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.
25 of 25



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


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


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


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


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


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


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


(1). The Formation of a Hoard.


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


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


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


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


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


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


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


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


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


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

(2). The Additional Constant Capital.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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

(3). The Additional Variable Capital.


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


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


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



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


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


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


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


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


Let us take the formula previously used.

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


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


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


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



We now study reproduction by means of the following diagram:

Diagram a) I. 4000 c + 1000 v + 1000 s = 6000 Total, 8252
II. 1500 c + 376 v + 376 s = 2252


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


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

Diagram b) I. 4000 c + 875 v + 875 s = 5750 Total, 8252
II. 1750 c + 376 v + 376 s = 2502


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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

(1) First Illustration.


A. Diagram of Simple Reproduction.

I. 4000 c + 1000 v + 1000 s = 6000 Total, 9000.
II. 2000 c + 500 v + 500 s = 3000


B. Initial Diagram for Accumulation on an Expanded Scale.

I. 4000 c + 1000 v + 1000 s = 6000 Total, 9000.
II. 1500 c + 750 v + 750 s = 3000


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


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

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


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


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


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


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

I. 4400 c + 1100 v + 500 fund for consumption = 6000
II. 1600 c + 800 v + 600 fund for consumption = 3000
Total, as before, 9000


Of these amounts, the following are capital:

I. 4400 c + 1100 v (money) = 5500 Total, 7900
II. 1600 c + 800 v (money) = 2400

while production started out with

I. 4000 c + 1000 v = 5000 Total, 7250.
II. 1500 c + 750 v = 2250


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

I. 4400 c + 1100 v + 1100 s = 6600 Total, 9800.
II. 1600 c + 800 v + 800 s = 3200


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

I. 4400 c + 550 s (to be capitalized); furthermore, realized in commodities of II for the fund for consumption of the capitalists and laborers of I, 1650 (v + s).
II. 1650 c (50 added from II s as indicated above) + 800 v + 750 s (fund for the consumption of the capitalists).


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

II. 1650 c + 825 v + 725 s.


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

I. (4400c + 440c) + (1100v + 110v) = 4840c + 1210v =6050
II. (1600c + 50c + 110c) + (800v + 25v + 55v) = 1760c + 880v =2640
     Total... 8690


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


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

I. 4840 c + 1210 v + 1210 s = 7260 Total, 10,780
II. 1760 c + 880 v + 880 s = 3520


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


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


Then we have the following capitals:

I. Constant capital : 4840 + 484 = 5324.
Variable capital : 1210 + 121 = 1331.
II. Constant capital : 1760 + 55 + 121 = 1936.
Variable capital : 880 + 27.5 + 60.5 = 968.

Totals : I. 5324 c + 1331 v = 6655 Grand total 9559.
  II. 1936 c + 968 v = 2904


And at the end of the year the product is

I. 5324 c + 1331 v + 1331 s = 7986 Total, 11,858.
II. 1936 c + 968 v + 968 s = 3872


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

I. 5856 c + 1464 v + 1464 s = 8784 Total, 13,033.
II. 2129 c + 1065 v + 1065 s = 4249


And at the end of the following year:

I. 6442 c + 1610 v + 1610 s = 9662 Total, 14,348.
II. 2342 c + 1172 v + 1172 s = 4686


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

(2). Second Illustration.


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

I. 5000 c + 1000 v + 1000 s = 7000 Total, 9000.
II. 1430 c + 285 v + 285 s = 2000


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

I. 5000 c + 500 s (to be capitalized) + 1500 (v + s) in the fund set aside for consumption by capitalists and laborers.
II. 1430 c + 70 s (to be capitalized) + 285 v + 215 s.


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

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


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


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


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


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


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


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


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


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


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


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

I. 5000 c + 500 s (to be capitalized) + 1500 (v + s) fund for consumption, a total of 7000 in commodities.
II. 1500 c + 299 v + 201 s, a total of 2000 in commodities. Grand total, 9000 in commodities.


Capitalization takes place in the following manner:


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

I. (5000 c + 417 s) + (1000 v + 83 s) = 5417 c + 1083 v = 6500
II. (1500 c + 83 s) + (299 v + 17 s) = 1583 c + 316 v = 1899
      Total... 8399


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


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

I. (5417 c + 452 s) c + (1083 v + 90 s) v = 5869 c + 1173 v = 7042.
II. (1583c + 42s + 90s) c + (316v + 8s + 18s)v = 1715c + 342 v = 2057.


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

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


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

I. (5869 c + 489 s) c + (1173 v + 98 s) v = 6385 c + 1271 v = 7629.
II. (1715 c + 45 s + 98 s) c + (342 v + 9 s + 20 s) v = 1858 c + 371 v = 2229.
      Total capital... 9858


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

(3). Exchange of II c Under Accumulation.


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


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


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


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


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


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


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


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


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



The original source for the money of II is v + s of the gold producers in department I, exchanged for a portion of II c. Only to the extent that the gold producer accumulates surplus-value or converts it into means of production of I, in other words, to the extent that he expands his production, does his v + s stay out of department II. On the other hand, to the extent that the accumulation of gold on the part of the gold producer himself leads ultimately to an expansion of production, a portion of the surplus-value of gold production not spent as revenue passes into department II as additional variable capital of the gold producers, promotes the accumulation of new hoards in II and supplies it with means by which to buy from I without having to sell to it immediately. From this money derived from I (v + s) of gold production must be deducted that portion of gold which is employed by certain lines of II as raw material, etc., in short as an element for building up their constant capital. An element of preliminary reproduction, for the purpose of future expanded production, is created for either I or II under the following conditions: For I only when a portion of I s is sold onesidedly, without a balancing purchase, to II and serves there as additional constant capital; for II, when the same case occurs on the part of I with reference to the variable capital; furthermore when a portion of the surplus-value spent by I as revenue is not covered by II c, so that a portion of II s is bought with it and thus converted into money. If I (v + s-x) is greater than II c, then II c need not for its simple reproduction make up in commodities of I what I has taken out of II s. The question is, to what extent hoarding may take place within the exchange of the capitalists of II among themselves, an exchange which can consist only of a mutual crossing of II s. We know that direct accumulation takes place within II by means of direct conversion of a portion of II s into variable capital (just as department I converts a portion of I s directly into constant capital). In the various stages of accumulation within the different lines of business of II, and for the individual capitalists of these lines, the matter explains itself, with the self-understood modifications, in the same way as in I. One side is still engaged in hoarding and sells without buying, the other is on the point of actual expansion of reproduction and buys without selling. The additional variable money-capital is first advanced for additional labor-power, but this, in its turn, buys articles of consumption from the hoarding owners of the additional articles of consumption used by the laborers. To the extent that these owners hoard the money, it does not return to its point of departure.

Notes for this chapter

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

End of Notes


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