing in the form of means of production of I and in that of articles of consumption of II, in other words, equal to the sum of the constant capital-values reappearing in the total product of society. This total value is equal in terms of value to four thirds of a working day preceding the process of production of I and two thirds of a working day preceding the process of production of II, in all equal to two annual working days.

The difficulty in the analysis of the annual social product arises, therefore, from the fact that the constant portion of value is represented by a different class of products (means of production) than the new portion of value (v + s) added to this constant portion and represented by articles of consumption. Thus the appearance is created, so far as the question of values is concerned, as though two thirds of the consumed mass of products were reproduced in a new form, without any labor having been expended by society in their production. This is not so in the case of an individual capital. Every individual capitalist employs some particular concrete class of labor, which transforms the means of production peculiar to it into products. For instance, the capitalist may be a manufacturer of machines, the constant capital expended by him during the current year may be 6000 c, the variable capital 1500 v, the surplus-value 1500s, the product 9000, represented, say, by 18 machines of 500 each. The entire product in this instance consists of the same form, of machines. If he produces various kinds, each one is calculated separately. The entire product in commodities is the result of the labor expended during the current year in machine manufacture by a combination of the same concrete labor with the same kind of means of production. The various portions of the value of the product therefore present themselves in the same natural form: 12 machines represent 6000 c, 3 machines 1500 v, and 3 machines 1500 s. It is evident that the value of the 12 machines is equal to 6000 c, not merely because there is incorporated in these machines labor performed previously to the manufacture of these machines and not expended in their making. The value of the means of production for 18 machines did not transform itself into machines of its own doing, but the value of these 12 machines (consisting itself of 4000 c + 1000 v + 1000 s) is equal to the total value of the constant capital-value contained in the 18 machines. The machine manufacturer must, therefore, sell 12 of the 18 machines, in order to recover his expended constant capital, which he requires for the reproduction of 18 new machines. On the other hand, the thing would be inexplicable, if the result of the labor expended solely in the manufacture of machines, were to be: On the one hand, 6 machines of 1500 v + 1500 s, on the other iron, copper, screws, belts, etc., to the amount of 6000 s, in other words, the natural means of production of the machines which the individual machine-building capitalist does not produce himself, but must secure by way of the process of circulation. And yet it seemed at the first glance as though the reproduction of the annual product of society took place in this absurd way.

The product of an individual capital, that is to say, of every aliquot part of the social capital endowed with a life of its own and acting independently, has some natural form. The only condition is that this product must have a certain use-value, which endows it with the character of a member of the world of commodities fit for circulation. It is immaterial and a matter of hazard, whether or not it can go back as a means of production into the same process of production from which it came as a product, in other words, whether that portion of its value as a product, in which the constant capital is incorporated, has a natural form, in which it can actually serve again as constant capital. If it has not, then this portion of the value of the product is reconverted into the form of its material elements by means of sale and purchase, and thus the constant capital is reproduced in the natural form adapted to its function.

It is different with the product of the total social capital. All the material elements of reproduction in their natural form must be a part of this product. The consumed constant portion of capital can be reproduced by the production as a whole only to the extent that the entire reappearing constant capital is represented in the product by the natural form of new means of production, which can actually serve as constant capital. Simple reproduction being assumed, the value of that portion of the product which consists of means of production must be equal to the constant portion of the value of social capital.

Furthermore: Individually considered, the capitalist produces in the value of his product by means of the newly added labor only his variable capital plus surplus-value, while the constant value is transferred by the concrete form of the newly added labor to the product.

Socially considered, that portion of the social working day which produces means of production, adding new value to them and transferring to them at the same time the value of the means of production consumed in their manufacture, creates nothing but new constant capital, which is intended to replace that consumed in the shape of the old means of production, that is to say of the constant capital consumed in department I and II. It creates only product intended for productive consumption. The entire value of this product, then, is a value which can serve only as a new constant capital, which can buy back only constant capital in its natural form, and which, for this reason, resolves itself neither into variable capital nor surplus-value, looking at it from the social point of view. On the other hand, if that portion of the social working day which produces articles of consumption does not create any portion of the social capital intended for reproduction, it creates only products intended, in their natural form, to realize the value of the variable capital and surplus-value of departments I and II.

Speaking of looking at things from the point of view of society as a whole, in this instance at the aggregate product of society, which comprises both the reproduction of social capital and individual consumption, we must not follow the manner copied by Proudhon from bourgeois economy, which looks upon this matter as though a society with a capitalist mode of production would lose its specific historical and economic characteristics by being taken as a unit. Not at all. We have, in that case, to deal with the aggregate capitalist. The aggregate capital appears as the capital stock of all individual capitalists combined. This stock company shares with many other stock companies the peculiarity that every one knows what he puts in, but not what he will get out of it.

IX. A RETROSPECT ON ADAM SMITH, STORCH, AND RAMSAY.

The total value of the social product amounts to 9000 equal to 6000 c+1500 v+1500 c, in other words, 6000 represent the value of the means of production, and 3000 that of the articles of consumption. The value of the social revenue (v + s), then, amounts to only one third of the value of the total product, and the totality of the consumers, laborers as well as capitalists, can draw on the total social product for commodities only to the amount of this third, for the purpose of individual consumption. On the other hand, 6000, or two thirds, of the value of the product, are the value of the constant capital which must be reproduced in its natural form. Means of production to this amount must again be incorporated in the productive fund. Storch recognizes this without being able to prove it: "It is clear that the value of the annual product is distributed partly to capital and partly to profits, and that each one of these portions of the value of the annual product is regularly employed in buying the products which the nation needs both for the maintenance of its capital and for stocking its fund for consumption. * * * * The products which constitute the capital of a nation are not consumable." (Storch, Considérations sur la nature du revenu national. Paris, 1824, page 150.)

Adam Smith, however, has promulgated this strange dogma, which is believed to this day, not only in the previously mentioned form, according to which the entire value of the social product resolves itself into revenue, that is to say, into wages plus surplus-value, or, as he expresses it, into wages plus profit (interest) plus ground rent, but also in the still more popular form, according to which the consumers must ultimately pay to the producers the entire value of the product. This is to this day one of the best established commonplaces, or rather of the eternal truths of the so-called science of political economy. This is illustrated in the following plausible manner: Take any article, for instance linen shirts. First, the spinner of linen yarn has to pay the flax grower the entire value of the flax, in other words the value of flax seed, fertilizers, cattle feed, etc., plus the value transferred to the product from the fixed capital of the flax grower, such as buildings, agricultural implements, etc.; furthermore the wages paid in the production of the flax; the surplus-value incorporated in the flax (profit, ground rent); finally the cost of transportation of the flax from its place of production to the spinnery. Next, the weaver has not only to reimburse the spinner for linen yarn, for the price of the flax, but also for that portion of the value of machinery, buildings, etc., in short of the fixed capital, which is transferred to the yarn, furthermore all the auxiliary materials consumed in the spinning process, the wages of the spinners, the surplus-value, etc., and so forth in the case of the bleaching process, the transportation of the finished linen, and finally the shirtmaker, who has to pay the entire price of all preceding producers, who supplied him only with his raw material. There is now a further addition of value by his hands, either by means of constant capital which is consumed in the shape of materials of labor, auxiliary materials, etc., used in the making of shirts, or by means of labor expended in it, which adds the value of the wages of the shirtmakers plus the surplus-value of the shirt manufacturer. Now let this entire product in shirts cost ultimately 100 p. st., and let this be the aliquot part of the total annual value in products expended by society in shirts. The consumers of the shirts pay these 100 p. st., that is to say the value of all the means of production, and of the wages plus surplus-value of the flax grower, spinner, weaver, bleacher, shirtmaker, and all carriers. This is quite true. Indeed, every child can see that. But now they continue: The same is true of the value of all other commodities. It should rather be said that this is true of the value of all articles of consumption, of the value of that portion of the social product which passes into consumption, in other words, that portion of the value of the social product which may be expended as revenue. It is true that the sum of the value of all these commodities is equal to the value of all the means of production (constant portions of capital) consumed in their creation, plus the value added by the last labor expended on them (wages plus surplus-value). Hence the totality of the consumers can pay for this entire sum of values, because, although the value of each individual commodity is made up by c + v + s, nevertheless the sum of the values of all commodities passing into consumption, taken at its maximum, can be equal only to that portion of the value of the social product, which resolves itself into v + s, in other words, equal to that value which the labor expended during the current year has added to the existing means of production representing the value of the constant capital. As for the value of the constant capital, we have seen that it is reproduced out of the mass of social products in a twofold way. First, by an exchange of the capitalists of II, who produce articles of consumption, with the capitalists of I, who produce the means of production. And here is the source of the phrase that what is capital for one is revenue for the other. But this is not the actual state of affairs. The 2000 II c, existing in the shape of articles of consumption valued at 2000, constitute a constant capital-value for the capitalists of class II. They cannot consume it themselves, although the product must be consumed on account of its natural form. On the other hand, the 2000 I (v + s) are wages plus surplus-value produced by the capitalist and working classes of I. They exist in the natural form of means of production, of things in a shape in which their own value cannot be consumed. We have here, then, values to the amount of 4000, only one half of which, either before or after the change, reproduce constant capital, while the other half form revenue. In the second place, the constant capital of I is reproduced in its natural form, partly by exchange among the capitalists of I, partly by reproduction in a natural form in each individual business.

The phrase that the entire annual value in products must be ultimately paid by the consumer would be correct only in the case that we were to include in the term consumer two vastly different classes, namely individual consumers and productive consumers. But to say that one portion of the product must be consumed productively is precisely to say that it must serve as capital and cannot be consumed as revenue.

On the other hand, if we divide the total value of the entire product, equal to 9000, into 6000 c+1500 v+1500 s, and look upon the 3000 (v + s) in the light of a revenue, then the variable capital seems to disappear and capital, socially speaking, seems to consist only of constant capital. For that which appeared originally as 1500 v has resolved itself into a portion of the social revenue, into wages, the revenue of the working class, and has thus lost its character of capital. This conclusion is actually drawn by Ramsay. According to him, capital, socially considered, consists only of fixed capital, but he means by fixed capital the constant capital, that quantity of values which consists of means of production, whether these are instruments or materials of labor, such as raw materials, partly finished products, auxiliary materials, etc. He calls the variable capital a circulating capital: "Circulating capital consists only of subsistence and other necessaries advanced to the workmen previously to the completion of the produce of their labor. * * * * Fixed capital alone, not circulating, is properly speaking a source of national wealth. * * * * Circulating capital is not an immediate agent in production, nor essential to it at all, but merely a convenience rendered necessary by the deplorable poverty of the mass of the people. * * * * Fixed capital alone constitutes an element of cost of production in a national point of view." (Ramsay, 1, c., pages 23 to 26, selected.) Ramsay defines fixed capital, by which he means constant capital, more closely in the following words: "The length of time during which any portion of the product of that labor" (namely labor bestowed on any commodity) "has existed as fixed capital i.e., in a form in which, though assisting to raise the future commodity, it does not maintain laborers." (Page 59.)

Here we see once more the confusion created by Adam Smith by drowning the distinction between constant and variable capital in that of fixed capital and circulating capital. The constant capital of Ramsay consists of means of production, his circulating capital of articles of consumption. Both of them are commodities of a given value. The one can no more create any surplus-value than the other.

X. CAPITAL AND REVENUE: VARIABLE CAPITAL AND WAGES.50

The entire annual production, the entire product of a year, is the product of the useful labor of that year. But the value of this total product is greater than that portion of it in which the labor-power expended on production during the last year is incorporated. The product in values of this year, the new value created in its course in the form of commodities, is smaller than the value of the product, that is to say, THE TOTAL VALUE OF THE COMMODITIES FINISHED DURING THE ENTIRE YEAR. The difference obtained by deducting from the total value of the annual product that portion of value which was added by the labor of the last year, is not an actually reproduced value, but merely one re-appearing in a different form of existence. It is value transferred to the annual product from previously existing value, which may be of an earlier or later date, according to the wear of the constant portions of capital which have participated in that year's annual labor-process, a value which may be derived from some means of production which were first created during the year before last or in years even previous to that. It is under all circumstances a value transferred from means of production of former years to the product of the year under discussion.

Take our formula. We then have after the exchange of the elements, hitherto considered, between I and II, and within II:

(I) 4000 c + 1000 v + 1000 s (these last realized in articles of consumption of II c) = 6000.

(II) 2000 c (reproduced by exchange with I [v + s]) + 500 v + 500 s = 3000.

Sum of values 9000.

Value newly produced during the year is incorporated only in v and s. The sum of the product in values of this year is therefore equal to the sum of v + s, that is to say, 2000 I(v + s) + 1000 II (v + s) = 3000. All other portions of value in the products of this year are merely transferred values, derived from the value of means of production. previously produced and consumed in the annual production. Aside from the value of 3000, the current annual labor has not produced anything in the way of values. That 3000 represents its entire annual product in values.

Now, we have seen that the 2000 I (v + s) of department II replace its 2000 II c in the natural form of means of production. Two thirds of the annual labor, then, expended in department I, have newly produced the constant capital of II, both as regards its value and its natural form. Socially speaking, two thirds of the labor expended during the entire year have created a new constant capital-value, which is realized in a natural form meeting the requirements of department II. The greater portion of the annual labor of society, then, has been spent in the production of new constant capital (means of production representing capital-value) in order to replace the value of the constant capital expended in the production of articles of consumption. That which distinguishes in this case capitalist society from a society of savages is not, as Senior thinks,51 that it is a privilege and peculiarity of a savage to expend his labor during a certain time which does not secure for him any revenue convertible into articles of consumption, but the distinction is the following:

(a) Capitalist society employs more of its available annual labor in the production of means of production (and thus of constant capital) which are not convertible into revenue in the form of wages or surplus-value, but can serve only as capital.

(b) When a savage makes bows, arrows, stone hammers, axes, baskets, etc., he knows very well that he did not spend the time so employed in the production of articles of consumption, but that he has simply stocked his supply of means of production, and nothing else. Furthermore, a savage commits a grave economic sin by his utter indifference so far as waste of time is concerned, for Tyler52 tells us of him that he takes sometimes a whole month to make one arrow.

The current conception, by which some political economists seek to get rid of the theoretical difficulty, in other words, of the understanding of the real state of affairs, the conception that a thing may be capital for one and revenue for another, and vice versa, is only partially true, and it becomes wholly wrong, when it is made general, since it then implies a complete misunderstanding of the entire process of transactions taking place in annual reproduction and at the same time a misunderstanding of the actual basis of the partial truth.

We now review the actual conditions, on which the partial correctness of this conception rests, and we shall at the same time expose the wrong conception of these conditions.

(1) The variable capital serves as capital in the hands of the capitalist and as revenue in the hands of the wage worker.

The variable capital exists first in the hands of the capitalist as money-capital; and it performs the function of money-capital, when he buys labor-power with it. So long as it persists in the form of money in his hands, it is nothing but a given value existing in the form of money, in other words, a constant and not a variable magnitude. It is only a potential variable capital, owing to its convertibility into labor power. It becomes actually a variable capital only after divesting itself of its money-form and assuming the form of labor-power serving as an element of productive capital in the capitalist process.

The money which first served in the function of the money-form of the variable capital for the capitalist, now serves in the hands of the laborer as the money-form of his revenue, which he derives from the ever repeated sale of his labor-power.

We have here but the simple fact that the money in the hands of the buyer, in this case the capitalist, passes from these hands into those of the seller, in this case a seller of labor-power, the wage-worker. It is not the variable capital which serves twice, first as capital for the capitalist and then as revenue for the laborer. It is merely the same money, which exists first in the hands of the capitalist as the money-form of his variable capital representing a potential variable capital, and which serves in the hands of the laborer as an equivalent for sold labor-power, as soon as the capitalist has converted it into labor-power. But the fact that the same money serves another useful purpose in the hands of the buyer than in those of the seller is a peculiarity of the sale and purchase of all commodities.

Apologists in political economy present the matter in a wrong light, as we can see best when we keep our eye exclusively, without taking any notice of the following transactions, on the transaction in circulation indicated by M—L (a variation of M—C), the conversion of money into labor-power on the part of the capitalist buyer, which is L—M (C—M), a conversion of the commodity labor-power into money, on the part of the seller, the laborer. They say: "The same money realizes in this instance two capitals; the buyer—the capitalist—converts his money-capital into living labor-power, which he incorporates in his productive capital; on the other hand, the seller, the laborer, converts his commodity, his labor-power, into money, which he spends as his revenue, and this enables him to resell his labor-power in ever repeated turns and thereby to maintain it. His labor-power, then, represents his capital in the form of a commodity, which yields him a continuous revenue." Labor-power is indeed his wealth (ever self-renewing and reproductive), not his capital. It is the only commodity which he must and can sell continually, in order to live, and which does not serve as capital until it reaches the hands of the capitalist. The fact that a man is continually compelled to sell his labor-power (himself) to another man proves to those apologetic economists that he is a capitalist, for lo! he is continually selling his "commodity," himself. In that case, a slave is also a capitalist, although he is sold by another for once and all as a commodity, for the nature of this commodity, a laboring slave, has the peculiarity that its buyer does not only make it work every new day, but also provides it with the food which enables it to do ever new work—(compare on this point the remarks of Sismondi and Say in their letters to Malthus.)

(2) In the exchange of 1000 Iv + 1000 Is for 2000 II c, we see that what is constant capital for one (2000 II c) is variable capital and surplus-value, or in short, revenue for others; and what is variable capital and surplus-value (2000 I (v + s), or in short, revenue for one, becomes constant capital for another.

Let us first look at the exchange of I v for II c, beginning with the point of view of the laborer.

The aggregate laborer of I has sold his labor-power to the aggregate capitalist of I for 1000; he receives this value in money as his wages. With this money, he buys from II articles of consumption of the same value. The capitalist of II meets him only in the role of a seller of commodities, nothing else, even if the laborer buys from his own capitalist, as he does in the exchange of 500 II v, as we have seen above. The form of circulation through which his commodity, labor-power, passes, is that of the simple circulation of commodities for the mere purpose of consumption in the satisfaction of needs, the form C (labor-power)—M—C (articles of consumption). The result of this transaction in circulation is that the laborer maintains himself as a labor-power for a capitalist, and in order to continue maintaining himself as such, he must continually renew the transaction L (C)—M—C. His wages are realized in articles of consumption, they are spent as revenue, and, taking the working class as a whole, are again and again spent as a revenue.

Now let us look at the same transaction, the exchange of I v for II c, from the point of view of the capitalist. The entire commodity-product of II consists of articles of consumption, of things intended for annual consumption, serving in the realization of revenue for some one, in the present case for the aggregate laborer of I. But so far as the aggregate capitalist of II is concerned, one portion of his commodity-product, equal to 2000, is now the form of the constant portion of the value of his productive capital converted into commodities. It must be reconverted from the form of commodities into its natural form, in which it may serve again as the constant portion of a productive capital. What the capitalist of II has accomplished so far is that he has reconverted one half (1000) of the constant portion of his capital, which had been reproduced in the shape of commodities, into the form of money by means of sale to the laborers of I. Hence it is not the variable capital I v, which has been exchanged for this first half of the value of the constant capital of II, but simply the money which served I as money-capital in the exchange for labor-power has thus been transferred to the possession of the seller of labor-power, and for him it did not represent any capital, but merely revenue in the form of money, which is to be expended in the purchase of articles of consumption. The money to the amount of 1000, on the other hand, which has come into the hands of the capitalists of II by means of the transaction with the laborers of I, cannot as yet serve as the constant element of the productive capital of II. For the present it is but the money-form of the commodity-capital of II, to be commuted into fixed or circulating portions of constant capital. Department II now buys with the money received from the laborers of I, the buyers of its commodities, means of production from I to the amount of 1000. By this means the constant value of the capital of II is renewed to the extent of one half of its total amount in its natural form, in which it can serve once more as an element of the productive capital of II. The circulation in this instance took the course C—M—C, that is to say, articles of consumption to the amount of 1000—money to the amount of 1000—means of production to the amount of 1000.

But C—M—C represents here the movement of capital. C, when sold to the laborers, is converted into M, and this M is converted into means of production. It is the reconversion of commodities into the material elements of which this commodity is made. On the other hand, just as the capitalist of II plays only the role of a buyer of commodities with regard to I, so the capitalist of I acts only as a seller of commodities with regard to II. Department I bought originally labor-power valued at 1000 with that amount of money intended for service as variable capital. It has therefore received an equivalent for the 1000 v which it expended in money. This money now belongs to the laborers, who spend it in purchases from II. Department I cannot recover this money from II unless it secures the amount by the sale of commodities of the same value to II.

Department I first had a certain sum of money amounting to 1000 and destined to serve as variable capital. The money performs this service by its exchange for labor-power to the same amount. The laborer in his turn supplied as a result of the process of production a quantity of commodities (means of production) to the amount of 6000, of which one sixth, or 1000, are equivalent in value to the variable portion of capital advanced in money. This variable portion of value no more serves as variable capital so long as it retains the form of commodities than it did while in the form of money. It serves as variable capital only after its conversion into living labor-power, and only so long as this labor-power serves in the process of production. So long as this value was incorporated in money, it represented only potential variable capital. But it had at least a form, in which it was immediately convertible into labor-power. But in the form of commodities, the same variable value is but potential money, it must first assume the form of money by means of the sale of commodities, in the present instance by the sale of 1000 in value of commodities of I to department II. The movement of the circulation passes here through the form 1000 v (money)—1000 c (labor-power)—1000 c (commodities equivalent in value to the variable capital)—1000 v (money); in other words, M—C...C—M (identical with M—L...C—M). The process of production intervening between C...C does not belong to the sphere of circulation. It does not figure in the mutual exchange of the various elements of annual reproduction, although this exchange includes the reproduction of all the elements of productive capital, the constant as well as the variable element (labor-power). All the participants in this exchange appear either as buyers, or as sellers, or as both. The laborers appear only as buyers of commodities. The capitalists act alternately as buyers and sellers, and within certain limits only on one side, either as buyers of commodities or as sellers of commodities.

The result is that department I possesses once more the variable part of the value of its capital in the form of money, from which alone it is immediately convertible into labor-power, in other words, department I once more holds its variable capital value in the only form in which it can again be advanced as an actual variable element of its productive capital. On the other hand, the laborer must again act as a seller of commodities, of his labor-power, before he can act as a buyer of commodities.

So far as the variable capital of department II (500 II v) is concerned, the circulation between the capitalists and laborers of the same department takes place without any intermediate transactions, since we look upon it as taking place between the aggregate capitalist and the aggregate laborer of II.

The aggregate capitalist of II advances 500 v for the purchase of labor-power to the same amount. In this case, the aggregate capitalist is a buyer, the aggregate laborer a seller. Thereupon the laborer acts as a buyer of a portion of the commodities produced by himself, using the money received for his labor-power. In this case, the capitalist is the seller. The laborer has reproduced for the capitalist the money paid in the purchase of labor-power by means of a portion of the newly produced commodity-capital of II, amounting to 500 v in commodities. The capitalist then holds in the form of commodities the same v, which he had in the form of money before the exchange for labor-power; while the laborer has realized the value of his labor-power in money, and uses this money by spending it as his revenue in the purchase of articles of consumption produced by himself. It is an exchange of the revenue of the laborer in money for a portion of the commodities in which he has himself reproduced 500 of the value of the variable capital of the capitalist employing him. In this way this money returns to the capitalist of II as the money-form of his variable capital. An equivalent value of revenue in the form of money thus reproduces variable value of capital in the form of commodities.

The capitalist does not increase his wealth by recovering the money paid by him to the laborer in the purchase of labor-power through the sale of an equivalent quantity of commodities to the laborer. He would really pay the laborer twice, if he were to pay him first 500 in the purchase of labor-power, and then give him in addition thereto a quantity of commodities valued at 500, after the laborer had produced them. On the other hand, if the laborer were to produce nothing but an equivalent in commodities valued at 500 for the price of his labor-power of 500, the capitalist would be no better off after the transaction than before it. But the laborer has actually reproduced a product of 3000. He has preserved the constant portion of the value of the product, that is to say, the value of the means of production incorporated in the product, to the amount of 2000, by converting it into a new product. He has furthermore added to this existing value a value of 1000 (v + s). (The idea that the capitalist grows richer by the return of 500 in money is advanced by Destutt de Tracy, as shown in detail in section XIII of this chapter.)

By the purchase of articles of consumption to the value of 500 on the part of the laborer of II, the capitalist of II recovers the value of 500 II v, which he had just held in the shape of commodities, but which he now holds in the form of money, in which he advances it originally. The immediate result of this transaction, as of any other sale of commodities, is the conversion of a given value from the form of commodities into that of money. Nor is the resulting reflux of the money to its point of departure anything specific. If capitalist of II had bought, with 500 of money, commodities from the capitalist of I, and then sold to the capitalist of I commodities valued at 500, he would likewise have recovered 500 in money. This sum of 500 in money would merely have served for the circulation of commodities valued at 1000, and according to a law previously mentioned, the money would have returned to the one starting it into circulation.

But the 500 in money, which have returned to the capitalist of II, represent at the same time a renewed potential variable capital. Why is this so? Money, and money-capital, is a potential variable capital only to the extent that it is convertible into labor-power. The return of 500 p. st. in money to the capitalist of II is accompanied by the return of the labor-power of II to the market. The return of both of these at opposite poles—and to this extent the reappearance of 500 in money not merely in the capacity of money, but of variable capital in the form of money—is conditioned on one and the same process. The money of 500 returns to the capitalist of II, because he sold to the laborers of II articles of consumption valued at 500, for which the laborer spent his wages, in order to maintain himself and his family and thus his labor-power. In order to be able to live on and act again as a buyer of commodities he must again sell his labor-power. The return of 500 in money to the capitalist of II is therefore at the same time a return, or a staying, of labor-power in the capacity of a commodity purchasable with 500 in money, and thereby a return of 500 in money to its capacity of potential variable capital.

As for the v of department II b, which produces articles of luxury, this (II b) v is treated the same as I v. The money which renews the variable capital of the capitalists of II b in the form of money returns to them in a round-about way through the hands of the capitalists of II a. But it makes nevertheless a difference, whether the laborers buy their articles of consumption by direct purchase from the same capitalist producers to whom they sell their labor-power, or whether they buy from capitalists of another department, through whose hands the money returns indirectly to the capitalists of their own department. Since the working class live from hand to mouth, they buy just as long as they have the means. It is different with the capitalists, for instance in the transaction between 1000 II c and 1000 I v. The capitalist does not live from hand to mouth. His compelling motive is the utmost self-expansion of his capital. Now, if circumstances seem to promise greater advantages to the capitalist of II by holding on to his money for a while, instead of immediately renewing his constant capital, then the return of 1000 II c in money to I is retarded. This implies a retardation in the return of 1000 I v to the form of money, and in that case the capitalist of I cannot continue his business on the same scale, unless he can draw on some reserve capital. Generally speaking, reserve capital in the form of money is always necessary, in order to be able to work without interruption, regardless of the rapid or slow reflux of the variable portion of capital-value in money.

If the transactions of the various elements of the current annual reproduction are to be investigated, the results of the labor of the preceding year, which has come to a close, must also be taken into consideration. The process of production which resulted in the product of the present year, is past and incorporated in its products, and so much more is this the case with the process of circulation preceding the process of production or running parallel with it, by which potential variable capital is transformed into actual variable capital, in other words, the sale and purchase of labor-power. The labor-market is not a part of the commodity-market which concerns us here. For the laborer has not only disposed of his labor-power before this, but also supplied an equivalent of the price of his labor-power in the shape of commodities, aside from the surplus-value created by him. He has furthermore his wages in his pocket and figures during the present transactions only as a buyer of commodities (articles of consumption). On the other hand, the annual product must contain all the elements of reproduction, must renew all the elements of productive capital, above all its most important element, the variable capital. And we have seen, indeed, that the result of the present transactions, so far as the variable capital is concerned, is this: The laborer as a buyer of commodities, by means of the expenditure of his wages, and the consumption of the purchased commodities, reproduces his labor-power, this being the only commodity which he has to sell. Just as the money advanced in the purchase of this labor-power by the capitalists returns to them, so labor-power returns to the market to be once more exchanged for this money. The result in the special case of 1000 I v is that the capitalists of I hold 1000 v in money and the laborers of I offer them 1000 in labor-power, so that the entire process of reproduction of I can be renewed. This is one result of the process of circulation.

On the other hand, the expenditure of the wages of the laborers of I drew on II for articles of consumption to the amount of 1000 II c, transforming them from commodities into money. Department II reconverted them into the natural form of its constant capital, by purchasing from I commodities valued at 1000 v and thus restoring to I the value of its variable capital in money.

The variable capital of I passes through three metamorphoses, which are only indicated in the circulation of the annual product or do not appear at all in it.

(1) The first form is 1000 I v in money, which is converted into labor-power of the same value. This transaction does not itself appear in the exchange of commodities between I and II, but its result is seen in the fact that the working class of I approach the capitalist seller of commodities of II with 1000 in money, just as the working class of II approach the capitalist of II with 500 in money in order to buy his 500 II v of commodities.

(2) The second form is the only one in which variable capital actually varies and serves as variable capital. In this form, a power which creates values takes the place of given values offered in exchange for it. It belongs exclusively to the process of production which is past.

(3) The third form, in which the variable capital as such performs its function in the process of production, is the annual product in values, which in the case of I amounts to 1000 v plus 1000 s, or 2000 I (v+s). In the place of its original value of 1000 in money we have a value of double this amount, or 2000, in commodities. The variable capital-value of 1000 is therefore only one half of the product in values created by it as an element of productive capital. The 1000 I v in commodities are an exact equivalent of the variable part of capital originally advanced in money. But in the form of commodities they are but potential money (they do not become money until they are sold), so that they are still less directly money-capital. They finally become money-capital by the sale of the commodities of 1000 I v to II c, and by the hurried reappearance of labor-power as a purchasable commodity, as a material for which 1000 v in money may be exchanged.

During all these transactions the capitalist of I continually holds the variable capital in his hands; (1) originally as money-capital; (2) then as an element of his productive capital; (3) still later as a portion of the value of his commodity-capital, in the form of the value of commodities; (4) finally once more in money which seeks the company of labor-power for the purpose of exchange. During the process of production, the capitalist has the variable capital in his control as a labor-power creating values, but not as a value of a given magnitude. But since he never pays the laborer until the laborer's power has been applied for a certain length of time, he always holds in his hands the value created by labor for its own reproduction and the surplus-value in excess of this, before he pays him.

Seeing that the variable capital always stays in the hands of the capitalist, it cannot be claimed in any way that it converts itself into revenue for any one. On the contrary, 1000 I v converts itself into money by its sale to II, whose constant capital it reproduces to the extent of one half in its natural form.

That which resolves itself into revenue is not the variable capital of I, represented by 1000 v in money. This money has ceased to serve as the money-form of the variable capital of I as soon as it has converted itself into labor-power, just as the money of any other seller of commodities ceases to represent any of his property as soon as he has exchanged it for commodities of some other seller. The transactions which the money paid as wages makes in the hands of the working class are not transactions of variable capital, but of the value of their labor-power converted into money. So are the transactions of the product in values (2000 I (v+s)), created by the working class, only transactions of commodities belonging to the capitalists, which do not concern the laborers. However, the capitalist, and still more his theoretical interpreter, the political economist, can rid himself only with the greatest difficulty of the idea that the money paid to the laborer is still the capitalist's money. If the capitalist is a producer of money, then the variable portion of value—in other words, the equivalent in commodities which reproduces for him the price of the labor-power bought by him—appears immediately in the form of money, so that it can serve again as variable money-capital without the circuitous route of a reflux. But so far as the laborer of II is concerned—aside from the laborer who produces articles of luxury—500 v exists in the form of commodities intended for the consumption of the laborer, which he, the aggregate laborer, buys by direct purchase from the same aggregate capitalist to whom he had sold his labor-power. The variable portion of the capital of II, so far as its natural form is concerned, consists of articles of consumption, the greater portion of which are intended for the consumption of the laboring class. But it is not the variable capital which is spent in this form by the laborer. It is the wages, the money of the laborer, which by its realization in these articles of consumption restores to the capitalist the variable capital 500 II v in its money-form. The variable capital II v is reproduced in articles of consumption, the same as the constant capital 2000 II c. The one resolves itself no more into revenue than the other does. In either case it is the wages which resolve themselves into revenue.

It is a weighty fact in the circulation of the annual production that the expenditure of wages restores both the constant and variable capital to the form of money-capital, in the one case 1000 II c, in the other 1000 I v and 500 II v (In the case of the variable capital either by means of a direct or indirect reflux).

XI. REPRODUCTION OF THE FIXED CAPITAL.

A great difficulty in the analysis of the transactions in annual reproduction is the following. Take the simplest form in which the matter may be presented, as follows:

(I.) 4000 c + 1000 v + 1000 s +
(II.) 2000 c + 500 v + 500s = 9000.

This resolves itself finally into

4000 I c + 2000 II c + 1000 I v + 500 II v + 1000 I s + 500 II s = 6000 c + 1500 v + 1500 s = 9000.

One portion of the value of the constant capital, to the extent that it consists of instruments of production in the strict meaning of the term (as a distinct section of the means of production) is transferred from the instruments of labor to the product of labor (commodities); these instruments of labor continue to serve as elements of productive capital in their old natural form. It is their wear and tear, the loss in value experienced by them after a certain period of service, which re-appears as an element of value in the commodities produced by means of them, which is transferred from the instruments of labor to the product of labor. In a question of annual reproduction, therefore, only those elements of fixed capital demand consideration, which last longer than one year. If they are completely worn out within one year, then they must be completely reproduced by the annual reproduction, and the point of issue does not concern them at all. It may happen in the case of machines and other lasting forms of fixed capital—and it frequently does happen—that certain parts of them must be completely reproduced within one year, although the organism of the building or machine as a whole lasts a much longer time. These partial organs belong in the same category with the elements of fixed capital which must be reproduced within one year.

This element of the value of commodities must not be confounded with the cost of repairs. If a commodity is sold, this element is turned into money, the same as all others. But after it has been turned into money, its difference from all other elements becomes apparent. The raw and auxiliary materials consumed in the production of commodities must be replaced in their natural form, in order that the reproduction of commodities may begin anew (or that the production of commodities in general may be continuous). The labor-power embodied in them must also be renewed by fresh labor-power. For this reason, the money realized on the commodities must be continually reconverted into these elements of productive capital, a conversion of money into commodities. It does not alter the matter that raw and auxiliary materials, for instance, are bought in large quantities in certain intervals, so that they constitute a productive supply, and need not be secured by new purchases during those intervals. Nor does it matter that the money coming in through the sale of commodities, to the extent that it is intended for the purchase of those means of production, may accumulate while they last, so that this portion of constant capital appears temporarily in the role of money-capital suspended from its active function. It is not a revenue-capital. It is productive capital suspended in the form of money. The renewal of the means of production must continue all the time, but the form of their renewal—with reference to the circulation—may vary. The new purchases, the transactions in the circulation by which they are renewed, may take place in more or less prolonged intervals, and a large amount may be invested at one stroke in a correspondingly large supply of means of production. Or, the intervals between purchases may be small, and in that case small amounts of money are invested in correspondingly small supplies of means of production. But this does not alter the matter itself. The same applies to labor-power. Wherever production is carried on continuously throughout the year on the same scale, there the consumed labor-power must be continuously replaced by new labor-power. Where work depends on seasons, or different portions of the work are done at different periods, as in agriculture, there the purchases of labor-power are relatively smaller. But the money received through the sale of commodities, so far as it represents the value of the wear and tear of fixed capital, is not reconverted into that component part of productive capital whose loss in value it makes good. It settles down beside the productive capital and retains the form of money. This precipitation of money is repeated, until the period of reproduction, consisting of a small or great length of time has elapsed, during which the fixed element of constant capital continues to perform its function in the process of production in its old natural form. As soon as the fixed element, such as buildings, machinery, etc., has been worn out and can no longer serve in the process of production, its value exists fully in money, in the sum of money precipitated by the values which had been gradually transferred by the fixed capital to the commodities in whose production it assisted, and which had been converted into money by the sale of these commodities. This money then serves to replace the fixed capital (or its elements, since its various elements have a different durability) in its natural form and thus to renew this part of the productive capital in reality. This money is, therefore, the money-form of a part of the value of the productive capital, namely of its fixed part. The formation of this hoard is thus a factor in the capitalist process of reproduction, it is the reproduction and storage, in the form of money, of the value of the fixed capital, or its individual elements, until such time as the fixed capital, shall be worn out, until it shall have transferred its entire value to the commodities produced and must be reproduced in its natural form. And this money does not lose the form of a hoard and resume its activity in the process of reproduction of capital promoted by the circulation, until it is reconverted into new elements of fixed capital which will replace the worn-out elements.

The transactions disposing of the annual product in commodities can no more be dissolved into a mere direct exchange of its individual elements than the simple circulation of commodities can be regarded as identical with a simple exchange of commodities. Money plays a specific role in this circulation, which is particularly marked by the manner in which the value of the fixed capital is reproduced. (It is left to a later analysis to ascertain how the matter would present itself, if production were collective and no longer a production of commodities.)

Let us now return to our fundamental diagram, which showed in department II the formula 2000 c + 500 v + 500 s. All the articles of consumption produced in the course of the year are in that case valued at 3000. And every one of the different elements of the commodities composing the total quantity of the product consists, so far as its value is concerned, of 2-3 c + 1-6 v + 1-6 s, or in percentages, 66 2-3 c + 16 2-3 v + 16 2-3 s. The various kinds of commodities of department II may contain different proportions of constant capital. The fixed portion of their constant capitals may be different. The duration of this fixed portion, its wear and tear and therefore that portion of value which it transfers by degrees to the commodities, produced by its assistance, may also differ. But that is immaterial. So far as the process of social reproduction is concerned, it is only a question of transactions between departments II and I. These two departments are here confronted by each other only as social masses. Hence the proportional magnitude of the portion c of the value of the commodity-product of II (which is the only essential one in the settlement of the present question) gives the average proportion, if all the branches of production classed under II are taken as a whole.

Every kind of commodities (and they are largely the same kinds) classed under 2000 c + 500 v + 500 s thus shares uniformly in the value to the extent of 66 2-3 % c + 16 2-3 % v + 16 2-3 % s. This applies equally to every 100 of the commodities classed under c, or v, or s.

The commodities in which the 2000 are incorporated may be further divided into

(1) 1333 1-3 c + 333 1-3 v + 333 1-3 s = 2000 c.

Those under 500 v may be divided into

(2) 333 1-3 c + 83 1-3 v + 83 1-3 s = 500 v.

Those under 500 s may be divided into

(3) 333 1-3 c + 83 1-3 v + 83 1-3 s = 500 s.

Now, if we add these three formulae, we have 1333 1-3 c + 333 1-3 c + 333 1-3 c = 2000 c. Furthermore 333 1-3 v + 83 1-3 v + 83 1-3 v=500 v. And the same in the case of s. The addition gives the same total value of 3000 as above.

The entire constant capital-value contained in the quantity of commodities of II represented by 3000 is therefore incorporated in 2000 c, and neither 500 v nor 500 s contain an atom of it. The same is true of v and s in the case of 500 v and 500 s.

In other words, the entire quantity of constant capital-value, embodied in the commodities of II and reconvertible either into its natural or its money-form, exists in 2000 c. Everything referring to the conversion of the constant value of the commodities of II is therefore dealing only with the movements of 2000 c of II. And these transactions can be made only with 1000 v + 1000 s of I.

In the same way, all remarks made with reference to the transactions of the constant capital-value of department I are confined to a consideration of 4000 I c.

(1) The Reproduction of the Value of the Worn-out Part in the Form of Money.

Let us first consider the diagram

The exchange of the commodities represented by 2000 II c for commodities of I of the same value (1000 v + 1000 s) is conditioned on the assumption that the entire 2000 II c are reconverted from their natural form into that of the elements of the constant capital of II, produced by I. But the value of the commodities of 2000 c, of which the constant capital of II consists, contains an element making good the loss in the value of fixed capital, which is not to be immediately reproduced in its natural form, but converted into money and accumulated until such time as shall require the natural reproduction of the fixed capital on account of its having been completely worn out. Every year registers the finish of some fixed capital which must be renewed in this or that individual business, or this or that line of industry. In the case of one and the same individual capital, this or that portion of its fixed capital must be renewed, since its elements have a different durability. In examining annual reproduction, even on a simple scale, that is to say, disregarding all accumulation, we do not begin at the very beginning of things. The year which we study is one in the flow of many, it is not the year of the first birth of capitalist production. The various capitals invested in the numerous lines of production of department II are, therefore, of different age. Just as a great many persons die annually in the service of these lines of production, so scores of fixed capitals expire annually in the same service and must be restored in their natural form by means of the accumulated fund of money. To that extent the exchange of 2000 II c for 2000 I (v + s) implies a conversion of 2000 II c from the form of commodities (articles of consumption) into that of natural elements of constant capital, which consist not only of raw and auxiliary materials, but also of natural elements of fixed capital, such as machinery, tools, buildings, etc. The wear and tear, which must be reproduced in money in the value of 2000 II c, by no means corresponds to the volume of the actively engaged fixed capital, since a portion of this must be reproduced every year in its natural form. The necessary preparation for this reproduction is an accumulation of money in preceding years on the part of the capitalists of II. And the same condition holds good for the current year as well as for the preceding ones.

In the transaction of I (1000 v + 1000 s) it must be noted that the magnitude I (v + s) does not contain any elements of constant capital, so that none of it implies a reproduction of wear and tear, that is to say, of elements transferred from the fixed portion of some constant capital to the commodities which represent the natural form of v + s. On the other hand, such elements do exist in II c and constitute that portion of value due to fixed capital which is not immediately converted from money into its natural form, but first accumulated in the form of money. The exchange between I (1000 v + 1000 s) and 2000 II c, therefore, presents the difficulty, that the means of production of I, which are the natural form of (1000 v + 1000 s), are to be exchanged to the full value of 2000 for articles of consumption of II, while the 2000 II c of articles of consumption cannot be offered entirely in exchange for I (1000 v + 1000 s), because a portion of them, corresponding in value to the wear and tear of the fixed capital, must be accumulated in the form of money and do not serve as a medium of circulation during the current period of annual reproduction which we are examining. But the money paying for this element of wear and tear incorporated in the value of 2000 II c can come only from department I, since II cannot pay for its own articles, but must secure payment for them by selling them, and since we have assumed that I (1000 v + 1000 s) buys the full amount of commodities of 2000 II c. Hence department I must supply the money to cover that wear and tear of II c. Now, according to the rules previously determined, money advanced to the circulation returns to that capitalist producer who later on throws an equal amount of commodities into the circulation. It is evident that department I, in buying II c, cannot transfer commodities worth 2000 to department II and yield up to it every time an additional amount of money, without any equivalent returning by way of the circulation. Otherwise department I would buy the commodities II c at a price exceeding their value. If department II actually exchanges its 2000 c for I (1000 v + 1000 s), then it has no further claims on department I, and the money circulating in this transaction returns either to I or to II, according to whether I or II acted first as a buyer. And in that case department II would have reconverted the entire value of its commodity-capital into the natural form of means of production, contrary to our assumption that it would not reconvert an aliquot portion during the current period of annual reproduction into the natural form of fixed elements of its constant capital. Department II could not secure a balance of money in its favor, unless it sold a value of 2000 to department I and bought less than that from department I, for instance, only 1800. In that case department I would have to make good the balance of 200 in money, which would not return to it, because it would not have recovered this amount by an equivalent surrender of commodities to the circulation. Only then could II have a fund of money which it could place to the credit of the wear and tear of its fixed capital. But then we should also have an overproduction of means of production to the amount of 200 on the part of department I, and the basis of our diagram would be destroyed, which assumed reproduction on the same scale, in other words, a complete proportionality between the various systems of production. We should have done away with one difficulty and created another, which would be still worse.

As this problem offers peculiar difficulties and has never been mentioned by political economy, we shall consider one by one all possible solutions (at least apparent solutions), or rather all possible formulations of the problem.

In the first place, we had just assumed that department II sells commodities valued at 2000 to department I, but buys from it only 1800 worth. The value of the commodities of 2000 c contains 200 for wear and tear of fixed capital, which must be accumulated as money. The value of 2000 c would therefore be dissolved into 1800, which would be exchanged for means of production of I, and 200 for the reproduction of worn-out elements of fixed capital, which would be held in the form of money after the sale of 2000 II c to department I. Expressed in terms of value, this would be 2000 II c = 1800 c + 200 w, this w standing for wear and tear.

We should then be studying the transaction

Department I buys with 1000 p. st., which the laborers have received as wages in payment for their labor-power, 1000 II c of articles of consumption. Department II buys with the same 1000 p. st. means of production from department I from the lot 1000 v. The capitalists of I thus recover their variable capital in the form of money and can employ it next year in the purchase of labor-power to the same amount, that is to say, they can reproduce the variable portion of their productive capital in its natural form.—Department II furthermore advances 400 p. st. and buys means of production from the lot I s, and department I s buys with the same 400 p. st. articles of consumption from II c. The 400 p. st. advanced by the capitalists of II have thus returned to them, but only as an equivalent for sold commodities. Department I now buys from II articles of consumption to the amount of 400 p. st.; II buys from I 400 worth of means of production, thereby returning the 400 p. st. to department I.

So far, then, we have the following calculation: Department I b throws into circulation 1000 v + 800 s in commodities; it also throws into circulation, in money, 1000 p. st. of wages and 400 p. st., thus facilitating its transaction with II. After the transaction is closed, department I has 1000 v in money, 800 s exchanged for articles of consumption from 800 II c, and 400 p. st. in money.

Department II throws into circulation 1800 c in commodities (articles of consumption) and 400 p. st. in money. At the close of the transaction it has 1800 in commodities (means of production from department I) and 400 p. st. in money.

There still remain on the side of department I 200 s in means of production, and on the side of II 200 c (w) in articles of consumption.

According to our assumption department I buys with 200 p. st. the articles of consumption II w, valued at the same amount. But II holds these 200 p. st., since 200 w represents wear and tear and is not immediately reconverted into means of production. Therefore 200 I s cannot be sold. One-tenth of the surplus-value of I cannot be realized by any exchange, cannot be converted from the natural form of means of production into that of articles of consumption.

This does not only contradict our assumption of reproduction on a simple scale, but it is not even a hypothesis which would explain the payment of 200 II w in money. It is another way of saying that it cannot be explained. Since it cannot be demonstrated in what manner 200 w is converted into money, it is assumed that department I is obliging enough to supply the money, just because it is not able to convert its own remainder of 200 s into money. This is as much a legitimate method of analysis as the assumption that 200 p. st. fall every year from the clouds in order to convert 200 II w into money.

But the absurdity of such an assumption does not become evident at once, if I s, instead of appearing, as it does in this case, in its primitive mode of existence—that is to say as an element of the value of means of production, as an element of the value of commodities which must be converted into money by their capitalist producers—appears in the hands of capitalist stockholders, for instance as ground rent in the hands of land owners, or as interest in the hands of money-lenders. Now, if that portion of the surplus-value of commodities, which the industrial capitalist yields in the form of ground rent or interest to other shareholders in the surplus-value, cannot be in the long run converted into money by the sale of the commodities, then there is an end to the payment of rent and interest, and the land owners or recipients of interest can no longer serve in the role of miraculous interlopers, who convert aliquot portions of the annual reproduction into money by spending their revenue. The same is true of the expenditures of all so-called unproductive laborers, state officials, physicians, lawyers, etc., and others who serve economists as an excuse for explaining inexplicable things, in the role of the "general public."

Nor does it improve the matter, if the direct transaction between departments I and II, the two great departments of capitalist producers, is circumvented and the merchant is dragged in as a mediator, in order to overcome all difficulties with his "money." In the present case, for instance, 200 I s must ultimately be sold to the industrial capitalists of II. It may pass through the hands of a number of merchants, but the last of them will find himself in the same predicament, in which the capitalists of I were at the outset, that is to say he cannot sell the 200 I s to the capitalists of II. And this amount, being arrested in its course, cannot renew the same process with department I.

We see, then, that, aside from our ultimate purpose, it is quite necessary to view the process of reproduction in its fundamental simplicity, in order to get rid of all obscuring interference and dispose of the false subterfuges, which assume the semblance of scientific analysis, but which cannot be removed so long as the process of social reproduction is immediately analyzed in its concrete and complicated form.

The law that under normal conditions of reproduction—whether it be on a simple or on an enlarged scale—the money advanced by the capitalist producer to the circulation must return to its point of departure (no matter whether the money is his own or borrowed) excludes decidedly the hypotheses that 200 II w can be converted into money by an advance of money on the part of department I.

(2) The Reproduction of Fixed Capital in its Natural Form.

Having disposed of the above hypothesis, only such hypotheses remain as assume the possibility of a reproduction of the worn-out fixed capital partly in money and partly in its natural form.

We had assumed in the preceding case

(a) That 1000 p. st. had been paid in wages by department I and spent by the laborers for articles of consumption of II c to the same amount.

It is a simple affirmation of fact that these 1000 p. st. are advanced by I in money. Wages must be paid in money by the various capitalist producers. This money is then spent by the laborers for articles of consumption and serves the sellers of articles of consumption in their turn as a medium of circulation in the conversion of their constant capital from a commodity-capital into a productive capital. It passes indeed through many channels (store keepers, house owners, tax collectors, unproductive laborers, such as physicians, etc., who are needed by the laborer himself) and therefore it flows only in part directly from the hands of the laborer of I into those of the capitalist of II. Its flow may be retarded more or less and the capitalist may therefore require more reserve funds of money. But all this is ruled out of the analysis of the simplest fundamental form.

(b) We had furthermore assumed that department I advances at a certain time 400 p. st. in money for the purchase of articles from II and that this money returns to it, while at some other time department II advances also 400 p. st. for the purchase of commodities from I and likewise recovers this money. This assumption must be granted, for it would be arbitrary to think that only the capitalist class of I, or only that of II, should advance the money required for the exchange of their commodities. Now, since we have shown (under 1) that it would be absurd to think that department I should throw money into circulation in order to promote the conversion of 200 II w into money, there would remain only the seemingly still more absurd hypothesis that department II itself should advance this money, by which that portion of the value of its commodities which makes good the depreciation of its fixed capital through wear and tear is converted into money. For instance, that portion of value which is lost by the spinning machine of Mr. X. in the process of production re-appears as a portion of the value of the yarn. That which his spinning machine loses on the one hand through wear and tear, is supposed on the other hand to be accumulated by him in money. Now take it that X. buys 200 p. st.'s worth of cotton from Y. and advances 200 p. st. in money for this purpose. Y then buys from him 200 p. st.'s worth of yarn, and X. now accumulates this money as a fund for the reproduction of the worn-out portion of his machine. This would simply amount to the statement that X., aside from his production, its product, and the sale of this product, keeps 200 p. st. in reserve, in order to make good to himself the depreciation of his machine, in other words, that he not only loses 200 p. st. by the depreciation of his machine, but must also put up 200 p. st. additional every year out of his own pocket in order to be finally able to buy a new spinning machine.

This looks only seemingly absurd. For the producers of department II are capitalists whose fixed capital is in various stages of its reproduction. In the case of some of them it has arrived at the stage where it must be entirely renewed in its natural form. In the case of the others it is more or less removed from this stage. All the capitalists of these last named stages have this in common, that their fixed capital is not actually reproduced, that is to say, not actually renewed in its natural form by a new specimen of the same kind, but that its value is successively accumulated in money. The first class of the capitalists of II are in the same (or almost the same) position as they were at the establishment of their business, when they came on the market with their money-capital in order to convert this money partly into constant (fixed and circulating) capital, partly into labor-power (variable capital). They have once more to advance this money to the circulation, the value of fixed constant capital as well as that of circulating constant and variable capital.

Hence, if we assume that half of the 400 p. st. thrown into circulation by the capitalist class of II for the purpose of transacting business with department I comes from those capitalists of II who have to reproduce by means of the sale of their commodities not only their means of production so far as they are circulating capital, but also to buy with money new fixed capital in its natural form, while the other half of the capitalists of II reproduce with their money only the circulating portion of their constant capital in its natural form, but not the fixed portion, then there is no contradiction in the statement that these 400 p. st., when returned by department I in exchange for articles of consumption, are variously distributed among these two classes of department II. They return to department II, but they do not return into the same hands. They are distributed within this department and pass from one of its sections to another.

One section of II has secured means of production whose value is covered by their commodities, and has furthermore converted 200 p. st. of money into natural elements of new fixed capital. The money thus spent does not return to this section by way of the circulation until after a succession of years and is gradually accumulated by the sale of products created by this fixed capital and bearing the value of its worn-out portion.

But the other section of II did not purchase any commodities from I for 200 p. st. That section is rather paid with the money which the first section of II spent for elements of its fixed capital. The first section of II has its fixed capital-value once more in a natural form, while the second section is still engaged in accumulating money for the purpose of renewing its fixed capital later on.

The basis on which we now have to work, after the previous transactions have been closed, is the remainder of the commodities still to be exchanged by the two departments; 400 s on the part of I, and 400 c on the part of II.53 We assume that II advances 400 p. st. in money for the exchange of commodities aggregating 800 in value. One-half, or 200 p. st., must be advanced under all circumstances by that section of II c which has accumulated 200 in money for making good the depreciation by wear and tear and which has to reconvert this fund into the natural form of its fixed capital.

Just as constant capital-value, variable capital-value, and surplus-value—being the elements of the value of the commodity-capital of II and I—may be represented by proportional quantities of the commodities of II and I, so that portion of the value of the constant capital which is not to be converted into the natural form of fixed capital for the present, but rather to be accumulated in money, may like-wise be represented. A certain quantity of commodities of II (in the present case one-half of the remainder of 400, or 200) is as yet the bearer of the value of this depreciation, which has to be converted into money by sale. (The first section of the capitalists of II, who renew their fixed capital in its natural form, may have done so with a portion of its depreciation by means of a corresponding portion of the remaining commodities, but they still have to realize 200 in money.)

The second 200 of the 400 thrown into circulation by II in this remaining transaction buy circulating elements of constant capital from I. A portion of these 200 p. st. may be thrown into circulation by both sections of II, or only by the one not renewing its fixed capital in its natural form.

Department I, then, secures with these 400 p. st. in the first place commodities valued at 200 p. st., consisting only of elements of fixed capital; in the second place, commodities valued at 200 p. st., reproducing only natural elements of the circulating portion of the constant capital of II. Department I has then sold its entire annual product in commodities, so far as it is sold to department II. And the value of one-fifth, or 400 p. st., is now held in its hands in the form of money. This money is monetized surplus-value which must be spent as revenue for articles of consumption. Department I having bought with its 400 p. st. the entire stock of department II, valued at 400, this money flows back to II.

Now we may assume three possibilities. Let us name those capitalists of II, who renew their fixed capital in its natural form, section 1, and those, who accumulate the equivalent for the depreciation of fixed capital, section 2. The three possibilities are: (a) That the 400 still remaining in the shape of commodities of II may make good certain portions of the circulating part of the constant capital of both section 1 and section 2 (perhaps one-half for each); (b) that section 1 has already sold all its commodities, so that section 2 has for sale all of the 400; (c) that section 2 has sold all but the 200 which are the bearers of the value of depreciation.

Then we have the following distributions:

(a) Of the value of the commodities still in the hands of department II, namely 400 c, section 1 holds 100, and section 2 holds 300; 200 out of the 300 represent depreciation. In that case section 1 originally advanced 300 of the 400 in money returned by department I for commodities of II, namely 200 in money, for which it secured elements of fixed capital from I, and 100 in money for the promotion of its transaction with I. Section 2, on the other hand, advanced only 100 of the 400, likewise for the promotion of its exchange with I.

Remember, then, that section 1 advanced 300, and section 2 advanced 100 of the 400.

Now these 400 return in the following manner: Section 1 recovers only one-third of the money advanced by it, or 100. But it has in place of the other 200 a renewed fixed capital. Section 1 has given money to department I for these elements of fixed capital, but sold no more commodities. So far as this money is concerned, section 1 has met department I for the purpose of buying, but not of selling later on. This money cannot return to section 1, otherwise it would receive the elements of fixed capital from I as a gift. So far as the last third of its advanced money is concerned, section 1 first acted as a buyer of circulating elements of its constant capital. The same money serves department I for the purchase of the remainder of the commodities of section 1, valued at 100. This money, then, returns to section 1 of department II, because it acts as a seller of commodities soon after having acted as a buyer. If this money did not return, then section 1 of department II would have given to department I a sum of 100 in money for commodities of the same value and in addition thereto 100 in commodities, in other words, it would have given away its commodities as a present.

On the other hand, section 2 receives 300 in money back, while it has advanced only 100 in money. As a buyer it first threw 100 in money into circulation, and these it receives back when acting as a seller. And it receives 200 more, because it acts only as a seller of commodities to that amount, but not in turn as a buyer. Hence the money cannot return to department I. The value of the depreciation of the fixed capital is thus balanced by the money thrown into circulation by section 1 of department II in the purchase of elements of fixed capital. But it reaches the hands of section 2, not as money of section 1, but as money of department I.

(b) Under these conditions the remainder of IIc is distributed so that section 1 has 200 in money, and section 2 has 400 in commodities.

Section 1 has sold all of its commodities, but 200 in money are a changed form of the fixed elements of its constant capital which it has to renew in their natural form. It acts only as a buyer in the present case and receives in exchange for its money the same value in commodities of department I having the natural form of elements of its fixed capital. Section 2 has to throw 200 p. st. into circulation, at a maximum (if department I does not advance any money for the transaction between I and II), since it is to the extent of one-half of the value of its commodities only a seller to I, not a buyer from I.

It recovers from the circulation 400 p. st. It gets 200, because it has advanced them as a buyer and recovers them as a seller of commodities of the same value. It receives another 200, because it sells commodities of that value to I without buying an equivalent from I.

(c) Section 1 has 200 in money and 200c in commodities. Section 2 has 200c (w) in commodities.

Section 2 has not any advance of money to make under these circumstances, because it does not act any more in the role of a buyer from I, but only as a seller, so that it must wait till some one wants to buy from it.

Section 1 advances 400 p. st. in money, of which 200 serve for a mutual exchange with department I, while 200 are used to buy from I. The last 200 serve in the purchase of the elements of fixed capital.

Department I buys from section 1 commodities to the value of 200 with 200 p. st. in money, so that section 1 thus recovers the money it had advanced for its transaction with I. And I buys with the other 200 p. st., which it has likewise received from section 1, commodities valued at 200 from section 2, which thus recovers the value of the depreciation of its fixed capital.

The matter would not be altered by the assumption that, in the case of (c), department II instead of section 1 of this department should advance the 200 in money required for the exchange of the existing commodities. If I buys in that case first 200 in commodities from section 2 of department II—assuming that this section has only this much left to sell—then the 200 p. st. do not return to I, since section 2 of department II no longer acts in the role of buyer. But section 1 of department II has in that case 200 p. st. to spend in buying and 200 in commodities to offer for sale, making a total of 400 which it has to trade with department I. 200 p. st. in money then return to department I from section 1 of department II. When I spends them again in the purchase of 200 in commodities from section 1 of department II, then they return to department I as soon as section 1 of department II buys the second half of the 400 in commodities from I. Section 1 of department II has spent 200 p. st. in the purchase of elements of fixed capital, without selling anything in return. Therefore this money does not return to it, but serves to monetize the remaining 200 c of commodities of section 2 of department II, while the 200 p. st. in money advanced by I for the promotion of the transactions return to it by way of section 1 of department II, not section 2. In the place of its commodities of 400 it has secured an equivalent, and the 200 p. st. in money advanced by it for transacting business to the extent of 800 in commodities have likewise returned to it. Everything is therefore settled.

The difficulty encountered in the transaction between I (1000 v + 1000 s) and II 2000 c was reduced to the difficulty of balancing accounts between I 400 s and II (section 1) 200 in money plus 200 c in commodities plus (section 2) 200 c in commodities. Or, to make the matter still clearer, 1 (200 s + 200 s) against II (200 in money of section 1 plus 200 c in commodities of section 1 plus 200 c in commodities of section 2).

Since section I of department II exchanges 200c for commodities of department I representing 200s, and since all the money circulating in this exchange of 400 commodities between I and II returns to him who first advances it, be he I or II, this money promoting the exchange between I and II is not an element of the problem which troubles us here. Or, to express it differently, if we assume that the money used in the transaction between 200 I s (commodities) and 200 IIc (commodities of section 1, department II) serves only as a medium of payment, not as a medium of purchase and therefore not as a "medium of circulation," strictly speaking, it is evident that the means of production valued at 200 are exchanged for articles of consumption valued at 200, because the commodities of 200 I s and 200 IIc (section 1) are equivalent in value, that therefore the money serves here merely ideally, and that neither side has to advance any money to the circulation for the payment of any balance. Hence the problem does not show itself in its clearest form, until we eliminate the commodities of 200 I s and their equivalent, the commodities of 200 IIc (section 1), from both sides.

After the elimination of these two amounts of commodities of equal value, which balance one another in I and II, the remainder of the transaction shows the problem clearly, namely I 200s in commodities against II (200c in money of section 1 plus 200c in commodities of section 2).

It is evident that section 1 of department II buys with 200 in money the elements of its fixed capital from 200 I s. The fixed capital of section 1, department II, is there-by renewed in its natural form, and the surplus-value of I, to the amount of 200, is converted form the form of commodities (means of production representing elements of fixed capital) into that of money. Department I buys with this money articles of consumption from section 2, department II, and the result for II is that section 1 has renewed a fixed element of its constant capital in its natural form; and that section 2 has stored up another element in money which is destined to make good the depreciation of its fixed capital. And this continues every year, until this last element is also renewed in its natural form.

The first condition is here evidently that this fixed element of constant capital II, which must annually be reconverted into money to the full extent of its value and, therefore, entirely reproduced in its natural form (section 1), should be equal to the annual depreciation of the other fixed element of constant capital II, which continues its function in its old natural form and whose depreciation, represented by the value transferred by it to the commodities produced by it, is first accumulated in money. Such a balance of value would seem to be a law of reproduction on the same scale. This is equivalent to saying that the proportional division of labor in department I, which puts out means of production, must remain unchanged, to the extent that it produces partly circulating, partly fixed portions of the constant capital of department II.

Before we analyze this more closely, we must first see how the matter looks, if the remaining amount of II c (1) is not equal to the remainder of II c (2). It may be larger or smaller. Let us study either case.

First Case.

I. 200 s.
II. (1) 220 c in money plus (2) 200 c in commodities.

In this case II c (1) buys with 200 p. st. the commodities of 200 I s, and I buys with the same money the commodities of 200 II c (2), in other words, that portion of the fixed capital which has to be accumulated in money. This portion is thus converted into money. But 20 II c (1) cannot be reconverted into the natural form of fixed capital.

It seems that we might remedy this inconvenience by making the remainder of I s 220 instead of 200, so that only 1780 instead of 1800 of the 2000 I would be disposed of by former transactions. Then we should have:

I. 220 s.
II. (1) 220 c in money plus (2) 200 c in commodities.

Section 1 of II c buys with 220 p. st. in money the 220 I s, and I buys with 200 p. st. the 200 II c (2) of commodities. But now 20 p. st. in money remain on the side of I, a portion of surplus-value which it can hold only in money, without being able to spend it in articles of consumption. The difficulty is thus merely transferred from section 1, department II c, to I s.

Let us now assume, on the other hand, that section 1, II c, is smaller than section 2, II c, then we have:

Second Case.

I. 200 s in commodities.
II. (1) 180 c in money plus (2) 200 c in commodities.

Section 1, department II, buys with 180 p. st. in money the commodities of 180 I s. Department I buys with the same money commodities of the same value from section 2, department II, that is to say, 180 II c (2). There remain 20 I s unsaleable on one side, and 20 II c of section 2 on the other. In other words, commodities valued at 40 remain unsaleable.

It would not help us any to make the remainder of I equal to 180. It is true, there would not be any surplus in I under these circumstances, but the same surplus of 20 would remain unsaleable in section 2 of department II and could not be converted into money.

In the first case, where section 1 of department II is greater than section 2 of department II, there remains a surplus of money in section 1 of department II and cannot be converted into fixed capital; or, if the remainder in I s is assumed to be equal to II c (1), the same surplus in money remains inconvertible into articles of consumption in I s.

In the second case, where II c (1) is smaller than II c (2), there remains a deficit of money on the side of 200 I s and II c (2), and an equal surplus of commodities on both sides, or, if the remainder of I s is assumed to be equal to II c (2), there remains a deficit of money and a surplus of commodities in II c (2).

If we assume the remainder of I s to be always equal to II c (1)—seeing that production is determined by demand, and reproduction is not altered by the fact that there may be a greater output of fixed elements of capital this year, and a greater output of circulating elements of constant capitals I and II next year—then I s could not be reconverted into articles of consumption in the first case, unless I brought with it a portion of the surplus-value of II and accumulated it in money instead of consuming it; in the second case there would be no other way out but an expenditure of the money on the part of I itself, an assumption which we have already rejected.

If II c (1) is greater than II c (2), then the importation of foreign commodities is required for the employment of the money-surplus in I s. If II c (1) is smaller than II c (2), then an exportation of commodities (articles of consumption) is required for the realization of the value of the depreciation of II c in means of production. In either case, foreign trade is necessary.

Even assuming that, on the basis of simple reproduction on the same scale, the productivity of all lines of industry, and thus the proportional relation of the value of their commodities, would remain unchanged, there would nevertheless be an incentive for production on an enlarged scale whenever the two last named cases may occur, in which II c (1) is greater or smaller than II c (2).

(3) Results.

With reference to the reproduction of the fixed capital, the following general remarks may be made:

If a larger portion of the fixed element of II c expires this year than last and must be reproduced in its natural form—all other circumstances remaining the same, that is to say, not only the scale of production, but also the productivity of labor, etc.—then that portion of the fixed capital, which is as yet only declining and must be temporarily accumulated in money until its term of expiration arrives, must decline in the same proportion, since we have assumed that the sum of the fixed capital serving in II (also the sum of its values) remains unchanged. This implies the following consequences: If a greater portion of the commodity-capital of I consists of elements of the fixed capital of II c, then a correspondingly smaller portion consists of circulating elements of II c, because the total production of I for II c remains unchanged. If one of these portions increases, then the other decreases, and vice versa. On the other hand, the total production of II also retains the same volume. But how is this possible, if the production of its raw materials, half-wrought products, and auxiliary materials (the circulating elements of the constant capital of II) decreases? In the second place, a greater portion of fixed capital of II c, restored to its money-form, flows into department I, in order to be reconverted from its money-form into its natural form. In other words, there is a greater flow of money into department I, aside from the money circulating between I and II merely for the transaction of their business, more money which does not merely serve as a medium for the mutual exchange of their commodities, but acts onesidedly in purchase without a corresponding sale. At the same time the quantity of commodities of II c, the bearers of the value of the depreciation of fixed capital, would have decreased proportionately. This is that quantity of commodities of II which is not exchanged for commodities of I, but must be converted into money of I. More money would have flown from II into I for onesided purchase, and there would be fewer commodities of II which would stand only in the relation of a buyer toward I. Under these circumstances a great portion of I s—for I v has already been converted into commodities of II—would not be convertible into commodities of II, but would be held in the form of money.

The opposite case, in which the reproduction of expired fixed capitals of a certain year exceeds that of the depreciation, need not be discussed in detail after the preceding statements.

The result would be a crisis—a crisis in production—in spite of the fact that reproduction had taken place on the same scale.

In short, unless a constant proportion between expiring (and about to be renewed) fixed capital and still continuing (merely transferring the value of its depreciation to its product) fixed capital is assumed, so long as reproduction takes place on a simple scale under the same conditions, such as productivity, volume, intensity of labor, the mass of circulating elements to be reproduced in one case would remain the same while the mass of fixed elements to be reproduced would have been increased. Therefore the aggregate production of I would have to increase, or, there would be a deficit in the reproduction, even aside from money matters.

In the other case, if the proportional magnitude of the fixed capital of II, to be reproduced in its natural form, should decrease and the elements of the fixed capital of II, which must be merely accumulated in money, should increase in the same ratio, then the quantity of the circulating elements of the constant capital of II, reproduced by I, would remain unchanged, while that of the fixed elements about to be reproduced would have decreased. Hence there would be either a decrease in the aggregate production of I, or a surplus (the same as previously a deficit) which could not be converted into money.

It is true that the same labor may, in the first case, supply a greater product with an increase in its productivity, extension, or intensity, and so the deficit could be covered in the first case. But such a change could not take place without a transfer of capital and labor from one line of production of department I to another, and every transfer would cause monetary disturbances. Furthermore, to the extent that an expansion and intensification of labor would increase, department I would have to exchange more of its value for less value of II. In other words, there would be a depreciation of the product of I.

The reverse would take place in the second case, where I must contract its production, which implies a crisis for its laborers and capitalists, or produce a surplus, which implies another crisis. Such a surplus is not an evil in itself, but it is an evil under the capitalist system of production.

Foreign trade could relieve the pressure in either case. In the first case it would convert products of I held in the form of money into articles of consumption, in the second case it would dispose of the surplus of commodities. But foreign trade, so far as it does not merely reproduce certain elements of production, only transfers these contradictions to a wider sphere and gives them a greater latitude.

Once that the capitalist mode of production is abolished, the problem resolves itself into the simple proposition that the magnitude of the expiring portion of fixed capital, which must be reproduced in its natural form every year (which served in our illustration for the production of articles of consumption), varies in successive years. If it is very large in a certain year (in excess of the average mortality, the same as among men), then it is so much smaller in the next year. The quantity of raw materials, half wrought articles, and auxiliary materials required for the annual production of the articles of consumption—other circumstances remaining the same—does not decrease in consequence. Hence the aggregate production of means of production would have to increase in the one case and decrease in the other. This can be remedied only by a continuous relative overproduction. There must be on the one hand a certain quantity of fixed capital in excess of that which is immediately required; on the other hand there must be above all a supply of raw materials, etc., in excess of the actual requirements of annual production (this applies particularly to articles of consumption). This sort of reproduction may take place when society controls the material requirements of its own reproduction. But in capitalist society it is an element of anarchy.

This illustration of fixed capital, on the basis of an unchanged scale of reproduction, is convincing. A disproportion of the production of fixed and circulating capital is one of the favorite arguments of political economists in explaining productive crises. That such a disproportion can and must arise even when the fixed capital is merely preserved by renewal is new to them. And yet, it can and must arise even on the assumption of an ideal and normal production on the basis of a simple reproduction of the already existing capital of society.

XII. THE REPRODUCTION OF THE MONEY SUPPLY.

One element has so far been entirely disregarded, namely the annual reproduction of gold and silver. To the extent that these metals serve as material for articles of luxury, gilding, etc., they do not deserve any special mention, any more than any other products. But they play an important role as money-material, as potential money. For the sake of simplicity, we regard only gold as material for money.

According to older statements, the entire annual production of gold amounts to about 8-900,000 lbs., equal to about 1100 to 1250 million marks (264 to 392.5 million dollars). But according to Soetbeer54 it amounts to only 170,675 kilograms, valued at about 476 million marks on an average of the years 1871 to 1875. Of this amount, Australia supplied about 167, the United States 166, Russia 93 million marks. The remainder is distributed over various countries in sums of less than 10 million marks each. The annual production of silver, during the same period, amounted to somewhat less than 2 million kilograms, valued at 354.5 million marks. Of this amount, Mexico supplied about 108, the United States 102, South America about 67, Germany about 26 million, etc.

Among the countries with predominating capitalist production only the United States are producers of gold and silver. The capitalist countries of Europe obtain almost all their gold and by far the greater part of their silver from Australia, the United States, Mexico, South America, and Russia.

But we transfer the gold mines into the country with capitalist production whose annual reproduction we are analyzing, for the following reasons:

Capitalist production does not exist at all without foreign commerce. But when we assume annual reproduction on a given scale, we also assume that foreign commerce replaces home products only by articles of other use-value, or natural form, without affecting the relations of value, such as those of the two categories known as means of production and articles of consumption and their transactions, nor the relations of constant capital, variable capital, and surplus-value, into which the value of the products of each of these categories may be dissolved. The introduction of foreign commerce into the analysis of the annually reproduced value of products can, therefore, produce only confusion, without furnishing any new point in the aspect or solution of the problem. For this reason we leave it aside. And consequently gold as a direct element of annual reproduction is not regarded as a commodity imported from a foreign country.

The production of gold, like that of metals generally, belongs to department I, which occupies itself with means of production. Let us assume that the annual production of gold amounts to 30 (from reasons of expediency, although it is far too high compared to the other figures of our diagrams). Let this value be resolved into 20 c+5 v+5 s; 20 c is to be exchanged for other elements of department I c, and this is to be studied later; but the 5 v+5 s are to be exchanged for elements of II c, namely, articles of consumption.

As for the 5 v, every gold producing business begins by buying labor-power. This is done, not with money produced by this particular business, but with a portion of the money existing in the land. The laborers buy with this 5 v articles of consumption from II, and this department buys with the same money means of production from I. Let us say that II buys from I gold for elements of its commodities (elements of constant capital) to the value of 2, then 2 v flow back to the gold producers of I in money which was formerly in circulation. If II does not buy any more material from I, then I buys from II by throwing its gold into circulation, for gold can buy any commodity. The difference is only that I does not act as a seller, but as a buyer, in that case. The gold producers of I can always get rid of their product, for it is always in a form which may be directly exchanged.

Take it that some producer of yarn has paid 5 v to his laborers, who create for him in return—aside from a surplus-product—yarn to the amount of 5. The laborers buy values worth 5 from II c, and II c buys with the same 5 in money yarn from I, and this 5 in money flows back to the producer of yarn. Now we had assumed that I g (meaning the producer of gold) advanced to his laborers 5 v in money which had previously belonged to the circulation. The laborers spend it for articles of consumption, but only 2 of the 5 return from II to I g. However, I g can begin his process of reproduction anew, just as well as the producer of yarn. For his laborers have supplied him with 5 in gold, 2 of which he sold, and 3 of which he still has, so that he has but to coin it,55 or exchange it for bank notes, in order that his entire variable capital may be immediately in his hands, without the intervention of II.

Even this very first process of annual reproduction has wrought a change in the quantity of money actually or virtually in circulation. We assumed that II c bought 2 v from I g for material, and that I g invested 3 in II as the money-form of its variable capital. In other words, 3 of the amount of money supplied by the new gold production remained within department II and did not return to I. According to our assumption II has satisfied its needs for gold material. The 3 remain in its hands as a hoard of gold. Since they cannot constitute any elements of its constant capital, and since II had previously enough money-capital for the purchase of labor-power; since, furthermore, these additional 3 g, with the exception of the element making good the loss through depreciation, have no function to perform within II c, for a portion of which they were exchanged (they could only serve to cover a shortage in the element making good loss through depreciation, in the case that section 1 of department II should be smaller than section 2 of department II, which would be accidental); and since, on the other hand, the entire commodity-product of II c, with the exception of the element making up for depreciation, must be exchanged for means of production of I (v+s); therefore this money must be entirely transferred from II c to II s, no matter whether it exists in necessities of life or articles of luxury, and vice versa, a corresponding value of commodities must be transferred from IIs to II c. Result: A portion of the surplus-value is accumulated as a hoard of money.

In the second year of reproduction, when the same proportion of annually produced gold continues to be used as material, 2 will again flow back to I g, and 3 will be reproduced in its natural form, that is to say, it will be set aside in department II as a hoard, etc.

With reference to the variable capital in general, it may be said that the capitalist of I g must continually advance money for the purchase of labor-power, the same as every other capitalist. But so far as these wages are concerned, it is not he, but his laborers who buy from II. He can never appear as a buyer, transferring gold to II, without the initiative of II. But to the extent that II buys material from him for the purpose of converting its constant capital II c into a gold supply, a portion of the v of I g flows back to it from II in the same way that it does to other capitalists of I. And so far as this is not the case, he reproduces his v in gold direct from his product. But to the extent that the v advanced by him in money does not flow back to him from II, a portion of the existing medium of circulation (received from I and not returned to it) is converted by II into a hoard and a portion of its surplus-value is not converted into articles of consumption. Since new gold mines are continually opened or old ones re-opened, a certain proportion of the money invested by I g in v is always money existing previously to the new gold production, and passing from I g by way of its laborers into II, where it becomes an element in the formation of a hoard, or as much of it as is not returned from II to I g.

But as for (I g)s, department I g can always act as a buyer in this case. It throws its s in the shape of gold into circulation and withdraws from it in return articles of consumption of II c. The gold is there used in part as material, and thus serves as a real element of the constant portions c of productive capital II. And any portion of the gold not so employed becomes once more an element in the formation of a hoard in the role of that part of II s which retains the shape of money. We see, then,—aside from I c which we reserve for a later analysis—that even simple reproduction, excluding accumulation strictly so called, namely reproduction, on an enlarged scale, inevitably includes the accumulation, or hoarding, of money.56 And as this is annually repeated, it explains the assumption from which we started in the analysis of capitalist production, namely that a supply of money corresponding to the exchange of commodities is in the hands of the capitalists of departments I and II at the beginning of the reproduction. Such an accumulation takes place even after deducting the amount of gold lost by the depreciation of money in circulation.

It is a matter of course, that the quantity of money accumulated on all sides increases in proportion to the advancing age of capitalist production, and that the quantity annually added to this hoard by the production of new gold decreases proportionately, although the absolute quantity thus added may be considerable. We revert once more in general terms to the objection raised against Tooke and contained in the question: How is it possible that every capitalist draws a surplus-value in money out of the circulation, in other words, draws more money out of the circulation than he throws into it, seeing that the capitalist class must be the ultimate source which throws all money into circulation?

We reply by summarizing the statements made previously (in chapter XVII):

(1) The only essential assumption, namely, that there is money enough available for the exchange of the various elements of annual reproduction, is not touched by the fact that a portion of the value of commodities consists of surplus-value. Take it that the entire production belonged to the laborers, so that their surplus-labor were done for themselves, not for the capitalists, then the quantity of circulating commodity-values would be the same and, other circumstances remaining equal, would require the same amount of money for circulation. The question in either case is therefore only: Where does the money come from which serves as a medium of exchange for this quantity of commodity-values? It is not at all: Where does the money come from which monetizes the surplus-value?

It is true, to repeat it once more, that every individual commodity consists of c+v+s, and the circulation of the entire quantity of commodities therefore requires a certain quantity of money for the circulation of the capital c+v, and another for the circulation of s, the revenue of the capitalists. For the individual capitalist as well as for the entire capitalist class, the money in which they advance capital is distinct from the money in which they spend their revenue. Where does this last money come from? Simply from the entire quantity of money available in society, a portion of which circulates as the revenue of the capitalists. We have already seen in previous instances that every capitalist establishing a new business recovers the money which he spent for his maintenance in the purchase of articles of consumption, by the process of converting his surplus-value into money, once that his business is fairly under way. But generally speaking the difficulty is due to two sources:

In the first place, if we analyze only the circulation and the turn-over of capital, regarding the capitalist merely as a personification of capital, not as a capitalist consumer and sport, then we see indeed that he is continually throwing surplus-value into circulation as a part of his commodity-capital, but we never see money as a form of revenue in his hands. We never see him throwing money into circulation for the consumption of his surplus-value.

In the second place, if the capitalist class throw a certain amount of money into circulation in the shape of revenue, it seems as though they were paying an equivalent for this portion of the total annual product, so that this portion is then no longer surplus-value. But the surplus product in which the surplus value is incorporated does not cost the capitalist anything. As a class, they possess and enjoy it gratuitously, and the circulation of money cannot alter this fact. The alteration due to this circulation consists merely in the fact that every capitalist, instead of consuming his surplus-product in its natural form, a thing which is generally impossible, draws commodities of all sorts up to the amount of his surplus-value out of the general stock of the annual surplus-product of society and appropriates them for his own use. But the mechanism of the circulation has shown that the capitalist class, while throwing money into the circulation for the purpose of spending their revenue, also recover this money from the circulation, so that they can continue the same process over and over; so that, as a class of capitalists, they always remain in possession of the amount of money necessary for the monetization of their surplus-value. Hence, seeing that the capitalist does not only withdraw his surplus-value from the market in the form of commodities for his individual consumption, but also the money which he has paid for these commodities, it is evident that he secures the commodities without paying an equivalent for them. They do not cost him anything, although he pays money for them. If I buy commodities for one pound sterling and recover this money from the seller by means of a surplus product which I got for nothing, it is obvious that I have received the commodities gratis. The continual repetition of this transaction does not alter the fact that I continually secure commodities and continually remain in possession of my pound sterling, although I release it temporarily in the purchase of the commodities. The capitalist continually retains this money as an equivalent of surplus-value that has not cost him anything.

We have seen that with Adam Smith the entire value of the social product resolves itself into revenue, into v+s, so that the constant capital-value is set down as zero. It follows necessarily that the money required for the circulation of the yearly revenue must also suffice for the circulation of the entire annual product, so that, in our illustration, the money of 3000 required for the circulation of the articles of consumption of the same value must also suffice for the circulation of the entire annual product valued at 9000. This is indeed the opinion of Adam Smith, and it is repeated by Th. Tooke. This erroneous conception of the ratio of the quantity of money required for the realization of the revenue to the quantity of money required for the circulation of the entire social product is a necessary result of misapprehending, thoughtlessly conceiving the manner in which the various elements of material and value of the total annual product are reproduced and annually renewed. It has already been refuted by us.

Let us listen to Smith and Tooke themselves.

Smith says in Book II, chapter 2: "The circulation of every country may be divided into two parts: the circulation of the merchants among themselves and the circulation between merchants and consumers. Although the same pieces of money, paper or metal, may be used now in the one, now in the other circulation, both of them nevertheless take place continually side by side, and each one of them requires therefore a certain quantity of money of this or that kind in order to keep moving. The value of the commodities circulating among the various merchants can never exceed the value of the commodities circulating between merchants and consumers; for whatever the merchants may buy must be sold ultimately to the consumers. As the circulation between the merchants is wholesale, it generally requires a rather large sum for every exchange. The circulation between merchants and consumers, on the other hand, is mostly retail and requires often but very small sums of money: one shilling, or even half penny, suffices sometimes. But small sums circulate much more rapidly than large ones. * * * * Although the annual purchases of all consumers are therefore at least"—this at least is rich—"equal in value to those of the merchants, they may nevertheless be effected, as a rule, with a much smaller quantity of money," etc.

Th. Tooke remarks to this passage of Adam Smith (in "An Inquiry into the Currency Principle," London, 1844, pages 34 to 36): "There cannot be any doubt that the distinction here made is essentially correct. * * * * The exchange between merchants and consumers includes also the payment of wages, which are the principal means of the consumers. * * * * All transactions between merchant and merchant, that is to say, all sales from the producer or importer, through all gradations of intermediate processes of manufacture, etc., down to the retail merchant or export merchant, may be dissolved into movements transferring capital. But transfers of capital do not necessarily imply, nor indeed carry actually with them, in the great number of exchanges, a real cession of bank notes or coin—I mean a substantial, not a fictitious, cession—at the time of transfer. * * * * The total amount of exchanges between merchants and merchants must in the last instance be determined and limited by the amount of exchanges between merchants and consumers."

If this last sentence stood by itself, one might think that Tooke stated simply the fact of a ratio between the exchanges of merchants and merchants and those of merchants and consumers, in other words, a ratio between the value of the total annual revenue and the value of the capital with which it is produced. But this is not the case. He explicitly endorses the view of Adam Smith. A special criticism of his theory of circulation is therefore superfluous.

(2) Every industrial capital, when beginning its career, throws at one single investment enough money into circulation to cover its entire fixed element, which it recovers but gradually in the course of years by the sale of its annual products. Thus it throws at first more money into circulation than it recovers from it. This is repeated at every renewal of its entire capital in a natural form. It is repeated every year in a certain number of enterprises whose fixed capital must be renewed in its natural form. It is repeated in fragments at every repair, every partial renewal of fixed capital. While more money is on the one hand withdrawn from circulation than is thrown into it, the opposite takes place on the other hand.

In all lines of industry whose period of production—as distinguished from the working period—extends over a long term, money is continually thrown into circulation during this period by the capitalist producers, either in payment for labor-power employed, or in the purchase of means of production to be consumed. Means of production are thus directly withdrawn from the commodity market, and articles of consumption either indirectly by the laborers spending their wages, or directly by the capitalists, who do not by any means stop consuming, although they do not immediately throw any equivalent on the market, in the shape of commodities. During this period, the money thrown by them into circulation serves for the conversion of the value of commodities, including the surplus value embodied in them, into money. This element becomes very important in an advanced stage of capitalist production in the case of lengthy enterprises, such as are undertaken by stock companies, for instance the construction of railways, canals, docks, large municipal buildings, iron ships, drainage of land on a large scale, etc.

(3) While the other capitalists, aside from the investment of fixed capital, draw more money out of the circulation than they threw into it in the purchase of labor-power and the circulating elements of capital, the gold and silver producing capitalists, on the other hand throw only money into the circulation, aside from the precious metals which serve as raw material, while they withdraw only commodities from it. The constant capital, with the exception of the depreciated portion, furthermore the greater portion of the variable capital and the entire surplus-value, with the exception of the hoard which is eventually accumulated in the hands of these capitalists, is thrown into the circulation as money.

(4) On one side, various things circulate as commodities which were not produced during the current year, such as real estate, houses, etc., furthermore products whose period of production extends over more than one year, such as cattle, wood, wine, etc. It is important to emphasize in this respect that aside from the quantity of money required for the immediate circulation, there is always a certain quantity in a latent state which may enter into service when so required. Furthermore, the value of such products circulates often in fractions and gradually, for instance, the value of houses in the rents of a number of years.

On the other hand, not all movements of the process of reproduction are promoted by the circulation of money. The entire process of production, once that its elements have been purchased, is excluded from it. Furthermore all products, which the producer consumed directly in his own individual or productive consumption. Under this head belongs also the board of agricultural laborers.

The quantity of money, then, which circulates the annual product, exists in society, having been gradually accumulated. It does not belong to the values produced during the current year, with the exception of the gold used for making good the loss of depreciated money.

This presentation of the matter assumes the exclusive circulation of precious metals as money, and the simplest form of cash purchases and sales, although even plain metals, as a basis of circulation, may serve as money, and have actually so served in history and have been the fundament for the development of a credit system and of certain portions of its mechanism.

This assumption is not made from mere considerations of method, although these are important enough, as demonstrated by the fact that Tooke and his school as well as his adversaries were continually compelled in their controversies concerning the circulation of bank notes to revert to the hypothesis of a purely metallic circulation. They were compelled to do so subsequently, and did so very superficially, because they thus reduced to an incidental point what should have been the point of departure of their analysis.

But the simplest study of the circulation of money in its primitive form, which is the immanent factor of the process of annual reproduction, demonstrates:

(a) Assuming capitalist production to be developed to the point where the wage system predominates, money-capital evidently plays a prominent role, seeing that it is the form in which the variable capital is advanced. To the extent that the wage system develops, all products are converted into commodities and must, therefore, pass through the stage of money as one phase of their metamorphoses, with a few important exceptions. The quantity of circulating money must suffice for this conversion of commodities into money, and the greater part of this quantity is furnished in the form of wages, in that money, which is the money-form of the variable capital advanced by the industrial capitalists in payment for labor-power, and which serves in the hands of the laborers overwhelmingly as a medium of circulation (of purchase). It is quite the reverse under a system of natural economy such as was predominant under every form of vassalage (including serfdom), and still more in more or less primitive communities, whether they are infected by conditions of vassalage or slavery, or not.

In a slave system, the money-capital invested in the purchase of slaves plays the role of the fixed capital in money-form, which is but gradually replaced after the expiration of the active life period of the slaves. Among the Athenians, therefore, the gain realized by a slave owner through the industrial employment of his slaves, or indirectly by hiring them out to other industrial employers (for instance mine owners), was regarded merely as an interest (with sinking fund) on the advanced money-capital, just as the industrial capitalist under capitalist production places a portion of the surplus-value plus the depreciation of his fixed capital to the account of interest and renewal of his fixed capital. This is also the rule in the case of capitalists offering fixed capital, such as houses, machinery, etc., for rent. Mere household slaves, who perform the necessary services or are kept as luxuries are not considered here. They correspond to the modern servant class. But the slave system—so long as it is the dominant form of productive labor in agriculture, manufacture, navigation, etc., as it was in the advanced states of Greece and Rome—preserves an element of natural economy. The slave market maintains its supply of labor-power by war, piracy, etc., and this rape is not promoted by a process of circulation, but by the natural appropriation of the labor-power of others by physical force. Even in the United States, after the conversion of the neutral territory between the wage labor states of the North and the slave labor states of the South into a slave breeding region for the South, where the slave thus raised for the market had become an element of annual reproduction, this method did not suffice for a long time, so that the African slave trade was continued as long as possible for the purpose of supplying the market.

(b) The natural flux and reflux of money by the exchange of the annual products on the basis of capitalist production; the advances of fixed capital in one bulk to the full value and the gradual and prolonged recovery of this outlay from the circulation in the course of successive years, in other words, the gradual reconstitution of fixed capital in money by the annual formation of a hoard, which is different from the simultaneous accumulation of a hoard based on the annual production of new gold; the different length of time in which money is advanced according to the duration of the periods of reproduction of commodities, and in which money must, therefore, be accumulated anew, before it can be recovered from the circulation by the sale of commodities; the different length of time for which money must be advanced, resulting even from the different distances of the places of production from their selling market; furthermore the differences in the magnitude and period of the reflux according to the relative size or condition of the productive supplies in the various lines of business and in the individual businesses of the same line, and with them the terms at which the elements of constant capital are bought—all this taking place during the year of reproduction, it was necessary that all these different factors should be noted and brought home by experience in order to give rise to a systematization of the mechanical aids of the credit-system and to an actual discovery of whatever capital was available for lending.

This is further complicated by a difference between lines of business whose production proceeds continuously under normal conditions on the same scale, and those which are carried on at different scales at different periods of the year, such as agriculture.

XIII. DESTUTT DE TRACY'S THEORY OF REPRODUCTION.

As an illustration of the confused and at the same time boastful thoughtlessness of political economists analyzing social reproduction, the great logician Destutt de Tracy may serve (compare volume I, page 181, footnote 1), whom even Ricardo took seriously, calling him a very distinguished writer.

This distinguished writer makes the following revelations concerning the entire process of social reproduction and circulation:

"One may ask me how these industrial capitalists can make such large profits and out of whom they can draw them. I reply that they do so by selling everything which they produce for more than it has cost to produce; and that they sell

(1) to one another to the extent of the entire share of their consumption, intended for the satisfaction of their needs, which they pay with a portion of their profits;

(2) to the wage workers, both those whom they pay and those whom the idle capitalists pay; from these wage workers they recover the entire wages in this way, except what little they may save;

(3) to the idle capitalist, whom they pay with a portion of their revenue which they have not spent for the wages of the laborers employed by them directly; so that the entire rent, which they pay them annually, flows back to them in this way." (Destutt de Tracy, Traité de la volonté et de ses effets. Paris, 1821. Page 239.)

In other words, the capitalists enrich themselves by mutually getting the best of one another in the exchange of that portion of their surplus-value which they reserve for their individual consumption, or consume as revenue. For instance, if this portion of their surplus-value, or of their profits, is 400 p. st., this sum is supposed to be increased to, say, 500 p. st. by mutually selling their respective shares at an excess of 25% over the normal. But if all do the same, the result will be just what it would have been if they had mutually sold their shares at their normal values. They merely need in that case 500 p. st. in money for the circulation of commodities valued at 400 p. st., and this would seem to be rather a method of impoverishing than of enriching themselves, since it means that they are compelled to reserve a large portion of their total wealth unproductively in the state of a medium of circulation. The outcome is simply that the capitalist class can divide only 400 p. st.'s worth of commodities among themselves for their individual consumption, after nominally raising prices all around, but that they do one another the favor of circulating 400 p. st.'s worth of commodities by means of a quantity of money which would just as well circulate 500 p. st.'s worth of commodities.

And this is saying nothing about the fact that the assumption deals here only with a "portion of their profits," or any supply of commodities representing profits. But Destutt undertook precisely to tell us where these profits come from. The quantity of money required to circulate it represents a very subordinate question. It seems that the quantity of commodities, in which the profit is incorporated, is produced by the circumstance that the capitalists do not only sell these commodities to one another (an assumption which is quite fine and profound), but also mutually sell them too dearly. Thus we are acquainted with the secret of the wealth of the capitalists. It is on a par with the secret of Reuter's funny "Inspector Braesig" who discovered that the great poverty is due to the great "pauvreté."

(2) The same capitalists, furthermore, sell "to the wage workers, both those whom they pay and those whom the idle capitalists pay; from these wage workers they recover the entire wages in this way, except what little they may save."

According to Destutt, then, the reflux of the money-capital advanced to the laborers as wages, is the second source of the wealth of the capitalists.

For instance, if the capitalists have paid 100 p. st. to their laborers as wages, and if these same laborers buy from the same capitalists commodities of this same value of 100 p. st., so that what the capitalists have advanced to the laborers as wages returns to the capitalists when the laborers spend it for commodities, then the capitalists get richer. A common mortal would think that the capitalists recover only their 100 p. st., which they possessed before this transaction. At the beginning of the transaction they have 100 p. st. They buy labor-power valued at 100 p. st. This labor-power, so bought, produces commodities of a certain value, which, so far as we know, amounts to 100 p. st. By selling these commodities for 100 p. st. to their laborers, the capitalists recover 100 p. st. in money. The capitalists then have once more 100 p. st., the same as before, and the laborers have 100 p. st.'s worth of commodities which they have themselves produced. It is hard to understand how that can make the capitalists any richer. If they did not recover the 100 p. st., then they would have to pay first 100 p. st. to the laborers in wages and then to give them their product for nothing, although it is also worth 100 p. st. The reflux of this money might therefore at best explain, why the capitalists do not get any poorer by this transaction, but not, why they get richer by it.

It is another question, how the capitalists got possession of the 100 p. st., and why the laborers, instead of working for their own account, are compelled to exchange their labor-power for this money. But this is a fact which is self-explanatory for a thinker of Destutt's caliber.

However, Destutt himself is not quite satisfied with his solution. He did not simply tell us that the capitalists get richer by spending a sum of 100 p. st. in money and then recovering the same amount. He had not plainly spoken of a reflux of 100 p. st. which merely explains why this money is not lost. He had told us that the capitalists get richer "by selling everything which they produce for more than it has cost to produce."

Consequently the capitalists must also get richer by their transaction with the laborers by selling too dearly to them. Very well! "They pay wages * * * * and all this flows back to them by the expenditures of all these people who pay them more" (for the products) "than they cost the capitalists in wages." (Page 240.) In other words, the capitalists pay 100 p. st. in wages to the laborers, and then they sell to these laborers their own product at 120 p. st., so that they not only recover their 100 p. st., but also gain 20 p. st. That is impossible. The laborers can pay for the commodities only with the money which they receive in the form of wages. If they get only 100 p. st. in wages, they can buy only 100 p. st.'s worth, not 120 p. st.'s worth. This is therefore impracticable. But there is still another way. The laborers buy from the capitalists commodities for 100 p. st., but receive only 80 p. st.'s worth. They are cheated out of 20 p. st. Then the capitalists have certainly gained 20 p. st., because he practically pays 20% less than the actual value for labor-power. This is equivalent to cutting wages 20% by a circuitous route.

The capitalists would accomplish the same end if they paid the laborers in the first place only 80 p. st. in wages and gave them only 80 p. st.'s worth of commodities in exchange. This seems to be the normal way for the class of capitalists as a whole, for according to Destutt the laboring class must "receive sufficient wages" (page 219), since their wages must be at least sufficient to maintain them alive and working, "to gain the barest subsistence" (page 180). If the laborers do not receive such sufficient wages, then that means according to the same Destutt "the death of industry" (page 208), which does not seem to be a way by which the capitalists can get richer. But whatever may be the scale of wages, paid by the capitalists to the laborers, they have a certain value, for instance, 80 p. st. If the capitalist class pays the laborers 80 p. st., then it has to supply them with commodities worth 80 p. st. in exchange for these wages, and the reflux of this sum does not make the capitalists any richer. If the capitalists pay the laborers 100 p. st. in wages, and supply them in exchange for 100 p. st. only with 80 p. st.'s worth of commodities, then they pay 20% above the normal scale in wages and supply on the other hand 20% less in commodities.

In other words, the fund from which the capitalist class would derive its profits, would be made up of deductions from the normal scale of wages of the laborers, by paying less than its value for labor-power, in other words, less than the value of the necessities of life required for the normal reproduction of the laborer. If the normal scale of wages were paid, which is supposed to be the case according to Destutt, there can be no fund for profits, neither for the industrial nor for the idle capitalists.

Hence Destutt should have reduced the entire secret of how the capitalist class get richer, to these words: A deduction from the wages of the laborers. In that case the other sources of surplus-value, which he mentions under (1) and (3), would not exist.

Under these conditions all the countries, in which the money paid to the laborers in wages is reduced to the value of the articles of consumption required for the subsistence of the working class, would not have any fund for the consumption of capitalists, nor any fund for the accumulation of capital. In other words, there would be no fund permitting a capitalist class to live, and therefore no capitalist class. And according to Destutt this would be the case in all wealthy and developed countries with an old civilization, for in them, "in our deeprooted old societies, the fund from which wages are paid * * * * is an almost constant magnitude" (page 202).

Even with a deduction from the wages, the capitalist does not enrich himself by first paying the laborer 100 p. st. in wages and then supplying him with 80 p. st.'s worth of commodities for 100 p. st. of wages, in other words, by circulating 80 p. st.'s worth of commodities by means of 100 p. st., an excess of 20%. The capitalist gets richer by appropriating, aside from the surplus-value—that portion of the product in which surplus-value is incorporated—20% of that portion of the product which the laborer should receive in exchange for his wages: The capitalist class would not gain anything by the silly method which Destutt assumes. They pay 100 p. st. for wages and give to the laborer for these 100 p. st. a part of his own product valued at 80 p. st. But in the next transaction they must again advance 100 p. st. for the same purpose. They would thus indulge in the useless sport of advancing 100 p. st. in money and giving in exchange therefor 80 p. st. in commodities, instead of paying 80 p. st. and exchanging it for 80 p. st. in commodities. That is to say, they would be continually advancing a money-capital which is 20% in excess of the normal required for the circulation of their variable capital. That is a very peculiar method to get rich.

(3) The capitalist class, finally, sells "to the idle capitalists, whom they pay with a portion of their revenue which they have not spent for the wages of the laborers employed by them directly; so that the entire rent, which they pay them annually, flows back to them in this way."

We have seen a while ago that the industrial capitalists pay with a portion of their profits "the entire share of their consumption, intended for the satisfaction of their needs." Take it, then, that their profits amount to 200 p. st. And let them consume 100 p. st. of this in their individual consumption. But the other half, or 100 p. st., does not belong to them. It belongs to the "idle" capitalists, that is to say, to those who take ground rent and lend money on interest. In other words, they have to pay 100 p. st. to this gentry. Let us assume that this gentry use 80 p. st. for their individual consumption, and 20 p. st. for the purchase of servants, etc. They buy with those 80 p. st. articles of consumption from the industrial capitalists. These capitalists, then give up commodities valued at 80 p. st. and receive in return 80 p. st. in money, or four fifths of the 100 p. st. paid by them to the idle capitalists under the name of rent, interest, etc. The servant class, who are the wage workers directly in attendance upon the idle capitalists, have received 20 p. st. from their masters. These servants likewise buy articles of consumption from the industrial capitalists to the amount of 20 p. st. In this way these capitalists recover also the last 20 p. st., or the last fifth, of the 100 p. st., which they have paid to the idle capitalists for rent, interest, etc., while they give up in return commodities valued at 20 p. st.

At the close of this transaction the industrial capitalists have recovered the full 100 p. st., which they paid to the idle capitalists for rent, interest, etc., in money. But one half of their surplus products, valued at 100 p. st., have passed from their hands into the fund for the individual consumption of the idle capitalists.

It is evidently immaterial for the present question, whether the division of the 100 p. st. among the idle capitalists and their dependent wage workers is drawn into this discussion or not. The matter is simple: Their rent, interest, in short, their share in the surplus-value of 200 p. st., is paid to them by the industrial capitalists in money to the amount of 100 p. st. With these 100 p. st. they buy directly or indirectly articles of consumption from the industrial capitalists. They return the 100 p. st. in money to them and take from them instead articles of consumption valued at 100 p. st.

This completes the reflux of the 100 p. st. paid by the industrial capitalists to the idle capitalists. Is this transaction a means of making the industrial capitalists any richer, as Destutt imagines? Before this transaction they had values amounting to 200 p. st., 100 being money and 100 articles of consumption. After the transaction they have only one half of the original amount of values. They have once more 100 p. st. in money, but they have lost the articles of consumption valued at 100 p. st., which have passed into the possession of the idle capitalists. In other words, they have become poorer to the extent of 100 p. st., instead of being richer. If, instead of first choosing the circuitous route of paying out 100 p. st. in money, and then receiving this money back in payment for articles of consumption valued at 100 p. st., they had paid rent, interest, etc., directly in the natural form of commodities, then they would not recover any 100 p. st. in money, because they did not throw that amount of money into the circulation. In the case of a payment in commodities, the transaction would simply have been confined to keeping one-half of the surplus product of 200 p. st. for themselves and giving the other half to the idle capitalists without receiving any equivalent in return. Even Destutt would not have been able to consider this a means of getting richer.

Of course, the land and capital borrowed by the industrial capitalists from the idle capitalists and paid for by a portion of their surplus-value in the form of ground rent and interest, etc., are profitable for them, for they constitute one of the conditions for the production of any commodity, and more especially of that portion of the product, which creates surplus-value, or in which surplus-value is incorporated. This profit flows from the use of the borrowed land and capital, not out of the price paid for them. This price rather constitutes a deduction from the profit. Or one would have to contend, that the industrial capitalists do not get richer, but poorer, if they are enabled to keep the other half of their surplus-value, instead of being compelled to give it up. This is the confusion which results from the indiscriminate mixing up of such phenomena of circulation as a reflux of money with the distribution of the product, which is merely promoted by this circulation.

And yet the same Destutt is so sharp as to remark: "Whence come the revenues of these idle people? Do they not come out of the rent paid by them out of the profits of those who put the capitals of the former to work, that is to say, who pay with the funds of the former a certain kind of labor which produces more than it costs, in other words, the profits of the industrial capitalists? It is always necessary to revert to them, in order to find the source of wealth. It is they who in reality feed the wage workers employed by the idle capitalists." (Page 246).

In other words, in this quotation the rent, etc., of the idle capitalists is a deduction from the profit of the industrial capitalists. In former quotations it was a means of enriching them.

But at least one consolation is left for our friend Destutt. These good industrials treat the idle capitalists in the same way that they have treated one another and their laborers. They sell them all commodities too dearly, for instance, at a raise of 20%. Now there are two possibilities. The idle capitalists either have other funds of money aside from the 100 p. st. which they receive from the industrials, or they have not. In the first case, the industrials sell them commodities valued at 100 p. st. at a price of, say, 120 p. st. In other words, they recover by the sale of their commodities not only the 100 p. st. paid to the idle capitalists, but also 20 p. st. of new values. Now, how stands the account? They have given away 100 p. st. in commodities for nothing, for the 100 p. st. that paid for their commodities were their own money. Their own commodities have been paid with their own money. In other words, they have lost 100 p. st. But they have also received an additional sum of 20 p. st. in the price of their commodities. In other words, 20 p. st. of gain. Balance this against the loss of 100 p. st., and you still have a loss of 80 p. st. Never a plus, always a minus. The advantage taken by the industrials over the idle capitalists has reduced the loss of the industrials, but for all that it has not transformed a reduction of their wealth into an increase of wealth. But this method cannot go on indefinitely, for the idle capitalists cannot pay year after year 120 p. st., if they receive only 100 p. st.

There remains the other possibility. The industrials sell commodities valued at 80 p. st. in exchange for the 100 p. st. paid to the idle capitalists. In this case, they still give away 80 p. st. for nothing, in the form of rent, interest, etc. By means of cheating the industrials have reduced their tribute to the idlers, but it nevertheless is exacted from them the same as ever, and the idlers are enabled, on the same theory, assuming the prices to depend on the free will of the sellers, to demand in the future 120 p. st. instead of 100 p. st. as rent and interest on their land and capital.

This brilliant analysis is quite worthy of that depth of thought which copies on the one hand from Adam Smith that "labor is the source of all wealth" (page 242), that the industrial capitalists "employ their capital for the payment of labor that reproduces it with a profit" (page 246), and which concludes on the other hand that these industrial capitalists "maintain all the other people, are the only ones who increase the public wealth, and create all the means for our enjoyment" (page 242), that it is not the capitalists who are maintained by the laborers, but the laborers who are maintained by the capitalists, for the brilliant reason that the money, with which the laborers are paid, does not remain in their hands, but continually returns to the capitalists in payment of the commodities produced by the laborers. "They receive only with one hand, and return with the other. Their consumption must therefore be regarded as being due to those who pay their wages." (Page 235).

After this exhaustive analysis of social reproduction and consumption, as promoted by the circulation of money, Destutt continues: "This is what perfects this perpetuum mobile of wealth, this movement which,-though ill understood" (I should say so!) "yet has justly been named circulation. For it is indeed a circulation and always returns to its point of departure. This is the point where production is accomplished." (Pages 139, 140.)

Destutt, that very distinguished writer, membre de l'Institut de France et de la Sociéte Philosophique de Philadelphie, and indeed to a certain extent a beacon light among the vulgar economists, finally requests his readers to admire the wonderful lucidity with which he has presented to them the course of the social process, the flood of light which he has poured over the matter, and he is condescending enough to communicate to his readers, where all this light comes from. This must be read in the original in order to be appreciated.

"On remarquera, j'espere, combien cette maniere de considérer la consommation de nos richesses est corcordante avec tout ce que nous avons dit a propos de leur production et de leur distribution, et en meme temps quelle clarté elle répand sur toute la marche de la société. D'ou viennent cet accord et cette lucidité? De ce que nous avons rencontré la vérité. Cela rappelle I' effet de ces miroirs ou les objets se peignent nettement et dans leurs justes proportions, quand on est placé dans leur vrai point-de-vue, et ou tout parait confus et desuni, quand on est trop près ou trop loin." (Pages 242, 243). (It will be noted, I hope, how much this manner of viewing the consummation of our wealth is in accord with all we have said concerning its production and distribution, and also how much light it throws on the entire course of society. Whence come this accord and this lucidity? It is due to the fact that we have met truth face to face. This recalls the effect of those mirrors, in which the objects are reflected clearly and in their true proportions, when we are placed in their correct focus, but in which everything appears confused and distorted, when we are too close or too far away from them).

There you have the bourgeois idiocy in all its beatitude!

CHAPTER XXI.57
ACCUMULATION AND REPRODUCTION ON AN ENLARGED SCALE.

It has been shown in Volume I, how accumulation works in the case of the individual capitalist. By the conversion of the commodity-capital into money, the surplus-product, in which the surplus-value is incorporated, is also monetized. The capitalist reconverts the surplus-value thus monetized into additional natural elements of his productive capital. In the next cycle of production the increased capital furnishes an increased product. But what happens in the case of the individual capital, must also show in the annual reproduction of society as a whole, just as we have seen it done in the case of reproduction on a simple scale, where the successive precipitation of the depreciated elements of fixed capitals in the form of money, accumulated as a hoard, also makes itself felt in the annual reproduction of society.

If a certain individual capital amounts to 400 c + 100 v, with an annual surplus-value of 100 s, then the product in commodities amounts to 400 c + 100 v + 100 s. This amount of 600 is converted into money. Of this money, again, 400 c are converted into the natural form of constant capital, 100 v into labor-power, and—provided that the entire surplus-value is accumulated—100 s are converted into additional constant capital by their transformation into natural elements of productive capital. The following assumptions go with this case: (1) That this amount is sufficient under the given technical conditions either to expand the existing constant capital, or to establish a new industrial business. But it may also happen that surplus-value must be converted into money and this money hoarded for a much longer time, before these steps may be taken, before actual accumulation, or expansion of production, can take place. (2) It is furthermore assumed that production on an enlarged scale has actually been in process previously. For in order that the money (the surplus-value hoarded as money) may be converted into elements of productive capital, these elements must be available on the market as commodities. It makes no difference whether they are bought as finished products, or made to order. They are not paid for until they are finished, and at any rate, until actual reproduction on an enlarged scale, an expansion of hitherto normal production, has taken place so far as they are concerned. They had to be present potentially, that is to say, in their elements, for it required only an impulse in the form of an order, that is to say, a purchase preceding their actual existence and anticipating their sale, in order to stimulate their production. The money on one side in that case calls forth expanded reproduction on the other, because the possibility for it exists without the money. For money in itself is not an element of actual reproduction.

For instance, capitalist A, who sells during one year, or during a number of successive years, certain quantities of commodities produced by him, thereby converts that portion of the commodities, which bears surplus-value, the surplus-product, or, in other words, the surplus-value produced by himself, successively into money, accumulates it gradually, and thus makes for himself a new potential money-capital. It is potential money-capital on account of its capacity and destination of being converted into the elements of productive capital. But practically he merely accumulates a simple hoard; which is not an element of actual production. His activity for the time being consists only in withdrawing circulating money out of circulation. Of course, it is not impossible that the circulating money thus laid away by him was itself, before it entered into circulation, a portion of some other hoard. This hoard of A, which is potentially a new money-capital, is not an addition to the social wealth, any more than it would be if it were spent in articles of consumption. But money, when withdrawn from circulation, having previously circulated, may have been held somewhere as a hoard, or may have been the money-form of wages, may have monetized means of production or other commodities, may have circulated portions of constant capital or of the revenue of some capitalist. It is no more new wealth than money, considered from the standpoint of the simple circulation of commodities, is the bearer, not only of its simple value, but also of its tenfold value, because it may have been turned over ten times a day and realized ten different values of commodities. The commodities exist without it, and it remains what it is (or becomes even less by depreciation) whether in one turn-over or in ten. Only in the production of gold—to the extent that the output of gold contains a surplus-product and is the bearer of surplus-value—is new value created (potential money), and the new output of gold increases the money-material of potential new money-capitals only to the extent that it enters entirely into the circulation.

Although the surplus-value hoarded in the form of money is not an addition to the social wealth, it represents an addition to the potential money-capital, on account of the function for which it is hoarded. (We shall see later that new money-capital may arise in still another way than by the gradual monetization of surplus-value.)

Money is withdrawn from circulation and accumulated as a hoard by the sale of commodities without a subsequent purchase. If this operation is conceived as one taking place universally, then it seems inexplicable where the buyers are to come from, since in that case everybody would want to sell in order to hoard, and none would want to buy. And it must be so conceived, since every individual capital may be in process of accumulation.

If we were to conceive of the process of circulation as one taking place in a straight line between the various divisions of annual reproduction—which would be incorrect, as it consists with a few exceptions of mutually retroactive movements—then we should have to start out from the producer of gold (or silver) who buys without selling, and to assume that all others sell to them. In that case the entire social surplus-product of the current year would pass into his hands, representing the entire surplus-value of the year, and all the other capitalists would distribute among themselves their relative shares in his surplus-product, which consists naturally of money, gold being the natural form of his surplus-value. For that portion of the product of the gold producer, which has to make good his active capital, is already tied up and disposed of. The surplus-value of the gold producer, in the form of gold, would then be the only fund from which all other capitalists would have to derive the material for the conversion of their annual surplus-product into gold. The magnitude of its value would then have to be equal to the entire annual surplus-value of society, which must first assume the guise of a hoard. Absurd as this assumption would be, it would accomplish nothing more than to explain the possibility of a universal formation of a hoard at the same period. It would not further reproduction itself, except on the part of the gold producer, one single step.

Before we solve this seeming difficulty, we must distinguish between the accumulation in department I (production of means of production) and in department II (production of articles of consumption). We start out from I.

I. ACCUMULATION IN DEPARTMENT I.

(1). The Formation of a Hoard.

It is evident that both the investments of capital in the numerous lines of industry constituting department I, and the different individual investments of capital within each of these lines of industry, according to their age, that is to say, the space of time during which they have served, quite aside from their volume, technical conditions, market conditions, etc., must be in different stages of the process of successive transformation from surplus-value into potential money-capital. It is immaterial whether this money-capital is to serve for the expansion of the active capital, or for the establishment of new industrial enterprises, which constitute the two forms of expansion of production. One portion of the capitalists, then, is continually converting its potential capital, when grown to a sufficient size, into productive capital, that is to say, they buy with the money hoarded by the monetization of surplus-value means of production, additional elements of constant capital. Another portion of the capitalists is meanwhile still engaged in accumulating potential money-capital. Capitalists belonging to these two categories meet as buyers and sellers, each one of them exclusively in one of these roles.

For instance, let A sell 600, representing 400 c + 100 v + 100 s, to B, who may represent more than one buyer. A sells 600 in commodities for 600 in money, of which 100 are surplus-value which he withdraws from circulation and hoards in the form of money. But these 100 in money are but the money-form of the surplus-product in which a value of 100 was incorporated. The formation of a hoard, then, is not a production, nor is it an increment of production. The action of the capitalist consists merely in withdrawing from circulation 100 obtained by the sale of his surplus-product, in holding and hoarding this amount. This operation is carried on, not alone on the part of A, but at numerous points of the periphery of circulation by other capitalists, named A', A'', A''', all of whom work busily at this sort of accumulation. These numerous points at which money is withdrawn from circulation and accumulated in numerous individual hoards appear as so many obstacles of circulation, because they stop the movement of money and deprive it of its capacity to circulate for a certain length of time. But it must be remembered that hoarding takes place in the simple circulation of commodities long before it is based on the capitalist mode of production. The quantity of money existing in society is always greater than the amount in actual circulation, although this varies according to circumstances. We meet the same hoards, and the same accumulation of hoards, at this stage, but now it is a factor immanent in the capitalist process of production.

One can understand the pleasure felt by some men when all these potential capitals, by their concentration in the hands of bankers, etc., by means of the credit system, become disposable, "loanable capital," money-capital, which is no longer merely passive and a dream of the future, but active usury-capital, self-expanding capital.

However, A accomplishes the formation of a hoard only to the extent that he acts as a seller, so far as his surplus-product is concerned, not as a buyer. His successive production of surplus-products, the bearers of his surplus-value convertible into money, is therefore a promise for the formation of his hoard. In the present case, where we are dealing only with the circulation within department I, the natural form of the surplus-product, and of the total product of which it is a part, is that of an element of constant capital of I, that is to say, it belongs to the category of a means of production creating means of production. We shall see presently what becomes of it, what function it performs, in the hands of the buyers such as B, B', B'', etc.

It must be particularly noted at this point that A, while withdrawing money from circulation and hoarding it, on the other hand throws commodities into it without withdrawing other commodities in return. The capitalists B, B', B'', etc., are thereby enabled to throw only money into it and withdraw only commodities from it. In the present case, these commodities, according to their natural form and destination, become a fixed or circulating element of the constant capital of B, B', etc. We shall hear more about this anon, when we shall deal with the buyer of the surplus-product, with B, B', etc.

We remark by the way: Once more we find here, as we did in the case of simple reproduction, that the disposal of the various elements of annual reproduction, that is to say, their circulation which must comprise the reproduction of the capital to the point of replacing its various elements, such as constant, variable, fixed, circulating, money and commodity-capital, is not conditioned on the mere purchase of commodities followed by a corresponding sale, or a mere sale followed by a corresponding purchase, so that there would actually be a bare exchange of commodity for commodity, as the political economists assume, especially the free trade school from the time of the physiocrats and Adam Smith. We know that the fixed capital, once that its investment is made, is not replaced during the entire period of its function, but serves in its old form, until its value is gradually precipitated in the form of money. Now we have seen that the periodical renewal of the fixed capital of IIc [the entire value of the capital of IIc being converted into elements of I valued at (v + s)] pre-supposes on the one hand the mere purchase of the fixed portion of IIc, which is reconverted from the form of money into its natural form, and to which corresponds the mere sale of Is; and presupposes on the other hand the mere sale on the part of IIc, the sale of its fixed (depreciating) value, which is precipitated in money and to which corresponds the mere purchase of I s. In order that the transaction may take place normally in this case, it must be assumed that the mere purchase on the part of II c is equal in value to the mere sale on the part of II c, and that in the same way the mere sale of I s to IIc, section 1, is equal in value to the mere purchase from department IIc, section 2. Otherwise simple reproduction is interrupted. The mere sale on one side must be offset by a mere purchase on the other. It must likewise be assumed that the mere sale of that portion of I s, which forms the hoards of A, A', A'' is balanced by the mere purchase of that portion of I s, which converts the hoards of B, B', B'', into elements of additional productive capital.

So far as the balance is restored by the fact that the buyer acts later on as a seller to the same amount, and vice versa, the money returns to the side that has advanced it in the first place, which sold first before it bought again. But the actual balance, so far as the exchange of commodities itself is concerned, that it to say, the disposal of the various portions of the annual product, is conditioned on the equal value of the commodities exchanged for one another.

But to the extent that only one-sided exchanges are made, a number of mere purchases on one hand, a number of mere sales on the other—and we have seen that the normal disposal of the annual product on the basis of capitalist production requires such onesided metamorphoses—the balance can be maintained only on the assumption that the value of the onesided purchases and onesided sales is the same. The fact that the production of commodities is the general form of capitalist production implies the role which money is playing not only as a medium of circulation, but also as money-capital, and creates conditions peculiar for the normal transaction of exchange under this mode of production, and therefore peculiar for the normal course of reproduction, whether it be on a simple, or on an expanded scale. These conditions become so many causes of abnormal movements, implying the possibility of crises, since a balance is an accident under the crude conditions of this production.

We have also seen that there is indeed, in the exchange of I v for a corresponding value of II c, an ultimate renewal of the value of the commodities of II by an equivalent value of commodities of I, so that the sale of the commodities of the aggregate capitalist of II is balanced subsequently by the purchase of commodities from I to the same amount. This restitution takes place. But it is not an exchange which takes place between the capitalists of I and II in the disposal of their relative commodities. II c sells its commodities to the working class of I. This class meets it one-sidedly in the role of a buyer of commodities, and it meets that class onesidedly as a seller of commodities. With the money so obtained II c meets the aggregate capitalist of I onesidedly as a buyer of commodities, and the aggregate capitalist of I meets it onesidedly as a seller of commodities to the extent of I v. It is only by means of this sale of commodities that department I finally reproduces its variable capital in the form of money-capital. Just as one-sidedly as the capitalist class of I faces that of II in the role of a seller of commodities to the extent of I v, so does that class face its working class in the role of a buyer of commodities, a buyer of labor-power. And just as one-sidedly as that working class faces the capitalists of II in the role of a buyer of commodities (namely of articles of consumption), so it faces the capitalists of I as a seller of commodities, namely, a seller of its labor-power.

The continual offer of labor-power on the part of the working class of I, the reconversion of a portion of the commodity-capital of I into the money-form of variable capital, the renewal of a portion of the commodity-capital of II by natural elements of the constant capital of II c—all these are necessary premises dovetailing into one another, but they are promoted by a very complicated process including three processes of circulation which occur independently of one another, but intermingle. The complicatedness of this process presents so many opportunities for abnormal deviations.

(2). The Additional Constant Capital.

The surplus-product, the bearer of surplus-value, does not cost its appropriators, the capitalists of I, anything. They are in no way obliged to advance any money or commodities in order to secure it. An advance means even in the writings of the physiocrats the general form of value materialized in elements of productive capital. Hence what they advance is nothing but their constant and variable capital. The laborer preserves by his labor not only their constant capital; he reproduces not only the value of their variable capital by creating corresponding qualities of new values; he supplies them also by his surplus-labor with surplus-values in the form of surplus-products. By the successive sale of this surplus-product, they accumulate a hoard, additional potential money-capital. In the present case, this surplus-product consists at the outset of means of production used in the creation of means of production. It is not until it reaches the hands of B, B', B'', etc. (I), that this surplus-product serves as additional constant capital. But it is virtually that even in the hands of the accumulators of hoards, the capitalists A, A', A'', (I), before it is sold. If we consider merely the volume of values of the reproduction on the part of I, then we are still moving within the limits of simple reproduction, for no additional capital has been set in motion for the purpose of creating this virtual additional constant capital (the surplus-product), nor has any greater amount of surplus-labor been performed than that done on the basis of simple reproduction. The difference is here only one of the form of the surplus-labor performed, of the concrete nature of its particularly useful service. It is expended in means of production for department I c instead of II c, in means of production of means of production instead of means of production of articles of consumption. In the case of simple reproduction it had been assumed that the entire surplus-value was spent as revenue in commodities of II. Hence it consisted only of such means of production as restore the constant capital of II c in its natural form. In order that the transition from simple to expanded reproduction may take place, the production in department I must be enabled to create fewer elements for the constant capital of II and more for that of I. This transition, which will not always take place without difficulties, is facilitated by the fact that some of the products of I may serve as means of production in either department.

Considering the matter merely from the point of view of the volume of values, it follows, then, that the material requirements of expanded reproduction are produced within simple reproduction. It is simply a question of the expenditure of the surplus-labor of the working class of I for the production of means of production, the creation of virtual additional capital of I. The virtual additional money-capital, created on the part of A, A', A'', by the successive sale of their surplus-product, which was formed without any capitalist expenditure of money, is in this case simply the money-form of the additional means of production made by I.

The production of virtual additional capital expresses in our case (we shall see that it may also be formed in a different way) merely the fact that it is a phenomenon of the process of production itself, the production of elements of productive capital in a particular form.

The production of virtual additional money-capital on a large scale, at numerous points of the periphery of circulation, is therefore but a result and expression of a multifarious production of virtual additional productive capital, whose rise does not itself require any additional expenditure of money on the part of the industrial capitalists.

The successive transformation of this virtual additional productive capital into virtual money-capital (hoard) on the part of A, A', A'', etc., (I), conditioned on the successive sale of their surplus-product, which is a repeated onesided sale without a compensating purchase, is accomplished by a repeated withdrawal of money from circulation and a corresponding formation of a hoard. This hoarding, except in the case of buyers who are gold producers, does not in any way imply an addition to the wealth in precious metals, but only a change of function on the part of money previously circulating. A while ago it served as a medium of circulation, now it serves as a hoard, as a virtual additional money-capital in process of formation. In other words, the formation of additional money-capital and the volume of the precious metals existing in a certain country are not directly connected facts.

Hence it follows furthermore: The greater the productive capital already serving in a certain country (including the labor-power incorporated in it as the producer of the surplus-product), the more developed the productive power of labor and at the same time the technical appliances for the rapid extension of the production of means of production, the greater furthermore the quantity of the surplus-product both as to value and mass, so much greater is

(1) The virtual additional productive capital in the form of a surplus-product in the hands of A, A', A'', etc., and

(2) The mass of this surplus-product transformed into money, in other words, the virtual additional money-capital in the hands of A, A', A''. The fact that Fullerton, for instance, will have nothing to do with any overproduction in the ordinary meaning of the term, but only with the overproduction of capital, meaning money-capital, shows how pitifully little even the best bourgeois economists understand of the mechanism of their own system.

While the surplus-product, directly produced and appropriated by the capitalists A, A', A'' (I), is the actual basis of the accumulation of capital, that is to say, of expanded reproduction, although it does not actually serve in this capacity until it reaches the hands of the capitalists B, B', B'', etc. (I), it is quite unproductive in its chrysalis stage of money, of a hoard representing virtual money-capital in process of formation. It runs parallel with the process of production, but moves outside of it. It is a dead weight of capitalist production. The desire to utilize this surplus-value, while accumulating as virtual money-capital, for the purpose of deriving profits or revenue from it, finds in the credit system and paper securities its consummation. Money-capital thereby gains in another form an enormous influence on the course and the stupendous development of the capitalist system of production.

The surplus-product converted into virtual money-capital will grow so much more in volume, the greater the aggregate amount of capital actually engaged which produced it by its function. With the absolute increase of the volume of the annually reproduced virtual money-capital its segmentation also becomes easier, so that it is more rapidly invested in a certain business, either in the hands of the same capitalist or in those of others (for instance members of the family, in the case of a division of inheritances, etc.). By segmentation of money-capital I mean in this case that it is wholly detached from the parent capital in order to be invested as a new money capital in a new and independent business.

While the sellers of the surplus-product, A, A', A'', etc., (I), have obtained it as a direct outcome of the process of production, which does not require any additional act of circulation aside from the advance of constant and variable capital made even in simple reproduction; and while they thereby construct the real basis for a reproduction on an expanded scale, seeing that they manufacture virtually additional capital—the attitude of B, B', B''," etc., (I), is different. (1) The surplus-product of A, A', A'', etc., does not actually serve as additional constant capital until it reaches the hands of B, B', B'', etc. (We leave out of consideration for the present the other elements of productive capital, the additional labor-power, in other words, the additional variable capital). (2) In order that the surplus-product may reach their hands, they must buy it.

In regard to point 1, it may be noted that a large portion of the surplus-product (virtual additional constant capital) is produced by A, A', A'', (I), in the course of the current year, but may not serve as industrial capital in the hands of B, B', B'', (I), until next year, or still later. With reference to point 2, the question is: Whence comes the money required for the process of circulation?

To the extent that the products created by B, B', B'', etc., (I), re-enter in their natural form into their own process, it goes without saying that a corresponding portion of their own surplus-product is transferred directly (without any intervention of circulation) to their productive capital and becomes an element of additional constant capital. To the same extent they do not help to convert any surplus-product of A, A', A'', etc., (I), into money. Aside from this where does the money come from? We know that they have formed their hoard in the same way as A, A', etc., by the sale of their respective surplus-products. Now they have arrived at the point where their accumulated hoard of virtual money-capital is to enter effectually upon its function as additional money-capital. But this is merely turning around in a circle. The question still remains: Where does the money come from, which the various B's (1) withdrew from the circulation and accumulated?

Now we know from the analysis of simple reproduction, that the capitalists of I and II must have a certain amount of ready money in their hands, in order to be able to dispose of their surplus-products. In that case, the money which served only for the spending of revenue in articles of consumption returned to the capitalists in the same measure in which they advanced it for the purpose of disposing of their commodities. Here the same money re-appears, but in a different function. The A's and B's supply one another alternately with the money for converting their surplus-product into virtual additional capital, and throw the newly formed money-capital alternately into circulation as a medium of purchase.

The only assumption made in this case is that the amount of money existing in a certain country (the velocity of circulation, etc., being the same) suffices for both the active circulation and the reserve hoard. It is the same assumption which had to be made in the case of the simple circulation of commodities, as we have seen. Only the function of the hoards is different in the present case. Furthermore, the existing amount of money must be larger, first, because all the products (with the exception of the newly produced precious metals and the few products consumed by the producer himself) are produced as commodities under capitalist production and must, therefore, pass through the stage of money; secondly, because on a capitalist basis the quantity of the commodity-capital and the volume of its value is not only absolutely greater, but also grows with much greater rapidity; thirdly, an ever more voluminous variable capital must be converted into money-capital; fourthly, with the extension of production, the formation of new money-capital keeps step, so that the material for it must be available in the form of a hoard.

While this is a common truism for the first phase of capitalist production, in which even the credit system is accompanied by a prevalence of metallic circulation, it applies even to the most developed phase of the credit system to the extent that metallic circulation remains its basis. On the one hand, the additional production of precious metals may exert a disturbing influence on the prices of commodities according to whether it is abundant or scarce, not only in long, but also in very short intervals. On the other hand, the entire mechanism of credit is continually occupied in reducing the actual metallic circulation to a relatively more and more decreasing minimum by means of sundry operations, methods, and technical devices. To the same extent are the artificiality of the entire mechanism and the possibility of disturbing its normal flow increased.

It may be that the different B, B', B'', etc., (I), whose virtual new capital enters upon its active function, are compelled to buy from one another their product (portions of their surplus-product) or to sell it to one another. In that case the money advanced by them for the circulation of their surplus-product flows back under normal conditions to the different B's in the same proportion in which they advanced it for the circulation of their respective commodities. If the money circulates as a medium of payment, then only balances are to be paid so far as the alternate purchases and sales do not cover one another. But it is important to assume here, as everywhere, metallic circulation in its simplest form, because then the flux and reflux, the balancing of accounts, in short all elements appearing as consciously directed processes under the credit system, appear as forms independent of the credit system, show themselves in their primitive form instead of their later, reflected, one.

(3). The Additional Variable Capital.

Hitherto we have been dealing only with additional constant capital. Now we must direct our attention to a consideration of the additional variable capital.

We have explained at great length in volume I that labor-power is always held available under the capitalist system of production, and that more labor can be set in motion, if necessary, without increasing the number of laborers, or quantity of labor-power, employed. We need not detail this any further for the present, but assume without ceremony that the portion of the newly created money-capital which is to be converted into variable capital will always find as much labor-power as it cares to transform. It has also been explained in volume I that a certain capital may expand its volume of production within certain limits without any accumulation. But now we are dealing with the accumulation of capital in the strict meaning of the term, so that the expansion of production is conditioned on the conversion of surplus-value into additional capital, and thus on an expansion of the basis of productive capital.

The gold producer can accumulate a portion of his golden surplus-value as a virtual money-capital. As soon as it reaches a sufficient volume, he can transform it directly into new variable capital, without first selling his surplus-product. In the same way he can convert it into the elements of constant capital. But in this last case, he must find the material elements of constant capital at hand. This may be accomplished by having each producer working to stock his supply, as was hitherto assumed, and then bringing his finished product on the market, or by having them work to fill orders. The actual expansion of production, that is to say, the surplus-product, is assumed in either case, in the one case as actually on hand, in the other as virtually available, because ordered.

II. ACCUMULATION IN DEPARTMENT 2.

We have hitherto assumed that the capitalists A, A', A'', etc., (I), sell their surplus-product to the capitalists B, B', B'', etc., who belong to the same department. But take it now that A (I) converts his surplus-product into gold by selling it to a capitalist B in department II. This can be done only by the sale of means of production on the part of A (I) to B (II) without a subsequent purchase of articles of consumption, in other words, only by a one-sided sale on A's part. Now we have seen that II c cannot be converted into the natural form of productive constant capital unless not only I v, but also at least a portion of I s, is exchanged for a portion of II c, which II c exists in the form of articles of consumption. But now that A has converted his I s into gold by making this exchange impossible and withdrawing the money obtained from II c out of circulation, instead of spending it for articles of consumption of II c, there is indeed on the part of A (I) a formation of additional virtual money-capital, but on the other hand there is a corresponding portion of the value of the constant capital B (II) held in the form of commodity-capital, unable to transform itself into natural productive constant capital. In other words, a portion of the commodities of B (II), and at that a portion which must be sold if he wishes to reconvert his entire constant capital into its productive form, has become unsaleable. To that extent there is an over production, which clogs reproduction, even on the same scale.

In this case, the additional virtual money-capital on the side of A (I) is indeed a gilded form of surplus-product (surplus-value), but the surplus-product (surplus-value) as such is as yet but a phenomenon of simple reproduction, not of reproduction on an expanded scale. In order that the reproduction of II c may take place on the same scale, I (v + s) must ultimately be exchanged for II c, and this applies at all events to a portion of I s. By the sale of his surplus-product to B (II), A (I) has supplied to B (II) a certain portion of the value of constant capital in its natural form. But at the same time he has rendered an equal portion of the value of the commodities of B (II) unsaleable by withdrawing the money from circulation and not making a compensating purchase. Hence, if we view the entire social reproduction, which comprises both the capitalists of I and II, then the conversion of the surplus-product of A (I) into a virtual money-capital implies the impossibility of reconverting an equal portion of the value of the commodity-capital of B (II) into productive (constant) capital, in other words, not a virtual production on an enlarged scale, but an obstruction of simple reproduction, a deficit in the simple reproduction. As the formation and sale of the surplus-product of A (I) are normal phenomena of simple reproduction, we have here even on the basis of simple reproduction the following mutually interdependent phenomena: The formation of virtual additional money-capital in department I (implying underconsumption in department II); the stagnation of commodities of department II which cannot be reconverted into productive capital (implying a relative overproduction in department II); a surplus of money-capital in department I and a deficit in the reproduction of department II.

Without pausing any longer at this point, we simply repeat that we had assumed in the analysis of simple reproduction that the entire surplus-value of I and II is spent as revenue. As a matter of fact, however, one portion of the surplus-value is spent as revenue, and another is converted into capital. Actual accumulation can take place only on this condition. That accumulation should take place at the expense of consumption, is, as a general assumption, an illusion contradicting the nature of capitalist production. For it takes for granted that the aim and compelling motive of capitalist production is consumption, instead of the gain of surplus-value and its capitalization, in other words, accumulation.

Let us now take a closer look at the accumulation in department II.

The first difficulty with reference to II c, that is to say the conversion of an element of the commodity-capital of II into the natural form of constant capital of II, concerns simple reproduction.

Let us take the formula previously used.

(1000 v + 1000 s) I are exchanged for 2000 II c.

Now, if one half of the surplus-product of I, or 500 s, is reincorporated in department I as constant capital, then this portion, being detained in department I, cannot take the place of any portion of II c. Instead of being converted into articles of consumption, it is made to serve as an additional means of production in department I itself (and it must be noted that in this section of the circulation between I and II the exchange is actually mutual, consisting of a double change of position, different from the substitution of 1000 I v for 1000 II c by the laborers of I). It cannot perform this function simultaneously in I and II. The capitalist cannot spend the value of his surplus-product for articles of consumption, and at the same time consume the surplus-product itself productively, by incorporating it in his productive capital. Instead of 2000 I(v + s), only 1500 are exchangeable for 2000 II c, namely 1000 v + 500 s of I. But 500 I c cannot be reconverted from the form of commodities into productive constant capital of II. Hence there would be an overproduction in department II, equal in volume to the expansion of production in department I. This overproduction of II might react to such an extent on department I that even the reflux of the 1000 v spent by the laborers of I for articles of consumption of II might take place but partially, so that these 1000 would not return to the hands of the capitalists of I in the form of variable money-capital. In that case, these capitalists would be hampered even in reproduction on a simple scale by the mere attempt of expanding it. And it must be remembered in this connection that department I had actually resumed only simple reproduction, and that only the elements classified in our diagram were differently grouped with a view of expanding in the future, say, next year.

One might attempt to circumvent this difficulty in the following way: The 500 II c which are held by the capitalists, and cannot be immediately converted into productive capital, do not by any means represent any overproduction, but are, on the contrary, a necessary element of reproduction, which we have so far neglected. We have seen that a money supply must be accumulated at many points by withdrawing it from circulation, either for the purpose of facilitating the formation of new money-capital in department I, or to the end of temporarily holding the gradually depreciating portion of the fixed capital in the form of money. But since we have placed all the available money and commodities exclusively into the hands of the capitalists of I and II, when we made up our diagram, eliminating merchants, money-changers, and bankers, and all merely consuming and not directly producing classes, it follows that the formation of supplies of commodities in the hands of their respective producers is here indispensable in order to keep the machinery of reproduction in motion. The 500 II c now held in stock by the capitalists of II therefore represent the supply of articles of consumption by which the continuity of the process of consumption included in the process of reproduction is promoted. This means in the present case the transition from this year into next. The fund for consumption, which is as yet in the hands of its sellers and producers cannot fall to the point of zero and begin with zero next year, any more than such a thing can take place in the transition from to-day to to-morrow. Since new supplies of commodities must be continually accumulated, even though their volume may differ, our capitalist producers of department II must have a reserve capital, which enables them to continue their process of production, although one portion of their productive capital is temporarily tied up in the shape of commodities. Our assumption is all the time that they combine the business of a merchant with that of a producer. Hence they must also have at their disposal an additional money-capital, which would be in the hands of merchants, if the various functions in the process of reproduction were distributed among independent capitalists.

But we would reply to this argument: (1) That the forming of such supplies and the necessity for it applies to all capitalists, those of I as well as of II. Considering them in their capacity as sellers of commodities, they differ only by the fact that they sell different kinds of commodities. A supply of commodities of II implies a previous supply of commodities of I. If we neglect this supply on one side, we must also do so on the other. But if we count them in on both sides, the problem is not altered in any way. (2) Just as this year closes on the side of II with a supply of commodities for next year, so it was opened by a supply of commodities on the same side, taken over from last year. In the analysis of annual reproduction, reduced to its abstract form, we must therefore strike it out at both ends. By leaving this year in possession of its entire production, including the supply held for next year, we take from it the supply of commodities transferred from last year, and thus we have actually to deal with the aggregate product of an average year as the object of our analysis. (3) The simple circumstance that the difficulty which must be overcome did not show itself in the analysis of simple reproduction proves that it is a specific phenomenon due merely to the different arrangement of the elements of department I with a view to reproduction, an arrangement without which reproduction on an expanded scale cannot take place at all.

III. DIAGRAMMATIC PRESENTATION OF ACCUMULATION.

We now study reproduction by means of the following diagram:

We note in the first place that the total volume of the annual product is smaller than that of the first diagram, being 8252 instead of 9000. We might just as well assume a much larger sum, for instance one ten times larger. We have chosen a smaller sum than in our first diagram, in order to demonstrate, that reproduction on an enlarged scale (which is here regarded merely as a production carried on with a larger investment of capital) has nothing to do with the absolute volume of the product, and that it implies merely a different arrangement, a different distribution of functions to the various elements of a certain product, so that it is but a simple reproduction so far as the value of the product is concerned. It is not the quantity, but the destination of the given elements of simple reproduction which is changed, and this change is the material basis of a subsequent reproduction on an enlarged scale.58

We might vary the diagram by changing the proportions between the variable and constant capital. For instance this way:

In this case, the diagram would be arranged for reproduction on a simple scale, so that the surplus-value would be entirely consumed as revenue, instead of being accumulated. In either case, that of (a) as well as (b), we have an annual product of the same value. Only (b) has the functions of its elements arranged in such a way that reproduction is resumed on the same scale, while in the case of (a) the arrangement forms the material basis of reproduction on an enlarged scale. For in the case of (b), the factors (875 v + 875 s)I, equal to 1750 I(v + s), are exchanged without any remainder for 1750 II c, while in the case of (a), the exchange of (1000 v + 1000 s)I, equal to 2000 (v + s)I, for 1500 II c leaves a surplus of 500 I s for accumulation in department I.

Now let us analyze diagram (a) closer. Let us assume that both I and II accumulate one half of their surplus-value, that is to say, convert it into an additional element of capital instead of spending it as revenue. When one half of 1000 I s, or 500, are accumulated in one form or another, that is to say, invested as additional money-capital, converted into additional productive capital, then only (1000 v + 500 s) I are spent as revenue. Hence 1500 is here inserted as the normal size of II c. We need not examine the exchange between 1500 I(v + s) and 1500 II c any more, because this has already been done under the head of simple reproduction. Nor does 4000 I c require any attention, since its re-arrangement was likewise discussed under the head of simple reproduction, although this re-arrangement is now preparing for a new reproduction on an enlarged scale.

The only thing which remains for us to examine is 500 I s and (376 v + 376 s)II, both as regards the internal conditions of the two departments and the movements between them. Since we have assumed that department II is likewise accumulating one half of its surplus-value, 188 are to be converted into capital, of which one fourth, or 47, or, to round it off, 48, are variable capital, so that 140 remain to be converted into constant capital.

Here we come across a new problem, whose very existence must appear strange to the current idea that commodities of one kind are exchanged for commodities of another kind, or commodities for money and the same money for commodities of another kind. The 140 II c can be converted into productive capital only by exchanging them for commodities of I s of the same value. It is a matter of course that that portion of I s which must be exchanged for II s must consist of means of production, which may either be fit for service in the production of both I and II, or exclusively adapted to the production of II. This change of place can be made only by means of a onesided purchase on the part of II, as the entire remaining surplus-product of 500 I s, which we shall presently examine, is reserved for accumulation in department I and cannot be exchanged for commodities of II; in other words, it cannot be simultaneously accumulated and consumed by I. Therefore department II must buy 140 I s for cash without recovering this money by a subsequent sale of its commodities to I. And this is a process which is continually repeated in every new annual production, so far as it is reproduction on an enlarged scale. Where does II get the money for this?

It rather seems as though department II were a very unprofitable field for the formation of new money-capital, by means of simple hoarding, which accompanies actual accumulation and is its basis under capitalist production.

We have first 376 II v. The money-capital of 376, advanced for labor-power, returns through the purchase of commodities of II continually as variable capital to the capitalists of II. This continually repeated departure from and return to the starting point, the pocket of the capitalist, does not add in any way to the money moving in this cycle. This, then, is not a source of the accumulation of money. Nor can this money be withdrawn from circulation in order to form a hoard, or virtual new money-capital.

But stop! Isn't there a chance to make a little profit?

We must not forget that class II has the advantage over class I that its laborers must buy back from it the commodities produced by themselves. Department II is a buyer of labor-power and at the same time a seller of the commodities to the owners of the labor-power employed by it. Department II, then, may do two things.

(1) It may depress the wages below its average level, and this privilege it shares with department I. By this means a portion of the money serving in the function of variable capital is released, and if this process is continually repeated, it may become a normal source of hoarding, and thus of virtual additional money-capital in department II. Of course we are not referring to a casual stolen profit here, since we are speaking of a normal formation of capital. But it must not be forgotten that the wages actually paid (which determine the magnitude of the variable capital under normal conditions) do not depend on the benevolence of the capitalists, but must be paid under certain conditions. This does away with this expedient as a source of additional money. If we assume that 376 v is the variable capital at the disposal of department II, we cannot suddenly substitute the hypothesis that the capitalists pay only 350 v instead of 376 v, merely because we are confronted by a new problem.

(2) On the other hand, department II, taken as a whole, has the above mentioned advantage over I that it is at the same time a buyer of labor-power and a seller of commodities to its own laborers. Every industrial country furnishes the most tangible proofs to what extent this may be exploited, by paying nominally the normal wages, but grabbing, or in plain words, stealing back a large portion without a corresponding equivalent in wages; by accomplishing the same thing either through the truck system, or through a falsification of the medium of circulation (perhaps in a way that cannot be punished by law). England and America furnish such instances. (Illustrate this by some striking examples). This is the same operation as under (1), only disguised and carried out by a detour. Therefore it must likewise be rejected as an explanation of the present problem. The question is here of actually paid, not of nominal wages.

We see that some extraordinary disfigurations on the face of capitalism cannot be used in an objective analysis of the mechanism of capitalism as an excuse to get over some theoretical difficulties. But strange to say, the great majority of my bourgeois critics score me as though I had wronged the capitalists by assuming in volume I of this work that they really pay labor-power at its value, a thing which they rarely do! (Here I may exercise some of the magnanimity attributed to me by quoting Schaeffle.)

In short, we cannot accomplish anything with 376 II v for the solution of this question.

But it seems to be still more impossible to do anything with 376 II s. Here the capitalists of the same department are standing face to face, mutually buying and selling their articles of consumption. The money required for these transactions serves only as a medium of circulation and must flow back to the interested parties in the normal course of things, to the extent that they have advanced it to the circulation, in order to pass again and again over the same course.

There seem to be only two ways by which this money can be withdrawn from circulation for the purpose of forming virtual additional money-capital. Either one portion of the capitalists of II cheats the others and thus robs them of their money. We know that no preliminary expansion of the circulating medium is necessary for the formation of new money-capital. All that is necessary is that money should be withdrawn from circulation by certain parties and hoarded. It would not alter the case, if this money were stolen, so that the formation of additional money-capital on the part of a portion of the capitalists of II would be accompanied by a positive loss of money on the part of others. The cheated capitalists would have to live a little less gaily, that would be all.

Or, a certain portion of II s, represented by necessities of life, might be directly converted into new variable capital of department II. How that is done, we shall examine at the close of this chapter (in section IV).

(1) First Illustration.

A. Diagram of Simple Reproduction.

B. Initial Diagram for Accumulation on an Expanded Scale.

Assuming that in diagram B one half of the surplus-value of I, amounting to 500, is accumulated, we have first to accomplish the change of place between (1000 v + 500 s)I, or 1500 I(v + s), and 1500 II c. Department I then keeps 4000 c and 500 s, the last sum being accumulated. The exchange between (1000 v + 1000 s)I and 1500 II c is a process of simple reproduction, which has been examined previously.

Let us now assume that 400 of the 500 I s are to be converted into constant capital, and 100 into variable capital. The transactions within the 400 s of I, which are to be capitalized, have already been discussed. They can be immediately annexed to I c, and in that case we get in department I

4400 c + 1000 v + 100 s (these last to be converted into 100 v).

Department II buys from I for the purpose of accumulation the 100 I s (existing in means of production), which thus become additional constant capital in department II, while the 100 in money, which this department pays for them, are converted into the money-form of the additional variable capital of I. We then have for I a capital of 4400 c + 1100 v (these last in money), a total of 5500.

Department II has now 1600 c for its constant capital. In order to be able to operate this, it must advance 50 v in money for the purchase of new labor-power, so that its variable capital grows from 750 to 800. This expansion of the constant and variable capital of II by a total of 150 is supplied out of its surplus-value. Hence only 600 of the 750 II s remain for the consumption of the capitalists of II, whose annual product is now distributed as follows:

II. 1600 c + 800 v + 600 s (fund for consumption), a total of 3000. The 150 s, produced in articles of consumption, which have been converted into (100 c + 50 v)II, pass entirely into the consumption of the laborers in this form, 100 being consumed by the laborers of I(100 I v), and 50 by the laborers of II(50 II v), as explained above. Department II, where the total product is prepared in a form suitable for accumulation, must indeed reproduce surplus-value in the form of necessary articles of consumption exceeding the other portions by 100. If reproduction really starts on an expanded scale, then the 100 of variable money-capital of I flow back to II through the hands of the laborers of I, while II transfers 100 s in commodities to I and at the same time 50 in commodities to its own laborers.

The change made in the arrangement for the purpose of accumulation now presents the following aspect:

Of these amounts, the following are capital:

while production started out with

Now, if actual accumulation takes place on this basis, that is to say, if reproduction is actually undertaken with this increased capital, we obtain at the end of next year:

Then let department I continue accumulation at the same ratio, so that 550 s are spent as revenue, and 550 s accumulated. In that case, 1100 I v are first replaced by 1100 I c, and 550 I s must be realized in an equal amount of commodities of II, making a total of 1650 I(v + s). But the constant capital of II, which is to be replaced, amounts only to 1600, and the remaining 50 must be made up out of 800 II s. Leaving aside the money aspect of the matter, we have as a result of this transaction:

I. 4400 c + 550 s (to be capitalized); furthermore, realized in commodities of II for the fund for consumption of the capitalists and laborers of I, 1650 (v + s).

II. 1650 c (50 added from II s as indicated above) + 800 v + 750 s (fund for the consumption of the capitalists).

But if the old proportion is maintained in II between v and c, then 25 v additional must be advanced for 50 c, and these must be taken from 750 s. Then we have

II. 1650 c + 825 v + 725 s.

In department I, 550 s must be capitalized. If the former proportion is maintained, 440 of this amount form constant capital, and 110 variable capital. These 110 must be eventually taken out of 725 II s, that is to say, articles of consumption to the value of 110 are consumed by the laborers of I instead of the capitalists of II, so that the latter are compelled to capitalize these 110 s which they cannot consume. This leaves 615 II s of the 725 II s. But if II thus converts these 110 into additional constant capital, it requires an additional variable capital of 55. This again must be taken out of its surplus value. Subtracting this amount from 615 II s, we find that only 560 II s remain for the consumption of the capitalists of II, and we obtain the following values of capital after accomplishing all actual and potential transfers:

If things are to proceed normally, accumulation in II must take place more rapidly than in I, because that portion of I (v + s) which must be converted into commodities of II c, would otherwise grow more rapidly than II c, for which it can alone be exchanged.

If reproduction is continued on this basis and with otherwise unchanged conditions, then we obtain at the end of the following year:

If the rate of division of the surplus-value remains unchanged, then the capitalists of I have first to spend as revenue 1210 v and one-half of s, or 605, a total of 1815. This revenue fund is again larger than II c by 55. These 55 must be taken from 880 s, leaving 825. Furthermore, the conversion of 55 II s into II c implies another deduction from II s for a corresponding variable capital of 27.5, leaving for consumption 797.5 II s.

Department I has now to capitalize 605 s. Of these 484 are constant, and 121 variable capital. The last named sum, deducted from 797.5 II s, leaves 676.5 II s. Department II, then, converts another 121 into constant capital and requires another variable capital of 60.5 for it, which likewise comes out of 676.5 II s, leaving for consumption 616.

Then we have the following capitals:

I. Constant capital : 4840 + 484 = 5324.
Variable capital : 1210 + 121 = 1331.

II. Constant capital : 1760 + 55 + 121 = 1936.
Variable capital : 880 + 27.5 + 60.5 = 968.

And at the end of the year the product is

Repeating the same calculation and rounding off the fractions, we get at the end of the following year the product:

And at the end of the following year:

In the course of four years of reproduction on an expanded scale the aggregate capital of I and II has risen from 5400 c + 1750 v = 7150 to 8784 c + 2782 v = 11,566, in other words at the rate of 100:160. The total surplus-value was originally 1750, it is now 2782. The consumed surplus-value was originally 500 for I and 535 for II, a total of 1035. In the last year it was 732 for I and 985 for II, a total of 1690. It has therefore grown at the rate of 100 : 163.

(2). Second Illustration.

Now take the annual product of 9000, which is altogether a commodity-capital in the hands of the industrial capitalist class, a form in which the average ratio of the variable to the constant capital is that of 1 : 5. This presupposes a considerable development of capitalist production and accordingly of the productivity of social labor, a previous expansion of the scale of production to a considerable extent, and finally a development of all circumstances which bring about a relative overpopulation among the working class. The annual product will then be divided as follows, after rounding off the various fractions:

Now take it that the capitalist class of I consumes one-half of its surplus-value, or 500, and accumulates the other half. In that case (1000 v + 500 s) I, or 1500, must be converted into 1500 II c. Since II c amounts to only 1430, it is necessary to take 70 from the surplus-value. Subtracting this sum from 285 II s leaves 215 II s. Then we have:

I. 5000 c + 500 s (to be capitalized) + 1500 (v + s) in the fund set aside for consumption by capitalists and laborers.

II. 1430 c + 70 s (to be capitalized) + 285 v + 215 s.

As 70 II s are directly annexed by II c, a variable capital of 70-5, or 14, is required to set this additional constant capital in motion. These 14 must come out of the 215 s, so that only 201 remain, and we have:

II. (1430 c + 70 c) + (285 v + 14 v) + 201 s.

The disposal of 1500 I (v + ½ s) is a process of simple reproduction, and this has been dealt with. However, a few peculiarities remain to be noted here, which arise from the fact that in reproduction on an expanding scale I (v + ½ s) is not made up solely by way of II c, but by II c plus a portion of II s.

It goes without saying that as soon as we assume a process of accumulation, I (v + s) is greater than II c, not equal to II c, as it is in simple reproduction. For in the first place, department I incorporates a portion of its own surplus-product in its productive capital, and converts five-sixths of it into constant capital, so that it cannot exchange these five-sixths simultaneously for articles of consumption of department II. In the second place, department I has to supply out of its surplus-product the material for the accumulation of the constant capital of II, just as II has to supply I with the material for the variable capital, which sets in motion a portion of the surplus-product of I used as additional constant capital. We know that the actual variable capital consists of labor-power, and therefore the additional must consist of the same thing. It is not the capitalist of I who among other things buys from II a supply of necessities of life for his laborers, or accumulates them for this purpose, as the slave-holder had to do. It is the laborers themselves who trade with II. But this does not prevent the capitalist from regarding the articles of consumption of his eventual additional labor-power as so many means of production and maintenance of that labor-power, or the natural form of his variable capital. His own immediate operation, in the present case that of department I, consists in merely storing up the new money-capital required for the purchase of additional labor-power. As soon as he has incorporated this labor-power in his productive capital, the money becomes a medium for the purchase of commodities of II on the part of this labor-power, which must find these articles of consumption at hand.

By the way, the capitalist and his press are often dissatisfied with the way in which the laborer spends his money and with the commodities of II for which he spends it. On such occasions the capitalist philosophizes, babbles of culture, and dabbles in philanthropical talk, for instance after the manner of Mr. Drummond, the Secretary of the British Legation in Washington. According to him, "The Nation" (a journal) contained on the last of October, 1879, an interesting article, which contained the following passages "The laborers have not kept step in their civilization with the progress of inventions; a mass of objects have become accessible to them which they do not know how to make use of, and for which they do not create a market." (Every capitalist naturally wants the laborer to buy his commodities.) "There is no reason why the laborer should not desire as much comfort as the clergyman, the lawyer, and the physician, who earn the same amount as he." (This class of clergymen, lawyers, and physicians have indeed to be satisfied with wishing for a good many comforts!) "But he does not do so. The question is still, how he may be raised as a consumer by a rational and healthy method; not an easy question, since his whole ambition does not reach beyond a reduction of his hours of labor, and the demagogue incites him to this rather than to elevating his condition by an improvement of his intellectual and moral qualities." (Reports of H. M.'s Secretaries of Embassy and Legation on the Manufactures, Commerce, etc., of the countries in which they reside. London, 1879, page 404.)

Long hours of labor seem to be the secret of the rational and healthy method, which is to elevate the condition of the laborer by an improvement of his intellectual and moral faculties and to make a rational consumer of him. In order to become a rational consumer of the commodities of the capitalist, he should above all begin to let the capitalist consume his labor-power irrationally and unhygienically—but the demagogue prevents him! What the capitalist means by a rational consumption, is evident wherever he is condescending enough to engage directly in the trade with his own laborers, in the truck system, which includes also among other lines the supplying of homes to the laborers, so that the capitalist is at the same time a landlord.

The same Drummond, whose beautiful soul is enamored of the capitalist attempts to elevate the working class, tells in the same report among other things of the cotton goods manufacture in the Lowell and Lawrence Mills. The boarding and lodging houses for the factory girls belong to the company that owns the factories. The landladies of these houses are in the pay of the same company and act according to its instructions. No girl is permitted to stay out after 10 P. M. Then comes a gem: The special police of the company patrol the surrounding country, in order to prevent a violation of this rule. After 10 P. M., no girl can leave or enter any of these houses. No girl can live anywhere but on the land of the company, and every house on this land brings about 10 dollars per week in rent. And now we see the rational consumer in his full glory: "But since the omnipresent piano is found in many of the best lodging houses of the working girls, music, singing, and dancing play a prominent role at least among those, who after ten hours of unremitting labor at the loom need a change after this monotony rather than actual rest." (Page 412) But the main secret of making a rational consumer of the laborer is yet to be told. Mr. Drummond visits the cutlery factory of Turner's Falls, Connecticut River, and Mr. Oakman, the treasurer of the company, after telling him that especially American table knives beat the English goods in quality, continues: "But we shall beat England also in the matter of prices, we are ahead of it in quality even now, that is acknowledged; but we must have lower prices, and we shall get them as soon as we get our steel cheaper and bring down our labor." (427). A reduction of wages and long hours of labor, that is the essence of the rational and healthy method which is to elevate the laborer to the dignity of a rational consumer, in order that he may create a market for the mass of objects which civilization and the progress of invention have made accessible to him.

To repeat, then, just as department I has to supply the additional constant capital of II out of its surplus-value, so II supplies the additional variable capital for I. Department II accumulates for itself and for I, so far as the variable capital is concerned, by reproducing a greater portion of its total product, especially of its surplus-product, in the shape of necessary articles of consumption.

I (v + s), in the case of production on the basis of increasing capital, must be equal to II c plus that portion of the surplus-product which is re-incorporated as capital, plus the additional portion of constant capital required for the expansion of the production of II; and the minimum of this expansion is that without which actual accumulation, that is to say, an actual expansion of the production of I, is impossible.

Reverting now to the case which we examined last, we find that it has the peculiarity that II c is smaller than I (v + ½ s), smaller than that portion of the product of I which is spent as revenue for articles of consumption, so that a portion of the surplus-product of II, equal to 70, is at once realized for the purpose of disposing of the 1500 I (v + s). As for II c, equal to 1430, it must, other circumstances remaining the same, be reproduced out of an equal amount of I (v + s), in order that simple reproduction may take place, and to that extent we need not pay any more attention to it. It is different with the additional 70 II c. That which is for I merely an exchange of revenue for articles of consumption, is for II more than a mere reconversion of its constant capital from the form of commodity-capital into its natural form, as it is in simple reproduction, for it is a process of direct accumulation, a transformation of a portion of its surplus-product from the form of articles of consumption into that of constant capital. If I buys with 70 p. st. in money (money-reserve for the conversion of surplus-value) the 70 II s, and if II does not buy in exchange 70 I s, but accumulates the 70 p. st. as money-capital, then this money is indeed always the expression of an additional product (namely the surplus-product of II, the equivalent of which it is), although this is not a product which returns into the production; but in that case this accumulation of money on the part of II would be the evidence that 70 I s in means of production are unsaleable. There would be a relative overproduction in I, corresponding to a simultaneous break in the reproduction of II.

But apart from this, the following point must be noted: During the time in which the 70 in money, which came from I, have not as yet returned to it, or have but partially done so, by the purchase of 70 I s on the part of II, this 70 in money figures entirely or in part as additional virtual money-capital in the hands of II. This is true of every transaction between I and II, before the mutual replacement of their respective commodities has accomplished the reflux of the money to its starting point. But the money, under a normal condition of things, figures here only temporarily in this role. In the credit system, however, where all momentarily released money is to be used immediately as an active additional money-capital, such a temporarily released money-capital may be engaged, for instance, in new enterprises of I, while it still would have to liquidate additional products held in other enterprises. It must also be noted that the annexation of 70 I s to the constant capital of II requires at the same time an expansion of the variable capital of II to the extent of 14. This implies, similarly as it did in the direct incorporation of the surplus-product of I s in capital I c, that the reproduction in II is already in process with a view to further capitalization; in other words, it implies the expansion of that portion of the surplus-product, which consists of necessary articles of consumption.

The product of 9000, in the second illustration, must be distributed in the following manner for the purpose of reproduction, when 500 I s is to be capitalized. We merely consider the commodities in this case and leave aside the circulation of money.

I. 5000 c + 500 s (to be capitalized) + 1500 (v + s) fund for consumption, a total of 7000 in commodities.

II. 1500 c + 299 v + 201 s, a total of 2000 in commodities. Grand total, 9000 in commodities.

Capitalization takes place in the following manner:

In department I, the 500 s, which are capitalized, divide themselves into five-sixths, or 417 c, plus one-sixth, or 83 v. The 83 v draw an equal amount out of II s, which buys elements of constant capital and adds them to II c. An increase of II c by 83 implies an increase of II v by one-fifth of 83, or 17. We have, then, after this transaction

The capital in I has grown from 6000 to 6500, or by 1-12. That of II has grown from 1715 to 1899, or by nearly 1-9.

The reproduction on this basis in the second year brings the capital at the end of that year up to the following figures:

And at the end of the third year, we have as a product:

I. 5869 c + 1173 v + 1173 s.
II. 1715 c + 342 v + 342 s.

If department I then accumulates as before one-half of its surplus-value, we find that I (v + ½ s), 1173 v + 587 (½ s), amount to 1760, more than the entire 1715 II c, namely an excess of 45. This must again be balanced by annexing an equal amount of means of production to II c, which thus grows by 45. This again requires an addition of one-fifth, or 9, to II v. Furthermore, the capitalized 587 I s are divided into five-sixths and one-sixth respectively, that is to say, 489 c and 98 v. These last 98 imply a new addition of 98 to the constant capital of II, and this again an increase of the variable capital of II by one-fifth, or 20. Then we have.

In three years of reproduction on an increasing scale the total capital of I has grown from 6000 to 7629, and that of II from 1715 to 2229, or the total social capital from 7715 to 9858.

(3). Exchange of II c Under Accumulation.

In the exchange of I (v + s) with II c we meet with different cases.

Under simple reproduction, both of them must be equal and take one another's places, otherwise simple reproduction cannot proceed smoothly, as we have seen.

Under reproduction on an expanded scale, it is above all the rate of accumulation which is important. In the preceding cases we had assumed that the rate of accumulation in department I was equal to one-half of I s, and also that it remained constant from year to year. We changed merely the proportion in which this accumulated capital was divided between variable and constant capital. We then had three cases.

(1) I (v + ½s) equal to II c, which is therefore smaller than I (v + s). This must always be the case, otherwise I cannot accumulate.

(2) I (v + ½s) greater than II c. In this case the exchange is effected by adding a corresponding portion of II s to II c, so that this becomes equal to I (v + ½ s). In this case, the transaction in department II is not a simple reproduction of its constant capital, but accumulation, an augmentation of its constant capital by that portion of its surplus-product which it exchanges for means of production of I. This augmentation implies at the same time a corresponding addition to the variable capital of II out of its own surplus-product.

(3) I (v + ½s) smaller than IIc. In this case department II had not fully reproduced its constant capital by means of exchange and had to make good the deficit by a purchase from I. But this did not require any further accumulation of variable capital on the part of II, since its constant capital was brought only to its full size by this operation. On the other hand, that portion of the capitalists of I who accumulate only additional money-capital, had already accomplished a part of this accumulation by this transaction.

The premise of simple reproduction, that I (v + s) is equal to II c, is irreconcilable with capitalist production, although this does not exclude the possibility that a certain year in an industrial cycle of 10 or 11 years may not show a smaller total production than the preceding year, so that there would not have been even a simple reproduction, compared to the preceding year. Indeed, considering the natural growth of population per year, simple reproduction could take place only in so far as a correspondingly larger number of unproductive servants would partake of the 1500 representing the aggregate surplus-product. But accumulation of capital, actual capitalist production, would be impossible under such circumstances. The fact of capitalist production therefore excludes the possibility of II c being equal to I (v + s). Nevertheless it might occur even under capitalist production that in consequence of the process of accumulation during a preceding number of periods of production II c might not only be equal, but even greater than I (v + s). This would mean an overproduction in II and could not be compensated in any other way than by a great crash, in consequence of which some capital of II would be transferred to I. It does not alter the relations of I (v + s), if a portion of the constant capital of II reproduces itself, as happens, for instance, in the employment of home raised seeds in agriculture. This portion of II c has no more reference to the exchange between I and II than has I c. Nor does it alter the matter, if a portion of the products of II are of such a nature that they may serve as means of production in I. They are covered by a portion of the means of production supplied in II by I, and this portion must be deducted on both sides at the outset, if we wish to analyze without any obscuring interference the exchange between the two great departments of social production, the producers of means of production and the producers of articles of consumption.

To repeat, then, under capitalist production I (v + s) cannot be equal to II c, in other words, the two cannot balance. On the other hand, naming I s-x that portion of I s which is spent by the capitalists as revenue, we see that I (v + s-x) may be equal to, greater or smaller than, II c. But I (v + s-x) must always be smaller than II (c + s), namely, as much smaller as that portion of II s which must be consumed under all circumstances by the capitalist class of II.

It must be noted that in this presentation of accumulation the value of the constant capital, so far as it is a portion of the value of the commodity-capital, which it helped to produce, is not exactly represented. The fixed portion of the newly accumulated constant capital is transferred to the commodity-capital only gradually and periodically according to the different nature of these fixed elements. Where-ever raw materials and halfwrought articles are employed in large quantities for the production of commodities, the commodity-capital therefore consists overwhelmingly of objects replacing circulating constant elements and variable capital. (On account of the turn-over of the circulating elements this method may nevertheless be adopted. It is then assumed that the circulating portion together with that portion of value which the fixed capital has transferred to it is turned so often during the year that the aggregate sum of the commodities supplied is equal in value to all the capital invested in the annual production.) But wherever only auxiliary materials are used for machine work, and no raw material, there v, the labor element, must reappear in the commodity-capital as its largest factor. While in the calculation of the rate of profit the surplus-value is figured on the total capital, regardless of whether the fixed elements transfer periodically much or little value to the product, the fixed portion of constant capital is included in the calculation of the value of any periodically created commodity-capital only to the extent that it yields a certain average of value to the product.

[35.]From manuscript II.

[36.]Beginning of manuscript VIII.

[37.]"Capital," volume I, page 647, footnote.

[38.]Some physiocrats had paved the way for him even here, especially Turgot. This author uses more frequently than Quesnay and the other physiocrats the term capital instead of avances and identifies still more the avances or capital of the manufacturers with those of the capitalist farmers. For instance: "Like these (the manufacturing entrepreneurs), the capitalist farmers must secure, over and above the return of their capitals, etc." (Turgot, Oeuvres, Daire edition, Paris, 1844, vol. I, page 40.)

[39.]In order that the reader may not be in doubt as to the meaning of the phrase "the price of by far the greater part of the commodities," the following lines may show how Adam Smith himself explains it. For instance, no rent passes into the price of sea fish, only wages and profit; only wages pass into the price of Scotch pebbles. He says: "In some parts of Scotland poor people make it their business to gather on the sea shore the varicolored pebbles, known as Scotch pebbles. The price which the stone cutters pay for them consists only of their wages, as neither ground rent nor profit constitute any part of it."

[40.]I reproduce this sentence verbatim from the manuscript, although it seems to contradict, in its present connection, both the preceding and the following statements. This apparent contradiction is solved farther along in (4). Capital and Revenue in Adam Smith.—F. E.

[41.]We do not make anything of the fact that Adam Smith was here particularly unlucky in the choice of his example. The value of the corn resolves itself into wages, profit, and rent only, because the food consumed by the laboring cattle is regarded as wages, and the laboring cattle as laborers, so that, on the other hand, the wage laborer also appears in the role of the laboring cattle. (Note added from manuscript II.)

[42.]From here to the end of the chapter, an extract from manuscript II is presented.

[43.]From manuscript II.

[44.]From manuscript VIII.

[45.]Mainly taken from manuscript II; the diagrams from manuscript VIII.

[46.]Here manuscript VIII is resumed.

[47.]Advocates of the theory of crises of Rodbertus are requested to make a note of this.

[48.]This presentation differs somewhat from that given in another place of this section farther along. There I throws likewise an additional amount of 500 p. st. into circulation. Here II alone supplies the additional money for the circulation. But this does not alter the final result.—F. E.

[49.]Manuscript II resumed here.

[50.]The following is from manuscript VIII.

[51.]"When a savage manufactures bows, he carries on an industry, but he does not practice any abstinence." (Senior, Principes foundamentaux de l'Economie Politique, traduction Arrivabene, Paris, 1836, page 308.) "The more society advances, the more abstinence it requires." (Ibidem, page 342.) Compare "Capital," volume I, chapter XXIV, 3, page 608.

[52.]E. B. Tyler, Forschungen ueber die Urgeschichre der Menschheit, translated by H. Mueller. Leipsic, no date, page 240.

[53.]These figures do not coincide with those previously assumed. But this does not alter the substance of the argument, since it is merely a question of proportions.—F. E.

[54.]Ad. Soetbeer, Edelmetall-produktion. Gotha, 1875.

[55.]"A considerable quantity of gold bullion...is taken by the gold diggers directly to the Mint in San Francisco."—Reports of H. M. Secretaries of Embassy and Legation. 1879. Part III, p. 337.

[56.]The analysis of the exchange of newly produced gold within the constant capital of department I is not contained in the manuscript.—F. E.

[57.]From here to the end manuscript VIII.

[58.]This puts an end, once for all, to the feud over the accumulation of capital between James Mill and S. Bailey, which we have discussed from our point of view in volume I, chapter XXIV, section 5, foot notes on pages 622 and 623, namely the feud concerning the extensibility of the effects of industrial capital without changing its magnitude. We shall revert to this later.