Capital: A Critique of Political Economy, Vol. II. The Process of Circulation of Capital

Karl Marx
Marx, Karl
Display paragraphs in this book containing:
Friedrich Engels, ed. Ernest Untermann, trans.
First Pub. Date
Chicago: Charles H. Kerr and Co.
Pub. Date
Das Kapital, based on the 2nd edition.

Volume II. The Process of Circulation of Capital.

Book II. The Circulation of Capital.

The Metamorphoses of Capital and Their Cycles.

Part I, Chapter I


The circulation process*4 of capital takes place in three stages, which, according to the presentation of the matter in Volume I, form the following series:

First stage: The capitalist appears as a buyer on the commodity and labor market; his money is transformed into commodities, or it goes through the circulation process M-C.
Second stage: Productive consumption of the purchased commodities by the capitalist. He acts in the capacity of a capitalist producer of commodities; his capital passes through the process of production. The result is a commodity of more value than that of the elements composing it.
Third stage: The capitalist returns to the market as a seller; his commodities are exchanged for money, or they pass through the circulation process C-M.


Hence the formula for the circulation process of money capital is: M-C...P...C'-M', the dots indicating the points where the process of circulation was interrupted, and C' and M' designating C and M increased by surplus value.


The first and third stages were discussed in Volume I only in so far as it was required for an understanding of the second stage, the process of production of capital. For this reason, the various forms which capital assumes in its different stages, and which it either retains or discards in the repetition of the circulation process, were not considered. These forms are now the first objects of our study.


In order to conceive of these forms in their purest state, we must first of all abstract from all factors which have nothing to do directly with the discarding or adopting of any of these forms. It is therefore taken for granted at this point that the commodities are sold at their value and that this takes place under the same conditions throughout. Abstraction is likewise made of any changes of value which might occur during the process of circulation.

I. First Stage. M-C.*5


M-C represents the exchange of a sum of money for a sum of commodities; the purchaser exchanges his money for commodities, the sellers exchange their commodities for money. It is not so much the form of this act of exchange which renders it simultaneously a part of the general circulation of commodities and a definite organic section in the independent circulation of some individual capital, as its substance, that is to say the specific use-values of the commodities which are exchanged for money. These commodities represent on the one hand means of production, on the other labor-power, and these objective and personal factors in the production of commodities must naturally correspond in their peculiarities to the special kind of articles to be manufactured. If we call labor-power L, and the means of production Pm, the sum of commodities to be purchased is C=L+Pm, or more briefly C. M-C, considered as to its substance, is therefore represented by M-C, that is to say M-C is composed of M-L and M-Pm. The sum of money M is separated into two parts, one of which buys labor-power, the other means of production. These two series of purchases belong to entirely different markets, the one to the commodity-market proper, the other to the labor-market.


Aside from this qualitative division of the sum of commodities into which M is transformed, the formula M-C also represents a very characteristic quantitative relation.


We know that the value, or price, of labor-power is paid to its owner, who offers it for sale as a commodity, in the form of wages, that is to say it is the price of a sum of labor containing surplus-value. For instance, if the daily value of labor-power is equal to the product of five hours' labor valued at three shillings, this sum figures in the contract between the buyer and seller of labor power as the price, or wages, for say, ten hours of labor time. If such a contract is made, for instance, with 50 laborers, they are supposed to work 500 hours per day for their purchaser, and one-half of this time, or 250 hours equal to 25 days of labor of 10 hours each, represent nothing but surplus-value. The quantity and the volume of the commodities to be purchased must be sufficient for the utilization of this labor-power.


M-C, then, does not merely express the qualitative relation represented by the exchange of a certain sum of money, say 422 pounds sterling, for a corresponding sum of means of production and labor-power, but also a quantitative relation between certain parts of that same money spent for the labor-power L and the means of production Pm. This relation is determined at the outset by the quantity of surplus-labor to be expended by a certain number of laborers.


If, for instance, a certain manufacturer pays a weekly wage of 50 pounds sterling to 50 laborers, he must spend 372 pounds sterling for means of production, if this is the value of the means of production which a weekly labor of 3,000 hours, 1,500 of which are surplus-labor, transforms into factory products.


It is immaterial for the point under discussion, how much additional value in the form of means of production is required in the various lines of industry by the utilization of surplus-labor. We merely emphasize the fact that the amount of money M spent for means of production in the exchange M-Pm must buy a proportional quantity of them. The quantity of means of production must suffice for the absorption of the amount of labor which is to transform them into products. If the means of production were insufficient, the surplus-labor available for the purchaser would not be utilized, and he could not dispose of it. On the other hand, if there were more means of production than available labor, they would not be saturated with labor and would not be transformed into products.


As soon as the process M-C has been completed, the purchaser has more than simply the means of production and labor-power required for the manufacture of some useful article. He has also at his disposal a greater supply of labor-power, or a greater quantity of labor, than is necessary for the reproduction of the value of this labor-power, and he has at the same time the means of production required for the materialization of this quantity of labor. In other words, he has at his disposal the elements required for the production of articles of a greater value than these elements, he has a mass of commodities containing surplus-value. The value advanced by him in the form of money has then assumed a natural form in which it can be incarnated as a value generating more value. In brief, value exists then in the form of productive capital which has the faculty of creating value and surplus-value. Let us call capital in this form P.


Now the value of P is equal to that of L+Pm, it is equal to M exchanged for L and Pm. M is the same capital-value as P, only it has a different form of existence, it is capital value in the form of money—money-capital.


M-C, or the more general formula M-C, a sum of purchases of commodities, a process within the general circulation of commodities, is therefore at the same time, seeing that it is a stage in the independent circulation of capital, a process of transforming capital-value from its money form into its productive form. It is the transformation of money-capital into productive capital. In the diagram of the circulation which we are here discussing, money appears as the first bearer of capital-value, and money-capital therefore represents the form in which capital is advanced.


Money in the form of money-capital finds itself employed in the functions of a medium of exchange, in the present case it performs the service of a general purchasing medium and general paying medium. The last-named service is required inasmuch as labor-power, though first bought is not paid until it has been utilized. If the means of production are not found ready on the market, but have to be ordered, money in the process M-Pm likewise serves as a paying medium. These functions are not due to the fact that money-capital is capital, but that it is money.


On the other hand, money-capital, or capital-value in the form of money, cannot perform any other service but that of money. This service appears as a function of capital simply because it plays a certain role in the movements of capital. The stage in which this function is performed is interrelated with other stages of the circulation of money-capital. Take, for instance, the case with which we are here dealing. Money is here exchanged for commodities which represent the natural form of productive capital, and this form contains in the germ the phenomena of the process of capitalist production.


A part of the money performing the function of money-capital in the process M-C assumes, in the course of this circulation, a function in which it loses its capital character but preserves its money character. The circulation of money-capital M is divided into the stages M-Pm and M-L, into the purchase of means of production and of labor-power.


Let us consider the last-named stage by itself. M-L is the purchase of labor-power by the capitalist. It is also the sale of labor-power, or we may say of labor, since we have assumed the existence of wages, by the laborer who owns it. What is M-C, or in this case M-L, from the standpoint of the buyer, is here, as in every other transaction of this kind, C-M from the standpoint of the seller, L-M from the standpoint of the laborer. It is the sale of labor-power by the laborer. This is the first stage of circulation, or the first metamorphosis, of commodities (Vol. I, Chap. III, Sect. 2a). It is for the seller of labor-power a transformation of his commodity into the money-form. The laborer spends the money so obtained gradually for a number of commodities required for the satisfaction of his needs, for articles of consumption. The complete circulation of his commodity therefore appears as L-M-C, that is to say first as L-M, or C-M, second as M-C, which is the general form of the simple circulation of commodities, C-M-C. Money is in this case merely a passing circulation-medium, a mere mediator in the exchange of one commodity for another.


M-L is the typical stage of the transformation of money-capital into productive capital. It is the essential condition for the transformation of value advanced in the form of money into capital, that is to say into a value producing surplus-value. M-Pm is necessary only for the purpose of realizing the quantity of labor bought in the process M-L. This process was discussed from this point of view in Vol. I, Part II, under the head of "Transformation of Money into Capital." But at this point, we shall have to consider it also from another side, relating especially to money-capital as a form of capital.


M-L is regarded as a general characteristic of the capitalist mode of production. But in this case we are doing so, not so much because the purchase of labor-power represents a contract which stipulates the delivery of a certain quantity of labor-power for the reproduction of the price of labor-power, or of wages, not so much for the reason that it means the delivery of surplus-labor which is the fundamental condition for the capitalization of the value advanced, or for the production of surplus-value; but we do so rather on account of its money form, because wages in the form of money buy labor-power, and this is the characteristic mark of the money system.


Nor is it the irrational feature of the money form which we shall note as the characteristic part. We shall overlook the irrationalities. The irrationality consists in the fact that labor itself as a value-creating element cannot have any value which could be expressed in its price, and that, therefore, a certain quantity of labor cannot have any equivalent in a certain quantity of money. But we know that wages are but a disguised form in which, for instance, the price of one day's labor-power is seen to be the price of the quantity of labor materialized by this labor-power in one day. The value produced by this labor-power in six hours of labor is then expressed as the value of twelve hours of its labor.


M-L is regarded as the characteristic signature of the so-called money system, because labor there appears as the commodity of its owner, and money as the buyer. In other words, it is the money relation in the sale and purchase of human activity which is considered. It is a fact, however, that money appears at an early stage as a buyer of so-called services, without the transformation of M into money-capital, and without any change in the general character of the economic system.


It makes no difference to money into what sort of commodities it is transformed. It is the general equivalent of all commodities, which show by their prices that they represent in an abstract way a certain sum of money and anticipate their exchange for money. They do not assume the form in which they may be translated into use-values for their owners, until they change places with money. Once that labor power has come into the market as the commodity of its owner, to be sold for wages in return for labor, its sale and purchase is no more startling than the sale and purchase of any other commodity. The peculiar characteristic is not that the commodity labor-power is salable, but that labor-power appears in the shape of a commodity.


By means of M-C, that is to say by the transformation of money-capital into productive capital, the capitalist accomplishes the combination of the objective and personal factors of production so far as they consist of commodities. If money is transformed into productive capital for the first time, or if it performs for the first time the function of money-capital for its owner, he must begin by buying means of production, such as buildings, machinery, etc., before he buys any labor-power. For as soon as labor-power passes into his control, he must have means of production for it, in order to utilize it.


This is the capitalist's point of view.


The laborer, on the other hand, looks at this question in the following light: The productive application of his labor-power is not possible, until he has sold it and brought it into contact with means of production. Before its sale, it exists in a state of separation from the means of production which it requires for its materialization. So long as it remains in this state, it cannot be used either for the production of use-values for its owner, or for the production of commodities, by the sale of which he might live. But from the moment that it is brought into touch with means of production, it forms part of the productive capital of its purchaser, the same as the means of production.


It is true, that in the act M-L the owner of money and the owner of labor-power enter into the relation of buyer and seller, of money-owner and commodity-owner. To this extent they enter into a money relation. But at the same time the buyer also appears in the role of an owner of means of production, which are the material conditions for the productive expenditure of labor-power on the part of its owner. The means of production, then, meet the owner of labor-power in the form of the property of another. On the other hand, the seller of labor meets its buyer in the form of the labor-power of another and it must pass into the buyer's possession, it must become a part of his capital, in order that it may become productive capital. The class relation between the capitalist and the wage laborer is therefore established from the moment that they meet in the act M-L, which signifies L-M from the standpoint of the laborer. It is indeed a sale and a purchase, a money relation, but it is a sale and a purchase in which the buyer is a capitalist and the seller a wage-laborer. And this relation arises out of the fact that the conditions required for the materialization of labor-power, viz.: means of subsistence and means of production, are separated from the owner of labor-power and are the property of another.


We are not here concerned in the origin of this separation. It is a fact, as soon as the act M-L can be performed. The thing which interests us here is that M-L does not become a function of money-capital for the sole reason that it is a means of paying for a useful human activity or service. The function of money as a paying medium is not the main object of our attention. Money can be expended in this form only because labor-power finds itself separated from its means of production, including the means of subsistence required for its reproduction; because this separation can be overcome only by the sale of the labor-power to the owner of the means of production; because the materialization of labor-power, which is by no means limited to the quantity of labor required for the reproduction of its own price, is likewise in the control of its buyer. The capital relation during the process of production arises only because it is inherent in the process of circulation based on the different economic conditions, the class distinctions between the buyer and the seller of labor-power. It is not money which by its nature creates this relation; it is rather the existence of this relation which permits of the transformation of a mere money-function into a capital-function.


In the conception of money-capital, so far as it relates to the special function which we are discussing, two errors run parallel to one another or cross each other. In the first place, the functions performed by capital-value in its capacity of money-capital, which are due to its money form, are erroneously derived from its character as capital. But they are due only to the money form of capital-value. In the second and reverse case, the specific nature of the money-function, which renders it simultaneously a capital-function, is attributed to its money nature. Money is here confounded with capital, while the specific nature of the money-function is conditioned on social relations such as are indicated by the act M-L, and these conditions do not exist in the mere circulation of commodities and money.


The sale and purchase of slaves is formally also a sale and purchase of commodities. But money cannot perform this function without the existence of slavery. If slavery exists, then money can be invested in the purchase of slaves. On the other hand, the mere possession of money cannot make slavery possible.


In order that the sale of his labor-power by the laborer, in the form of the sale of labor for wages, may take place as a result of social conditions which make it the basis of the production of commodities, in order that it may not be an isolated instance, so that money-capital may perform, on a social scale, the function in the process M-C, definite historical processes are required, by which the original connection of the means of production with labor-power is dissolved. These processes must have resulted in opposing the mass of the people, the laborers, as propertiless to the idle owners of the means of production. It makes no difference in this case, whether the connection between the labor-power and the means of production before its dissolution was such that the laborer belonged to the means of production and was a part of them, or whether he was their owner.


The fact which lies back of the process M-C is distribution; not distribution in the ordinary meaning of a distribution of articles of consumption, but the distribution of the elements of production themselves. These consist of the objective things which are concentrated on one side, and labor-power which is isolated on the other.


The means of production, the objective things of productive capital, must therefore stand opposed to the laborer as capital, before the process M-L can become a universal, social one.


We have seen on previous occasions that capitalist production, once it is established, does not only reproduce in its further development this separation, but extends its scope more and more, until it becomes the prevailing social condition. However, there is still another side to this question. In order that capital may be able to arise and take control of production, a definite stage in the development of commerce must precede. This includes the circulation of commodities, and therefore also the production of commodities; for no articles can enter circulation in the form of commodities, unless they are manufactured for sale, and intended for commerce. But the production of commodities does not become the normal mode of production, until it finds as its basis the capitalist system of production.


The Russian landowners, who are compelled to carry on agriculture by the help of wage-laborers instead of serfs, since the so-called emancipation of the serfs, complain about two things. They wail in the first place about the lack of money-capital. They say, for instance, that large sums must be paid to wage-laborers, before the crops can be sold, and there is a dearth of ready cash. Capital in the form of money must always be available for the payment of wages, before production on a capitalist scale can be carried on. But the landowners may take hope. In due time the industrial capitalist will have at his disposal, not alone his own money, but also that of others.


The second complaint is more characteristic. It is to the effect that even if money is available, there are not enough laborers at hand at any time. The reason is that the Russian farm laborer, owing to the communal property in land, has not been fully separated from his means of production, and hence is not yet a "free wage-worker" in the full capitalist meaning of the word. But the existence of "free" wage-workers is the indispensable condition for the realization of the act M-C, the exchange of money for commodities, the transformation of money-capital into productive capital.


As a matter of course, the formula M-C...P...C' -M' does not represent the normal form of the circulation of money-capital, until capitalist production is fully developed, because it is conditioned on the existence of a social class of wage-laborers. We have seen that capitalist production does not only create commodities and surplus-values, but also gives rise to an ever growing class of wage-laborers, either by propagation or by the transformation of independent producers into proletarians.


Since the first condition for the realization of the act M-C...P...C' -M' is the permanent existence of a class of wage-workers, capital in the form of productive capital and the circulation of productive capital must precede it.

II. Second Stage. Functions of Productive Capital.


The circulation of capital which we have here considered begins with the act of circulation represented by the formula M-C, the transformation of money into commodities, or purchase. Circulation must therefore be supplemented by the reverse metamorphosis C-M, the transformation of commodities into money, or sale. But the immediate result of M-C is the interruption of the circulation of the capital advanced in the form of money. By the transformation of money-capital into productive capital the value of capital has assumed a natural form in which it cannot continue to circulate, but must enter into consumption, more accurately into productive consumption.


The application of labor-power, labor, can not be carried into effect anywhere but in the labor process. The capitalist cannot sell the laborer along with the commodities, because the wage-worker is not a chattel slave and the capitalist does not buy anything from the laborer but the privilege of utilizing the labor-power purchased in the person of the laborer for a certain time. On the other hand, the capitalist cannot use this labor-power in any other way than by using it up in transforming, by its help, means of production into commodities. The result of the first stage of the circulation of money-capital is therefore its entrance into the second stage, that of productive capital.


This movement is represented by the formula M-C, P, in which the dots indicate the place where the circulation of capital is interrupted, while its rotation continues, since it passes from the sphere of the circulation of commodities into that of production. The first stage, the transformation of money-capital into productive capital, is therefore merely the harbinger of the second, the productive stage of capital.


The act M presupposes that the person performing it not only has at his or her disposal values of some useful form, but also that he or she has them in the form of money. And the act consists precisely in giving away money. A man can, therefore, remain the owner of money only on the condition, that the giving away of money at the same time implies a return of money. But money can return only through the sale of commodities. Hence the above formula assumes the owner of money to be a producer of commodities.


Now let us look at the formula M-L. The wage worker lives only by the sale of his labor-power. The preservation of this power, equivalent to the self-preservation of the laborer, requires a daily consumption. Hence the payment of wages must be continually repeated at short intervals, in order that the wage laborer may be able to repeat acts L-M or C-M-C, by means of which he is enabled to purchase the articles required for his self-preservation. For this reason the capitalist must stand opposed to the wage worker in the capacity of a money-capitalist, and his capital must be money-capital. On the other hand, if the wage laborers, the mass of direct producers, are to perform the act L-M-C, the means of subsistence required for it must be present in the form of purchasable commodities. This state of affairs necessitates a high degree of development of the circulation of products in the form of commodities, and this again must be preceded by a corresponding extension of the production of commodities. As soon as production by means of wage labor has become universal, the production of commodities must be the typical form of production. If this mode of production is general, it carries in its wake an ever increasing division of labor, that is to say an ever growing differentiation in the special nature of the products which are manufactured in the form of commodities by the various capitalists, an ever greater division of supplementary processes of production into independent specialties. To the extent that M-L develops, M-Pm also develops, that is to say the production of means of production to that extent differentiates from the production of commodities with those means. The means of production then stand opposed as commodities to every producer of commodities and he must buy those means in order to be able to carry on his special line of commodity production. They are derived from branches of production which are entirely divorced from his own and enter into his own branch as commodities which he must buy. The objective materials of commodity production assume more and more the character of products of other commodity manufacturers which he must purchase. And to the same extent the capitalist must become a money-capitalist, in the same ratio his capital must assume the functions of money-capital.


On the other hand, the same conditions which are the cause of the fundamental constitution of capitalist production, especially the existence of a class of wage laborers, also demand the transition of all commodity production into the capitalist mode of commodity production. In proportion as the capitalist mode of production develops, it has a disintegrating effect on all older forms of production, which were mainly adjusted to the individual needs and transformed only the surplus over and above those needs into commodities. Capitalist production makes of the sale of products the main incentive, without at first apparently affecting the mode of production itself. Such was, for instance, the first effect of capitalist world commerce on such nations as the Chinese, Indians, Arabs, etc. But wherever it takes root, there it destroys all forms of commodity production which are either based on the self-employment of the producers, or merely on the sale of the surplus product. The production of commodities is first made general and then transformed by degrees into the capitalist mode of commodity production.*6


Whatever may be the social form of production, laborers and means of production always remain its main elements. But either of these factors can become effective only when they unite. The special manner in which this union is accomplished distinguishes the different economic epochs from one another. In the present case, the separation of the so-called free laborer from his means of production is the starting point, and we have observed the way and the conditions in which these two elements are united in the hands of the capitalist, as the productive mode of existence of his capital. The actual process which combines the personal and objective materials of commodity production under these conditions, the process of production, thus becomes in its turn a function of capital, a capitalist process of production, the nature of which has been fully analyzed in the first volume of this work. Every process of commodity production at the same time becomes a process of exploiting labor-power. But it is not until the capitalist production of commodities is established that this mode of exploitation becomes universal and typical, and revolutionizes in the course of its historical development, through the organization of the labor process and the enormous improvement of technique, the entire economic structure of society, in a manner eclipsing all former epochs.


The means of production and labor-power in so far as they are forms of existence of advanced capital values, are distinguished by the different roles assumed by them in the production of value, hence also of surplus-value, and known under the names of constant and variable capital. As different parts of productive capital they are further-more distinguished by the fact that the means of production in the possession of the capitalist remain his capital even outside of the process of production, while labor-power exists in the form of individual capital only within this process. While labor-power is a commodity only in the hands of its seller, the wage worker, it becomes capital only in the hands of its buyer, the capitalist who uses it temporarily. And the means of production do not become objective parts of productive capital, until labor-power, the personal form of productive capital, is embodied in them. Human labor-power is originally no more capital than are the means of production. They assume this specific social character only under definite historically developed conditions, and the same character is impregnated upon precious metals, and still more upon money, by the same circumstances.


Productive capital, in performing its functions, consumes its own component parts for the purpose of transforming them into a mass of products of a higher value. Seeing that labor-power acts likewise merely as an organ of productive capital, the surplus-value produced by its surplus-labor over and above the value of its component elements is also gathered by capital. The surplus-labor of labor-power is the inexpensive labor of capital and thus forms surplus-value for the capitalist, a value which costs him no equivalent return. The product is, therefore, not only a commodity, but a commodity pregnant with surplus-value. Its value is equal to P+S, that is to say equal to the value of the productive capital consumed in its manufacture plus the surplus-value S created by it. Assuming that this product were represented by 10,000 pounds of yarn, let us say that means of production valued at 372 pounds sterling and labor-power valued at 50 pounds sterling were consumed in the production of this quantity of yarn. During the process of spinning, the spinners transferred the value of the means of production to the amount of 372 pounds sterling to the yarn, and at the same time they created, by means of their labor-power, new values to the amount of 128 pounds sterling. The 10,000 pounds of yarn therefore represent a value of 500 pounds sterling.

III. Third Stage. C'-M'.


Commodities become commodity-capital by springing into existence as a direct result of commodity-production, embodying in a new form the capital values already utilized. If the production of commodities were carried on as capitalist production in all spheres of society, all commodities would be elements of commodity-capital from the outset, whether they would be composed of crude iron, Brussels laces, sulphuric acid, or cigars. The problem as to what class of commodities is destined by its nature to rank as capital and what class to serve as general commodities, is one of the self-prepared ills of the scholastic economists.


In the form of commodities, capital has to perform the functions of commodities. The articles of which commodity capital is composed are produced for sale and must be exchanged for money, must go through the process C-M.


The commodities of the capitalist may consist of 10,000 pounds of yarn. If 372 pounds sterling represent the value of the means of production consumed in the spinning process, and new values to the amount of 128 pounds sterling have been created, the yarn has a value of 500 pounds sterling, which is expressed in its price of the same amount. This price is realized by the sale C-M. What is it that makes of this simple process of all commodity circulation at the same time a capital function? It is not any change that takes place inside of it. Neither the use-value of the product has been changed, for it passes into the hands of the buyer as an object of use, nor has anything been altered in its exchange-value, for this value has not experienced any change of magnitude, but only of form. It first existed as yarn, while now it exists as money. Thus a plain distinction is evident between the first stage C-M, and the last stage C'-M'. There the advanced money serves as money-capital, because it is transformed, by means of the circulation of commodities, into articles of a specific use-value. Here, on the other hand, the commodities can only serve as capital, since they brought this character with them from the process of production before their circulation began. During the spinning process, the spinners created new values to the amount of 128 pounds sterling in the shape of yarn. Of this sum, say 50 pounds sterling are regarded by the capitalist merely as an equivalent for wages advanced for labor-power, while 78 pounds sterling—representing an exploitation of 156 per cent—are his surplus-value.


The value of the 10,000 pounds of yarn therefore embodies first the value of the consumed productive capital P, which consists of a constant capital of 372 pounds sterling and a variable capital of 50 pounds sterling, their sum being 422 pounds sterling, equal to 8,440 pounds of yarn. Now the value of the productive capital P is equal to C, the value of the elements constituting it which the capitalist found to be in the hands of their sellers in the stage M-C. In the second place, the value of the yarn embodies a surplus-value of 78 pounds sterling, equal to 1,560 pounds of yarn. C as an expression of the value of 10,000 pounds of yarn is therefore equal to C plus surplus C, or C plus an increment of C worth 78 pounds sterling, which we shall call c, since it exists in the same commodity form as that now assumed by the original value C. The value of the 10,000 pounds of yarn, equal to 500 pounds sterling, is therefore represented by the formula C+c=C'. What changes C, the value of the 10,000 pounds of yarn, into C' is not its absolute value of 500 pounds sterling, for it is determined, the same as C standing for the expression of the value of any other sum of commodities, by the quantity of labor embodied in it. It is rather its relative value, its value as compared to that of the productive capital P consumed in its production, which is the essential thing. This value is contained in it plus the surplus-value created through the productive capital. Its value exceeds that of the capital by the surplus-value c. The 10,000 pounds of yarn are the bearers of the consumed capital value increased by this surplus-value, and they are so by virtue of the capitalist process of production. C' expresses the relation of the value of the commodities to that of the capital advanced in its production, in other words the composition of the value of the commodities, of capital value and surplus-value. The 10,000 pounds of yarn represent a commodity-capital C' only because they are an altered form of the productive capital P, and this relation exists originally by virtue of the circulation of this individual capital, it applies primarily to the capitalist who produced the yarn by the help of his capital. It is, so to say, an internal, not an external relation which makes a commodity capital of the 10,000 pounds of yarn in their capacity of representatives of value. They are bearing the imprint of capital not in the absolute magnitude of their value, but in its relative magnitude, in the proportion of their value to that of productive capital embodied in them before they became commodities. If, then, these 10,000 pounds of yarn are sold at their value of 500 pounds sterling, this act of circulation, considered by itself, is identical with C-M, a mere transformation of the same value from the form of a commodity into that of money. But as a special stage in the circulation of a certain individual capital, the same act is also a realization of the capital value, embodied in the commodity, to the amount of 422 pounds sterling plus the surplus-value, likewise embodied in it, of 78 pounds sterling. That is to say, it also represents C'-M', the transformation of the commodity-capital from its commodity form into that of money.*7


The function of C' is now that of all commodities, viz.: to transform itself into money, to be sold, to go through the circulation stage C-M. So long as the capital utilized so far remains in the form of commodity-capital and stays on the market, the process of production rests. The commodity-capital serves then neither as a creator of value nor of products. In proportion to the degree of speed with which capital throws off the commodity-form and assumes that of money, in other words, in proportion to the rapidity of the sale, the same capital-value will serve in widely different degrees as a creator of products or of values, and the scale of reproduction will be extended or abridged. It has been shown in Volume I that the effectiveness of any given capital is conditioned on factors in the productive process which are to a certain extent independent of the magnitude of its own value. Here we see that the process of circulation sets in motion new factors which are independent of the value of the capital, its effectiveness, its expansion or contraction.


The mass of commodities C', being the embodiment of the consumed capital, must furthermore pass in its entire volume through the metamorphosis C'-M'. The quantity sold is here the main determinant. The individual commodity figures only as an integral part of the total mass. The 500 pounds sterling are embodied in 10,000 pounds of yarn. If the capitalist succeeds in selling only 7,440 pounds of yarn at their value of 372 pounds sterling, he has recovered only the value of his constant capital, the value expended by him for means of production. If he sells 8,440 pounds of yarn, he recovers only the value of his total capital. He must sell more, in order to obtain some surplus-value, and he must sell the entire 10,000 pounds in order to get the entire surplus-value of 78 pounds sterling (1,560 pounds of yarn). In 500 pounds sterling he receives merely an equivalent for the commodity sold. His transaction within the process of circulation is simply C-M. If he had paid his laborers 64 pounds sterling instead of 50 pounds sterling, his surplus-value would be only 64 pounds sterling instead of 78, and the degree of exploitation would have been only 100 per cent instead of 150. But the value of the yarn would remain the same; only the relation of its component parts would be changed. The circulation-act C-M would still represent the sale of 10,000 pounds of yarn for 500 pounds sterling, which is their value.


C' is equal to C+c (or 422 plus 78 pounds st.). C equals the value of P, the productive capital, and this equals the value of M, the money advanced in the act M-C, the purchase of the elements of production, amounting to 422 pounds sterling in our example. If the mass of commodities is sold at its value, then C equals 422 pounds sterling, and c, the value of the surplus product of 1,560 pounds of yarn, equals 78 pounds sterling. If we call c, expressed in money, m, then C'-M'=(C+c)-(M+m), and the cycle M-C...P...C'-M', in its expanded form, is represented by M-C...P...(C+c)-(M+m).


In the first stage, the capitalist takes articles of use out of the commodity-market proper and the labor-market. And in the third stage he throws commodities back, but only into one market, the commodity-market proper. But the fact that he extracts from the market, by means of his commodities, a greater value than he threw upon it originally, is due only to the circumstance that he throws more commodity-values back upon it than he first drew out of it. He threw the value M into it and drew out of it the equivalent C; he throws the value C+c back into it, and draws out of it the equivalent M+m.


M was in our example equal to the value of 8,440 pounds of yarn. But he throws 10,000 pounds of yarn into the market, he returns a greater value than he drew out of it. On the other hand, he threw this increased value into it only by virtue of the fact that he obtained a surplus-value through the exploitation of labor-power (this value being expressed by an aliquot part of the product). The mass of commodities becomes a commodity-capital only by virtue of this process, it is the impersonation of the used-up capital value only through it. By the act C'-M' the advanced capital-value is recovered as well as the surplus-value. The realization of both coincides with that series of sales, or with that one sale, of the entire mass of commodities, which is expressed by C'-M'. But this same act of circulation is different for capital-value and surplus-value, because it expresses for each one of these two values a different stage of their circulation, a different section of the series of metamorphoses through which each of them passes in its circulation. The surplus-value c did not come into the world until the process of production began. It appeared for the first time on the commodity-market in the form of commodities. This is its first form of circulation, hence the act c-m is its first circulation act, or its first metamorphosis, which remains to be supplemented by the reverse circulation, or the opposite metamorphosis, M-c.*8


It is different with the circulation which the capital-value C performs in the same circulation act C'-M', and which constitutes for it the circulation act C-M, in which C is equal to P, the M originally advanced. It opened its circulation in the form of M, money-capital, and returns through the act C-M to the same form. In other words, it has now passed through the two opposite stages of the circulation, first M-C, second C-M, and finds itself once more in the form in which it can begin its cycle anew. What constitutes for surplus-value the first transformation of the commodity-form into that of money, constitutes for capital-value its return, or retransformation, into its original money-form.


By means of M-C, money-capital is transformed into an equivalent mass of commodities, L and Pm. These commodities no longer perform the function of commodities, of articles of sale. Their value now exists in the hands of the capitalist who bought them, they represent the value of his productive capital P. And in the function P, productive consumption, they are transformed into commodities substantially different from the means of production, into yarn, in which their value is not only preserved but increased, rising from 422 pounds sterling to 500 pounds sterling. By means of this metamorphosis, the commodities taken from the market in the first stage, M-C, are replaced by commodities of a different substance and value, which now perform the function of commodities, being exchanged for money and sold. The process of production, therefore, appears to us as an interruption of the process of circulation of capital-value, since up to production it has passed only through the phase M-C. It passes through the second and concluding phase, C-M, after C has been altered in substance and value. But so far as capital-value, considered by itself, is concerned, it has merely gone through a transformation of its use-form in the process of production. It existed in the form of 422 pounds sterling's worth of L and Pm, while now it exists in the form of 8,440 pounds of yarn valued at 422 pounds sterling. If we consider merely the two circulation phases of capital-value, apart from its surplus-value, we find that it passes through the stages M-C and C-M, in which the second C represents a different use-value, but the same exchange-value as the first C. And the process M-C-M is, therefore, a cycle which requires the return of the value advanced in money to its money-form, because the commodity here changes places twice and in the opposite direction, the first change being from the money to the commodity-form, the second from the commodity to the money-form. Capital-value is retransformed into money.


The same circulation act C'-M', which constituted the second and concluding metamorphosis, a return to the money-form, for capital-value, represents for the surplus-value simultaneously embodied in the commodity-capital, and realized by its exchange for money, its first metamorphosis, its transformation from the commodity to the money-form, C-M, its first circulation phase.


We have, then, two observations to make. First, the final return of capital-value to its original money-form is a function of commodity-capital. Second, this function includes the first transformation of surplus-value from its original commodity-form to that of money. The money-form, then, plays a double role here. On the one hand, it is a return of a value, originally advanced in money, to its old form, a return to that form of value which opened the process. On the other hand, it is the first metamorphosis of a value which originally enters the circulation in the form of a commodity. If the commodities composing the commodity-capital are sold at their value, as we assume, then C plus c is transformed into M plus m, its equivalent. The sold commodity-capital now exists in the hands of the capitalist in the form of M plus m (422 pounds sterling plus 78 pounds sterling, equal to 500 pounds sterling). Capital-value and surplus-value are now present in the form of money, the form of the general equivalent.


At the conclusion of the process, capital-value has resumed the form in which it entered, and can now open a new cycle of the same kind, in the form of money-capital, and go through it. Just because the opening and concluding form of this process is that of money-capital, M, we call this form of the circulation process the circulation of money-capital. It is not the form, but merely the magnitude of the advanced value which is changed in the end.


M plus m is a sum of money of a definite magnitude, in this case 500 pounds sterling. As a result of the circulation of capital, of the sale of commodity-capital, this sum of money contains the capital-value and the surplus-value. And these values are now no longer organically connected, as they were in the yarn, they are now arranged side by side. Their sale has given both of them an independent money form; 211-250th of this money represent the capital value of 422 pounds sterling, and 39-250th constitute the surplus-value of 78 pounds sterling. This separation of capital-value and surplus-value, which results from the sale of the commodity-capital, has not only the formal meaning to which we shall refer presently. It becomes important in the process of the reproduction of capital, according to whether m is entirely, or partially, or not at all, lumped together with M, that is to say according to whether or not it continues to perform the functions of capital-value. Both m and M may also pass through widely different cycles of circulation.


In M', capital has returned to its original form M, to its money-form. But it then has a form, in which it is materialized capital.


There is in the first place a difference of quantity. It was M, 422 pounds sterling. It is now M', 500 pounds sterling, and this difference is expressed by the quantitatively different points M...M' of the cycle, the movement of which is indicated by the dots. M' is greater than M, and M'-M is equal to the surplus-value s. But as a result of this cycle M...M' it is only M' which exists now; it is the product which marks the close of the process of formation of money-capital. M' now exists independently of the movement which it started. This movement is completed, and M' exists in its place.


But M', being M plus m, or in this case 500 pounds sterling, composed of 422 pounds sterling advanced capital plus an increment of 78 pounds sterling, represents at the same time a qualitative relation. It is true that this qualitative relation does not exist outside of the quantitative relation of the parts of one and the same sum. M, the advanced capital, which is now once more present in its original form (422 pounds sterling), exists as the realization of capital. It has not only preserved itself, but also realized its own capital-form, distinguished from m (78 pounds sterling), to which it stands in the relation of creator, m being its fruit, an increment born by it. It has realized its capital-form, because it is a value which has created more value. M' exists as a capital relation. M no longer appears as mere money, but it is explicitly used as money-capital, as a value which has utilized itself by creating a higher value than itself. M acts as capital by virtue of its relation to another part of M', which it has created. Thus M' appears as a sum of values expressing the capital relation, being differentiated into functionally different parts.


But this expresses only a result, without showing the intermediate process which caused it.


Parts of value as such are not qualitatively different from one another, except in so far as they are values of different articles, of concrete things, embodied in different use-values. They are values of different commodities, and this difference is not due to their character as exchange-values. In money, all differences of commodities are extinguished, because it is an equivalent form common to all of them. A sum of money of 500 pounds sterling consists of equal elements of one pounds sterling each. Since the intermediate links of descent are extinguished in the simple form of this sum of money. and all traces of the specific differences of the individual parts of capital in the productive process have disappeared, there exists only the mental distinction between the main sum of 422 pounds sterling, which was the capital advanced, and a surplus sum of 78 pounds sterling.


Or, again, let M' be equal to 110 pounds sterling, of which 100 may be equal to the main sum M and 10 equal to the surplus-value s. There is an absolute homogeneity, an absence of distinctions, between the two constituent parts of the sum of 110 pounds sterling. Any 10 pounds of this sum always constitute 1-11th of the sum of 110 pounds regardless of the fact that they are also 1-10th of the advanced main sum of 100 pounds, or the excess of 10 pounds above it. Main sum and surplus sum (capital and surplus-value), may simply be expressed as fractional parts of the total sum. In our illustration, 10-11th form the main sum, and 1-11th the surplus sum. Materialized capital, at the end of its cycle, therefore appears as an undifferentiated expression, the money expression, of the capital relation.


True, this applies also to C' (C plus c). But there is this difference, that C', of which C and c are also proportional parts of the same homogeneous mass of commodities, indicates its origin P, the immediate product of which it is, while in M', a form derived immediately from circulation, the direct relation to P is obliterated.


The undifferentiated distinction between the main sum and the surplus sum, which are contained in M', so far as this expresses the result of the movement M...M', disappears as soon as it performs its active function of money-capital and is not preserved as a fixed expression of materialized industrial capital. The circulation of money-capital can never begin with M' (although M' now performs the function of M). It can begin only with M, that is to say, it can never begin as an expression of the capital relation, but only as an advance of capital-value. As soon as the 500 pounds sterling are once more advanced as capital, in order to be again utilized, they constitute a point of departure, not one of conclusion. Instead of a capital of 422 pounds sterling, a capital of 500 pounds sterling is now advanced. It is more money than before, more capital-value, but the relation between its two constituent parts has disappeared. In fact, a sum of 500 pounds sterling might have served instead of the 422 pounds sterling as the original capital.


It is not an active function of money-capital to materialize in the form of M'; this is rather a function of C'. Even in the simple circulation of commodities, first in C-M, then in M-C2, money M does not figure actively until in the second movement, M-C.2 Its embodiment in the form of M is the result of the first act, by virtue of which it becomes a transformation of C.1 The capital relation contained in M', the relation of its constituent parts in the form of capital-value and surplus-value, assumes a functional importance only in so far as the repeated cycle M...M' splits M' into two circulations, one of them a circulation of capital, the other of surplus-value. In this case these two parts perform not only quantitatively, but also qualitatively different functions, M others than m. But considered by itself, M...M' does not include the consumption of the capitalist, but emphatically only the self-utilization and accumulation of money-capital, the latter function expressing itself at the outset as a periodical augmentation of ever renewed advances of money-capital.


Although M' (M plus m) is the undifferentiated form of capital, it is at the same time a materialization of money-capital, it is money which has generated more money. But this is different from the role played by money-capital in the first stage, M-C. In this first stage, M circulates as money. It assumes the functions of money-capital only because it cannot serve as money unless it assumes the form of money, because it cannot transform itself in any other way into the component parts of P, L and Pm, which stand opposed to it in the form of commodities. In this circulation act it serves as money. But as this act is the first stage in the circulation of capital-value, it is also a function of money-capital, by virtue of the specific use-value of the commodities L and Pm which are bought by it. M', on the other hand, composed of M, the capital-value, and m, the surplus-value created by M, stands for materialized capital-value, expresses the purpose and the outcome, the function of the total process of circulation of capital. The fact that it expresses this outcome in the form of money, of materialized money-capital, is due to the capital-character of money-capital, not to its money-character; for capital opened the process of circulation in the form of an advance of money. Its return to the money-form, as we have seen, is a function of C', not of money-capital. As for the difference between M and M', it is simply m, the money-form of c, the increment of C. For M' is composed of M plus m only because C' was composed of C plus c. In C', this difference and the relation of capital-value to its product, surplus-value, is already present and expressed, before both of them are transformed into M'. And in this form, these two values appear independently side by side and may, therefore, be employed in separate and distinct functions.


M' is the outcome of the materialization of C'. Both M' and C' are different forms of utilized capital-value, one of them the commodity, the other the money-form. Both of them share the quality of being utilized capital-value. Both of them are materialized capital, because capital-value here exists simultaneously with its product, surplus-value, although it is true that this relation is expressed in the undifferentiated form of the proportion of two parts of one and the same sum of money or commodity-value. But as expressions of capital, and in distinction from the surplus-value produced by it, M' and C' are the same and express the same thing, only in different forms. In so far as they represent utilized value, capital acting in its own role, they express the result of the function of productive capital, the only function in which capital-value generates more value. What is common to both of them, is that money-capital as well as commodity-capital are different modes of existence of capital. Their distinctive and specific functions cannot, therefore, be anything else but the difference between the functions of money and of commodities. Commodity-capital, the direct product of the capitalist process of production, indicates its capitalist origin and is, therefore, to that extent more rational and less difficult to understand than money-capital, in which every trace of this process has disappeared. In general, all special use-forms of commodities disappear in money.


It is only when M' itself figures as commodity-capital, when it is the direct outcome of a productive process, instead of being a transformed product of this process, that it loses its bizarre form, that is to say, in the production of money itself. In the production of gold, for instance, the formula would be M-C...P...M (M plus m), and M' would here figure as a commodity, because P furnishes more gold than had been advanced for the elements of production contained in the first money-capital M. In this case, the irrational nature of the formula M...M' (M plus m) disappears. Here a part of a certain sum of money appears as the mother of another part of the same sum of money.

IV. The Rotation as a Whole.


We have seen that the process of circulation is interrupted at the end of its first phase, M-C. by P, which makes the commodities L and Pm parts of the substance and value of productive capital and consumes them. The result of this productive consumption is a new commodity C', which is of different composition and value than the commodities L and Pm. The interrupted process of circulation, C-M, must be completed by M-C. The basis of this second and concluding phase of circulation is C', a commodity of different composition and value than C. The process of circulation therefore appears first as M-C,1 then as C 2-M', the C2 in this second phase representing a greater value and a different use-value than C1, due to the interruption caused by the function of P which is the production of C' from elements of C, embodied in the productive capital P. The first form assumed by capital (vol. I, chap. IV), viz., M-C-M', or extended first M-C,1 second C1-M', shows the same commodity twice. It is the same commodity which is exchanged for money in the first phase and again exchanged for more money in the second phase. In spite of this essential difference, these two modes of circulation share the peculiarity of transforming in their first phase money into commodities, and in the second phase commodities into money, so that the money spent in the first phase returns in the second. On the one hand, both have in common this return of money to its starting point, on the other hand the excess of the returned money over the money first advanced. To this extent, the formula M-C...C'-M' is apparently contained in the general formula M-C-M'.


It follows furthermore that equal quantities of simultaneously existing values are placed in opposition to one another and exchanged in the two metamorphoses of circulation represented by M-C and C'-M'. The change of value is due exclusively to the metamorphosis P, the process of production, which thus appears as a natural metamorphosis of capital, as compared to the merely formal metamorphosis of circulation.


Let us now consider the total movement, M-C...P...C'-M', or its more explicit form, M-C...P...C' (C+c) -M' (M+m). Capital here appears as a value which goes through a series of connected metamorphoses conditioned on one another and representing so many phases of the total process. Two of these phases belong to the sphere of circulation, one of them to that of production. In each one of these phases, capital-value has a different form corresponding to a different, special, function. Within this cycle, value does not only maintain itself at the magnitude in which it was originally advanced, but it increases. Finally, in the concluding stage, it returns to the same form which it had at the beginning of the cycle. This total movement constitutes the process of rotation as a whole.


The two forms assumed by capital-value are that of money-capital and commodity-capital. In the stage of production, its form is that of productive capital. The capital which assumes these different forms in the course of its total process of rotation, discards them one after the other, and performs a special function in each one of them, is industrial capital. The term industrial applies to every branch of industry run on a capitalist basis.


Money-capital, commodity-capital, productive capital are not, therefore, terms indicating independent classes of capital, nor are their functions processes of independent and separate branches of industry. They are here used only to indicate special functions of industrial capital, assumed by it seriatim.


The circulation of capital proceeds normally only so long as its various phases flow uninterruptedly one into the other. If capital stops short in its first phase M-C, money-capital assumes the rigid form of a hoard; if it stops in the phase of production, the means of production remain lifeless on one side, while labor-power remains unemployed on the other; and if capital stops short in its last phase C'-M', masses of unsold commodities accumulate and clog the flow of rotation.


At the same time, it is a matter of course that the rotation of capital includes the stopping of capital for a certain length of time in the various sections of its cycle. In each of these sections, industrial capital is poured into a definite mold, being either money-capital, productive capital, or commodity-capital. It does not assume a form in which it may enter a new metamorphosis, until it has gone through the function corresponding to the form preceding the new metamorphosis. In order to make this plain, we have assumed in our illustration, that the capital-value of the mass of commodities created in the phase of production is equal to the total sum of values originally advanced in the form of money, or, in other words, that the entire capital-value advanced in the form of money enters undivided from one stage into the next. Now we have seen (vol. I, chap. IV) that a part of the constant capital, the means of production proper, such as machinery, always serve repeatedly, for a greater or smaller number of times, in the same processes of production, so that they transfer their values piece-meal to the products. We shall see later, to what extent this circumstance modifies the process of rotation of capital. For the present, it suffices to say this: In our illustration, the value of the productive capital of 422 pounds sterling contained only the average wear and tear of buildings, machinery, etc., that is to say only that part of value which they transferred in the transformation of 10,600 pounds of cotton to 10,000 pounds of yarn, which represents the product of one week's spinning, or of 60 hours. In the means of production, into which the advanced constant capital of 372 pounds sterling is transformed, the instruments of labor, buildings, machinery, etc., figure only as would objects which were rented in the market for a weekly rate. But this does not change the problem in any way. We have but to multiply the quantity of yarn produced in one week, or 10,000 pounds of yarn, with the number of weeks contained in a certain number of years, in order to transfer the entire value of the means of production bought and consumed during this period. It is then plain that the advanced money-capital must first be transformed into these means of production, must first have gone through the phase M-C, before it can be used as productive capital, P. And it is likewise plain that, in our illustration, the capital value of 422 pounds sterling, embodied in the yarn during the process of production, cannot become a part of the value of the 10,000 pounds of yarn and enter the circulation phase C'-M', until it has been produced. The yarn cannot be sold, until it has been spun.


In the general formula, the product of P is regarded as a material thing different from the elements of the productive capital, as an object existing apart from the process of production and having a different use-value than the elements of production. And if the fruit of production assumes the form of such an object, it always corresponds to this description, even if a part of it should re-enter production as one of its elements. Grain, for instance, serves as seed for its own reproduction, but the final product is always grain and has a different composition than the elements used in its production, such as labor-power, implements, and fertilizer. But there are certain independent branches of industry, in which the result of the productive process is not a new material product, not a commodity. Among these, only the industries representing communication, such as transportation proper for commodities and human beings, and the transmission of communications, letters, telegrams, etc., are economically important.


A. Cuprov*9 says on this score: "The manufacturer may first produce articles and then look for consumers" (his product, having been completed in the process of production, is transferred to the process of circulation as a separate commodity). "Production and consumption thus appear as two acts distinct from one another in space and time. In the transportation industry, which does not create any new products, but merely transfers men and things, these two acts coincide; its services (change of place) must be consumed at the same time that they are produced. For this reason the distance, within which railroads can find customers, extends at best 50 verst (53 kilometers or about 30 miles) on either side of their tracks."


The result in the transportation of either men or commodities is a change of place. Yarn, for instance, is thus transferred from England, where it was produced, to India.


Now transportation, as an industry, sells this change of location. This utility is inseparably connected with the process of transportation, which is the productive process of transportation. Men and commodities travel by the help of the means of transportation, and this traveling, this change of location, constitutes the production in which these means of transportation are consumed. The utility of transportation can be consumed only in this process of production. It does not exist as a use-value apart from this process, it does not, like other commodities, serve as a commodity which circulates after its process of production. The exchange value of this utility is determined, like that of any other commodity, by the value of the elements of production (labor-power and means of production) plus the surplus-value created by the surplus-labor of the laborers employed in transportation. This utility also entertains the same relations to consumption that all other commodities do. If it is consumed individually, its value is used up in consumption; if it is consumed productively by entering into the process of production of the transported commodities, its value is added to that of the commodity. The formula for the transportation industry would, therefore, be M-C...P-M', since it is the process of production itself which is paid for and consumed, not a product distinct and separate from it. This formula has almost the same form as that of the precious metals, only with the difference, that in this case M' represents the changed form of the utility resulting during the process of production, while in the case of the precious metals it represents the natural form of the gold or silver obtained in this process and transferred from it to other stages.


Industrial capital is the only form of existence of capital, in which not only the appropriation of surplus value or surplus product, but also its creation is a function of capital. Therefore it gives to production its capitalist character. Its existence includes that of class antagonisms between capitalists and laborers. To the extent that it assumes control over social production, the technique and social organization of the labor process are revolutionized and with them the economic and historical type of society. The other classes of capital, which appear before industrial capital amid past or declining conditions of social production, are not only subordinated to it and suffer changes in the mechanism of their functions corresponding to it, but move on it as a basis, live and die, stand and fall with this basis. Money-capital and commodity-capital, so far as they still persist as independent branches of industry along with industrial capital, are nothing but modes of existence of different functional forms either assumed or discarded by industrial capital in the sphere of circulation, made independent and developed one-sidedly by the social division of labor.


The cycle M...M' on one side intermingles with the general circulation of commodities, proceeds from it and flows back into it, is a part of it. On the other hand, it is for the individual capitalist an independent movement of his capital value, taking place partly within the general circulation of commodities, partly outside of it, but always preserving its independent character. For in the first place, its two phases taking place in the sphere of circulation, M-C and C'-M', have functionally different characters as functions of capital circulation. In M-C, the commodity C is composed of labor-power and means of production; in C'-M', capital value is realized plus surplus-value. In the second place, the process of production, P, includes productive consumption. In the third place, the return of money to its starting point makes of the cycle M...M' a process of circulation complete in itself.


Every individual capital is therefore, on the one hand, in its two phases M-C and C'-M', an active element in the general circulation of commodities, with which it is connected either as money or as a commodity. Thus it forms a link in the general chain of metamorphoses in the world of commodities. On the other hand, it goes through its own independent circulation within the general circulation. Its independent circulation passes through the sphere of production and returns to its starting point in the same form in which it left that point. Within its own circulation, which includes its natural metamorphosis in the process of production, it changes at the same time its value. It returns not only as the same money-value, but as an increased money-value.


Let us finally consider M-C...P...C'-M' as a special form of the process of circulation of capital, apart from the other forms which we shall analyze later. It is distinguished by the following points:


1. It appears as the circulation of money-capital, because industrial capital in its money form, as money-capital, forms the starting and terminal point of its total process. The formula itself expresses the fact that money is not expended as money at this stage, but advanced as the money-form of capital. It expresses furthermore that exchange-value, not use-value, is the determining aim of this movement. Just because the money-form of this value is its tangible and independent form, the compelling motive of capitalist production, the making of money, is most fittingly expressed by the circulation formula M...M.' The process of production appears merely as an indispensable and intermediate link, as a necessary evil of money-making. All nations with a capitalist mode of production are seized periodically by a feverish attempt to make money without the mediation of the process of production.


2. The stage of production, the function of P, represents an interruption of the two phases of circulation M-C...C'-M', which in their turn represent links in the simple circulation M-C-M'. The process of production appears formally and essentially in circulation as that which is typical of capitalist production, that is to say as a mere means of utilizing previously advanced values. The accumulation of wealth is the purpose of production.


3. Since the series of phases is opened by M-C, the second link of the circulation is C'-M.' In other words, the starting point is M, or the money-capital to be utilized, the terminal point M', or the utilized money-capital M plus m, in which M figures together with its offspring m. This distinguishes the circulation of M from that of the two other cycles P and C', in two ways. On one side, its two extremes are represented by the money-form. And money is the tangible form of value, the value of the product in its independent form, in which every trace of the use-value of the commodities has been extinguished. On the other side, the formula P...P is not necessarily transformed into P...P' (P plus p,) and in the form C-C', no difference in value is visible between the two extremes. It is, therefore, characteristic for the formula M-M' that capital value is its starting point, and utilized capital value its terminal point, so that advanced capital value appears as the means, and utilized capital value as the end of the entire operation. And furthermore, this relation is expressed in the form of money, in the form of independent value, so that money-capital is money generating more money. The generation of surplus-value by value is not only expressed as the Alpha and Omega of the process, but more explicitly in the form of glittering money.


4. Since M', the money-capital realized as a result of C'-M', the supplementary and concluding form of M-C, has absolutely the same form in which it began its first circulation, it can immediately begin the same circulation over again as an increased (accumulated) money-capital, or as M' equal to M plus m. And it is not expressed in the formula M-M' that, in the repetition of the cycle, the circulation of m separates from that of M. Considered in its complete form, the circulation of money capital expresses simply the process of utilization and accumulation. The consumption in it is productive consumption, as shown by the formula M-C and it is only this which is included in this circulation of individual capital. M-L means L-M, or C-M, on the part of the laborer. It is therefore the first phase of circulation which promotes his individual consumption, thus: L-M-C (means of subsistence). The second phase, M-C, no longer falls within the circulation of individual capital, but it is initiated by individual capital and an indispensable premise for it, since the laborer must above all live and maintain himself by individual consumption, in order to be always on the market for exploitation by the capitalist. But this consumption is here only assumed as the indispensable condition for the productive consumption of labor power by capital, and it is, therefore, considered only in so far as it preserves and reproduces his labor power by means of his individual consumption. But the means of production Pm, the commodities proper which enter into the circulation of capital, are only material feeding the productive consumption. The act L-M promotes the individual consumption of the laborer, the transformation of means of subsistence into flesh and blood. It is true, that the capitalist must also be present, must also live and consume in order to perform the function of a capitalist. To this end, he has, indeed, but to consume in the same way as the laborer, and this is all that is assumed in this form of the circulation process. But it is not formally expressed, since the term M' concludes the formula and indicates that it may at once re-enter on its function of increased money-capital.


In the formula C'-M', the sale of C' is directly indicated; but this sale C'-M' on the part of one is M-C, or the purchase of commodities, on the part of another, and in the last analysis a commodity is bought only for its use-value, in order to enter (leaving intermediate sales out of consideration) into the process of consumption, and this may be either productive or individual consumption, according to the nature of the commodity. But this consumption does not enter into the circulation of individual capital, the product of which is C'. This product is eliminated from this circulation from the moment that it is sold. C' is explicitly produced for consumption by others. For this reason we note that certain spokesmen of the mercantile system (which is based on the formula M-C...P...C'-M') deliver lengthy sermons to the effect that the individual capitalist should consume only in his capacity as a worker, that capitalist nations should let other and less intelligent nations consume their own and other commodities, and that a capitalist nation should devote itself for life to the productive consumption of commodities. These sermons frequently remind us in form and content of analogous ascetic exhortations of the fathers of the church.


The rotation process of capital is therefore a combination of circulation and production, it includes both. In so far as the two phases M-C and C'-M' are processes of circulation, the rotation of capital is a part of the general circulation of commodities. But in so far as they are definite sections performing a peculiar function in the rotation of capital, which combines the spheres of circulation and production, capital goes through its own circulation in the general circulation of commodities. The general circulation of commodities serves capital in its first stage as a means of assuming that form in which it can perform the function of productive capital; in its second stage, it serves to eliminate the commodity function in which capital cannot renew its circulation; at the same time it enables capital to separate its own circulation from that of the surplus-value created by it.


The circulation of money-capital is therefore the most one-sided, and thus the most convincing and typical form of the circulation of industrial capital. Its aim and compelling motive, the utilization of value, the making and accumulation of money, is thus most clearly revealed. Buying in order to sell dearer is its slogan. The first phase M-C also indicates the origin of the elements of productive capital in the commodity market, or more generally, the dependence of the capitalist mode of production on circulation, on commerce. The circulation of money-capital is not merely the production of commodities; it is itself possible only through circulation of commodities and based on it. This is plain from the fact that the term M belongs to circulation and represents the first and most typical form of advanced capital-value. This is not the case in the other two forms of circulation.


The circulation of money-capital always remains the general expression of industrial capital, because it always implies the utilization of the advanced value. In P...P, the money-character of capital is shown only in the price of the elements of production as a value expressed in money-terms for the purpose of calculation and book-keeping.


M...M' becomes a special form of the circulation of industrial capital when new capital is first advanced in the form of money and then returned in the same form, either in passing from one branch of industry to another, or in the case that industrial capital retires from business. This includes the capital function of the surplus-value first advanced in the form of money, and becomes most evident when surplus-value performs a function in some other business than the one in which it originated. M...M' may be the first circulation of a certain capital; it may be the last; it may be regarded as the form of the total social capital; it is that form of capital which is newly invested, either as a recently accumulated capital in the form of money, or as some old capital which is entirely transformed into money for the purpose of transfer from one branch of industry to another.


Being a form always contained in all circulations, money-capital performs this circulation precisely for that part of capital which produces surplus-value, viz., variable capital. The normal form of an advance in wages is payment in money; this process must be renewed in short intervals, because the laborer lives from hand to mouth. In his relation to the laborer, the capitalist must therefore always be a money-capitalist, and his capital must be money-capital. There can be no direct or indirect balancing of accounts in this case, such as we find in the purchase of means of production or in the sale of productive commodities, where the greater part of the money capital really exists in the form of commodities, while the money is mainly used for purposes of calculation and figures in cash only in the balancing of accounts. On the other hand, a part of the surplus-value arising out of variable capital is spent by the capitalist for his individual consumption, which is a part of the retail trade, and this surplus-value is in the last analysis always expended in the form of money. It does not matter how large or small may be this part of surplus-value. Variable capital always appears anew as money-capital invested in wages (M-L) and m as surplus-value which may be expended for the individual consumption of the capitalist. So that M, capital advanced for wages, and m, its increment, are necessarily held and spent in the form of money.


The formula M-C...P...C'-M', with its result M' equal to M plus m, is, in a certain sense, deceptive, owing to the existence of the advanced and surplus-value in the form of the general equivalent, money. The emphasis in this formula is not on the utilization of value, but on the money-form of this process, on the fact that more money-value is finally drawn out of the circulation than had originally been advanced; in other words, the emphasis is on the multiplication of the amount of gold and silver belonging to the capitalist. The so-called monetary system is merely the expression of the abstract formula M-C-M', a movement which takes place exclusively in the circulation. And this system cannot explain the two phases M-C and C-M' in any other way than by declaring that C is sold above its value in the second phase and thus draws more money out of the circulation than was put into it in its purchase. But if M-C...P...C'-M' becomes the exclusive form of circulation, it is the basis of a more highly developed mercantile system, in which not only the circulation of commodities, but also their production, is recognized as a necessary element.


The illusive character of M-C...P...C'-M' and the resulting illusive interpretation always appear, whenever this form is considered as rigid, not as a flowing and ever renewed movement; in other words, they appear whenever this formula is considered not as one section of circulation, but as the exclusive form of circulation. But it itself points toward other forms.


In the first place, this entire circulation is conditioned on the capitalist character of the process of production, and considers it and the specific social conditions created by it as the basis. M-C is equal to M-C but M-L assumes the existence of the wage laborer, and regards the means of production as parts of productive capital. It assumes, therefore, that the process of labor and of utilization, the process of production, is a function of capital.


In the second place, if M...M' is repeated, the return to the money-form is just as transient as the money-form in the first phase. M-C disappears and makes room for P. The recurrent advance of money-capital and its equally persistent return in the form of money appear merely as passing moments in the general circulation.


In the third place; the repeated formula has this form: M-C...P...C'-M'. M-C...P...C'-M'. M-C...P...etc.


Beginning with the second repetition of the circulation, the cycle P...C'-M'.M-C...P appears, before the second circulation of M is completed, and all other cycles may be considered under the form of P...C'-M-C...P, so that the first phase of the first circulation is merely the passing introduction for the constantly repeated circulation of the productive capital. And this is indeed the case for the first time in the investment of industrial capital in the form of money.


On the other hand, before the second circulation of P is completed, the first circulation, that of the commodity-capital, as shown in the formula C'-M'. M-C...P...C' (or abridged C'...C') has preceded. Thus the first form already contains the other two, and the money-form disappears, so far as it is a general equivalent and not merely an expression of value used for calculation.


Finally, if we consider some newly invested capital going for the first time through the circulation M-C...P...C'-M', then M-C is the introductory phase, the preparation for the first process of production undertaken by this capital. This phase M-C is not considered as existing, but is caused by the requirements of the process of production. But this applies only to this individual capital. The general form of the circulation of industrial capital is the circulation of money-capital, whenever the capitalist mode of production exists and with it the social conditions corresponding to it. It is therefore the capitalist mode of production which is the first condition for the circulation of money-capital, and if it is not assumed for the first phase of a newly invested industrial capital, it is certainly assumed for all others. The continuous movement of this process of production requires the persistent renewal of the cycle P...P. Even the first stage, M-C, reveals this basic condition. For it requires on one side the existence of the wage-working class. On the other side, that which is M-C for the buyer of means of production, is C'-M' for their seller. Hence C' presupposes the existence of commodity-capital, and thus of commodities as the result of capitalist production, and this implies the function of productive capital.

Notes for this chapter

From Manuscript II.
Beginning of Manuscript VII, started July 2, 1878.
End of Manuscript VII. Beginning of Manuscript VI.
End of Manuscript VI. Beginning of Manuscript V.
This is true, no matter how we separate capital-value and surplus-value. 10,000 lbs. of yarn contain 1,560 lbs., or 78 pounds sterling, surplus-value; but one lb., or one shilling, likewise contains 2,496 ounces, or 1,728 pence of surplus-value.
A. Cuprov: Zeleznodoroznoje chostjajstvo, Moskva, 1875, pg. 75 and 76.

Part I, Chapter II.

End of Notes

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