Capital: A Critique of Political Economy, Vol. II. The Process of Circulation of Capital
The transformations of capital from commodities into money and from money into commodities are at the same time transactions of the capitalist, acts of purchase and sale. The time in which these transformations take place constitutes from the personal standpoint of the capitalist a purchase and selling time, it is the time during which he performs the functions of a buyer and seller on the market. Just as the time of circulation of capital is a necessary part of its time of reproduction, so the time in which the capitalist buys and sells and remains in the market is a necessary part of the time in which he performs the functions of a capitalist, in which he personifies capital. It is a part of his business time.
*14Since we have assumed that commodities are bought and sold at their values, these transformations constitute merely a conversion of the same value from one form into another, from the form of commodities into that of money or vice versa, a change of composition in substance. If commodities are sold at their values, then the magnitude in the hands of the buyer and seller remains unchanged. Only the form of its existence is changed. If the commodities are not sold at their values, then the sum of the converted values remains the same; the plus on one side is offset by a minus on the other.
The metamorphoses C—M and M—C are transactions between buyers and sellers; they require time to perfect the trade, the more so as this represents a struggle in which each seeks to get the best of the other; for to business men applies the statement: "When Greek meets Greek, then comes the tug of war." The conversion of a commodity costs time and labor-power, not for the purpose of creating values, but in order to accomplish the conversion of value from one form into another. The mutual attempt to appropriate an extra share of this value, changes nothing fundamentally. This work, increased by the evil designs on either side, does not create value any more than the work done in a civil process increases the value of the object of contention. It is with this labor, which is a necessary part of the totality of the capitalist process of production, including the circulation or included by it, as it is with the labor of combustion of some element used for the generation of heat. This labor of combustion does not generate any heat, although it is a necessary part in the process of combustion. In order to employ coal as fuel, it must combine with oxygen, and for this purpose coal must be brought to the condition of carbonic acid gas; in other words, a physical change of form must take place. The separation of carbon molecules, which are united into a solid mass, and the breaking up of these molecules into their atoms, must precede the new combination, and this requires a certain effort, which is not transformed into heat, but taken from it. If the owners of commodities are not capitalists, but direct producers, the time required for buying and selling is so much loss of labor time, and for this reason such transactions were deferred in ancient and medieval times to holidays.
Of course, the dimensions acquired by the business in commodities in the hands of the capitalists cannot transform this labor, which does not create any values and promotes merely changes of form, into labor productive of surplus-value. Nor can this miracle of transsubstantiation be accomplished by unloading this work of "combustion" from the shoulders of the industrial capitalists to those of paid employees who attend to it exclusively. These employees will not tender their services out of pure love for the capitalists. The collector of some real-estate owner or the messenger of some bank is indifferent to the fact that their labor does not add any value to the rent or to the money carried to the bank in bags.*15
For the capitalist who has others working for him, selling and buying become primary functions. Seeing that he appropriates the products of many on a large social scale, he must sell on the same scale and then reconvert the money into elements of production. But still neither the sale nor the purchase create any values. An illusion is here created by the function of merchant's capital. But without entering at this point into a detailed discussion of this fact, we can plainly see this much: If a function, which is unproductive in itself, although a necessary link in reproduction, is transformed by a division of labor from an incidental occupation of many into an exclusive occupation of a few, the character of this function is not changed thereby. One merchant, as an agent promoting the transformation of commodities by assuming the role of a mere buyer and seller, may abbreviate by his operations the time of sale and purchase for many producers. To that extent he may be regarded as a machine which reduces a useless expenditure of energy or helps to set free some time of production.*16
In order to simplify the matter, seeing that we shall not discuss the merchant as a capitalist and his capital as merchant's capital until later, we shall assume that this buying and selling agent is a man who sells his labor-power. He expends his labor-power and labor-time in the operations C—M and M—C. And he makes his living that way, just as another does by spinning or by making pills. He performs a necessary function, because the process of reproduction itself includes an unproductive function. He works as well as any other man, but intrinsically his labor creates neither products nor values. He belongs himself to the unproductive expenses of production. His services do not transform an unproductive function into a productive one, nor unproductive into productive labor. It would be a miracle, if such a transformation could be accomplished by a mere transfer of a function. His usefulness consists rather in the fact that a small part of the labor-power and labor-time of society is tied up in this unproductive function. We shall assume that he is a wage-worker, even though better paid than others. Whatever may be his wages, in the role of a wage-worker he always works a part of his time for nothing. He may receive in wages the value of the product of eight working hours, when he performs his functions for ten hours. But his two hours of surplus-labor do not produce any surplus-values any more than his eight hours of necessary labor, although by means of these eight hours of necessary labor a part of the social product is transferred to him. In the first place, looking at it from the standpoint of society, his labor-power is used up for ten hours in a mere function of circulation. It cannot be used otherwise, for productive labor. In the second place, society does not pay for those two hours of surplus-labor, although they are expended by the man who worked during that time. Society does not appropriate any surplus-product or value through them. But the expenses of circulation, which he represents, are thereby reduced by one-fifth, from ten hours to eight. Society does not pay any equivalent for this fifth of this actual time of circulation, of which he is the agent. But if this man is employed by a capitalist, then the non-payment of these two hours reduces the expenses of circulation of his capital, which represent a deduction from his income. For the capitalist this is a positive gain, because the negative limit for the utilization of his capital is thereby reduced. So long as small independent producers of commodities spend a part of their own time in selling and buying, this shows itself either as time spent during the intervals of their productive function, or as a reduction of their time of production.
At all events, the time required for this purpose is an expense of circulation, which does not add any increment to the converted values. It is the expense which is required in order to convert them from commodities into money. Inasmuch as the capitalist producer of commodities appears as an agent of circulation, he differs from the direct producers of commodities only by the fact that he buys and sells on a larger scale and therefore is a greater factor in circulation. And if the expansion of his business compels or enables him to hire his own wage-laborers as agents of circulation, the nature of this phenomenon is not changed in any way. A certain amount of labor-power and labor-time must be expended in the process of circulation, so far as it is merely a change of form. But this now appears as an additional expenditure of capital. A part of the variable capital must be expended in the purchase of these labor-powers active only in circulation. This advance of capital creates neither products nor values. It reduces to that extent the volume of the productive function of capital. It is as though one part of the product were transformed into a machine, which buys or sells the rest of the product. This machine deducts so much from the product. It does not participate in the productive process, although it can reduce the labor-power required for the circulation. It constitutes simply a part of the expenses of circulation.
Apart from the actual selling and buying, labor-time is expended in bookkeeping, which assimilates more materialized labor, such as pens, ink, paper, desks, office-expenses. This function, therefore, requires labor-power and materials. It is the same condition of things which we observed in the case of the time of sale and purchase.
As a principle of unity within its cycles, as a value in process of rotation, whether it be in the sphere of production or in both phases of the sphere of circulation, capital exists ideally only in the form of accounting money, principally in the mind of the producer of commodities, more especially the capitalist producer of commodities. This movement is fixed and controlled by bookkeeping, which includes also the determination of prices, or the calculation of the prices of commodities. The movement of production, especially of the production of values—in which the commodities figure as bearers of value, as mere names of things, the ideal existence of which as values is crystallized in accounting money—thus is symbolically reflected in imagination. So long as the individual producer of commodities keeps account only in his head (for instance a farmer; a bookkeeping tenant is not known until capitalist production introduces him), or incidentally, outside of his time of production, makes a note of his expenses, receipts, instalment days, etc., just so long does it appear intelligible that this function, and the materials consumed by it, such as paper, etc., require an additional expenditure of labor-time and materials, which is necessary, but constitutes a deduction from the time available for productive consumption and from the materials which are used in the actual process of production and are embodied in the creation of products and values.*17 The nature of the function itself is not changed. The volume which it assumes by its concentration in the hands of the capitalist producer of commodities, who transforms it from a function of many small producers into that of one single capitalist within a process of large scale production does not alter the case, neither is its nature affected by its separation from those productive functions, which it accompanied incidentally, nor by its modification into an independent function of agents exclusively entrusted with it.
The division of labor, the assuming of independence, does not make a function productive, if it was not so before it became independent. If a capitalist invests his capital anew, then he must invest a part of it in hiring a bookkeeper, etc., and materials for bookkeeping. If his capital is already in active operation, in the process of continual reproduction, then he must continually reconvert a part of his commodity-product by means of its transformation into money, into a bookkeeper, salesman, etc. This part of his capital is withdrawn from production and belongs to the expenses of circulation, deductions from the total product (including the labor-power itself, which is expended wholly for this function).
But there is a certain difference between the expenses incidental to bookkeeping, or the unproductive expenditure of labor-time on one side, and that of mere selling and buying time on the other. The latter arise only from the definite social form of the process of production, they are due to the fact that it is a production of commodities. Bookkeeping, for the control and ideal survey of the process, becomes necessary to the extent that the process assumes a social scale and loses its purely individual character. It is, therefore, more necessary in capitalist production than in scattered handicraft and agricultural production, and still more necessary in co-operative than in capitalist production. But the expenses of bookkeeping are reduced to the extent that production is concentrated and becomes social bookkeeping.
We are here concerned only about the general character of the expenses of circulation, which arise out of the general metamorphoses. It is superfluous to discuss all its details. To what extent phenomena, which are mere incidents in changes of form due to the social character of the process of production, may deceive the eyes when they cease to be imperceptible and incidental accompaniments of individual production, we may observe in the case of the mere handling of money, when it is concentrated into an exclusive function of banks on a large scale, or of a cashier in individual businesses. But it must be remembered, that these expenses of circulation do not change their character by changing their form.
Whether a product is intended for a commodity or not, it is always a materialized form of wealth, a use-value to be productively or individually consumed. If it is a commodity, its value is ideally expressed in its price, which does not change its actual use-value. But the fact that certain commodities, such as gold and silver, may perform the function of money and as such reside exclusively in the process of circulation (even in the form of a hoard, a reserve fund, etc., they remain in the sphere of circulation, although latent), is due to the definite social form of the process of production, which is a production of commodities. Since capitalist production gives to all its products the general form of commodities, and since the overwhelming mass of products are produced for sale and must therefore assume the form of money, and since the commodity-part of the social wealth grows continually in proportion, it follows that the quantity of gold and silver employed as means of circulation, paying medium, reserve fund, etc., must likewise increase. These commodities performing the function of money do not enter either into productive or into individual consumption. They represent social labor fixed in a form in which it may serve as a mere machine in circulation. Apart from the fact that a part of the social wealth is tied up in this unproductive form, the wearing out of the money constantly requires its reproduction, or the conversion of more social labor, in the form of products, into mere gold and silver. These expenses of reproduction are considerable in capitalistically developed nations, because there is a large part of the wealth tied up in the form of money. Gold and silver as money-commodities represent social expenses of circulation, due to the social form of production. They are dead expenses of commodity-production in general, and they increase with the development of this production, especially when capitalized. They represent a part of the social wealth, which must be sacrificed in the process of circulation.*18
Expenses of circulation, which are due to a mere change of form in circulation, ideally speaking, do not enter into the value of the commodities. The capital parts expended for them are deductions from the productively expended capital, so far as the capitalist is concerned. Not so the expenses of circulation which we shall consider now. They may arise from processes of production, which are continued only in circulation, the productive character of which is merely concealed by the form of the circulation. Or, on the other hand, they may represent from the standpoint of society mere unproductive expenses of subjective or materialized labor, which for this very reason they may become productive of value for the individual capitalist, by making an addition to the price of his commodities. This follows from the simple fact that these expenses are different in different spheres of production, or even for different individual capitalists in the same sphere of production. When added to the prices of commodities, they are divided in proportion as they fall upon the shoulders of the various individual capitalists. But all labor which adds value can also add surplus-value, and will always do so under capitalist production, the value created by it depending on the amount of the labor, the surplus-value added depending on the amount which the capitalist pays for it. In other words, expenses which increase the price of a commodity without adding anything to its value, which therefore are dead expenses so far as society is concerned, may be a source of profit for the individual capitalist. On the other hand, in so far as the addition to the price of commodities merely distributes these expenses of circulation equally, the unproductive character of this expenditure is not changed. For instance, insurance companies divide the losses of individual capitalists among the capitalist class. But this does not alter the fact that these equalized losses are losses so far as the aggregate social capital is concerned.
During its existence as commodity-capital, or its stay on the market, in other words, in the interval between the process of production from which it originates and the process of consumption into which it enters, the product forms a supply of commodities. As a commodity on the market, and therefore in the form of a supply, the commodity-product figures twice in each cycle: The first time as the commodity-product of that rotating capital whose cycle is being considered; the second time as the commodity-product of another capital, which must be found ready on the market, in order to be bought and converted into productive capital. It is, indeed, possible that this last-named commodity-capital is not produced until ordered. In that case, an interruption occurs until it has been produced. But the flow of the process of production and reproduction required that a certain mass of commodities (means of production) should be always on the market, that there should be a supply of them. In the same way, productive capital comprises the purchase of labor-power and the money-form is here only that form of the value of means of existence which the laborer must find at hand on the market, for the greater part. We shall discuss this more in detail in a short while; suffice it to make this point at present.
From the standpoint of the rotating capital-value, which has been transformed into a commodity-product and must now be sold or reconverted into money, which, therefore, has for the moment the function of commodity-capital on the market, the condition in which it forms a supply is contrary to its intentions and its stay on the market is involuntary. The sooner the sale is effected, the smoother runs the process of reproduction. The delay in the phase C'—M' prevents the actual change of substance which must take place in the rotation of capital and obstructs its further function as productive capital. On the other hand, so far as M—C is concerned, the constant presence of a supply of commodities on the market is a requirement for the flow of the process of reproduction and of the investment of new or additional capital.
The demurrage of the commodity-capital as a supply on the market requires buildings, stores, storage places, warehouses, in other words, an expenditure of constant capital; furthermore the payment of labor-power for storing the commodities. Finally, the commodities spoil and are exposed to injurious elementary influences. Additional capital is required to protect them, and this capital must be invested in materialized labor as well as in labor-power.*19
We see, then, that the sojourn of commodity-capital as a supply on the market causes expenses, which belong to the expenses of circulation, since they do not fall within the sphere of production. These expenses of circulation differ from those mentioned under I, by the fact that they enter in part into the value of the commodities, in other words, that they increase the price of commodities. Under all circumstances the capital and labor-power required for the conservation and storage of the commodity-supply, are withdrawn from the direct process of production. On the other hand, the capitals thus employed, including their labor-power, must be reproduced by the social product. Their expenditure, therefore, reduces the productivity of labor-power to that extent, so that a greater amount of capital and labor is needed to obtain a certain intended effect. They are dead expenses.
Inasmuch as the expenses of circulation arising out of the formation of a supply of commodities are due merely to the time required for the transformation of existing commodity-values into money, in other words, inasmuch as they are due to the prevailing social form of production, which makes the production of commodities and their transformation into money imperative, they share the character of the expenses of circulation enumerated under I. On the other hand, the value of the commodities is here preserved or increased, because the use-value, the product itself, is placed in conditions which require an outlay of capital. The commodities are submitted to operations, which expend additional labor on the use-values. But the computation of the values of commodities, the bookkeeping incidental to this process, the transactions of sale and purchase, do not influence the use-values in which the exchange-values of the commodities are embodied. These transactions concern merely the form of the values. Although, in the present case, the expenses of keeping a supply (which is done involuntarily) arise only from a delay of the metamorphosis and from its necessity, these expenses differ from those mentioned under I, in that they are not made for the purpose of effecting a change of form, but for the purpose of preserving the value embodied in the commodity as a use-value, which cannot be preserved in any other way than by preserving the use-value, the product, itself. The use-value is neither increased nor raised in value, on the contrary, it diminishes. But its diminution is restricted and it is preserved. Neither is the advanced value contained in the commodity increased, although new materialized and subjective labor is added.
We have now to investigate furthermore, to what extent these expenses arise from the peculiar nature of the production of commodities in general and from the prevailing absolute form of this mode of production, its capitalistic form; and to what extent they are common to all social production and merely assume a peculiar form and mode of expression in capitalist production.
Adam Smith has expressed the strange opinion, that the formation of a supply is a phenomenon peculiar to capitalist production alone.*20 More recent economists, for instance Lalor, insist on the other hand, that it declines with the development of capitalist production. Sismondi even regards this as one of the drawbacks of this mode of production.
As a matter of fact, the supply exists in three forms: In the form of productive capital, in the form of a fund for individual consumption, and in the form of a commodity-supply or commodity-capital. The supply in one form decreases relatively, when it increases in another, although it may increase absolutely in all three forms simultaneously.
It is plain from the outset, that wherever production is carried on for direct consumption on the part of the producer, and only to a minor extent for exchange or sale, where the social product does not assume the character of commodities at all, or only to a small degree, there the supply in the form of commodities can be only a small and insignificant part of the social wealth. On the other hand, the supply for consumption is relatively large, especially that of the means of existence. We have but to take a look at ancient agriculture, in order to understand this. The overwhelming part of the product there constitutes directly a supply of means of production and means of existence, without becoming a supply of commodities, because it remains in the hands of its producers and owners. It does not assume the form of a supply of commodities, and for this reason Adam Smith declares that there is no supply at all in societies based on this form of production. He confounds the form of the supply with the supply itself and believes that society hitherto lived from hand to mouth or trusted to the luck of the next day.*21 This is a naive misunderstanding.
A supply in the form of productive capital exists in the shape of means of production, which are either in operation in the process of production, or at least in the hands of the producer, so that they are latent in the process of production. We have seen previously, that with the development of the productivity of labour, and therefore with the development of the capitalist mode of production, which develops the socially productive power of labor more than all previous modes of production, there is a steady increase of the mass of means of production, which are permanently embodied in the productive process as instruments of labor and perform their function in it for a longer or shorter time at repeated intervals (buildings, machinery, etc.); also, that this increase is at the same time the premise and result of the development of the productivity of social labor. It is especially capitalist production, which is characterized by relative as well as absolute growth of this sort of wealth. The material forms of existence of constant capital, the means of production, do not consist merely of such instruments of labor, but also of raw material in various stages of finish and of auxiliary substances, with the enlargement of the scale of production and the increase in the productivity of labor by co-operation, division, machinery, etc., the mass of raw materials and auxiliary substances used in the daily process of reproduction, grows likewise. These elements must be ready at hand in the shop. The volume of this form of productive capital increases absolutely. In order that the process may flow along smoothly—apart from the fact whether this supply may be renewed daily or only at fixed intervals—there must always be more raw material, etc., accumulated at the place of production than is used up, say, daily or weekly. The continuity of the process requires that the fulfillment of its conditions should neither depend on its possible interruption by daily purchases, nor on the daily or weekly sale of the product, so that the regularity of its reconversion into its elements of production may not be broken. But it is evident, that the productive capital may be latent, or form a supply, in different proportions. There is, for instance, quite a difference, whether a spinner must have on hand a supply of cotton or coal for three months or for one. Plainly this supply may decrease relatively, while it may at the same time increase absolutely.
This depends on various conditions, all of which practically amount to the requirement that there shall be a greater rapidity, regularity, and security in furnishing the necessary amount of raw material always in such a way, that there may be no interruption. To the extent that these conditions are not fulfilled, to the extent that there is no rapidity, regularity, and security of supply, the latent part of the productive capital in the hands of the producer, that is to say the supply of raw materials waiting to be used, must increase in size. These conditions are inversely proportional to the degree of development of capitalist production, and thus to the productive power of social labor. The same applies to the supply in this form.
However, that which appears as a decrease of the supply, for instance, to Lalor, is in part merely a decrease of the supply in the form of commodity-capital, or of the actual commodity-supply; it is only a change of form of the same supply. If, for instance, the mass of coal daily produced in a certain country, and therefore the scale and energy of the coal-industry, are great, the spinner does not need a large store of coal in order to insure the continuity of his production. The security of the continuous reproduction of the coal supply makes this unnecessary. In the second place, the rapidity with which the product of one process may be transferred as means of production to another process depends on the development of the means of transportation and communication. The cheapness of transportation plays a great role in this question. The continually renewed transport, for instance, of coal from the mine to the spinnery, would be more expensive than the storing up of a large supply for a long time when the price of transportation is relatively cheap. These two circumstances are due to the process of production itself. In the third place, the development of the credit-system exerts an influence on this question. The less the spinner is dependent on the immediate sale of his yarn for the renewal of his supply of cotton, coal, etc.,—and this dependence will be so much smaller, the more the credit-system is developed—the smaller can be the relative size of these supplies, in order to insure independence from the hazards of the sale of yarn for the continuous production of yarn on a given scale. In the fourth place, many raw materials, and half-finished products, etc., require long periods of time for their production, and this applies especially to all raw materials furnished by agriculture.
If no interruption of the process of production is to take place, there must be a certain amount of raw materials on hand for the entire period, in which no new products can take the places of the old. If this supply decreases in the hands of the capitalist, it proves merely that it increases in the hands of the merchant in the form of a supply of commodities. The development of transportation, for instance, makes it possible to convey the cotton stored in the import warehouses of Liverpool rapidly to Manchester, so that the manufacturer can renew his supply in small portions according to his needs. But in that case, the cotton remains in so much larger quantities as a commodity-supply in the hands of the merchants in Liverpool. It is therefore merely a question of a change of form, and Lalor and others have overlooked this. And from the standpoint of social capital, the same quantity of products still remains in the form of a supply. The quantity of the supply required for, say, a whole nation during the period of one year decreases to the extent that the means of transportation are developed. If a large number of sailing vessels trade between America and England, the opportunities of England for the renewal of its supply of cotton are increased and quantity of the cotton supply to be held in storage on an average decreases. The same effect is produced by the development of the world-market and thus the multiplication of the sources of supply of the same articles. Various quantities of this supply are carried to the market from different countries and at different intervals.
We have already seen that the product assumes the general form of commodities on the basis of capitalist production, and to the extent that the scale and scope of this production increase, this character becomes prevalent. Even if production retains the same scale, there will still be a far greater proportion of the product in the form of commodities, compared to other modes of production. And all commodities, and therefore all commodity-capital, which is but another expression for commodities in the form of capital-value, constitute an element of the commodity-supply, unless they pass immediately from the sphere of production into productive or individual consumption, instead of remaining on the market in the interval between production and consumption. If the scale of production remains the same, the commodity-supply, that is to say, the individualization, and fixation of the commodity-form of the product, grows therefore with the development of capitalist production. We have seen, furthermore, that this is merely a change of form on the part of the supply, that is to say the supply in the form of commodities increases on one side, while on the other the supply in the form of direct means of production for consumption decreases. It is merely a question of a changed form of the social supply. The fact that it is not only the relative size of the commodity-supply compared to the aggregate social product which increases, but also its absolute size, is due to the growth of the aggregate product with the advance of capitalist production.
With the development of capitalist production, the scale of production becomes less and less dependent on the immediate demand for the product and falls more and more under the determining influence of the amount of capital available in the hands of the individual capitalist, of the instinct for the creation of more value inherent in capital, of the need for the continuity and expansion of its processes of production. This necessarily increases the mass of products required in each branch of production in the shape of commodities. The amount of capital fixed for a longer or shorter period in the form of commodity-capital grows proportionately. In short, the commodity-supply increases.
Finally, the majority of the members of human society are transformed into wage workers, into people who live from hand to mouth, who receive their wages weekly and spend them daily, who therefore must find a supply of the necessities of life ready at hand. Although the individual elements of this supply may be in continuous flow, a part of them must always suffer delay in order that the supply may be ever renewed.
All these characteristics are due to the form of capitalist production and to the metamorphoses incidental to it, which the product must undergo in the process of circulation.
Whatever may be the social form of the supply of products, its preservation requires an outlay for buildings, storage facilities, etc., which protect the product; furthermore for means of production and labor, more or less of which must be expended, according to the nature of the product, in order to preserve it against injurious influences. The more the supply is socially concentrated, the smaller are the relative expenses. These expenses always consume a part of the social labor, either in a materialized or in a subjective form; they require an outlay of capital which does not enter into the productive process itself and thus diminish the product. They constitute the cost of preserving the social wealth, and are, therefore, necessary expenses, without regard to the fact whether the existence of the social product in the form of a commodity-supply is due merely to the social form of production, to the commodity-form and its metamorphoses, or whether we regard the commodity-supply merely as a special form of the supply of products, a supply common to all societies, though not always in the form of commodity-supply, which is a form of the supply of products belonging to the process of circulation.
The question is now, to what extent these expenses enter into the value of commodities.
If the capitalist has converted the capital advanced by him for means of production and labor-power into a product, into a mass of commodities ready for sale, and these commodities remain in stock unsold, then it is not only the creation of values by means of his capital which is interrupted. The expenses required for the conservation and storage of this supply in buildings, etc., and for additional labor, signify a positive loss for him. The final buyer would laugh in his face, if he were to say to him: "My articles were unsalable for six months, and their preservation during that period did not only make so and so much of my capital unproductive, but also cost me so much extra-expenses." "So much the worse for you," would the buyer say. "Here is another seller, whose articles were completed the day before yesterday. Your articles are old and probably more or less injured by the ravages of time. Therefore you will have to sell cheaper than your rival."
It does not alter the life-processes of a commodity, whether its producer is a direct producer or a capitalist producer, who is merely a representative of the actual producer. The product must be converted into money. The expenses caused by the fixation of the product in the form of commodities are a part of the individual adventures of the seller, and the buyer does not concern himself about them. The buyer does not pay for the time of circulation of the commodities. Even if the capitalist holds his goods back intentionally, in times of an actual or expected revolution of values, it depends on the materialization of this revolution of values, on the correctness or incorrectness of the seller's speculation, whether he will recover his outlay or not. Inasmuch, therefore, as the formation of a supply involves a delay in the circulation, the expenses caused thereby do not add anything to the value of the commodities. On the other hand, there cannot be any supply without a sojourn of the commodities in circulation, without the stay of capital for a longer or shorter time in the form of commodity; hence there cannot be any supply without a delay of the circulation. It is the same with money, which cannot circulate without the formation of money-reserve. Hence there cannot be any circulation of commodities without a supply of commodities. If this necessity does not confront the capitalist in C'—M', it will do so in M—C; not so far as his own commodity-capital is concerned, but that of other capitalists, who produce means of production for him and necessities of life for his laborers.
It appears that the nature of the case is not altered, whether the formation of a supply is voluntary or involuntary, that is to say whether the producer accumulates a supply intentionally or whether his product forms a supply in consequence of the resistance offered to its sale by the conditions of the process of circulation. But it is useful for the solution of this question to know what distinguishes the voluntary from the involuntary formation of a supply. The involuntary formation of a supply arises from, or is identical with, an interruption of the circulation, which is independent of the knowledge of the producer of commodities and thwarts his will. And what characterizes the voluntary formation of a supply? The seller seeks to get rid of his commodity as much as ever. He always offers his product as a commodity. If he were to withdraw it from sale, it would be only a latent, not an effective organ of the commodity-supply. The commodity as such is still as much as ever a bearer of exchange-value and can become effective only by discarding the commodity-form and assuming the money-form.
The commodity-supply must have a certain size, in order to satisfy the demand during a given period. The continual extension of the circle of buyers is one of the factors in the calculation. For instance, in order to last to a certain day, a part of the commodities on the market must retain the form of commodities while the remainder continue in flow and are converted into money. The part which is delayed while the rest keep moving decreases continually, to the extent that the size of the entire supply decreases, until it is all sold. The delay of the commodities is thus calculated on as a necessary requirement of their sale. The size of the supply must be larger than the average sale or the average extent of the demand. Otherwise the excess over this average could not be satisfied. At the same time, the supply must be continually renewed, because it is continually dissolved. This renewal cannot come from anywhere in the last instance than from production, from a new supply of commodities. Whether this comes from abroad or not, does not alter the case. The renewal depends on the periods required by the commodities for their reproduction. The commodity-supply must last during these periods. The fact that it does not remain in the hands of the original producer, but passes through various stores from the wholesaler to the retailer, changes merely the aspect, not the nature of the thing. From the point of view of society, a part of capital still retains the form of a commodity-supply, so long as the commodities have not been consumed productively or individually. The producer tries to keep a supply corresponding to his average demand, in order to be somewhat independent of the process of production and to insure for himself a steady circle of customers. Corresponding to the periods of production, terms of sale are formed and the commodities form a supply for a longer or shorter time, until they can be replaced by new commodities of the same kind. The continuity and regularity of the process of circulation, and therefore of the process of reproduction, which includes the circulation, is safeguarded only by the formation of a supply.
It must be remembered that C'—M' may have been transacted for the producer of C, although C may still be on the market. If the producer were to keep his own commodities until they are sold to the last consumer, he would have to invest two capitals, one as a producer and one as a merchant. For the commodity itself, whether we look upon it as an individual commodity or as a part of social capital, it is immaterial whether the expenses of the formation of a supply fall on the shoulders of its producer or on those of a series of merchants from A to Z.
In so far as the commodity-supply is nothing but the commodity-form of the supply which would exist at a given scale of social production either as a productive supply or as a supply of means of consumption, if it did not have the form of a commodity-supply, the expenses required for its conservation and formation, that is to say the expenses for materialized and subjective labor, are merely converted expenses for maintaining either the social fund for production or the social fund for consumption. The increase of the value of commodities caused by them distributes these expenses simply pro rata to the different commodities, since the cost is different for different kinds of commodities. And the expenses for the formation of the supply are as much as ever deductions from the social wealth, although they are one of its requirements.
The circulation of commodities is normal only to the extent that the formation of a commodity-supply is its premise and necessarily arises by means of it, only in so far as this apparent stagnation is a part of the rotation itself, just as it is in the case of the formation of a money-reserve. But as soon as the commodities resting in the reservoirs of circulation refuse to give space to the succeeding wave of so that the reservoirs are overstocked, the commodity-supply expands just as the hoards do, if the circulation of money is clogged. It does not make any difference, whether this stop occurs in the magazines of the industrial capitalist or in the warehouses of the merchant. The supply is in that case not the premise of the uninterrupted sale, but the result of the impossibility of selling the goods. The expenses remain the same, but since they now arise entirely out of the form, that is to say, out of the necessity of selling the commodities, and out of the obstacles to this metamorphosis into money, they do not enter into the values of the commodities, but cause deductions, losses, from the value to be realized. Since the normal and abnormal form of the supply cannot be distinguished externally, and both of them are clogging the circulation, these phenomena may be confounded and may deceive the agent in production so much easier as the process of circulation of the capital of the producer may continue smoothly, while that of the commodities he has sold to merchants may be arrested. If the size of production and consumption increase, other conditions remaining the same, then the size of the commodity-supply increases likewise. It is renewed and absorbed just as fast, but its size is greater. Hence the growing size of the commodity-supply caused by a delay in the circulation may be mistaken for a symptom of the expansion of the process of reproduction, especially when the development of the credit-system makes it possible to mystify the real nature of the movement.
The expense of the formation of the supply consist (1) of quantitative losses of the mass of the product (for instance, in the case of a supply of flour); (2) in a spoiling of the quality; (3) in the materialized and individual labor required for the conversion of the supply.
It is not necessary to enter at this place into all the details of the expenses of circulation, such as packing, sorting, etc. The general law is that all expenses of circulation, which arise only from changes of form, do not add any value to the commodities. They are merely expenses required for the realization of value, or for its conversion from one form into another. The capital invested in those expenses (including the labor employed by it) belongs to the dead expenses of capitalist production. They must be made up out of the surplus-product and are, from the point of view of the entire capitalist class, a deduction from the surplus-value or surplus product, just as the labor required for the purchase of the necessities of life is lost time for the laborer. But the expenses of transportation play a too prominent role to pass them by without a few short remarks.
Within the rotation of capital and the metamorphoses of commodities which are a part of that rotation, the mutation-processes of social labor take place. These mutation-processes may require a change of location on the part of the products, their transportation from one place to another. Still, a circulation of commodities may take place without their change from place to place, and a transportation of products without a circulation of commodities, or even without a direct exchange of products. A house which is sold by A to B does not wander from one place to another, although it circulates as a commodity. Movable commodity-values, such as cotton or iron ore, remain in the same warehouse at a time when they are passing through dozens of circulation processes, when they are bought and resold by speculators.*22 That which really changes its place here is the title of ownership, not the thing itself. On the other hand, transportation played a prominent role in the land of the Incas, although the social product did not circulate either as a commodity or by means of exchange.
Quantities of products are not increased by transportation, neither is the eventual alteration of their natural qualities, with a few exceptions, the result of premeditated action, but an inevitable evil. But the use-value of things has no existence except in consumption, and this may necessitate a change of place on the part of the product, in other words, it may require the additional process of production of the transportation industry. The productive capital invested in this industry adds value to the transported products, partly by transferring value from the means of transportation, partly by adding value through the labor-power used in transportation. This last-named addition of value consists, as it does in all capitalist production, of a reproduction of wages and of surplus-value.
Within each process of production, the change of place of the object of labor and the required instruments of labor and labor-power—such as cotton which passes from the carding to the spinning room, or coal which is hoisted from the shaft to the surface—play a great role. The transition of the finished product, in the role of a finished commodity, from one independent place of production to another in a different location shows the same phenomenon on a larger scale. The transport of the products from one factory to another is finally succeeded by the passage of the finished products from the sphere of production to that of consumption. The product is not ready for consumption until it has completed these movements.
We have shown previously that a general law of the production of commodities decrees: The productivity of labor and its faculty of creating value stand in opposition to one another. This is true of the transportation industry as well as of any other. The smaller the amount of materialized and subjective labor required for the transportation of the commodities over a certain distance, the greater is the productivity of labor, and vice versa.*23
The absolute magnitude of the value which the transportation of the commodities adds to them is smaller in proportion as the productivity of the transportation industry increases, and vice versa, and directly proportional to the distance traveled, other conditions remaining the same.
The relative magnitude of the value added to the prices of commodities by the cost of transportation, other conditions remaining the same, is directly proportional to their volume and weight. But there are many modifying circumstances. Transportation requires, for instance, more or less provision for protection against accidents, and therefore more or less expenditure of labor and instruments of labor, according to the relative fragility, perishable nature, explosiveness of the articles. In this department, the railroad magnates show a greater talent for inventing fantastic species than botanists and zoologists. The classification of the articles on English railroads fills volumes and rests in general on the tendency of transforming the many-sided natural qualities of commodities into so many difficulties of transportation and inevitable excuses for exploitation. "Glass, which was formerly valued at the rate of 11 pounds sterling per crate, is now valued at only 2 pounds sterling in consequence of industrial improvements and the abolition of the glass-tax, but the railway rates are as high as ever and exceed the cost of transportation by water. Formerly glass and glass ware for lead work was carried for 10 shillings per ton within a radius of 50 miles of Birmingham. Now the rates have been raised to thrice that figure on the pretext of the risk involved by the fragility of the article. But if anything is broken, the railway management does not pay for it.*24 The fact that the relative magnitude of the value added by the cost of transportation to the articles is inversely proportional to their values furnishes a special excuse for the railroads to tax the articles in direct proportion to their values. The complaints of the industrials and merchants on this score are found on every page of the testimony of witnesses given before the royal commission on railways.
The capitalist mode of production reduces the cost of transportation for the individual commodities by the development of the means of transportation and communication, by their concentration, the scale of their traffic, etc. It increases that part of the materialized and subjective social labor, which is expended in the transportation of commodities, first by converting the great majority of all products into commodities, secondly, by substituting distant for local markets.
The circulation, that is to say the actual perambulation of the commodities through space, is carried on in the form of transportation. The transportation industry forms on one hand an independent branch of production, and thus a special sphere of investment of productive capital. On the other hand, it is distinguished from other spheres of production by the fact that it represents a continuation of a process of production within the process of circulation and for its benefit.
Notes for this chapter
From here to 10 are statements taken from a note at the end of Manuscript VIII.
See explanation 9a.
"The expenses of commerce, although necessary, must be regarded as a burden." (Quesnay, Analyse du Tableau Economique, in Daire. Physiocrates, part I, Paris, 1846, page 71.) According to Quesnay, the "profit," which the competition between merchants produces, and which he sees in the fact that competition compels them "to figure a discount on their loss or gain...is really nothing but a prevention of loss for the seller at first hand or for the consuming buyer. Now, a prevention of loss on the expenses of commerce is not a real product or an increase of wealth through commerce, considering it simply as an exchange, whether with or without the cost of transportation." (Pages 145 and 146.) "The expenses of commerce are always paid by those who sell the products and who would enjoy the full prices paid for them by the buyers, if there were no incidental expenses." (Page 163, Ibidem.) The "proprietaires" and "producteurs" are "salariants," the merchants are "salaries." (Page 164, Quesnay, Problemes Economiques, in Daire, Physiocrates, Part I, Paris, 1846.)
In the middle ages, we find bookkeeping for agriculture only in the convents. But we have seen in Vol. I, that a bookkeeper was installed for agriculture as early as the primitive Indian communes. Bookkeeping is then made an independent function of a communal officer. This division of labor saves time, pains, and expenses, but production and bookkeeping for production remain as much two different things as a cargo of a ship and the way-bill. In the person of the bookkeeper, a part of the labor-power of the commune is withdrawn from production, and the cost of his function is not produced by his own labor, but by a deduction from the communal product. What is true of the bookkeeper of an Indian commune, is true under changed circumstances of the bookkeeper of the capitalists. (From Manuscript II.)
"The money circulating in a country is a certain portion of the capital of the country, absolutely withdrawn from productive purposes, in order to facilitate or increase the productiveness of the remainder; a certain amount of wealth is, therefore, as necessary in order to adopt gold as a circulating medium, as it is to make a machine, in order to facilitate any other production." (Economist, Vol. V, Page 519.)
Corbet calculates, in 1841, that the cost of storing wheat for a season of nine months amounts to a loss of 1½ per cent in quantity, 3 percent for interest on the price of wheat, 2 per cent for warehouse rental, 1 per cent for sifting and drayage, ½ per cent for delivery, together 7 per cent, or 3 sh. 6 d. on a price of 50 sh. per quarter. (Th. Corbet, An Inquiry Into the Causes and Modes of the Wealth of Individuals, etc., London, 1841.) According to the testimony of Liverpool merchants before the railroad commission, the net expenses of grain storage in 1865 amounted to 2 d. per month per quarter, or 9 to 10 d. per ton. (Royal Commission on Railways, 1867. Evidence, page 19, Nr. 331.)
Wealth of Nations, Book II, Introduction.
Instead of a supply arising from the conversion of the product into a commodity, and of the supply of articles of consumption into commodities, as Adam Smith thinks, this transformation, on the contrary, causes violent crises in the economy of the producer during the transition from production for use to production for sale. In India, for instance, the custom of storing up large quantities of grain in years of superfluity, when little could be gotten for it, was observed until very recent times. (Return. Bengal and Orissa Famine. H. of C., 1867, I, page 230, Nr.74.) The sudden increase in the demand for cotton, jute, etc., led in many parts of India to a restriction of rice culture, a rise in the price of rice, and a sale of old supplies of the producers. Then followed the unexampled export of rice to Australia, Madagascar, etc., in 1864-66. This accounts for the acute character of the famine of 1866, which cost the lives of more than a million inhabitants in the district of Orissa alone (1. c. 174, 175, 213, 214, and III. Papers relating to the Famine in Behar, pages 32, 33, where the "drain of the old stock" is emphasized as one of the causes of the famine).—From Manuscript II.
Storch calls this circulation factice.
Ricardo quotes Say, who considers it one of the blessings of commerce that it increases the price, or the value, of the products by transportation. "Commerce," writes Say, "enables us to obtain a commodity at its original place of production and to transport it to another place for consumption; it enables us, therefore, to increase the value of commodities by the entire difference between their price at the first and that at the second place." Ricardo remarks with reference to this: "True, but how is the additional value given to it? By adding to the cost of production, first, the expenses of conveyance, secondly, the profit on the advances of capital made by the merchant. The commodity is only more valuable, for the same reason that every other commodity may become more valuable, because more labor is expended on its production and conveyance before it is purchased by the consumer. This must not be mentioned as one of the advantages of commerce." (Ricardo, Principles of Political Economy, 3rd ed., London, 1821, pp. 309, 310.)
Royal Commission of Railways, p. 31, No. 630.
Part II, Chapter VIII.
End of Notes
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