Capital Volume 2, Chapter 17: The Circulation of Surplus-Value

I  The use of capitalised surplus-value as capital advanced

In the case of the capitalist A of the last chapter, excepting the first turnover period of her business, consumption is met out of the production of surplus-value; capitalist B has to wait for her surplus-value to be realised and hence has to recourse to her own funds not only for consumption but also, when the need for extra capital arises during production, to advance capital as well. The capital necessary to carry on production on a given scale, in effect part of capital advanced, may therefore come from the capital really originally advanced (B) of from capitalised surplus-value (A).

 

II  The relation between capital advanced and capitalised surplus-value, and credit

The relation between capital advanced and capitalised surplus-value becomes more intricate with the development of the credit system. If A is lent productive capital, surplus value deposited by D, E and F, by banker C, although for A, the money is no more than money, and not accumulated surplus-value, for D, E and F A is an agent who capitalises the surplus-value they themselves have appropriated.

 

III  The accumulation of surplus-value as money

Accumulation requires an expansion in the scale of production, which can be achieved in various ways (or combinations of ways, including: raising the productivity of labour already deployed; increasing its intensive exploitation; extending the working day), in addition to speculation in raw materials, etc. In these ways, accumulation ‘soaks up’ realised surplus-value. With shorter turnover periods bringing more frequent realisations of surplus-value surplus-value needs to be accumulated as money before it can enter production. Hence, ‘[b]esides real accumulation, or the transformation of surplus-value into productive capital […] there is thus accumulation of money, scraping together a part of the surplus-value […] to function as additional capital later on, when it has attained a certain volume.’

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Capital Volume 2, Chapter 16: The Turnover of Variable Capital

1  The Annual Rate of Surplus-Value

Let us consider a circulating capital of £2,500,  4/5 of which, £2,000, is constant capital, and 1/5 , £500, variable capital. The turnover period is five weeks: four weeks working period + one week circulation period. Capital I is thus £2,000, £1,600 constant and £400 variable capital; capital II is £500, £400 constant and £100 variable capital. In each working week, £500 is laid out. In a year of 50 weeks, an annual product of 50  500 = £25,000 is produced. Capital I is turned over 50/4, i.e. 12 1/2 times; 12 1/2 x £2,000 = £25,000. Of this £25,000, 4/5 , £20,000, is constant capital, and 1/5 , £5,000, variable. The total capital of £2,500 turns over 25,000/2,500 = 10 times.

Both the constant circulating capital and the variable circulating capital can serve again in the circulation process of capital to the extent that the product in which their value is reproduced is transformed from commodity capital and thence into money capital (unlike fixed capital, which maintains its function in production in its old shape through a cycle of turnover periods of the circulating capital).

In the last chapter we dealt, in accordance with these properties, with the constant and variable parts of circulating capital together. The first phase of the circulation of circulating capital C′–M′ is common to both the constant and variable parts; in the second phase they separate. Here, we shall be dealing with the variable alone. We shall also deal with surplus-value.

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Capital Volume 2, Chapter 15: Effects of Circulation Time on the Magnitude of the Capital Advanced

The task of this chapter (and the one which follows) is to consider ‘the influence of circulation time on the valorisation of capital.’

I  The effect of applying additional capital to maintain production during the circulation period

First example

To start, we consider a commodity capital, the product of a nine-week working period (with, unless otherwise stated, the working period equal to the production period). We abstract from that part of the commodity capital’s value arising from the depreciation of the fixed capital and also from that part equivalent to the surplus-value created in production, i.e. here we only consider that part of the commodity product whose realisation replaces the (constant and variable) circulating capital advanced.

Let the capital advanced for the nine-week working period be £900, advanced at the rate of £100 a week.

We assume that after nine weeks production the whole nine-week product is placed on the market (i.e. it is immaterial whether we deal with a given production time for a continuous product or the discrete product of a continuous production period).

We assume a circulation period of three weeks, giving a total turnover of 12 weeks.

The capital turnover cycle is set out in figure 1:

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Capital Volume 2, Chapter 14: Circulation Time

The turnover time of capital is the sum of its production time and its circulation time. All the factors which differentiate the circulation periods of different capitals invested in different branches of industry so far considered (the distinction between fixed and circulating capital, variations in the working period, discrepancy between production time and working time) pertain to the former. We also need to take account of the effects on turnover time of capital of differences in the latter sphere.

 

I  Selling Time­­

The most decisive part of circulation time is the time that capital exists in the form of the finished commodity product, i.e. the time required for the sale of the finished product.

A constant factor influencing variation in selling time is the simple time taken by the journey to market.

Improvements in the speed of communication shorten the absolute period of the migration of commodities, but not the relative differences between different commodity capitals. Increases in the frequency of communication permit the distribution of the reflux over shorter periods of time. Changes in the frequency and volume of transport, themselves arising from the needs of determinate places of production, in turn effect local shifts in the circulation time of commodities or alter the distribution of already existing local variations.

The development of capitalist production and the concomitant development of means of transport introduce the need to work for increasingly distant markets. In function of this the mass of commodities actually in transit, and hence that part of social capital tied up in commodity form, grow, as does that part of social wealth laid out on the means of transport, and the fixed and circulating capital necessary to keep them in operation.

A longer circulation time also supposes a greater risk of a change in price in the selling market occurring.

II  Time of Purchase­­

In the period in which capital is transformed from the money form into the elements of production it must persist for a greater or lesser period in the state of money capital, to the extent that a certain quantity of the total capital advanced always exists in this state, since, as money capital is transformed into productive capital, it is added to by the influx from circulation. ‘Thus a definite portion of the capital advanced always exists in the state of money capital, i.e. in a form pertaining not to its sphere of production but rather to its sphere of circulation.’

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Capital Volume 2, Chapter 13: Production Time

The time that capital is confined to the sphere of production and the time that capital actually exists in the production process are not equivalent terms: the former may be, and often actually is, longer than the latter. Here, rather than interruptions in the labour process itself, we are dealing with interruptions arising from the nature of the product and its production in which the product requires chemical, physical, etc. changes during which the labour process is suspended. One example (Marx gives more) would be the fermentation and maturation period necessary in the production of wine. The greater the difference between working time and production time, the greater the turnover period is extended. This phenomenon is particularly pronounced in the agricultural sector.

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Capital Volume 2, Chapter 12: The Working Period

Imagine two lines of business, thus:

cotton spinning	manufacture of locomotives
a definite quantity of product is turned out every day	labour process lasts, say, three months to produce a finished product
discrete product; work begins afresh each morning	continuous labour process, stretching over a large number of daily processes

Let us assume:

• same working day
• application of equal capitals
• same division between constant and variable capital
• same division between fixed and circulating capital
• same division between social and necessary labour
• both products produced to order and paid for on delivery

Then: at the end of the week, when the yarn is delivered, the spinner receives her outlay of circulating capital and the wear and tear of the fixed capital contained in the value of the yarn; the turnover is complete, and the cycle can begin again anew. The locomotive manufacturer, on the other hand, must lay out fresh capital every day for three months. All else being equal, the latter needs 12 times as much circulating capital available than the former. That the capital advanced each week is equal is irrelevant to this circumstance.

If the locomotive takes 100 days to build, for the workers each day forms a part of a discontinuous quantity; but for the product, the 100 days form a continuous quantity, a working day of 1,000 working hours, a single act of production. This act is the working period: the number of inter-related working days required to complete a finished product. Why does this matter? In the case of products requiring a more continuous production process, more additional outlay on circulating capital is required, since the period during which this capital is unable to exist in a form capable of circulation – in a finished commodity – is longer. This is not the case with regard to fixed capital, since the part of its value which remains fixed in production is independent of the length of the working period (excepting cases in which this latter is longer than the fixed capital’s use-value lifetime).

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Capital Volume 2, Chapter 11: Theories of Fixed and Circulating Capital. Ricardo

Ricardo identifies two sorts of capital: ‘capital that is to support labour’ (fixed capital), and ‘capital invested in tools, machinery, and buildings’ (circulating capital); respectively, instruments of labour and variable capital. The distinction is made on the basis not of the valorisation process but – as in the case of Smith – on that of circulation.

1. ‘The differences in the degree durability of the fixed capital, and the variations in the composition of capital in terms of constant and variable, are taken as equivalent.’ The former, however, as far as valorisation is concerned, only relates to how a given quantity of value is transferred to the product; the latter determines variations in the production of surplus-value. In terms of the circulation process, the former is concerned solely with the period of the renewal of capital. This standpoint is that of ‘phenomena in their finished form’, as opposed to that of the ‘inner mechanism of capitalist production’. As Marx notes, in the distribution of the social surplus-value between capitals, the effect on the equalisation of the general rate of profit and the transformation of values into process or production of differences in the time for which capital is advanced (i.e. variations in the lifespans of fixed capitals) and in organic compositions of capital are similar.
2. In Ricardo’s categories, with instruments of labour on the one side and variable capital on the other, objects of labour disappear from the picture. They cannot appear as fixed capital, since their manner of circulation coincides with the capital laid out on labour-power; but neither can they appear as circulation capital, because of the Smith’s legacy in conflating fixed/circulating capital and constant/variable capital.

From the standpoint of the organic composition of capital, the composition of constant capital between instruments of labour and objects of labour is immaterial; from the standpoint of circulation, i.e. the distinction between fixed and circulating capital, the composition of circulating capital between objects of labour and wages is equally immaterial. The characteristic feature of variable capital is that a given (‘constant’) part of capital (i.e., a given sum of value) is exchanged for a ‘power’ that valorises itself and creates value, i.e., which creates surplus-value. But this distinguishing feature of the part of capital expended on wages disappears once it is considered from the point of view of the circulation process, from which it appears only as circulating capital (opposed to the fixed capital expended on instruments of production), i.e., when it is placed together within a common category with a component of constant capital. Through this optic, surplus-value is ignored; what counts is just that the value imparted by labour-power (and object of labour) is imparted completely and is hence completely replaced by the commodity’s sale.

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Capital Volume 2, Chapter 10: Theories of Fixed and Circulating Capital. The Physiocrats and Adam Smith

Quesnay conceived of the distinction between fixed and circulating capital as that between avances primitives (original advances) and avances annuelles (annual advances). Correctly, he presented the distinction as one within productive capital (for the physiocrats agricultural capital), i.e. capital already incorporated into the production process. The distinction presented itself as one between capital advanced for annual and more than annual periods. Quesnay also (correctly) conceived of the distinction as a distinction between the different ways these two elements of productive capital entered the value of the finished product, the value of one being completely replaced in a year, that of the other piecemeal over a longer period.

Smith applied the distinction to productive capital in general; in so doing, however, he lost sight of the conceptual distinction introduced by the physiocrats, for he arrived at a conception of fixed capital as that which remains in the possession of its owner (‘master’) and that – like merchants’ capital – which changes form in exchange. Smith thus loses sight of the significance of the distinction as one within productive capital in its impact on turnover and reproduction. Smith designates as ‘circulating capital’ capital as it passes through the metamorphoses of the cycle of capital (in reality commodity capital), and thus confuses the movement of industrial capital as a whole with the distinct elements that exist within productive capital, in other words conflating the distinction between productive capital and capital in the circulation sphere and that between fixed and circulating capital within productive capital. In Smith’s conception, all  capital is ‘fixed’, when it is involved in production; and all capital is ‘circulating’, when it undergoes the changes of form between commodity and money in circulation.

In Smith’s conception, therefore, fixed capital yields a revenue without changing hands; circulating, on the other hand, yields no revenue insofar as it remains in the possession of its employer, or continues in its own shape. Smith thus

places the merely formal commodity metamorphosis which the product […] undergoes in the circulation sphere […] on the same level with the bodily metamorphosis which the various elements of the productive capital undergo during the production process. […] His example of circulating capital is merchants’ capital, which is transformed from commodity into money and from money into commodity […]. The significance that this formal change within the circulation sphere has for functioning industrial capital is that the commodities which money is transformed back into are elements of production (means of labour and labour-power), and so the change of form […] mediates […] the production process as a […] process of reproduction. This entire change of form proceeds in the circulation sphere […]. The metamorphoses that productive capital undergoes within its productive process, on the other hand, are metamorphoses pertaining to the labour process, which are necessary in order to transform the elements of production into the intended product.

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Capital Volume 2, Chapter 9: The Overall Turnover of the Capital Advanced. Turnover Cycles

The fixed and circulating components of productive capital turn over differently and in different periods; the different elements of fixed capital in the same productive unit also undergo different turnover periods according to their differing lifespans and reproduction times.

The overall turnover of capital advanced is its average turnover. Although apparently simple to calculate, there arise certain complications which must be resolved.

• The overall turnover of capital advanced is its average turnover. Although apparently simple to calculate, there arise certain complications which must be resolved.
• Insofar as some elements of fixed capital can be replaced piecemeal, and others only once, at the end of their lives, it is necessary to reduce turnovers of different types to a similar form, such that the differences are only quantitative.

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Capital Volume 2, Chapter 8: Fixed Capital and Circulating Capital

Before proceeding, we would do well to remind ourselves of certain conceptual distinctions Marx made in volume 1.

Observing that capital, as it loses its monetary form, is split up and directed into different forms of existence and transformed into different elements of the production process, Marx distinguishes between two different parts of capital:

• variable capital: that part of capital which is transformed into labour-power, and which consequently undergoes a quantitative increase in its value in production.
• constant capital: that part of which is turned into means of production, and which undergoes no quantitative alteration of value in production.

Means of production can be further subdivided into:

• objects of labour: what is worked on in production.
• instruments (or means) of labour: those forces of production which, by interposing themselves between the producer and the objects of production, mediate the action of the former. They consist in tools, etc., and those other elements on which production depends, such as workshops, roads, canals, etc.

In the case of both instruments and objects of labour their original use-value form is lost in production only to be re-assumed in a new form in the use-value of the product. But they do not function in this respect in the same way. In the case of objects of labour, use-value vanishes from the substance of the original material only to reappear in the properties of the new product; they thus lose the independent form they had when they enter the production process. The instruments of labour, on the other hand, do not lose their form (indeed, their utility precisely depends on them not doing so): their use-value is consumed, rather, over the course of their working life, so that a machine which has a life of, say, x years, will lose 1 xth part of its use-value, and pass on 1 xth part of its value, every year.

Objects of labour are thus transformed in form by productive labour, and, in so being, their value departs the old material body and occupies the new one, that of the product. This is a process that occurs simultaneously to, and as a consequence of, the value-creating process performed by labour-power, as a natural property of it in action: the reproduction of old value at the same time as it creates new.

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