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.
21 of 25

Part II, Chapter XVII


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


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


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


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


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


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


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


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


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


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


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


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

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

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


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


There is either reproduction on a simple scale.


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



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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


The general reply has already been given: When a mass of commodities valued at x times 1,000 p. st. has to circulate, it changes absolutely nothing in the quantity of the money required for this circulation, whether this mass of commodities contains any surplus-value or not, and whether this mass of commodities has been produced capitalistically or not. In other words, the problem itself does not exist. All other conditions being given, such as velocity of circulation of money, etc., a definite sum of money is required in order to circulate the value of commodities worth x times 1,000 p. st., quite independently of the fact how much or how little of this value falls to the share of the direct producers of these commodities. So far as any problem exists here, it coincides with the general problem: Where does all the money required for the circulation of the commodities of a certain country come from?


However, from the point of view of capitalist production, the semblance of a special problem does indeed exist. It is in the present case the capitalist who appears as the point of departure, who throws money into circulation. The money, which the laborer expends for the payment of his means of subsistence, exists previously as the money form of the variable capital and is, therefore, thrown originally into circulation by the capitalist as a medium of buying labor-power and paying for it. The capitalist furthermore throws into circulation the money which constitutes originally the money-form of his constant, fixed and circulating, capital; he expends it as a medium of purchase, or payment, for materials of production and instruments of labor. But beyond this, the capitalist no longer appears as the starting point of the quantity of money in circulation. Now, there are only two points of departure: The capitalist and the laborer. All third classes of persons must either receive money for their services from these two classes, or, to the extent that they receive it without any equivalent services, they are joint owners of the surplus-value in the form of rent, interest, etc. The fact that the surplus-value does not all stay in the pocket of the industrial capitalist, but must be shared by him with other persons, has nothing to do with the present question. The question is: How does he monetize his surplus-value, not, how does he divide the money later after he has secured it? For the present case, the capitalist may as well be regarded as the sole owner of his surplus-value. As for the laborer, it has already been said that he is but the secondary point of departure, while the capitalist is the primary starting point of the money thrown by the laborer into circulation. The money first advanced as variable capital is going through its second circulation, when the laborer spends it for the payment of means of subsistence.


The capitalist class, then, remains the sole point of departure of the circulation of money. If they need 400 p. st. for the payment of means of production, and 100 p. st. for the payment of labor-power, they throw 500 p. st. into circulation. But the surplus-value incorporated in the product, with a rate of surplus-value of 100%, is equal to the value of 100 p. st. How can they continually draw 600 p. st. out of circulation, when they continually throw only 500 p. st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.


Exception is here made of the fact that the sum of 400 p. st. may, perhaps, suffice, when turned over ten times, to circulate means of production valued at 4,000 p. st. and labor-power valued at 1,000 p. st., and that the other 100 p. st. may likewise suffice for the circulation of 1,000 p. st. of surplus-value. The proportion of the sum of money to the value of the commodities circulated by it does not matter here. The problem remains the same. Unless the same pieces of money circulate several times, a capital of 5,000 p. st. must be thrown into circulation, and 1,000 p. st. would be required to monetize the surplus-value. The question is, where this money comes from, whether it be 1,000 or 100 p. st. There is no doubt that it is in excess of the money, capital thrown into the circulation.


Indeed, paradoxical as it may appear at first sight, it is the capitalist class itself that throws the money into circulation which serves for the realization of the surplus-value incorporated in the commodities. But, mark well, it is not thrown into circulation as advanced money, not as capital. The capitalist class spends it for their individual consumption. The money is not advanced by them, although they are the point of departure of its circulation.


Take some individual capitalist, who opens his business, for instance, a capitalist farmer. During the first year, he advances a money-capital of, say, 5,000 p. st., paying 4,000 p. st. for means of production, and 1,000 p. st. for labor-power. Let the rate of surplus-value be 100%, the amount of surplus-value appropriated by him 1,000 p. st. The above 5,000 p. st. comprise all the money advanced by him. But the man must also live, and he does not get any receipts until the end of the year. Take it that his consumption amounts to 1,000 p. st. These he must have in his possession. He may say to himself that he has to advance these 1,000 p. st. during the first year. But this advance has only a subjective meaning, for it signifies that he must pay for his individual consumption during the first year out of his own pocket, instead of getting the money for it out of the unpaid labor of his employes. He does not advance this money as capital. He spends it, pays it out as an equivalent for means of subsistence which he consumes. This value is spent by him as money, thrown as such into circulation and withdrawn from it as commodities. He has consumed commodities of that amount. He has thus ceased to be in any way related to their value. The money with which he paid for this value is now an element of the circulating money. But he has withdrawn the value of this money from circulation in the form of products, and this value is destroyed with the commodities in which it was incorporated. It has disappeared. But at the end of the year he throws commodities worth 6,000 p. st. into circulation and sells them. By this means he recovers: (1) His advanced money-capital of 5,000 p. st.; (2) the monetized surplus-value of 1,000 p. st. He had thrown 5,000 p. st. into circulation when he advanced capital, and he withdraws from it 6,000 p. st., 5,000 p. st. of which cover his capital, and 1,000 p. st., his surplus-value. The last 1,000 p. st. are monetized with the money which he had himself thrown into circulation, not as a capitalist, but as a consumer, not advanced, but spent. They now flow back to him as the money-form of the surplus-value produced by him. And henceforth this operation is repeated every year. But beginning with the second year, the 1,000 p. st. which he spends are continually the converted form, the money-form of surplus-value produced by him. He spends it annually and it flows back annually.


If his capital were turned over more frequently in one year, it would not alter this condition of things, except so far as the time is concerned, and thus the size of the amount which he would have to throw into circulation, over and above his advanced money-capital, for his individual consumption.


This money is not thrown into circulation by the capitalist as money. It is rather inherent in the character of a capitalist to be able to live on means in his possession until some surplus-value flows back to him.


In the present case we had assumed, that the sum of money, which the capitalist throws into circulation until the first surplus-value flows back to him, is exactly equal to the surplus-value which he is going to produce and monetize. This is obviously an arbitrary assumption, so far as the individual capitalist is concerned. But it must be correct when applied to the entire capitalist class, when simple reproduction is assumed. It expresses the same thing that this assumption does, namely, that the entire surplus-value is consumed unproductively, but it only, not any portion of the original capital stock.


It had been previously assumed, that the entire production of precious metals (500 p. st.) sufficed only for the wear and tear of the money.


The capitalists producing gold possess their entire product in gold, that portion which replaces constant capital as well as that which replaces variable capital and that consisting of surplus-value. A portion of the social surplus-value, therefore, consists of gold, not of a product which is monetized by means of circulation. It consists from the outset of gold and is thrown into circulation in order to draw products out of it. The same applies in this case to wages, to variable capital, and to the part replacing the advanced constant capital. Hence, while a part of the capitalist class throws into circulation commodities greater in value, (by the amount of the surplus-value) than the money-capital advanced by them, another part of the capitalist class throws into circulation money of greater value (by the amount of the surplus-value) than the commodities which they continually withdraw from circulation for the production of gold. While one part of the capitalist class pumps continually more gold out of the circulation than they throw into it, another part of them who produce gold pump continually more gold into it than they take out in means of production.


Although a part of this product of 500 p. st. in gold is surplus-value of the gold-producers, still the entire sum is intended only to replace the money worn out in the circulation of commodities. It is immaterial for this purpose, how much of this gold monetizes the surplus-value incorporated in the commodities, and how much of their other constituents.


By transferring the production of gold from one country to another, nothing is changed in the fundamental condition of the matter. One part of the social labor-power and the social means of production of the country A is converted into a product, for instance, linen, valued at 500 p. st., which is exported to the country B in order to be there traded for gold. The productive capital employed for this purpose by the country A throws no more commodities, as distinguished from money, upon the market of this country than it would if it were directly engaged in the production of gold. This product of A is represented by 500 p. st. in gold, and enters into the circulation of this country only in money. That portion of the social surplus-value which is contained in this product exists directly in the form of money, and never in any other form for the country A. Although, from the point of view of the capitalist, only a part of the product represents surplus-value, and another part replaces capital, still the question as to how much of this gold replaces constant, and how much variable capital, and how much of it represents surplus-value, depends exclusively on the respective proportions which wages and surplus-value constitute of the value of the circulating commodities. That portion which represents surplus-value is distributed among the various members of the capitalist class. Although this surplus-value is continually spent by them for individual consumption and recovered by the sale of new products—it is precisely this purchase and sale which circulates the money required for the monetization of the surplus-value among them—there is nevertheless a portion of the social surplus-value, in the form of money, in varying proportions, in the pockets of the capitalists, just as a portion of the wages stays during a certain part of the week in the pockets of the laborers in the form of money. And this portion is not limited by that portion of the money-product which forms originally the surplus-value of the capitalists producing gold, but, as we have said, by the proportion in which the above product of 500 p. st. is generally distributed between capitalists and laborers, and in which the commodity-supply to be circulated consists of surplus-value and other constituents of value.


However, that portion of surplus-value, which does not exist in other commodities, but outside of them in the form of money, consists of a portion of the annually produced gold only to the extent that a portion of the annual production of gold circulates for the realization of surplus-value. The other portion of money, which is continually in the hands of the capitalists, in varying portions, being the money-form of their surplus-value, is not an element of the annually produced gold, but of the masses of money previously accumulated in the country.


According to our assumption, the annual production of gold just covers the annual wear of money, to the amount of 500 p. st. If we keep in mind these 500 p. st., and make abstraction of that portion of the annually produced mass of commodities which is circulated by means of previously accumulated money, then the surplus-value incorporated in the commodities will find money for its monetization in circulation for the simple reason that surplus-value is annually produced in the form of gold on the other side. The same applies to the other parts of the gold product which replace the advanced money-capital.


Now, two things are to be noted here.


In the first place, it follows that the surplus-value spent by the capitalists as money, as well as the variable and other productive capital advanced by them in money is actually a product of the laborers, namely of those engaged in the production of gold. They produce anew not only that portion of gold which is "advanced" to them as wages, but also that portion of gold in which the surplus-value of the capitalist gold producers is directly embodied. As for that portion of the gold product, which replaces only the constant capital-value advanced for its production, it re-appears in the form of money (or a product in general) only through the annual labor of the working men. In the beginning of the business, it was originally expended in money by the capitalists, and this money was not newly produced, but formed a part of the circulating mass of social money. But to the extent that it is replaced by a new product, by additional money, it is the annual product of the laborer. The advance on the part of the capitalist appears here likewise merely as a form, which owes its existence to the fact that the laborer is neither the owner of his own means of production, nor able to command, during his production, the means of subsistence produced by other laborers.


In the second place, as concerns that mass of money which exists independently of this annual reproduction of 500 p. st., either in the form of a hoard, or of circulating money, things must be, or rather must have been originally just as they still are with reference to these 500 p. st. annually. We shall return to this point at the close of this section. For the present, we wish to make a few other remarks.


We have seen during our study of the turn-over, that, other circumstances remaining equal, a change in the length of the periods of turn-over requires different amounts of money-capital, in order to carry on production on the same scale. The elasticity of the money-circulation must, therefore be sufficient to adapt itself to this fluctuation of expansion and contraction.


If we furthermore assume other circumstances as equal—the length, intensity, and productivity of the working day also remaining unchanged—but a different division of the value of the product, between wages and surplus-value, so that either the former rise and the latter fall, or vice versa, the mass of the circulating money is not touched thereby. This change can take place without any expansion or contraction of the mass of money in circulation. Let us consider particularly the case in which there would be a general rise in wages, so that, under the given assumptions, there would be a general fall in the rate of surplus-value, while there would not be any change, also according to our assumption, in the mass of circulating commodities. In this case, there should be indeed an increase of the money-capital which must be advanced as variable capital in the quantity of money which serves for this purpose. But to the exact extent that the amount of money required for the function of variable capital grows, does the surplus-value decrease, and thus the amount of money required for its realization. The amount of money required for the realization of the values of the commodities is not affected thereby, any more than this value itself. The cost price of the commodity rises for the individual capitalist, but its social price of production remains unchanged. That which is changed is the proportion, in which, apart from the constant portion of its value, the price of production stands to wages and profits.


But, it is argued, a greater outlay of variable capital (the value of the money is, of course, considered the same) means a larger amount of money in the hands of the laborer. This causes a greater demand for commodities on the part of the laborer. This, in turn, leads to a rise in the price of commodities. Or, it is said: If wages rise, the capitalists raise the prices of their commodities. In either case, the general rise in wages causes a rise in the prices of commodities. Hence a greater amount of money is needed for the circulation of commodities, no matter whether the rise in prices is explained in this or that way.


Reply to the first argument: In consequence of a rise in wages, especially the demand of the laborers for the necessities of life will rise. In a lesser degree their demand for articles of luxury will increase, or the demand will be developed for things which did not generally belong to the scope of their consumption. The sudden and increased demand for the necessities of life will doubtless raise their prices momentarily. As a result, a greater portion of the social capital will be invested in the production of the necessities of life, and a smaller portion in the production of articles of luxury, since these fall in price on account of the decrease in surplus-value and the consequent decrease in the demand of the capitalists for these articles. And to the extent that the laborers themselves buy articles of luxury, the rise in their wages—to this degree—does not promote an increase in the prices of necessities of life, but simply fills the place of the buyers of luxuries. More luxuries than before are consumed by laborers, and relatively fewer by capitalists. That is all. After some fluctuations, the value of the circulating commodities is the same as before. As for the momentary fluctuations, they will not have any other effect than to throw unemployed money-capital into the inland circulation, capital which so far had sought employment in speculative enterprises at the stock exchange or in foreign countries.


Reply to the second argument: If it were in the power of the capitalist producers to raise the prices of their commodities at will, they could and would do so without waiting for a rise in wages. Wages would never rise while the prices of commodities were going down. The capitalist class would never resist the trades unions, since the capitalists could always and under all circumstances do what they are now doing exceptionally under definite peculiar, one might say local, circumstances, to wit, to avail themselves of every rise in wages to raise prices much higher and thus pocket greater profits.


The claim that the capitalists can raise the prices of articles of luxury, because the demand for them decreases (in consequence of the reduced demand of the capitalists whose spending money has decreased) would be a very unique application of the law of supply and demand. The prices of articles of luxury fall in consequence of reduced demand to the extent that capitalist buyers are not replaced by laboring buyers, and so far as this replacement takes effect, the demand of the laborers does not result in a rise of the prices of necessities, for the laborers cannot spend that portion of their increased wages for necessities which they spend for luxuries. Consequently capital is withdrawn from the production of luxuries, until their supply in the market is reduced to the measure which corresponds to their altered role in the process of social production. With their production thus reduced, they rise in price, provided their value is otherwise unchanged, to their normal level. So long as this contraction, or this process of compensation, takes place, there is just as constantly, with rising prices of necessities, a migration of capital into the production of these to the degree that it is withdrawn from the other line of business, until the demand is satisfied. Then the balance is restored, and the end of the whole process is that the social capital, including the money-capital, is divided in a different proportion between the production of necessary means of subsistence and that of luxuries.


The entire objection is a scarecrow set up by the capitalists and their apologists in economics.


The facts, which furnish the material for this scarecrow, are of three kinds:

(1). It is the general law of the circulation of money that the quantity of circulating money increases if the total price of the circulating commodities increases, other circumstances remaining the same, regardless of whether this increase of the totality of prices applies to the same quantity of commodities, or to a greater quantity. The effect is then taken for the cause. Wages rise (although rarely and only exceptionally in proportion) with the increasing price of the necessities of life. This rise in wages is a result, not a cause, of the rise in the prices of commodities.
(2). In the case of a partial, or local, rise of wages—that is to say, a rise only in some lines of production—a local rise in the prices of the products of this line may follow. But even this depends on many circumstances, for instance, that wages had not been abnormally depressed previously, so that the rate of profits was abnormally high, that the market is not narrowed by a rise in prices (so that a contraction of its supply previous to the raising of its prices will not be necessary), etc.
(3). In the case of a general rise of wages, the price of the produced commodities rises in lines of business where the variable capital preponderates, but falls, on the other hand, in lines where the constant, or eventually the fixed, capital preponderates.


We found in our study of the simple circulation of commodities (volume I, chapter III, 2), that, even though the money-form of any definite quantity of commodities is infinitesimal within its circulation, still the money in the hand of one man disappears during the transformation of a certain commodity and takes its place in the hands of another, so that commodities are not only exchanged, or replaced by one another, but this mutual exchange of places is also promoted and accompanied by a universal precipitation of money. "When one commodity replaces another, the money commodity sticks to the hands of some third person. Circulation sweats money from every pore." (Vol. I, page 127.) The same fact is expressed, on the basis of capitalist production, of commodities, by the continual existence of a portion of capital in the form of money-capital, and by the retention of a portion of surplus-value in the hands of its owners, likewise in the form of money.


Aside from this, the rotation of money—that is to say, the return of money to its point of departure—so far as it is an element in the turn-over of capital, is a phenomenon entirely different from, or even the reverse of, the circulation of money,*34 which expresses its removal from the point of departure through a number of hands. (Vol. I. page 129.) Nevertheless an accelerated turn-over implies naturally an acceleration of the circulation.


As for the variable capital, if a certain money-capital, say 500 p. st., is turned over ten times in a year, in the form of a variable capital, it is evident that this aliquot part of the quantity of money in circulation circulates ten times its value, or 5,000 p. st. It circulates ten times per year between the capitalist and the laborer. The laborer is paid, and pays, ten times per year with the same aliquot amount of money. If the same variable capital were turned over only once a year, the scale of production remaining the same, there would be only one turn-over of capital per year.


Furthermore: The constant portion of the circulating capital may be, say, 1,000 p. st. If the capital is turned over ten times, the capitalist sells his commodity, and therefore also the constant circulating portion of its value, ten times per year. The same aliquot part of the circulating quantity of money (1,000 p. st.) passes ten times from the hands of its owners into those of the capitalist. This means ten changes of place on the part of this money from one hand into another. In the second place, the capitalist buys means of production ten times per year. This again implies ten turn-overs of the money from one hand into another. With regard to the amount of 1,000 p. st., commodities valued at 10,000 p. st. have been sold by the industrial capitalist, and then commodities valued at 10,000 p. st. purchased. By means of 20 circulations of 1,000 p. st. in money a commodity supply of 20,000 p. st. has been circulated.


Finally, with an acceleration of the turn-over, also that portion of money circulates faster, which realizes the surplus-value.


But, on the other hand, an acceleration in the circulation of money does not necessarily imply a more rapid turnover of capital, and thus of money, that is to say, it does not necessarily imply a contraction and more rapid renewal of the process of reproduction.


A more rapid circulation of money takes place whenever a larger number of transactions are carried on with the same amount of money. This may take place also with the same periods of reproduction of capital, as a result of changes in the technical appliances of the circulation of money. Furthermore, there may be an increase in the number of transactions in which money circulates without expressing actual exchanges, of commodities (marginal business at the stock-exchange, etc.). On the other hand, some circulations of money may be entirely dispensed with. For instance, where the farmer is himself a real estate owner, there is no circulation of money between the capitalist farmer and the real estate owner; where the industrial capitalist is himself the owner of the capital, there is no circulation of money between him and the creditor.


As for the primitive formation of a hoard of money in a certain country, and its appropriation by a few, it is unnecessary to discuss it at this point.


The capitalist mode of production—its basis being wage-labor as well as the payment of the laborer in money and in general the transformation of services for natural products into services for money—cannot develop a larger extension and a greater systematization, unless there is available in this country a quantity of money sufficient for the circulation and the corresponding formation of a hoard (reserve fund, etc.). This is the historical premise. However, this must not be interpreted in the sense that a sufficient hoard must first be formed, before capitalist production can begin. It rather develops simultaneously with the evolution of its foundations and one of these foundations is a sufficient supply of precious metals. Hence the increased supply of precious metals since the 16th century is an essential factor in the history of the development of capitalist production. But so far as the necessary further supply of money material on the basis of capitalist production is concerned, surplus-value incorporated in products is on the one hand thrown into circulation without the money required for its monetization, and on the other hand surplus-value in the form of gold without the previous transformation of products into gold.


The additional commodities which are to be converted into money find the necessary amount of money at hand, because on the other side additional gold (and silver) intended for conversion into commodities is thrown into circulation, not by means of exchange, but by production itself.



To the extent that accumulation takes place in the form of reproduction on an enlarged scale, it is evident that it does not offer any new problem in matters of the circulation of money.


In the first place, the additional money-capital required for the function of the increasing productive capital is supplied by that portion of the realized surplus-value, which is thrown into circulation by the capitalists as money-capital, not as the money-form of their revenue. The money is already present in the hands of the capitalists. Only its employment is different.


Now, by means of the additional productive capital, its product, an additional quantity of commodities, is thrown into circulation. Together with this additional quantity of commodities, a portion of the additional money required for its circulation is thrown into circulation, so far as the value of this mass of commodities is equal to that of the productive capital consumed in their production. This additional quantity of money has precisely been advanced as an additional money-capital, and therefore it flows back to the capitalist through the turn-over of his capital. Here the same question reappears, which we met previously. Where does the additional money come from, by which the additional surplus-value now contained in the form of commodities is to be realized?


The general reply is again the same. The sum total of the prices of the commodities has been increased, not because the prices of a given quantity of commodities have risen, but because the mass of the commodities now circulating is greater than that of the previously circulating commodities, and because this increase has not been offset by a fall in prices. The additional money required for the circulation of this greater quantity of commodities of greater value must be secured, either by greater economy in the circulating quantity of money—whether by means of balancing payments, etc., or by some measure which accelerates the circulation of the same coins—or, by the transformation of money from the form of a hoard into that of a circulating medium. This does not merely imply that barren money-capital becomes active as a means of purchase or payment, or that money-capital which is already actually circulating for the benefit of the society while representing a reserve fund for its owner is thus performing a double service (such as deposits in banks which are continually balanced). It also implies that the stagnating reserve funds of money are economized.


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


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


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


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


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


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


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


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


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


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


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


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


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

(1). Of deposits in banks; and it is a comparatively insignificant sum which is really at the disposal of the bank. Money-capital is but nominally accumulated there. What is actually accumulated are outstanding claims on money which can be monetized (so far as they are really monetized) only because there is a certain balance between the money drawn and the money deposited. It is a relatively small sum that is in the hands of the banker as money.
(2). Of public bonds. These are not capital at all, but mere claims on the annual product of the nation.
(3). Of stocks. So far as they are not bogus, they are titles of ownership of some actual capital belonging to some corporation and drafts on the surplus-value flowing from it.


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


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


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


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


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

Notes for this chapter

Although the physiocrats still intermingle these two phenomena indiscriminately, they are nevertheless the first who emphasize the reflux of money to its starting point as the essential form of circulation of capital, as that form of circulation which promotes reproduction. "Throw a glance at the Tableau Economique, and you will see that the productive class gives the money with which the other classes buy products from it, and that they return this money to it when they come back next year to make the same purchases.... You see, then, that there is in this instance no other cycle but that of expenditure followed by reproduction, and of reproduction followed by expenditure. And this cycle is described by the circulation of money, which is the measure of expenditure and reproduction."—Quesnay, Problems Economiques, Daire edition, Physiocrats, I, pages 208, 209.) "It is this continual advance and return of capitals which must be called the circulation of money, this useful and fertile circulation, which gives life to all the labors of society, which maintains the activity and life of the social body, and which is with good justification compared to the circulation of blood in the animal body." (Turgot, Reflexions, etc, Daire edition, I, page 45.)

Part III, Chapter XVIII.

End of Notes

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