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.
13 of 25

Part II, Chapter IX


We have seen that the fixed and circulating parts of productive capital turn over in different ways and at different periods, also that the different constituents of the fixed capital of the same business have different periods of turn-over according to their different durations of life and, therefore, of their different periods of reproduction. (As concerns the actual or apparent difference in the turn-over of different constituents of circulating capital in the same business, see the close of this chapter, under No. 6.)


1. The total turn-over of advanced capital is the average turn-over of its constituent parts; the mode of its calculation is given later. Inasmuch as it is merely a question of different periods of time, nothing is easier than to compute their average. But


2. It is a question, not alone of a quantitative, but also of a qualitative difference.


The circulating capital entering into the process of production transfers its entire value to the product and must, therefore, be continually reproduced in its natural form by the sale of the product, if the process or production is to proceed without interruption. The fixed capital entering into the process of production transfers only a part of its value (the wear and tear) to the product and continues despite this wear and tear, to perform its function in the process of production. Therefore it need not be reproduced until after the lapse of intervals of various duration, at any rate not as frequently as the circulating capital. This necessity of reproduction, this term of reproduction, is not only quantitatively different for the various constituent parts of fixed capital, but, as we have seen, a part of the perennial fixed capital may be replaced annually or at shorter intervals and added in natural form to the old fixed capital. In the case of fixed capital of a different composition, the reproduction can take place only all at once at the end of its life-time.


It is, therefore, necessary to reduce the specific turn-overs of the various parts of fixed capital to a homogeneous form of turn-over, so that they remain only quantitatively different so far as the duration of their turn-over is concerned.


This quantitative homogeneity does not materialize, if we take for our starting point P...P, the form of the continuous process of production. For definite elements of P must be continually reproduced in their natural form, while others need not to be. This homogeneity of turn-over is found, however, in the form M—M'. Take, for instance, a machine valued at 10,000 pounds sterling, which lasts ten years and one tenth, or 1,000 pounds of which are annually reconverted into money. These 10,000 pounds have been converted in the course of one year from money-capital into productive capital and commodity-capital, and then reconverted into money-capital. They have returned to their original money-form, just as did the circulating capital, if we study it from this point of view, and it is immaterial whether this money-capital of 1,000 pounds sterling is once more converted, at the end of the year, into the natural form of a machine or not. In calculating the total turn-over of the advanced productive capital, we, therefore, fix all its elements in the mold of money, so that the return to the money-form concludes the turn-over. We assume that value has always been advanced in money, even in the continuous process of production, where this money-form of value exists only as calculating money. Then we are enabled to compute the average.


3. It follows that the capital-value turned over during one year may be larger than the total value of the advanced capital, on account of the repeated turn-overs of the circulating capital within the same year, even if by far the greater part of the advanced productive capital consists of fixed capital, whose period of reproduction, and therefore of turn-over, comprises a cycle of several years.


Take it that the fixed capital is 80,000 pounds sterling, its period of reproduction 10 years, so that 8,000 pounds of this capital annually return to their money-form, or complete one-tenth of its turn-over. Let the circulating capital be 20,000 pounds sterling, and its period of turn-over be five times per year. The total capital would then be 100,000 pounds sterling. The turned over fixed capital is 8,000 pounds, the turned-over circulating capital five times 20,000, or 100,000 pounds sterling. Then the capital turned over during one year is 108,000 pounds sterling, or 8,000 pounds more than the advanced capital. 1+2.25 of the capital have turned over.


4. The turn-over of the values of the advanced capital therefore is to be distinguished from its actual time of reproduction, or from the actual time of turn-over of its component parts. Take, for instance, a capital of 4,000 pounds sterling and let it turn over five times per year. The turned over capital is then five times 4,000, or 20,000 pounds sterling. But that which returns at the end of its turn-over and is advanced anew is the original capital of 4,000 pounds sterling. Its magnitude is not changed by the number of its periods of turn-over, during which it performs anew its functions as capital. (We do not consider the question of surplus-value here.)


In the illustration under No. 3, then, the sums returned at the end of one year into the hands of the capitalist are (a) a sum of values in the form of 20,000 pounds sterling, which he invests again in the circulating parts of the capital, and (b) a sum of 8,000 pounds, which have been set free by wear and tear from the advanced fixed capital; at the same time, this same fixed capital remains in the process of production, but with the reduced value of 72,000 pounds, instead of 80,000 pounds sterling. The process of production, therefore, would have to be continued for nine years longer, before the advanced fixed capital would have outlived its term and ceased to perform any service as a creator of products and values, so that it would have to be replaced. The advanced capital-value, then, has to pass through a cycle of turn-overs, in the present case a cycle of ten years, and this cycle is determined by the life-time, in other words by the period of reproduction, or turn-over of the invested fixed capital.


To the same extent that the volume of the value and the duration of the fixed capital develop with the evolution of the capitalist mode of production, does the life of industry and of industrial capital develop in each particular investment into one of many years, say of ten years on an average. If the development of fixed capital extends the length of this life on one side, it is on the other side shortened by the continuous revolution of the instruments of production, which likewise increases incessantly with the development of capitalist production. This implies a change in the instruments of production and the necessity of continuous replacement on account of virtual wear and tear, long before they are worn out physically. One may assume that this life-cycle, in the essential branches of great industry, now averages ten years. However, it is not a question of any one definite number here. So much at least is evident that this cycle comprising a number of years, through which capital is compelled to pass by its fixed part, furnishes a material basis for the periodical commercial crises in which business goes through successive periods of lassitude, average activity, overspeeding, and crisis. It is true that the periods in which capital is invested are different in time and place. But a crisis is always the starting point of a large amount of new investments. Therefore it also constitutes, from the point of view of society, more or less of a new material basis for the next cycle of turn-over.*28


5. On the mode of calculation of the turn-overs, Scrope, an American economist, says in substance the following in his work on political economy (published by Alonzo Potter, New York, 1841, pages 141 and 142): In some lines of business the entire capital advanced is turned over, or circulated, several times inside of a year. In some others, one portion is turned over more than once a year, another portion not so often. It is the average period required by the entire capital for the purpose of passing through the hands of the capitalist, or in order to turn over once, which must furnish the basis on which the capitalist figures his profits. Take it, that a certain individual engaged in a certain business has invested half of his capital for buildings and machinery, which are replaced once in every ten years; one-quarter for tools, etc., which are replaced in two years; and the last quarter, invested in wages and raw materials, which quarter is turned over twice per year. Let his entire capital be $50,000. Then his annual expenditure will be:

50,000-2, or $25,000 in 10 years, or $2,500 in one year.
50,000-4, or $12,500 in 2 years, or $6,250 in one year.
50,000-4, or $12,500 in ½ year, or $25,000 in one year.
$33,750 in one year.


The average time, then, in which his capital is turned over once, is 16 months. Take another case: One quarter of the entire capital of $50,000 circulates in 10 years; another quarter in one year; the other half twice in one year. The annual expenditure will then be:

12,500-10... 1,250
12,500... 12,500
25,000×2... 50,000
Turned over in one year... 63,750


6. Real and apparent differences in the turn-over of the various component parts of capital. Scrope also says in the same place that the capital invested by a manufacturer, landlord, or merchant in wages circulates most rapidly, as it is probably turned over once a week, if he pays his laborers weekly, by the weekly receipts from his sales or from paid bills. The capital invested in raw materials and finished supplies does not circulate so fast; it may be turned over two or four times per year, according to the time passing between the purchase of the one and the sale of the other, provided that the capitalist buys and sells on equal terms of credit. The capital invested in tools and machinery circulates still more slowly, as it is turned over, that is to say consumed and circulated, probably on an average of once in five or ten years; many tools, however, are used up in one single series of manipulations. The capital invested in buildings, for instance, in factories, stores, storerooms, barns, streets, irrigation works, etc., circulates almost imperceptibly. But of course these structures are likewise worn out just the same as the others, so long as they serve in production, and must be replaced, in order that the producer may be able to continue his operations. They are merely consumed and reproduced more slowly than the others. The capital invested in them is probably turned over in twenty or fifty years. So far Scrope.—


Scrope here confounds the differences in the flow of certain parts of the circulating capital, caused by terms of payment and conditions of credit so far as the individual capitalist is concerned, with the turn-overs due to the nature of capital. He says that wages are paid weekly on account of the weekly receipts from paid sales or bills. We must note in the first place, that certain differences occur relative to wages, according to the length of the term of payment, that is to say the length of time for which the laborer must give credit to the capitalist, whether it be a week, a month, three months, six months, etc., In this case, the rule stated in volume I, chapter III, 3b, page 158, holds good, to the effect that "the quantity of the means of payment required for all periodical payments (in this case the quantity of the money-capital to be advanced at one time) is in inverse proportion to the length of their periods."


In the second place, it is only the entire new value added to the product by means of one week's labor which enters completely into the weekly product, but also the value of the raw and auxiliary material consumed by the weekly product. These values circulate with the product containing them. They assume the form of money by the sale of the product and must be reconverted into the same elements of production. This applies as well to the labor-power as to the raw and auxiliary materials. But we have already seen (chapter IV, 2, A) that the continuity of the production requires a supply of means of production, different for various branches of industry, and different within one and the same branch for the various component parts of the circulating capital, for instance, for coal and cotton. Hence, although these materials must be continually replaced in their natural form, they need not be bought continually. How often new purchases of them must be made, depends on the magnitude of the available supply, on the times it takes to use it up. In the case of the labor-power, there is no such storing of a supply. The reconversion into money of the capital invested in labor-power goes hand in hand with that of the capital invested in raw and auxiliary materials. But the reconversion of the money, on one side into labor-power, on the other into raw materials, proceeds separately on account of the special terms of purchase and payment of these two constituents of productive capital, one of them being bought as a productive supply for long terms, the other, labor-power, for shorter terms, for instance, for terms of one week. On the other hand, the capitalist must keep a supply of finished commodities besides a supply of materials for production. Apart from the difficulties of selling, etc., a certain quantity must be produced, say for instance, on order. While the last portion of this quantity is being produced, the finished product is waiting in storage until the order can be completely filled. Other differences in the turn-over of circulation capital arise as soon as some of its individual elements must stay in some preliminary stage of the process of production, such as the drying of wood, etc., longer than others.


The credit-system, to which Scrope here refers, and commercial capital, modify the turn-over for the individual capitalist. They modify the turn-over on a social scale only in so far as they do not accelerate merely production, but also consumption.

Notes for this chapter

"Municipal production is bound to a cycle of days, agricultural production to one of years." (Adam G. Mueller, Die Elemente der Staatskunst. Berlin, 1809, II, page, 178.) This is the naive conception of industry and agriculture held by the romantic school.

Part II, Chapter X.

End of Notes

13 of 25

Return to top