Capital: A Critique of Political Economy, Vol. II. The Process of Circulation of Capital

By Karl Marx

One of Econlib’s aims is to put online the most significant works in the history of economic thought, and there can be no doubting the significance of Marx’s influence on both economic theory in the late 19th century and on the creation of Marxist states in the 20th century. From the time of the emergence of modern socialism in the 1840s (especially in France and Germany), free market economists have criticised socialist theory and it is thus useful to place that criticism in its intellectual context, namely beside the main work of one of its leading theorists,
Karl Marx.In 1848, when Europe was wracked by a series of revolutions in which both liberals and socialists participated and which both lost out to the forces of conservative monarchism or Bonapartism,
John Stuart Mill published his
Principles of Political Economy. The chapter on Property shows how important Mill thought it was to confront the socialist challenge to classical liberal economic theory. In hindsight it might appear that Mill was too accommodating to socialist criticism, but I would argue that in fact he offered a reasonable framework for comparing the two systems of thought, which the events of the late 20th century have finally brought to a conclusion which was not possible in his lifetime. Mill states in
Book II Chapter I “Of Property” that a fair comparison of the free market and socialism would compare both the ideal of liberalism with that of socialism, as well as the practice of liberalism versus the practice of socialism. In 1848 the ideals of both were becoming better known (and there were some aspects of the ideal of socialism which Mill found intriguing) but the practice of each was still not conclusive. Mill correctly observed that in 1848 no European society had yet created a society fully based upon private property and free exchange and any future socialist experiment on a state-wide basis was many decades in the future. After the experiments in Marxist central planning with the Bolshevik Revolution in 1917, the Chinese Communists in 1949, and numerous other Marxist states in the post-1945 period, there can be no doubt that the reservations Mill had about the practicality of fully-functioning socialism were completely borne out by historical events. What Mill could never have imagined, the slaughter of tens of millions of people in an effort to make socialism work, has ended for good any argument concerning the Marxist form of socialism.Econlib now offers online two important defences of the socialist ideal, Karl Marx’s three volume work on
Capital and the
collection of essays on Fabian socialism edited by George Bernard Shaw. These can be read in the light of the criticism they provoked among defenders of individual liberty and the free market: Eugen Richter’s anti-Marxist
Pictures of the Socialistic Future, Thomas Mackay’s
2 volume collection of essays rebutting Fabian socialism,
Ludwig von Mises post-1917 critique of
Socialism. One should not forget that
Frederic Bastiat was active during the rise of socialism in France during the 1840s and that many of his essays are aimed at rebutting the socialists of his day. The same is true for Gustave de Molinari and the other authors of the
Dictionnaire d’economie politique (1852). Several key articles on communism and socialism from the
Dictionnaire are translated and reprinted in Lalor’s
Cyclopedia.For further reading on Marx’s
Capital see David L. Prychitko’s essay
“The Nature and Significance of Marx’s
Capital: A Critique of Political Economy“.For further readings on socialism see the following entries in the
Concise Encyclopedia of Economics:
Eastern Europe,
Marxism, and
Socialism.Also related:

Poor Law Commissioners’ Report of 1834,
edited by Nassau W. Senior, et al.

The Illusion of the Epoch: Marxism-Leninism as a Philosophical Creed by H. B. Acton

The Perfectibility of Man, by John Passmore
David M. Hart

March 1, 2004

Book Cover

Translator/Editor

Friedrich Engels, ed. Ernest Untermann, trans.

First Pub. Date

1885

Publisher

Chicago: Charles H. Kerr and Co.

Pub. Date

1909

Comments

First published in German. Das Kapital, based on the 2nd edition.

Copyright

The text of this edition is in the public domain. Picture of Marx courtesy of The Warren J. Samuels Portrait Collection at Duke University.

Part II, Chapter XI

THEORIES OF FIXED AND CIRCULATING CAPITAL. RICARDO.

Ricardo mentions the distinction between fixed and circulating capital merely for the purpose of illustrating the exceptions to the law of value, namely, in cases where the rate of wages affects the prices. The discussion of this point is reserved for volume III.

But the original confusion is apparent at the outset in the following indifferent parallel: “This difference in the degree of durability of fixed capital,
and this variety in the proportions in which the two sorts of capital may be combined.” (Principles, page 25.)

And if we ask him which two sorts of capital he is referring to, we are told: “The proportions too, in which the capital that is to support labor, and the capital that is invested in tools, machinery, and buildings, may be variously combined.” (l. c.) In other words, fixed capital consists of instruments of labor, and circulating capital is such as is invested in labor. “Capital that is to support labor” is a senseless term culled from Adam Smith. On one hand, the circulating capital is here confounded with the variable capital, that is to say, with that part of productive capital which is invested in labor. On the other hand, twice confounded conceptions arise for the reason that the distinction is not between variable and constant capital and derived from the process of self-expansion, but from the process of circulation repeating the old confusion of Smith.

1. The difference in the degree of durability of fixed capital and the difference in the proportion in which constant and variable capital may be combined, are conceived as being of equal significance. But the last-named difference determines the difference in the production of surplus-value; the first-named, on the other hand, refers merely to the manner in which a given value is transferred from a means of production to the product, in so far as the process
of self-expansion is concerned; and as for the process of circulation, this difference refers only to the period of the reproduction of the advanced capital, or, from another point of view, the time for which it has been advanced. Of course, if one looks upon the capitalist process of production in the light of a completed phenomenon, instead of seeing through its internal machinery, then these differences coincide. In the distribution of the social surplus-value among the various capitals invested in different lines of production, the proportions of the different periods of time for which capital has been advanced (for instance, the different durability of fixed capital) and the different organic composition of capital (and therefore also the different circulation of constant and variable capital) contribute equally toward an equalization of the general rate of profit and the conversion of values into prices of production.

From the point of view of the process of circulation, we have on one side the instruments of labor—fixed capital, on the other the materials of labor and wages—circulating capital. But from the point of view of the process of production and self-expansion, we have on one side means of production (instruments of labor and raw material)—constant capital; on the other, labor-power—variable capital. It is immaterial for the organic composition of capital (Book I, Chap. XXV, 2, page 683) whether the same quantity of constant capital consists of many instruments of labor and little raw material, or of much raw material and few instruments of labor, but everything depends on the proportion of the capital invested in means of production to that invested in labor-power. Vice versa, from the point of view of the process of circulation, of the difference between fixed and circulating capital, it is just as immaterial in what proportions a given amount of circulating capital is divided between raw material and wages. From one of these points of view the raw material is classed in the same category with the instruments of labor, as compared to the capital-value invested in labor-power; from the other the capital-value invested labor-power ranks with that invested in raw material, as compared to that invested in instruments of labor.

For this reason, the capital-value invested in materials of labor (raw and auxiliary materials) does not appear on either side. It disappears entirely. For it does not agree with the side of fixed capital, because its mode of circulation coincides entirely with that of the capital-value invested in labor-power. And on the other hand, it must not be placed on the side of circulating capital, because in that case the identification of the distinction between fixed and circulating capital with that of constant and variable capital, which had been carried over from Adam Smith and tacitly perpetuated, would abolish itself. Ricardo has too much logical instinct not to feel this, and for this reason that part of capital disappears entirely for him.

It is to be noted at this point that the capitalist, to use the language of political economy, advances the capital invested in wages for different periods, according to whether he pays these wages weekly, monthly, or quarterly. But in reality, the reverse takes place. The laborer advances his labor to the capitalist for one week, one month, or three months, according to whether he is paid by the week, by the month, or every three months. If the capitalist really were to
buy labor-power, instead of only paying for it, in other words, if he were to pay the laborer in advance for a day, a week, a month, or three months, then he would be justified in claiming that he advanced wages for those periods. But since he does not pay until labor has lasted for days weeks, or months, instead of buying it and paying for the time which it is intended to last, we have here a confusion of terms on the part of the capitalist, who performs the trick of converting an advance of labor made to the capitalist by the laborer into an advance of money made to the laborer by the capitalist. It does not alter the case that the capitalist may not get any returns from his product by way of the circulation in the shape of a reproduction of his product or of its value (increased by the surplus value embodied in it) until after a certain length of time, according to the different periods required for its manufacture, or for its circulation. It does not concern the seller of a commodity what its buyer is going to do with it. The capitalist does not get a machine cheaper, because he must advance
its entire value at one time, while this value returns to him only gradually and piecemeal by way of the circulation; nor does he pay more for cotton, because its value is assimilated fully by the product into which it is made over, and is therefore fully recovered at one time by the sale of the product.

Let us return to Ricardo.

1. The characteristic mark of variable capital is that a certain given, and to that extent constant, part of capital representing a given sum of values (supposed to be equal to the value of labor-power, although it is immaterial for this discussion whether wages are equal to the value of labor-power or higher or lower than it) is exchanged for a self-expanding power which creates value, namely, labor-power, which not only reproduces the value paid for it by the capitalist, but produces a surplus-value, a value not previously existing and not paid for by any equivalent. This characteristic mark of the capital-value advanced for wages, which distinguishes it as a variable capital from constant capital, disappears whenever the capital-value advanced for wages is considered solely from the point of view of the circulation, for then it appears as a circulating capital as distinguished from the fixed capital invested in instruments of labor. This is apparent from the simple fact that it is then classed under one head, namely, under that of circulating capital, together with a part of the constant capital, namely, that which is invested in raw materials, and thus distinguished from another part of constant capital, namely, that invested in instruments of labor. The surplus-value, the very fact which converts the advanced sum of values into capital, is entirely ignored under these circumstances. Furthermore, the fact is ignored that the value added to the product by the capital invested in wages is newly produced (and therefore actually reproduced), while the value transferred from the raw material to the product is not newly produced, not actually reproduced, but only preserved in the value of the product and merely reappears as a part of the value of the product. The distinction, as seen from the point of view
of the contrast between fixed and circulating capital, consists now simply in this: The value of the instruments of labor used for the production of a certain commodity is transferred only partially to the value of the commodity and is therefore only partially recovered by its sale, is only partially and gradually returned. On the other hand, the value of the labor-power and materials of labor (raw materials, etc.) used in the production of a certain commodity is entirely assimilated by it, and is therefore entirely recovered by its sale. From this stand-point, and with reference to the process of circulation, one part of capital appears as fixed, the other as circulating. In both cases it is a matter of a transfer of definite advanced values to the product and of their recovery by the sale of the product. The only difference which is essential at this point is whether the transfer of values, and consequently their recovery, proceeds gradually or in one bulk. By this means the really decisive difference between the variable and constant capital is blotted out, the whole secret of the production of surplus-value and of capitalist production, namely, the circumstances which transform certain values and the things in which they are contained into capital, are obliterated. All constituent parts of capital are then distinguished merely by their mode of circulation (and, of course, circulation concerns itself solely with already existing values of definite size). And the capital invested in wages then shares a peculiar mode of circulation with a part of capital invested in raw materials, partly finished articles, auxiliary substances, as distinguished from another part of capital invested in instruments of labor.

It is, therefore, easy to understand why the bourgeois political economy instinctively clung to Adam Smith’s confusion of the categories of “constant and variable capital” with the categories “fixed and circulating capital,” and repeated it parrotlike from generation to generation for a century. The capital invested in wages is not in the least distinguished by bourgeois political economy from capital invested in raw materials, and differs only formally from constant capital to the extent that it is partially or in bulk
circulated by the product. In this way the first requirement for an understanding of the actual movement of capitalist production, and thus of capitalist exploitation, is buried at one stroke. It is henceforth but a question of the reappearance of advanced values.

In Ricardo the uncritical adoption of the Smithian confusion is annoying, and not only more so than in the later apologetic writers, in whom the confusion of terms is rather otherwise than annoying, but also more than in Adam Smith himself, because Ricardo is comparatively more consistent and clear in his analysis of value and surplus-value, and indeed rescues the esoteric Adam Smith from the exoteric Adam Smith.

Among the physiocrats this confusion is not found. The distinction between
avances annuelles and
avances primitives refers only to the different periods of reproduction of the various parts of capital, especially of agricultural capital; while their ideas concerning the production of surplus-value form a part of their theory, apart from these distinctions, being upheld by them as the salient point of this theory. The formation of surplus-value is not explained out of capital as such, but only attributed to one special sphere of production of capital, namely, agriculture.

2. The essential point in the determination of variable capital—and therefore for the conversion of any sum of values into capital—is that the capitalist exchanges a definite given, and to that extent constant, magnitude of values for a power which creates values, a magnitude of values for a production, a self-expansion, of values. It does not alter this essential fact that the capitalist may pay the laborer either in money or in means of subsistence. This alters merely the mode of existence of the value advanced by the capitalist, seeing that in one case it has the form of money for which the laborer himself buys his means of subsistence on the market, in the other case that of means of subsistence which he consumes directly. A developed capitalist production rests indeed on the assumption that the laborer is paid in money and more generally on the assumption that the process of production is promoted by the process of circulation, in other words, by the monetary system. But the production of
surplus-value—and consequently the capitalization of the advanced sum of values—has its source neither in the money-form, nor in the natural form, of wages, or of the capital invested in the purchase of labor power. It arises out of the exchange of value for a power creating value, the conversion of a constant into a variable magnitude.

The greater or smaller fixity of the instruments of labor depends on the degree of their durability, on their physical properties. According to the degree of their durability, other circumstances being equal, they will wear out fast or slowly, will serve a long or a short time as fixed capital. The raw material in metal factories is just as durable as the machines used in manufacturing, and more durable than many parts of these machines, such as leather, wood, etc. Nevertheless the metal serving as raw material forms a part of the circulating capital, while the instrument of labor, although probably built of the same metal, is a part of the fixed capital, when in use. Hence it is not the substantial physical nature, not its great or small durability, to which the same metal owes its place, now in the category of the fixed, now of the circulating capital. This distinction is rather due to the role played by it in the process of production, being an object of labor in one case, and an instrument of labor in another.

The function of an instrument of labor in the process of production requires generally, that is should serve for a longer or shorter period in ever renewed labor processes. Its function, therefore, determines the greater or lesser durability of its substance. But it is not the durability of the material of which it is made that gives to it the character of fixed capital. The same material, if in the shape of raw material, becomes a circulating capital, and among those economists who confound the distinction between commodity-capital and productive-capital with that between circulating and fixed capital the same material, the same machine, are circulating capital as products and fixed capital as instruments of labor.

Although it is not the durability of the material of which it is made that gives to an instrument of labor the character of fixed capital, nevertheless its role as such an instrument
requires that it should be composed of relatively durable material. The durability of its material is, therefore, a condition of its function as an instrument of labor, and consequently the material basis of the mode of circulation which renders it a fixed capital. Other circumstances being equal, the greater or lesser durability of its material endows it in a higher or lower degree with the quality of fixedness, in other words, its durability is closely interwoven with its quality of being a fixed capital.

If the capital-value advanced for labor-power is considered exclusively from the point of view of circulating capital, in distinction from fixed capital, and if consequently the distinction between constant and variable capital is confounded with that between fixed and circulating capital, then it is natural to attribute the character of circulating capital, in distinction from fixed capital, to the substantial reality of the capital invested in labor-power, just as the substantial reality of the instrument of labor constitutes an essential element of its character of fixed capital, and to determine the circulating capital by the substantial reality of the variable capital.

The real substance of the capital invested in wages is labor itself, active, value creating, living labor, which the capitalist trades for dead, materialized labor and embodies in his capital, by which means alone the value in his hands is transformed into a self-expanding value. But this self expanding power is not sold by the capitalist. It is always solely a constituent part of his productive capital, the same as his instruments of labor; it is never a part of his commodity-capital, as, for instance, the finished product which he sells. Within the process of production, as parts of his productive capital, the instruments of labor are not distinguished from labor-power as fixed capital any more than the raw materials and auxiliary substances are identified with it as circulating capital. Labor confronts both of them as a personal factor, while they are objective things—speaking from the point of view of the process of production. Both of them stand opposed to labor-power, to variable capital, as constant capital—speaking from the point of view of the process of self-expansion. Or, if mention is to be made
here of a difference in substance, so far as it affects the process of circulation, it is only this: It follows from the nature of value which is nothing but materialized labor, and from the nature of active labor-power which is nothing but labor in process of materialization, that labor-power continually creates value and surplus-value during the process of its function; that the thing which on the part of labor-power appears as motion and a creation of value, appears on the part of its product as rest and as a created value. If the labor-power has performed its function, then capital no longer consists of labor-power on one side, and means of production on the other. The capital value invested in labor is then value added with a surplus-value to the product. In order to respect the process, the product must be sold, and new labor-power must be bought with the money so obtained, in order to be once more embodied in the productive capital. It is this which then gives to the capital invested in labor-power, and to that invested in raw materials, etc., the character of circulating capital as distinguished from the capital remaining fixed in instruments of labor.

But if the secondary quality of the circulating capital, which it shares with a part of the constant capital (raw and auxiliary materials), is made the essential mark of capital invested in labor-power, to wit, the transfer of the full value invested in it to the product in whose manufacture it is consumed, instead of a gradual and successive transfer such as takes place in the case of the fixed capital, and the consequent total reproduction of this value by the sale of the product, then the value invested in wages must likewise consist, not of active labor-power, but of the material elements which the laborer buys with his wages, in other words, it must consist of that part of the social commodity-capital which passes into the individual consumption of the laborer, of means of subsistence. In that case, the fixed capital would consist of the more durable instruments of labor which are reproduced more slowly, and the capital invested in labor-power would consist of the means of subsistence, which must be more rapidly reproduced.

However, the boundaries of greater or smaller durability pass imperceptibly into one another.

“The food and clothing consumed by the laborer, the buildings in which he works, the implements with which his labor is assisted, are all of a perishable nature. There is, however, a vast difference in the time for which these different capitals will endure: a steam-engine will last longer than a ship, a ship than the clothing of the laborer, and the clothing of the laborer longer than the food which he consumes.” (Ricardo, etc., page 27.)

Ricardo does not mention the house, in which the laborer lives, his tools of consumption, such as knives, forks, dishes, etc., all of which have the same quality of durability as the instruments of labor. The same things, the same classes of things, appear in one place as means of consumption, in another as instruments of labor.

The difference, as stated by Ricardo, is this: “According as capital is rapidly perishable and requires to be frequently reproduced or is of slow consumption, it is classed under the heads of circulating or fixed capital.”

He remarks in addition thereto: “A division not essential, and in which the line of demarcation cannot be accurately drawn.”

Thus we have once more arrived among the physiocrats, where the distinction between
avances annuelles and
avances primitives was one referring to the period of consumption, and consequently also to the different time of reproduction of the invested capital. Only, that which in their case constitutes a phenomenon important for society and for this reason is assigned in the
Tableau Economique a place of interrelation with the process of circulation, becomes here, in Ricardo’s own words, a subjective and unessential division.

As soon as the capital-value invested in labor-power differs from that invested in instruments of labor only by its period of reproduction and term of circulation, as soon as one part of capital consists of means of subsistence, another of instruments of labor, so that these differ from those only by the degree of their durability, which durability is further different for the various kinds of each class, it follows as a matter of course that all specific difference between
the capital invested in labor-power and that invested in means of production is obliterated.

This runs very much counter to Ricardo’s theory of value, likewise to his theory of profit, which is actually a theory of surplus-value. He does not consider the difference between fixed and circulating capital any further than is required by the way in which different proportions of both of them, in equal capitals invested in different branches of production, influence the law of value, particularly the extent to which an increase or decrease of wages in consequence of these conditions affects prices. But even within this restricted analysis, he commits the gravest errors on account of the confusion in the definitions of fixed and circulating, constant and variable capital. Indeed, he starts his analysis on an entirely wrong basis. In the first place, in so far as the capital-value invested in labor-power has to be considered under the head of circulating capital, he gives a wrong definition of circulating capital and misunderstands particularly the circumstances which place the capital-value invested in labor-power under this heading. In the second place, he confounds the definition, according to which the capital-value invested in labor-power is a variable capital, with that according to which it is circulating as distinguished from fixed capital.

It is evident from the beginning that the definition of capital-value invested in labor-power as circulating capital is a secondary one, obliterating its specific difference in the process of production. For on one hand, the values invested in labor-power are identified in this definition with those invested in raw materials. A classification which identifies a part of the constant capital with the circulating capital does not appreciate the specific difference of variable from constant capital. On the other hand, while the values invested in labor-power are indeed distinguished from those invested in instruments of labor, the distinction is based only on the fact that the values incorporated in them are transferred to the product in different periods of time, not on the fact that this transfer is significant for the radically different manner in which either of them passes into the production of values.

In all of these cases, it is a question of the
manner in which a given value, invested in the process of production of commodities,, whether the investment be made in wages, in the price of raw materials, or in that of instruments of labor, is transferred to the product, then circulated by it, and returned to its starting point by the sale of the product, or reproduced. The only difference lies here in the “how,” in the particular manner of the transfer, and therefore also in the circulation of this value.

Whether the price of labor-power previously agreed upon by contract in each case is paid in money or in means of subsistence, does not alter in any way the fact that it is a fixed price. However, it is evident in the case of wages paid in money, that it is not the money which passes into the process of production in the way that the value as well as the material of the means of production do. But if the means of subsistence which the laborer buys with his wages are directly classed in the same category with raw materials, as the material form of circulating capital distinguished from instruments of labor, then the matter assumes a different aspect. While the value of
these things, the instruments of labor, is transferred to the product in the process of production, the value of
those things, the means of subsistence, reappears in the labor-power that consumes them and is likewise transferred to the product by the exertion of this power. In every one of these cases it is a question of the mere reappearance of the values invested in production by means of transfer to the product. The physiocrats for this reason took this aspect of the matter seriously and denied that industrial labor could create any values. This is shown by a previously quoted passage of Wayland, in which he say that it is immaterial in which form the capital reappears, and that the different kinds of food, clothing, and shelter which are required for the existence and well-being of man are likewise changed, being consumed in the course of time while their value reappears. (Elements of Political Economy, pages 31 and 32.) The capital-values invested in production in the form of means of production and means of subsistence both reappear in the value and means of subsistence both reappear in the value of the product. By this means the transformation of the
capitalist process of production into a complete mystery is happily accomplished and the origin of the surplus-value incorporated in the product is entirely concealed.

At the same time, this perfects the fetishism typical of bourgeois political economy, which pretends that the social and economic character of things, arising from the process of social production, is a natural character due to the material substance of those things. For instance, instruments of labor are designated as fixed capital, a scholastic mode of definition which leads to contradictions and confusion. Just as we demonstrated in the case of the process of production (Vol. I, chapter VII), that it depends on the role, the function, performed by the various material substances in a certain process of production, whether they served as instruments of labor, raw materials, or products, just so we now claim that instruments of labor are fixed capital only in cases where the process of production is a capitalist process of production and the means of production are, therefore, capital and possess the economic form and social character of capital. And in the second place, they are fixed-capital only when they transfer their value to the product in a certain peculiar way. Unless they do so, they remain instruments of labor without being fixed-capital. In the same way, auxiliary materials, such as manure, if they transfer their value in the same peculiar manner as the greater part of the instruments of labor, become fixed capital, although they are not instruments of labor. It is not the definitions, which are essential in determining the character of these things. It is their definite functions which express themselves in definite categories.

If it is considered as one of the qualities exhibited by means of subsistence under all circumstances to be capital invested in wages, then it will also be a quality of this “circulating” capital “to support labor.” (Ricardo, page 25.) If the means of subsistence were not “capital,” then they would not support labor, according to this; while it is precisely their character of capital which endows them with the faculty of supporting capital by means of the labor of others.

If means of subsistence are of themselves capital circulating
after being converted into wages, it follows furthermore that the magnitude of wages depends on the proportion of the number of laborers to the existing quantity of circulating capital—a favorite economic law—while as a matter of fact the quantity of means of subsistence withdrawn from the market by the laborer, and the quantity of means of subsistence available for the consumption of the capitalist, depend on the proportion of the surplus-value to the price of labor.

Ricardo as well as Barton
*31 everywhere confound the relation between variable and constant capital with that between circulating and fixed capital. We shall see later, to what extent this vitiates Ricardo’s analyses concerning the rate of profit.

Ricardo furthermore identifies the distinctions which arise in the turn-over from other causes than the difference between fixed and circulating capital, with these same differences: “It is also to be observed that the circulating capital may circulate, or be returned to its employer, in very unequal times. The wheat bought by a farmer to sow is comparatively a fixed capital to the wheat purchased by a baker to make into loaves. The one leaves it in the ground, and can obtain no return for a year: the other can get it ground into flour, sell it as bread to his customers, and have his capital free, to renew the same, or commence any other employment in a week.” (Pages 26 and 27.)

In this passage, it is characteristic that wheat, although not serving as a means of subsistence, but as raw material when used for sowing, is supposed in the first place to be circulating capital, because it is in itself a food, and in the second place a circulating capital, because its reproduction extends over one year. However, it is not so much the slow or rapid reproduction which makes a fixed capital of a means of production, but rather the manner in which it transfers its value to the product.

The confusion caused by Adam Smith has brought about the following results:

1. The distinction between fixed and circulating capital
is confounded with that between productive capital and commodity-capital. For instance, a machine is said to be circulating capital when on the market as a commodity, and fixed capital when incorporated in the process of production. Under these circumstances, it is impossible to ascertain why one kind of capital should be more fixed or circulating than another.

2. All circulating capital is identified with capital invested, or about to be invested, in wages. This is the case with John Stewart Mill, and others.

3. The difference between variable and constant capital, which had been previously mistaken by Barton, Ricardo, and others, for that between circulating and fixed capital, is finally identified with this last-named difference, for instance by Ramsay, who calls all means of production, raw materials, etc., including instruments of labor, fixed capital, and only that which is invested in wages circulating capital. But on account of the reduction of the problem to this form, the real difference between variable and constant capital is not understood.

4. The latest English, and especially Scotch, economists, who look upon all things from the inexpressibly petty point of view of a bank clerk, such as MacLeod, Patterson, and others, transform the difference between fixed and circulating capital into one of money at call and money not at call.

31.

Observations on the Circumstances Which Influence the Condition of the Labouring Classes of Society, London, 1817.

Part II, Chapter XV.

Categories: Karl Marx