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.
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Part II, Chapter XII


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


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


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


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


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


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


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


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


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


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

1. The prolonged stay in the sphere of production. The capital invested, for instance, in the labor-power, raw, and auxiliary materials of the first week, the same as the portions of value transferred to the product by the fixed capital, are held in the sphere of production for the entire term of three months, and being incorporated in a growing and as yet unfinished product, cannot pass into the circulation of commodities.
2. Since the working period required for the completion of the productive act lasts three months, and forms one connected labor-process, a new quantity of circulating capital must be continually added week after week to the preceding quantity. The amount of the successively invested additional capital grows, therefore, with the length of the working period.


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


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


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


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


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


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


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


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


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


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


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


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


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

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