The Grundrisse

NOTEBOOK VI February 1858

The Chapter on Capital (continuation)

‘Any change that can disturb the existing relations between wages and profits must originate in wages.’ (Quincey. loc. cit. (X, 5) p. 205.) This is true only in so far as any variations in the mass of surplus labour must be derived from a variation in the relation between necessary and surplus labour. But this can likewise come about if necessary labour becomes less productive and hence a greater part of the total labour falls to it, or if the total labour becomes more productive, hence necessary labour time is reduced. It is nonsense to say that this productive force of labour arises from wages. The relative reduction of wages is rather its result. But it arises (1) from the appropriation by capital of the growth in the productive forces resulting from division of labour, trade which brings cheaper raw materials, science etc.; (2) but this increase of the productive forces has to be regarded as being initiated by capital in so far as it is realized through the employment of a greater capital etc. Further: profit and wages, although determined by the relation of necessary and surplus labour, do not coincide with it, are only secondary forms of the same. The point, however, is this: the Ricardians presuppose a definite quantity of labour; this determines the price of the product, out of which labour, in wages, and capital, in profits, then draw their dividends; the workers’ dividend = the price of the necessaries of life. Hence in the ‘existing relations between wages and profits’, the rate of profit is at its maximum and that of wages at its minimum. Competition among capitals can change only the relation in which they share the total profit, but cannot alter the relation between total profit and total wages. The general standard of profit is this relation of the total profit to the total wages, and this is not altered through competition. Hence, where does the alteration come from? Certainly not because the profit rate voluntarily declines, and it would have to do so voluntarily since competition does not have this result. Hence it is due to an alteration in wages, whose necessary costs may rise (theory of the progressive deterioration of the soil in agriculture; theory of rent) in consequence of a decrease in the productive force of labour due to natural causes. Carey etc. replies, correctly, to this (but, in the way he explains it, incorrectly again) that the rate of profit falls, as a result not of a decrease but rather of an increase in the productive force. [1] The solution of the whole matter is simply that the rate of profit is not the same as the absolute surplus value, but is rather the surplus value in relation to the capital employed, and that the growth of productive force is accompanied by the decrease of that part of capital which representsapprovisionnement in relation to that part which represents invariable capital; hence, when the relation between total labour and the capital which employs it falls, then the part of labour which appears as surplus labour or surplus value necessarily falls too. This inability to explain one of the most striking phenomena of modern production is the source of Ricardo’s failure to understand his own principle. But the difficulties in which he thereby entangles his disciples may be seen in this quotation among others from Quincey: ‘It is the common paralogism, that if upon the same farm you have always kept 5 men, and in 1800 their produce was 25 qrs, but in 1845 50 qrs, you are apt to view the produce only as variable, and the labour as constant: whereas virtually both have varied. In 1800 each qr must have cost 1/5 part of a man; in 1845 each has cost no more than 1/10 part of a man.’ (loc. cit. 214.) In both cases the absolute labour time was the same, 2 days; but in 1845 the productive force of labour had doubled in comparison with 1800, and therefore the cost of producing necessary labour was less. The labour bestowed upon 1 quarter was less, but the total labour was the same. Mr Quincey should, however, have learned from Ricardo that the productive force of labour does not determine the value of the product — although it determines the surplus value, albeit not in step with the increase of the productive force. These arguments against Ricardo, as well as the desperate sophistries of his disciples (e.g. Mr MacCulloch, who cites surplus labour as the source of the surplus value of old wine compared with new wine).’ Nor is value to be determined by the labour which the unit cost, i.e. the price of the single quarter. Rather, the price multiplied by the number constitutes the value. The 50 quarters in 1845 had the same value as the 25 in 1800, because they objectified the same amount of labour. The price of each single quarter, the unit,must have been different, and the total price (expressed in money) may have been different, for very different reasons. (What Quincey says about the machine holds for the worker: ‘A machine, as soon as its secret is known, will not sell for the labour produced, but for the labour producing… it will no longer be viewed as a cause equal to certain sects, but as an effect certainly reproducible by a known cause at a known cost.’ (84.) De Quincey says about Malthus: ‘Malthus in his Political Economy refuses to see, nay he positively denies, that if two men produce a variable result of ten and five, then in one case each unit of the result has cost double the labour which it has cost in the other. On the contrary, because there are always two men, Mr Malthus obstinately insists that the cost in labour is constant.’ (loc. cit. 215, note.) In fact: the cost in labour is constant, because, by presupposition, just as much labour is contained in ten as in five. But the cost of labour is not constant, because in the first case, where the productive force of labour [is] double, the time belonging to necessary labour [is] in a certain proportion less. We shall go into Malthus’ view immediately after this. Here, before we go further in the development of the circulation time of capital and its relation to labour time, it is proper first to examine Ricardo’s whole doctrine about this matter, in order to establish the difference between our own conception and his more sharply. (The quotations from Ricardo in Notebook VIII.) [3]

First presupposition with him, ‘competition without restriction’, and unhampered increase of products through industry. (19. R. 5.) [4] This means in other words nothing other than that the laws of capital are completely realized only within unlimited competition and industrial production. Capital develops adequately on the latter productive basis and in the former relation of production; i.e. its immanent laws enter completely into reality. Since this is so, it would have to be shown how this unlimited competition and industrial production are conditions of the realization of capital, conditions which it must itself little by little produce (instead of the hypothesis appearing here as merely that of the theoretician, who places free competition and the productive mode of capital’s existence externally and arbitrarily into the relation of capital to itself as capital, not as developments of capital itself, but as imaginary presuppositions of capital for the sake of purity.) This by the way the only place in Ricardo where a faint notion of the historic nature of the laws of bourgeois economy. With this presupposition, the relative value of commodities (this word meaningless, since absolute value is nonsense) is determined by the different quantity which can be produced in the same labour time, or by the quantity of labour relatively realized in different commodities. (p. 4.) (Notebook, 19.) (Henceforth the first number for the page in the notebook; the second for the page in Ricardo.) [5] Now, how one gets from value as equivalent determined by labour to the non-equivalent, i.e. to the value which posits surplus value through exchange, i.e. how one gets from value to capital, from one aspect to its apparent opposite, this does not interest Ricardo. The only question for him: how the value relation between the commodities can remain the same and can and must be determined by relative quantities of labour, although the owners of accumulated labour… do not exchange labour equivalentsin living labour, i.e. despite the relation of capital and labour. It is then a very simple arithmetical proof that commodity A and commodity B can exchange in relation to the labour realized in them, although the producers of A or B distribute product A, or the product B exchanged for it, in different ways among themselves. But since all distribution here proceeds on the basis of exchange, it appears in fact altogether impossible to explain why one of the exchange values — living labour — is exchanged according to the amount of labour time realized in it, while the other exchange value — accumulated labour, capital — is not exchanged according to the standard of the labour time realized in it. Bray e.g. therefore believes that he is the first to draw the true conclusion from Ricardo with his equal exchange between living and dead labour. [6] That from the standpoint of exchange alone, the worker’s pay would have to = the value of the product, i.e. the amount of labour in objective form which the worker obtains in pay, = the amount of labour in subjective form which he expends in labour, is so necessary a conclusion that A. Smith falls into it. [7] Ricardo, by contrast, avoids this fallacy, but how? ‘The value of labour, and the quantity of commodities which a specific quantity of labour can buy, are not identical.’ Why not? ‘Because the worker’s product or an equivalent of this product is not = to the worker’s pay.’ I.e. the identity does not exist, because a difference exists. ‘Therefore’ (because this is not the case) ‘it is not the value of labour which is the measure of value, but the quantity of labour bestowed on the commodity.’ (19, 3.) [8] Value of labour is not identical with wages of labour. Because they are different. Therefore they are not identical. This is a strange logic. There is basically no reason for this other than that it is not so in practice. But it ought to be so, according to the theory. For the exchange of values [is] determined by the labour time realized in them. Hence equivalents are exchanged. Thus a specific quantity of labour time in living form would have to exchange for the same quantity of labour time in accumulated form. What would have to be demonstrated is precisely that the law of exchange turns into its precise opposite. Not even a faint suspicion that it does so is expressed here. Or the suspicion would have to lie in the frequently repeated admonition against mixing them up; that the distinction between past and living labour cannot do the job either is readily admitted: ‘The comparative quantity of commodities which a given quantity of labour will produce determines their past and present value’ (19, 9) where living labour thus even determines the value of past labour retroactively. Why then is capital not also exchanged for living labour in proportion to the labour realized in the capital? Why is it that a quantity of living labour is not itself = the quantity of labour in which it has objectified itself? ‘Labour is by nature of different quality, and it is difficult to compare different hours of labour in different branches of business. But this scale is very soon established in practice.’ (19, 13.) ‘For short periods, at least from year to year, the variation in this inequality is insignificant, and is therefore left out of account.’ (19, I 5.) This is nothing. If Ricardo had applied his own principle, the amounts of (simple) labour to which the different labour capacities are reducible, then the matter would have been simple. Generally, he is concerned straight away with the hours of labour. What the capitalist 562 acquires through exchange islabour capacity: this is the exchange value which he pays for. Living labour is the use value which this exchange value has for him, and out of this use value springs the surplus value and the suspension of exchange as such. Because Ricardo allows exchange with living labour — and thus falls straight into the production process — it remains an insoluble antinomy in his system that a certain quantity of living labour does not = the commodity which it creates, in which it objectifies itself, although the value of the commodity = to the amount of labour contained in it. The value of the commodity ‘includes also the labour of bringing the commodity to market’. (19, 18.) We shall see that circulation time, in so far as it appears as determining value with Ricardo, is only the labour required to bring the commodities to market. ‘The principle of value-determination by the relative amounts of labour contained in the commodity is considerably modified by the employment of machinery and other fixed and durable capital. A rise or fall in wages differently affects two capitals of which one is almost entirely circulating, the other almost entirely fixed; likewise the unequal duration of the fixed capital employed. Namely, there is added the profit on fixed capital (interest), as well as the compensation for the greater length of time which must elapse before the more valuable of the two commodities can be brought to market.’ (19, 29, 30.) The latter moment concerns only the duration of the production process, i.e. labour time directly employed, at least in Ricardo’s example of the farmer and the baker. (If one farmer’s wheat becomes ready for the market later than another’s, then this so-called compensation already presupposes interest; thus already something derivative, not an original aspect.)

‘Profit and wages are only portions in which the two classes, of capitalists and workers, partake in the original commodity, i.e. also in that exchanged for it.’ (p. 31.) The very great extent to which the production of the original commodity, its origin, is itself determined by theseportions, the extent to which, therefore, it precedes these portions as basic determinant, proves that the original commodity [would] not be produced at all, if it did not contain surplus labour for capital. ‘Commodities on which the same quantity of labour has been bestowed vary in relative value if they cannot be brought to market in the same amount of time. With a greater fixed capital, too, the higher value of a commodity is due to the greater length of time which must elapse before it can be brought to market… The difference arises in both cases from the profits being accumulated as capital, and is only a compensation for the time during which profits were withheld.’ (34, 35.) This means absolutely nothing other than that capital lying fallow is reckoned in and up as if it were not lying fallow, but were being exchanged with surplus labour time. This has nothing to do with the determination of value. It belongs with price. (In the case of fixed capital it [enters] into the determination of value only as another method of paying for the objectified labour, abstracted from the profit.)

‘There is another principle of labour which nothing points out to the economic inquirer in old countries, but of which every colonial capitalist has been made conscious in his own person. By far the greater part of the operations of industry, and especially those of which the produce is great in proportion to the capital and labour employed, require a considerable time for [their] completion. As to most of them, it is not worth while to make a commencement without the certainty of being able to carry them on for several years. A large portion of the capital employed in them is fixed, inconvertible, durable. If anything happens to stop the operation, all this capital is lost. If the harvest cannot be gathered, the whole outlay in making it grow has been thrown away… This shows that constancy is a no less important principle than combination of labour. The importance of the principle of constancy is not seen here, because rarely indeed does it happen, that the labour which carries on a business, is stopped against the will of the capitalists… But in the colonies just the opposite. Here capitalists are so much afraid of it that they avoid its occurrence as much as they can, by avoiding, as much as possible, operations which require much time for their completion.’ (Wakefield, 169, XIV, 71.) [9]‘There are numerous operations of so simple a kind as not to admit a division into parts, which cannot be performed without the cooperation of many pairs of hands. For example, the lifting of a large tree on to a wain, keeping down weeds in a large field of growing crops, shearing a large flock of sheep at the same time, gathering a harvest of corn at the time when it is ripe enough and not too ripe, moving any great weight; everything, in short, which cannot be done unless a good many pairs of hands help together in the same undivided employment, and at the same time.’ (168 loc. cit.) ‘Combination and constancy of labour are provided for in old countries, without an effort or thought on the part of the capitalist, merely by the abundance of labourers for hire. The scarcity of labourers for hire is the universal complaint of colonies.'(170 loc. cit.) ‘Only the cheapest land in a colony is that whose price affects the labour market. The price of this land, as of all bare land, and of everything else which it costs nothing to produce, depends of course on the relation between the demand and supply.’ (p. 332.)… ‘In order that the price of waste land should accomplish its objects’ (namely of making the worker into a non-landowner), ‘it must be sufficient for the purpose. Hitherto the price has been everywhere insufficient.’ (338 loc. cit.) This ‘sufficient’ price: ‘In founding a colony the price might be so low as to render the quantity of land appropriated by settlers practically unlimited: it might be high enough to occasion a proportion between land and people similar to that of old countries, in which case, if this very high price did not prevent emigration, the cheapest land in the colony might be as dear, and the superabundance of labourers as deplorable as in England: or it might be a just medium between the two, occasioning neither superabundance of people nor superabundance of land, but so limiting the quantity of land as to give the cheapest land a market value that would have the effect of compelling labourers to work some considerable time for wages before they could become landowners.’ (339 loc. cit.) (Notebook XIV, 71.) (These excerpts here quoted from Wakefield’s Art of Colonizationbelong with the ones given above about the necessary separation of the worker from the conditions of property.)

Surplus value and profit. Example (Malthus). — Profit and surplus value. Malthus — Difference between labour and labour capacity. — The peculiar assertion that the introduction of capital in no way changes the payment of labour. — Carey’s theory of the cheapening of capital for the worker. — (Decline of the profit rate.) — Wakefield on the contradiction between Ricardo’s theories of wage labour and of value

(The calculation of profit as distinct from the calculation of the real surplus value which capital posits in the exchange with living labour, made clear e.g. in the following example. It is a statement in the first Report of the Factory Commissioners. (Malthus’s Princip. of Polit. Economy,1836, 2nd ed. (Notebook X, p. 42).)

Capital sunk in building and machinery £10,000 Floating capital £7,000 £500 interest on £10,000 fixed capital 350 floating capital 150 Rents, taxes, rates 650 Sinking fund of 61/2% for wear and tear of the fixed capital £1,650 £1,100 Contingencies, carriage, coal, oil 2,750 2,600 Wages and salaries 5,350 10,000 for about 400,000 lb. raw cotton at 6d. 15,350 16,000 for 363,000 lb. twist spun. Value £16,000

The capital laid out in labour is 2,600; the surplus value = 1,650 (850 interest + 150 rents etc., makes 1,000 + 650 profit).

But 2,000:1,650 = 100:63 & 6/13. Thus the rate of surplus value is 63 6/13%. According to the profit calculation it would have to be 850 interest, 150 rents and 650 profit, or 1,650:15,350; nearly 10.1%.

In the above example, the floating capital turns over 167/70 times per year; the fixed capital turns over once in 15 5/13 years; once in 200/13 year.

Profit: 650 or about 4.2 [10] . The wages of the operatives 1/6. The profit is indicated here as 4.2; say it were only 4%. This 4% figured on an outlay of 15,350. But then we also have 5% interest on £10,000 and 5% on 7,000; £850 = 5% of 17,000. From the actual annual advances made, we must deduct (1) the part of the fixed capital which does not figure in the sinking fund; (2) that which is figured as interest. (It is possible that capitalist A does not pocket the interest, but capitalist B. In any case they are revenue, not capital; surplus value.) From the £15,350 outlays thus deduct 850; leaves: 514,500. Of the £2,600 for wages and salaries there were £183 1/3 in the form of salary, since 1/6 of 14,500 is not 2,600 but 2,416 2/3, and 14,500 divided by this is 6.

Thus, he sells the 14,500 at 16,000 or a profit of 1,500; makes 10 2/3%; but let us ignore these 2/3 and say 10%; 1/6 of 100 is 16 2/3. Thus, out of 100, he would give: 83 1/3 for advances, 16 2/3 wages and 10 profit. In detail:

  Advances Wages Sum Reproduces Profit
£ St.: 83 1/3 16 2/3 100 110 10

10 of 16 2/3 or of 50/3 is exactly 60%. Thus, in order that, in the capitalist’s calculation, an annual profit of 10% (it was slightly more) be made on a capital of £17,000, wherein labour makes up only 1/6 of the annual advances of 14,500, the worker (or capital, as you like) has to create a surplus value of 60%. Or, of the total labour time 40% are for necessary and 60 for surplus labour; they relate as 4: 6 or = 2:3 or 1:3/2. If, however, the advances on capital had been 50, the advances on wages also 50, then only 20% surplus value would have to be created in order that the capitalist should have 10%; 50 50 10 = 110. But 10 to 50 = 20:100 or 20%. If necessary labour in the second case posited as much surplus labour as in the first, then the capitalist’s profit would amount to £30; on the other hand if the rate of real value-creation, the positing of surplus labour, in the first case, were only as great as in the second, then the profit would amount to only £3 1/3, and if the capitalist had to pay 5% interest to another capitalist, then he would have to carry an actual loss. This much arises simply from the formula, (1) that, in order to determine the size of the real surplus value, one must calculate the profit on the advance made for wages; the percentage which expresses the proportion between the so-called profit and wages; (2) the relatively smaller percentage made up by the proportion between the outlay in living labour and the total outlay presupposes a greater outlay in fixed capital, machinery etc.; greater division of labour. Thus, although the percentage of labour is smaller than in the capital working with more labour, the mass of labour really set in motion must be significantly greater; i.e. a greater capital generally has to be worked with. The proportional part of labour out of the total advance is smaller; but the absolute sum of labour set in motion is larger for the individual capital; i.e. it must itself be larger. (3) If it is a case not of larger machinery etc., but of an instrument which does not set more labour into motion and itself represents no greater fixed capital (e.g. manual lithography) but merely replaces labour, then the profit of the capital working with the machine is absolutely smaller than that of the capital working with living labour. (But the latter can make a percentage profit higher than the former, and thus throw him out of the market.) (etc.) The examination of how far the rate of profit can decrease as capital grows, while the gross profit nevertheless increases, belongs to the doctrine of profit (competition).

In his Principles of Political Economy, 2nd ed., 1836, Malthus has an inkling that profit, i.e. not profit, but real surplus value, has to be calculated not in respect of capital advanced, but of living labour advanced, whose value is expressed objectively in wages; but this leads him into playing games which become absurd if they are to serve as a basis for any determination of value, or for reasoning about the relation of labour to the determination of value.

For example, if I take the total value of the finished product, then I can compare every part of the product advanced with the part of the outlay corresponding to it; and the percentage of profit in relation to the whole product is naturally the same percentage for any fractional part of the product. Say e.g. that 100 thalers brought 110; thus 10% the whole product; 75%, say, for the invariable part of capital, 25 for labour, i.e. 3/4 for the former, 1/4 for living labour. Now if I take 1/4 of the total product, i.e. of 110, then I obtain 27 2/4 or 27 1/2. On an outlay of 25 for labour, the capitalist would have a gain of 2 1/2, i.e. 10%. Likewise Malthus could have said that if I take 3/4 of the total product, i.e. 75, then these 3/4 are represented in the total product by 82 1/2; then 7 1/2 out of 75 is exactly 10%. This obviously means nothing other than that if I gain 10% on 100 then the gain on every part of 100 amounts to as much as, when added together, will be 10% on the total sum. If I have gained 10 on 100, then on 2×50 I have gained 5 each time etc. The fact that, if I gain 10 on 100, I gain 2 1/2 on 1/4 of 100 and 7 1/2 on 3/4 takes us not a single step further. If I have gained 10 on 100, how much have I then won on 1/4 of 100 or on 3/4? Malthus’s insight can be reduced to this childishness. The advance for labour amounted to 1/4 of the 100, and the gain on it amounted to 10%. 10% of 25 is 2 1/2. Or the capitalist, if he has gained 10 on 100, has gained 1/10 on every part of his capital, i.e. 10%. This gives the parts of the capital no qualitative character whatever, and it therefore holds for axed capital etc. just as well as for the part advanced in labour. Moreover, this only expresses the illusion that each part of the capital is involved to an equal degree in the newly created value. Nor has the 1/4 of the capital advanced for wages created the surplus value; rather, the unpaid living labour has done so. However, from the relation of the total value — here the 10 thalers — to wages we can see what percentage of labour was not paid, or, how much surplus labour there was. In the above relation, the necessary labour is objectified in 25 thalers, the surplus labour in 10; thus they relate as 25:10 = 100:40; 40% of the labour was surplus labour, or, what is the same, 40% of the value it produced was surplus value. It is quite true that the capitalist can make this reckoning: if I make 10 on 100, then, on wages, = 25, I have made 2 1/2. It is impossible to see what use this calculation is. But what Malthus wants to do with it will be seen shortly when we go into his determination of value. However, it is clear from the following that he indeed believes that his simple arithmetical example contains a real determination:

‘Suppose the capital be expended only for wages, £100 expended in immediate labour. The returns at the end of the year 110, 120, or 130; it is evident that in each case the profits will be determinated by the proportion of the value of the whole produce which is required to pay the labour employed. If the value of the produce in the market = 110, the proportion required to pay the labourers = 10/11 of the value of the produce, or the profits = 10%.’ (Here Mr Malthus does nothing more than to express the original advance, £100, as a relation to the total product. 100 is 10/11 of 110. Whether I say I gain 10 on 100, i.e. 1/10 of 100, or I say 1/11 of the 110 are gain, it is the same.) ‘If the value of the product is 120, the proportion for labour = 10/12 and the gain 20%; if 130, the proportion required to pay the labour = 10/13 and the gain = 30%.’ (Instead of saying: I gain 10 on 100, I can also say that 10/11 of the 110 were the advances; or, 20 on the 100, the advances amount only to 10/12 of 120 etc. The character of these advances, whether in labour or otherwise, has absolutely nothing to do with this other arithmetic form of expressing the matter. If a capital of 100 has brought in 110, then either I can start with the capital and say I gained 10 on it, or I can start with the product, with 110, and say that I advanced only 10/11 on it beforehand. The relation is, of course, the same.) ‘Now assume that the capitalist’s advances do not consist entirely of labour. The capitalist expects an equal benefit on all parts of the capital he advances’(that means simply that he distributes the benefit he has made, and whose origin may be quite obscure to him, among all parts of his outlays equally, entirely abstracting away their qualitative difference). ‘Suppose 1/4 of the advances, for labour’ (direct), 3/4 consisting of accumulated labour and profits, with any additions which may arise of rents, taxes and other outgoings. Then strictly true that the profits of the capitalist will vary with the varying value of this 1/4 of the produce compared with the quantity of labour employed.’ (Not quantity with Mr Malthus, but rather compared with the salary paid.) (Thus strictly true that his profits will vary with the varying value of the 3/4 of his profits compared with the advances in accumulated labour, i.e. the gain relates to the total capital advanced (10:100) as every part of the total product (110) does to the part of the advance corresponding to it.) ‘For example,’ Malthus continues, ‘a farmer employs £2,000 in cultivation, of which 1,500 in seed, keep of horses, wear and tear of his fixed capital, etc., and £500 on immediate labour, and the returns at the end are 2,400. His profit 400, on 2,000 = 20%. And it is immediately obvious that if we took 1/4 of the value of the produce, namely £600, and compared it with the amount paid in the wages of the immediate labour, the result would show exactly the same rate of profits.’ (loc. cit. 267, 268. Notebook X, 41, 42.) (It is equally obvious that if we took 3/4 of the value of the produce, namely 1,800, and compared it with the amount paid in the advances on accumulated labour, namely with 1,500, the result would show exactly the same rate of profits. 1,800:1,500 = 18:15 = 6:5. And 6 is 1/5 more than 5, hence 20%.) (Malthus here has two different arithmetic formulae in mind and gets them mixed up: firstly, if I make 10 on 100, then on every part of the 100 my gain is not 10 but 10%: i.e. 5 on 50, 2 1/2 on 25 etc.; to gain 10 on 100 means to gain 1/10 on each part of the 100, and consequently the profit has to show up also as — profit on wages, and if the profit is distributed evenly among all parts of the capital, then I can say that the rate of profit on the total capital varies with the rate of profit on each of its parts, including e.g. the part advanced as wages;secondly if I gained 10% on 100, then the total product 110. Now, if wages formed 1/4 of the advances = 25, then they form only a 4 2/5 part of 110; i.e. they form a fraction that is smaller by 2/5, and it will form an ever smaller part of the total product in proportion as the latter has risen in comparison with the original. This is again only another way of calculating. 10 is 1/10 of 100 but only 1/11 of 110. I can therefore say that as the total product grows larger, each of the fractional parts of the original capital forms a relatively smaller part of it. Tautology.)

In his work The Measure of Value Stated and Illustrated, London, 1823 (Notebook IX), Malthus asserts that the ‘value of labour’ is‘constant’ and is hence the true Measure of Value generally. ‘Any given quantity of labour must be of the same value as the wages which command it, or for which it actually exchanges.’ (p. 5, loc. cit.) (IX, 29.) He is speaking here, of course, about wage labour. The truth is rather: any given quantity of labour is = the same quantity of labour expressed in a product; or, each product is only a specific quantity of labour, objectified in the value of the product, which is measured with respect to other products by this quantity. Wages, however, express the value of living labour capacity, but in no way the value of living labour, which is expressed, rather, in wages + profit. Wages are the price of necessary labour. If the worker had to work 6 hours in order to live, and if he produced for himself as mere worker, then he would daily receive the commodity of 6 hours of labour, say 6d. Now the capitalist makes him work 12 hours, and pays him 6d. He pays him 1/2d. per hour, i.e. a given quantity of 12 hours of labour has the value of 12d., and 12d. is indeed the value for which the product exchanges, when it gets sold. On the other hand, the capitalist commands with this value, if he could re-invest it in mere labour, 24 hours. The wages command, therefore, a much greater quantity of labour than they consist of, and a given quantity of living labour actually exchanges for a much smaller one of accumulated labour. The only thing that is sure is that the price of labour, wages, must always express the quantity of labour which the labourers want in order to keep soul and body together. The wages of any quantity of labour must be equal to the quantity of labour which the labourer must expend upon his own reproduction. In the above instance a man would set to work two men for 12 hours each — together 24 hours — with the quantity of labour afforded by one man. In the case above, the product would be exchanged for another product with a value of 12d., or for 12 hours of labour, and this would be the source of its profit of 6d. (its surplus value for the capitalist). The value of products is determined by the labour contained in them, not by that part of the labour in them which the employer pays for. The value of the product is constituted by labour done, including that not paid for; but wages only express paid labour, never all labour done. The measure of this payment itself depends on the productivity of labour, for the latter determines the amount of necessary labour time. And since these wages constitute the value of labour (labour itself posited as commodity), this value is constantly variable, and is the opposite of constant. The amount of labour which the worker works is very different from the amount of labour that is worked up into his labour capacity, or which is required to reproduce his labour capacity. But he does not sell as commodity the use made of him, he sells himself not as cause but as effect. Let us listen how Mr Malthus exerts himself to get the matter clear:

‘The conditions of the supply of commodities do not require that they should retain always the same relative values, but that each should retain its proper natural value, or the means of obtaining those objects which will continue to the producer the same power of production AND accumulation … profits are calculated upon the advances necessary to production… the specific advances of capitalists do not consist of cloth, but of labour; AND as no other object whatever can represent a given quantity of labour, it is clear that it is the quantity of labour which a commodity will command, and not the quantity of any other commodity, which can represent the condition of its supply, or its natural value.’ (17, 18.) (IX, 29.) Already, from the fact that the capitalist’s advances consist of labour, Malthus could have seen that the matter has not become clear. Posit that the necessary labour time is 6 hours; also A, B, two men each of whom works for himself but who exchange with one another. Let A work 6 hours, B 12 hours. Now if A wants to eat up the 6 extra hours worked by B, if he wants to consume the product of B’s 6 surplus hours, there is nothing he can give him other than 6 hours of living labour, say the next day. B now has a product of 6 hours of labour more than A. Now posit that under these circumstances he begins to fancy himself a capitalist and stops working altogether. Then on the third day, the only thing he could give in exchange for A’s 6 hours is his own accumulated product of 6 hours, and, as soon as this exchange was accomplished, he would have to begin working again himself, or starve. But if he continues to work 12 hours for A, and A continues to work 6 hours for himself and 6 for B, then they exchange exactly 12 hours with one another. The natural value of the commodity, says Malthus, consists in its giving back to its possessor through exchange the same power of production AND accumulation. His commodity consists of 2 quantities of labour, one quantity of accumulated labour + one quantity of immediate labour. Thus if he exchanges his commodity for another which contains exactly the same total quantity of labour, then his power of production and accumulation has remained at least the same, equal. But it grew, because a part of the immediate labour has cost him nothing, while he sells it nevertheless. Yet Malthus comes to the conclusion that the quantity of labour of which the product consists is paid labour only, hence = to the sum of the wages, or, that wagesare the measuring rod of the value of the commodity. If every amount of labour contained in the commodity were paid for, then Mr Malthus’s doctrine would be correct, but it would be equally true that his capitalist would have no ‘advances of labour’ to make, and his ‘powers of accumulation would become totally forfeited’. Where is the profit to come from, if no unpaid labour is performed? Well, thinks Mr Malthus, [from] the wages for accumulated labour. But since labour done has ceased to work, it also ceases to draw wages. True, the product in which it exists could now be again exchanged for living labour, but posit that this product = 6 hours of labour; then the worker would give 6 hours of living labour and would receive the advances, the capitalist’s 6 hours of done labour, in return; so that the capitalist would not have budged a single step forward. Living labour would very soon be in possession of his dead labour. The reason Malthus gives, however, is that because ‘no other object whatsoever can represent a given quantity of labour’, the natural value of a commodity consists of ‘the quantity of labour which a commodity will command, and not the quantity of any other commodity’. That means a given quantity of labour can be represented only by a quantity of living (immediate) labour. Not ‘no other object whatsoever’ but rather ‘every object whatsoever’ can represent a given quantity of labour, namely every object in which the same quantity of labour is contained. But Malthus wants the quantity of labour contained in the commodity to be measured by, to be equal to, not the quantity of living labour which it can set in motion, but the quantity of paid labour which it sets in motion. Posit that the commodity contains 24 hours of labour; he thinks, then, that the capitalist can buy 2 working days with it; and if the capitalist paid all of this labour, or if the quantity of labour done = the quantity of paid living labour, then he could buy only 24 hours of living labour with his 24 hours of done labour, and his ‘powers of accumulation’ would have gone to the wall. But the capitalist does not pay the worker the labour time, the amount of labour, but rather pays him only the necessary labour, while forcing him to work the rest free of charge. Thus, with the 24 hours of done labour he may perhaps set 48 hours of living labour into motion. Thus he in fact pays 1 hour of done labour for 2 hours of living labour, and thus gains 100% on the exchange. The value of his commodity now = 48 hours, but is in no way equal to the wages exchanged for them, nor equal to the wages for which it then in turn exchanges. If he continues in the same way, his 48 hours of done labour will buy 96 hours of living labour.

Posit that no capitalists exist at all, but that the independent and mutually exchanging workers worked more than necessary to live, because they want to accumulate too, etc. Call that part of the work which the worker does in order to live, wages; and the surplus time he works in order to accumulate, profit. Then the value of his commodity would be = to the total amount of labour contained in it, = to the total sum of living labour time; but in no way = to the wages he paid himself, or equal to the part of the commodity which he would have to reproduce in order to live. Because the value of a commodity = a specific quantity of labour, Malthus says it is = to the quantity of necessary labour (i.e. wages) contained in it, and not = to the total sum of labour contained in it; its totality is = to a fraction of it. But the worker’s ‘powers of accumulation’ evidently would arise only because he has worked more than necessary to pay himself his wages. If a specific quantity of living labour time were = to the time required for the worker to live, then a specific quantity of living labour would be = to the wages which he produces, or the wages would be exactly equal to the living labour which they set in motion. If such were the case, capital would of course be impossible. If the worker, in the whole of his working time, can produce not a farthing more than his wages, then with the best of wills he cannot squeeze out a farthing for the capitalist. Property is the offspring of the productivity of labour. ‘If one can produce only for one, everyone a worker; there can be no property. If one’s man labour can maintain 5, there will be 4 idle men for 1 employed in production.’ (Ravenstone.)[11] We saw above how Malthus’s fantasizing profundity expressed itself in a purely childish kind of calculation. What lay behind this, by the way, was the doctrine that the value of labour was constant and that wages constituted price. Because the rate of profit on a total capital can be expressed as the same rate on the fraction of the capital made up by wages, he asserts that this fractional part constitutes and determines the price. Exactly the same profundityas here. If commodity A = an amount of commodity, he thinks that this can mean nothing else than that it = living labour, for only labour can represent labour. From this he concludes that commodity A = the amount of wage labour which it can command, and that therefore the value of labour is constant, because always = to the commodity by which it is set in motion. The nub of it is simply that the amount of living labour and the amount of wage labour are identical for him, and that he believes that every fractional part of wage labour is really paid for. But living labour can be (and, as wage labour, always is) = – necessary labour (wages) + surplus labour. dead labour can therefore set in motion x – ynecessary labour (wages) + surplus labour time; i.e. it always sets in motion as many additional hours of living labour time as there are hours of surplus labour time over and above necessary labour time contained within x hours of labour.

Wage labour always consists of paid and unpaid labour.

The value of labour is constant, thus means nothing other than that all labour time is necessary, i.e. wage-producing labour time. There is no surplus labour time but — nevertheless — there are ‘powers of accumulation’ and capital. Since wages are always equal to a given quantity of labour, namely the quantity of living labour which they set in motion, and since this is the same quantity of labour contained in the wages, therefore the value of labour is constant, for it is always = to the quantity of objectified labour. The rise and fall in the price of commodities, not of thevalue of labour. If a worker gets 8s. silver per week or 16, this comes about only because the price of shillings has risen or fallen, but the value of labour has remained the same. In both cases he obtains a week of done labour for a week of living labour. Mr M. proves this as follows:

‘If labour alone, without capital, were employed in procuring the fruits of the earth, the greater facility of procuring one sort of them compared with another would not, it is acknowledged, alter the value of labour, or the exchangeable value of the whole produce obtained by a given quantity of exertion.’[12]

This means nothing but that each of the commodities, regardless of their quantity, would be determined by the labour contained in it, despite the. fact that, depending on the degree of its productivity, it would express itself in one case in more, in another in fewer, use values. ‘ We should, without hesitation, allow that the difference was in the cheapness or dearness of the produce, not of the labour.’[13] We would say labour is more productive in one branch than in the other, or, alternatively, the product costs more or less labour. We could not speak of cheapness or dearness of labour, since no wage labour existed, and hence an hour of immediate labour would always command an hour of objectified labour, which would naturally not prevent one hour from being more productive than another. But still, to the extent that we distinguish the part of labour necessary for subsistence from the part that is surplus labour — and if any hours of the day are at all worked as surplus time, then it is the same as if every fractional part of labour time consisted of a part necessary and a part surplus labour — done by the immediate labourers, it could still not be said that the value of labour, i.e. wages (the part of the product exchanged for necessary labour, or the part of the total labour which is employed for the necessary product), are constant. The fractional part of labour time which reproduces wages would vary with productivity; thus, with the productivity of labour, the value of labour, i.e. wages, would constantly vary. Wages would be measured both before and after by a definite use value, and since the latter constantly varies in its exchange value depending on the productivity of labour, wages would change, or [in other words] the value of labour. Value of labour presupposes in principle that living labour is not equal to its product, or, what is the same, that it is sold not as an acting cause, but as itself a produced effect. ‘The value of labour is constant’ means nothing further than that it is constantly measured by the quantity of labour contained in it. A product may contain more or less labour. Therefore sometimes a greater, sometimes a lesser portion of product A may exchange for product B. But the quantity of living labour which the product buys can never be greater or smaller than the done labour which it represents, for a given quantity of labour is always a given quantity of labour, whether it exists in the form of objectified or in the form of living labour. Thus if more or less of a product is given for a specific quantity of living labour, i.e. if wages rise and fall, then this comes about not because the value of labour rose or fell, for the value of a specific quantity of labour is always equal to the same specific quantity of labour, but rather because the products have cost more or less labour, because a greater or lesser quantity of the products thus represents the same quantity of labour. Thus the value of labour remains constant. Only the value of the products changes, i.e. the productivity of labour changes, not its values. This is the pith of the theory of Malthus, if you can call such a shallow fallacy a theory. First of all, a product which has cost only half a working day may suffice for me to live and work a whole day. Whether or not the product possesses this quality depends not on its value, i.e. the labour time bestowed on it, but rather on its use value, and the exchange which takes place in this regard between living labour and the product of labour is not an exchange between both as use values, but rather their relation lies on the one side in the use value of the product, on the other side in the conditions of the existence of living labour capacity. Now, if objectified labour were exchanged for living labour, then according to the laws of exchange value the product which = half a day of work could only buy half a day of living labour, even though the worker could live from it for a whole day of work; and if his entire working day were to be bought, then he would have to obtain a whole working day in the product, with which, according to the assumption, he could live for two working days. But on the basis of capital, living labour and done labour do not exchange with one another as exchange values, as identical quantities: the same quantity of labour in objectified form as value being equivalent to the same quantity of labour in living form. Rather, what is exchanged is a product, and labour capacity, which is itself a product. Labour capacity is not = to the living labour which it can do, = to the quantity of labour which it can get done — this is its use value. It is equal to the quantity of labour by means of which it must itself be produced and can be reproduced. The product is thus in fact exchanged not for living labour, but for objectified labour, labour objectified in labour capacity. Living labour itself is a use value possessed by the exchange value [, labour capacity,] which the possessor of the product [, the capitalist,] has acquired in trade, and whether he has acquired less or more of this living labour than he has spent in the form of the product [, wages,] for labour capacity depends on the amount of living labour paid to the worker in the product. If an amount of labour were exchanged for an amount of labour, regardless of whether it were living or objectified, then of course every amount of labour would be equal to itself and its value equal to its amount. The product of half a working day thus could buy only half a working day. But then in fact no wages would exist, and no value of labour.Labour would have no value distinct from that of its product or the equivalent of its product, no specific value, and it is precisely the latter which constitutes the value of labour, wages.

From the fact, therefore, that a specific quantity of labour = a specific quantity of labour, or also that a specific quantity = itself, from the great discovery that a specific quantity is a specific quantity, Mr Malthus concludes that wages are constant, that the value of labour is constant, namely = to the same amount of labour objectified. This would be correct if living labour and stored-up labour were exchanged for one another asexchange values. But then there would exist neither value of labour, nor wages, nor capital, nor wage labour, nor Malthus’s inquiries. All of these are based on the fact that living labour appears as a use value and living labour capacity as an exchange value opposite the labour stored up in capital. Malthus calmly proceeds: ‘The same holds if capital and profits enter into the computation of value and the demand for labour varies.’ [14] Here we have the whole profundity. As soon as capital and profits are introduced, living labour capacity begins to be bought, and therefore a smaller portion of stored-up labour is exchanged for a larger portion of living labour. It is a general characteristic of this profundity that the entry of capital, which posits wage labour and which for the first time transforms labour into wage labour and labour capacity into a commodity, introduces no change whatever, either into the realization of labour or into the realization of stored-up labour. Capital, a specific form of the relation of labour to its product and to its value, is, according to Malthus, ‘entering’ without changing anything. It is just as if he allowed of no change in the constitution of the Roman Republic other than the introduction, the ‘entering of emperors’. He continues: ‘If an increased reward of the labourers takes place without an increase in the produce, this is possible only with a fall of profits… To obtain any given portion of the produce the same quantity of labour is necessary as before, but profit being diminished, the value of the produce is decreased; while this diminution of profits in reference to the value of wages is just counterbalanced by the increased quantity of labour necessary to procure the increased produce awarded to the labourer, leaving the value of labour the same as before.’ (p. 33, 34 loc. cit. Notebook IX, 29.) According to the presupposition, the product contains the same quantity of labour. But its value is supposed to have diminished because profits have fallen. However, if the labour time contained in the product has remained the same, how can profits fall? If wages rise while total labour time remains the same — not for momentary causes such as e.g. that competition has become favourable for the workers — then this means nothing other than that the productivity of labour has fallen, that a greater amount of time is necessary to reproduce labour capacity; that, therefore, a larger part of the living labour set in motion by capital falls to necessary labour and a smaller part to surplus labour. Let us leave these trivia for later. Only the following final quotation now for the sake of completeness: ‘Inversely in the opposite case. A smaller quantity of the produce would be awarded to the labourer and profits would rise. A given quantity of produce, which had been obtained by the same quantity of labour as before, would rise in value on account of the rise of profits; while this rise of profits, in reference to the wages of the labourer, would be balanced by the smaller quantity of labour necessary to obtain the diminished produce awarded to the labourer.’ (M. p. 35) (loc. cit. IX, 29.) What he says on this occasion about money prices in different countries, proceeding from his principles, to be looked at later.<For example, commodity A can buy one working day; it pays only a half (the necessary half), but it exchanges for the whole. The amount of the total labour purchased by the commodity is then equal to necessary + surplus time. Thus if I know the price of necessary labour =x, then the price of the whole labour = 2x, and I could in this way appraise the newly created commodity in terms of wages, and thus establish the prices of all commodities in wages. But this would indeed be anything but a constant value. Through the confusion that in civilized countries an average time must indeed be worked for wages, say 12 hours, regardless of the wages and regardless of how many of these 12 hours are necessary or surplus labour time, Mr Carey as well — who reduces the amount of labour to working days (and indeed they can be reduced toliving work days) — is led to make the assertion that, because the same capital costs constantly less labour time to reproduce, a machine of £100 will, for example, cost after a time only £50 owing to the growth of the productive forces, and hence will be the result of half as much labour time, working days or hours, whichever you like. From this Mr Carey concludes that the worker can buy, can obtain this machine, with half as many working days as before. [15] He commits the little mistake of regarding the growth of surplus labour time as if it had been gained for the worker, whereas the whole matter comes down to just the opposite, namely that the worker spends less of his whole working day working for himself, and more for capital, hence that the objective power of capital grows rapidly over against him, in a specific relation with the increase of the productive forces. Mr Carey lets the worker buy or borrow the machine; in short, he transforms him into a capitalist. And he is supposed to achieve this increased power over capital precisely because the reproduction of a specific quantity of capital costs less necessary labour, i.e. less paid labour, thus wages fall in relation to profit. In America, as long as the worker there still appropriates a part of his surplus labour for himself, he may accumulate enough to become e.g. a farmer etc. (although that too is already coming to a halt now). In places where wage labour in America can still get somewhere rapidly, this happens through the reproduction of earlier modes of production and property on the foundation of capital (e.g. the independent peasantry). In short, he regards the working days as working days belonging to the worker, and instead of concluding that he has to produce more capital in order to be employed for the same labour time, he concludes that he has to work less in order to buy the capital (to appropriate the conditions of production for himself). [16] If he produced 20 machines and can now produce 40 owing to increased productivity, then indeed the single machine becomes cheaper, but, because a smaller part of the working day is necessary in order to produce a given quantity of it, it does not follow that the product of the working day rose for the worker, but rather the reverse, that less living labour is employed for the production of a given quantity of machinery. By the way, Mr Carey, whose aim isharmony, himself finds that if the rate of profit declines, then the gross profit rises, because an ever larger capital is required in proportion to employed living labour, and it therefore becomes ever more impossible for the worker to appropriate the necessary sum of capital, the minimum of capital required for the productive employment of labour at the new stage of production. A fractional part of the capital requires less labour time for its reproduction, but a larger mass of capital is required in order to realize the lesser labour time. The growth of the productive forces expresses itself in a continuous decline of the part of capital consisting of labour compared with that laid out in advances, machinery etc. Carey’s entire bad joke, which was of course grist to Bastiat’s mill, rests on his transformation of the labour time or working days necessary for production into labour time belonging to the worker, whereas this time belongs in fact to capital, and an ever smaller portion of it remains for the worker in proportion to the growth in the productive force of labour. The less living labour time a given capital has to buy — or, the greater the total sum of the capital and the less the living labour employed by it relative to its size — the greater, according to Mr Carey, the chance for the worker to become owner of capital, because capital is reproduced by less living labour. The greater the capital and the smaller the number of workers it employs, relatively, the greater the chance these workers have of becoming capitalists, for has not capital now been reproduced with fewer working days? Cannot it therefore also be bought, gained with fewer working days? Take a capital of £100, employing 50 on advances, 50 on labour, and making 50% profit, for the decline of the rate of profit is Carey’s chief hobby horse and belongs with his theory. Let each £ in wages be equal to 1 working day = 1 worker. Now take another capital of £16,000, which uses 14,500 in advances, 1,500 in wages get this also = 1,500 workers) and makes only 20% profit. In the first case the product = 150; in the second (for convenient calculation’s sake let the fixed capital turn over in one year) = 19,200 (3,200 profit). Here we have the most advantageous case for Mr Carey. The rate of profit has declined from 50% to 20, i.e. by 3/5 or by 60%. In the one case, a product of 50 is the result of 50 living work days. In the other case, a product of 3,200 by 1,500 workers. In the first case the result of 1 working day a product of 1; in the second the result of 1 working day a product of 2 2/15. In the second case less than half the labour time is necessary to produce a value of 1 as in the first. Now, does this mean that in the second case half the worker’s day produces 1/15 for himself, while the other produces only 1 in twice the time, i.e. that he is on the high road to becoming a capitalist? He would first have to acquire a capital of £16,000, and buy alien labour instead of working himself, before this decrease in necessary labour time would aid him in the least. All it has done this way is created an infinite gap between his labour and the conditions of its employment, and decreased the rate of necessary labour, thus, in proportion to the first relation, thrown more than 6 times as many workers into the street. These workers thrown into the street are now supposed to, console themselves with the thought that if they had the conditions to work independently, or rather to work as capitalists, then they themselves would have to hire fewer workers. In the first case the entire capital necessary is £100, and there is more of a chance here for the individual worker in an exceptional case to save up enough, and, with a special combination of luck,himself become a capitalist at the same level as capitalist A. The labour time which the worker works is the same with A and B, although the total sum of working days needed by the capitalists is essentially different. For every 6 workers needed by the first capitalist, the second needs not quite 1. The remainder therefore have to work just as much and more surplus time. That capital needs fewer living work days at the stage of production to which it has risen along with the forces of production is the same thing, according to Carey, as that the worker needs fewer working days to appropriate capital for himself; probably with the working days of the un-‘occupied’ workers.) Because the capitalist needs fewer workers to realize his immense capital, the worker employed by him can, with less labour, make the greater capital his own. Such is the logic of Mr Carey, the harmonizer.

In connection with Ricardo’s theory, Wakefield says (Notebook VII, p. 74) loc. cit. p. 231 note:

‘Treating labour as a commodity, and capital, the produce of labour, as another, then, if the value of these two commodities were regulated by equal quantities of labour, a given amount of labour would, under all circumstances, exchange for that quantity of capital which had been produced by the same amount of labour; antecedent labour would always exchange for the same amount as present labour… But the value of labour, in relation to other commodities, in so far, at least, as wages depend upon share, is determined, not by equal quantities of labour, but by the proportion between supply and demand.[17]

Dormant capital. Increase of production without previous increase of capital. Bailey

(Bailey: Money and its Vicissitudes in Value etc., London, 1837 (Notebook V, p. 26 seq.), has remarks about dormant capital which can be set in motion through faster circulation (according to him, through a greater volume of currency; he should have said money) and tries to demonstrate that if capital were always fully employed in a country, then no increase of demand could bring about an increase of supply. The concept of dormant capital belongs within circulation, since capital which is not in circulation is asleep. The relevant quotations are: ‘Much capital and productive skill may exist in an inert state. Those economists are wrong who believe that the number of labourers and the quantity of capital are certain definitive powers who ought inevitably to produce a determinate result in any country where they exist.’ (p. 54.) ‘Far from the amount of commodities which the existing producers and the existing capital bring to market, being fixed and determined, it is subject to a wide range of variation.’ (p. 55.) Thus ‘not essential to an increase of production that new capital or new labourers should arise’ (e.g. in a country where there is a want of precious metals)… ‘Some commodities or, what is the same, the power to produce them, may be in excess at one place, other commodities at another place likewise, and the holder of each wishing to exchange their articles for those held by the other, but kept in a state of non-intercourse for want of a common medium of exchange, and in a state of inaction because they have no motive for production.’ (55, 56.) In the circulation of capital, money appears doubly, as the transformation of capital into money as well as realization of the price of the commodity; but here this positing of prices is not a formality. The transformation of the product into money is here the retransformation of capital into value as such, independently existing value; capital as money or money as realized capital. Secondly, in the role of mere medium of circulation; this is where it serves merely to retransform capital into the conditions of production. In this second moment, a definite amount of money has to be present at once in the form of wages, as medium of circulation, means of payment. Now the fact that money plays this double role in the circulation of capital makes it appear in all crises as if money were lacking as medium of circulation, whereas capital lacks value and hence cannot monetize itself. The mass of circulating money may even increase at the same time. A particular section must be made for the new aspects of money when posited as moment of the circulation of capital, partly as the medium of its circulation, partly as capital’s realized value,as itself capital; when we speak of interest etc.) (Bailey continues: ‘The labour made active by no means depends on a country’s available capital alone. It depends on whether food, tools and raw materials are distributed slowly or rapidly to those parts where it is wanted; whether it circulates with difficulty or not, whether it exists for long intervals in inert masses, and so as a result does not furnish sufficient employment to the population.’ (56, 57.) (Gallatin’s example, loc. cit. 68, of the western counties of Pennsylvania.) [18] ‘Political economists are inclined to regard a given quantity of capital and a given number of workers as production instruments of a uniform power or operating with a certain uniform intensity… The producer who employs a certain capital may have his products on hand a long time or a short, and while he waits for the occasion to exchange them, his power of producing is stopped or retarded, so that in a given period, such as one year e.g., he may produce only half of what he would, had a prompt demand been present. This remark is equally appropriate to the labourer who is his instrument. The adjustment of the various occupations of men in society to each other must, at least imperfectly, be effected. But there is a wide distance between the stages in which it is realized — every expedient that facilitates traffic is a step towards this adjustment. The more unimpeded and easy the interchange of commodities becomes, the shorter will be those unproductive intervals, in which men, eager for work, seem separated by an impassable barrier from the capital … which, although close at hand, is condemned to barren inertness.’ (p. 59-60.) ‘General principle, that a new demand will be met by fresh exertions; by the active employment of capital and labour before dormant, and not by the diversion of productive power from other objects. The latter possible only if the employment of capital and labour in a country were capable of no further growth. The exportation of the goods perhaps does not directly set new labour in motion, but it does then absorb commodities on hand as dead stock, and sets at liberty capital tied up in an unproductive state.’ (p. 65.) ‘Those who assert that an influx of money cannot promote the production of other commodities, since these commodities are the sole agents of production, prove that production cannot be enlarged at all, for it is required for such an enlargement that food, raw materials, and tools should be previously augmented, which in fact is maintaining that no increase of production can take place without a previous increase’ (but is this not the economic theory of accumulation?) ‘or in other words, that an increase is impossible.’ (p. 70.) ‘Now it is admittedly argued that if the buyer goes to market with an increased quantity of money and if he does not raise the prices of the commodities he finds there, then he gives no additional encouragement to production: if he raises the prices, however, then if prices are proportionally enhanced, the purchasers have no greater power of demand than before.’ (73.) ‘It is to be denied as a general principle that a purchaser cannot give additional encouragement to production, unless his demand raise prices… Apart from the circumstance that the preparation of a larger quantity admits of a more effective division of labour and the employment of superior machinery, there is in this matter that sort of latitude, arising from a quantity of labour and capital lying unemployed, and ready to furnish additional commodities at the same rate. Thus does it happen that a considerable increase of demand often takes place without raising prices.'(73.))

Wade’s explanation of capital. [19] Labour as mere agency of capital. Capital, collective force. Civilization, together with my remarks about it. (All social powers of labour as powers of capital. Manufacture. Industry. Division of labour. Formal unification of different branches of labour etc. by capital. Accumulation of capital. Transformation of money into capital. Science. Original accumulation and concentration the same. Free and coerced association. Capital as distinct from earlier forms)

(John Wade: History of the Middle and Working Classes etc., 3rd ed., Lond., 1835 (Notebook p. 20) says: ‘Labour is the agency by which capital is made productive of wages, profit, or revenue.’ (p. 161.) ‘Capital is stored up industry, provided to develop itself in new and equivalent forms; it is collective force.’ (p. 162.) ‘Capital is only another name for civilization.’ (164.) Like all productive powers of labour, i.e. those which determine the degree of its intensity and hence of its extensive realization, the association of the workers — the cooperation and division of labour as fundamental conditions of the productivity of labour — appears as the productive power of capital. The collective power of labour, its character as social labour, is therefore the collective power of capital. Likewise science. Likewise the division of labour, as it appears as division of the occupations and of exchange corresponding to them. All social powers of production are productive powers of capital, and it appears as itself their subject. The association of the workers, as it appears in the factory, is therefore not posited by them but by capital. Their combination is not their being, but the being [Dasein] of capital. Vis-à-vis the individual worker, the combination appears accidental. He relates to his own combination and cooperation with other workers as alien, as modes of capital’s effectiveness. Unless it appears in an inadequate form — e.g. small, self-employed capital — capital already, at a certain greater or lesser stage, presupposes concentration both in objective form, i.e. as concentration in one hand, which here still coincides with accumulation, of the necessaries of life, of raw material and instruments, or, in a word, of money as the general form of wealth; and on the other side, in subjective form, the accumulation of labour powers and their concentration at a single point under the command of the capitalist. There cannot be one capitalist for every worker, but rather there has to be a certain quantity of workers per capitalist, not like one or two journeymen per master. Productive capital, or the mode of production corresponding to capital, can be present in only two forms: manufacture and large-scale industry. In the former, the division of labour is predominant; in the second, the combination of labour powers (with a regular mode of work) and the employment of scientific power, where the combination and, so to speak, the communal spirit of labour is transferred to the machine etc. In the first situation the mass of (accumulated) workers must be large in relation to the amount of capital; in the second the fixed capital must be large in relation to the number of the many cooperating workers. But the concentration of many, and their distribution among the machinery as so many cogs (why it is different in agriculture does not belong here), is, however, already presupposed here. Case II therefore does not need to be specially examined here, but only case I. The development proper to manufacture is the division of labour. But this presupposes the (preliminary) gathering-together of many workers under a single command, just as the process through which money becomes capital presupposes the previous liberation of a certain amount of necessaries of life, raw materials and instruments of labour. The division of labour is therefore also to be abstracted away here as a later moment. Certain branches of industry, e.g. mining, already presuppose cooperation from the beginning. Thus, so long as capital does not exist, this labour takes place as forced labour (serf or slave labour) under an overseer. Likewise road building etc. In order to take over these works, capital does not create but rather takes over the accumulation and concentration of workers. Nor is this in question. The simplest form, a form independent of the division of labour, is that capital employs different hand weavers, spinners etc. who live independently and are dispersed over the land. (This form still exists alongside industry.) Here, then, the mode of production is not yet determined by capital, but rather found on hand by it. The point of unity of all these scattered workers lies only in their mutual relation with capital, which accumulates the product of their production in its hands and, likewise, the surplus values which they created above and beyond their own revenue. The coordination of their work exists only in itself, in so far as each of them works for capital — hence possesses a centre in it — without working together. Their unification by capital is thus merely formal, and concerns only the product of labour, not labour itself. Instead of exchanging with many, they exchange only with the one capitalist. This is therefore a concentration of exchanges by capital. Capital engages inexchange not as an individual, but as representing the consumption and the needs of many. It no longer exchanges as individual exchanger, but rather, in the act of exchange, represents society. Collective exchange and concentrative exchange on the part of capital with the scattered working weavers etc., whose products are collected, united through this exchange, and whose labours are thereby also united, although they proceed independently of one another. The unification of their labours appears as a particular act, alongside which the independent fragmentation of their labours continues. This is the first condition necessary for money to be exchanged as capital for free labour. The second is the suspension of the independent fragmentation of these many workers., so that the individual capital no longer appears towards them merely as social collective power in the act of exchange, uniting many exchanges, but rather gathers them in one spot under its command, into one manufactory, and no longer leaves them in the mode of production found already in existence, establishing its power on that basis, but rather creates a mode of production corresponding to itself, as its basis. It posits the concentration of the workers in production, a unification which will occur initially only in a common location, under overseers, regimentation, greater discipline, regularity and thePOSITED dependence in production itself on capital. Certain faux frais de production are thereby saved from the outset. (On this whole process compare Gaskell, where special regard is had to the development of large industry in England.) [20] Now capital appears as the collective force of the workers, their social force, as well as that which ties them together, and hence as the unity which creates this force. Afterwards as before, and at every stage of the development of capital, this all continues to be mediated through the many exchanging with it as the one, so that exchange itself is concentrated in it; the social character of exchange; it exchanges socially with the workers, but they individually with it. With craft production, the main concern is the quality of the product and the particular skill of the individual worker; the master, as master, is supposed to have achieved mastery in this skill. His position as master rests not only on his ownership of the conditions of production, but also on his own skill in the particular work. With the production of capital, and from the very outset, the point is not this half-artistic relation to labour — which corresponds generally with the development of the use value of labour, the development of particular abilities of direct manual work, the formation of the human hand etc. The point from the outset is mass, because the point is exchange value and surplus value. The principle of developed capital is precisely to make special skill superfluous, and to make manual work, directly physical labour, generally superfluous both as skill and as muscular exertion; to transfer skill, rather, into the dead forces of nature. Now, with the presupposition of the rise of manufacture as the rise of the mode of production of capital (slaves are combined in themselves, because under a single master), it is presupposed that the productive force of labour, still to be brought to life by capital, does not yet exist. It is a presupposition, therefore, that necessary labour still takes up a great portion of the entire available labour time in manufacture, hence that surplus labour per individual worker is still relatively small. Now, this is compensated on one side, and the progress of manufactures is correspondingly accelerated, by the fact that the rate of profit is higher, hence that capital accumulates more rapidly in relation to its already existing amount, than it does in big industry. If out of 100 thalers 50 go for labour and surplus time = 1/5, then the value created = 110 or 10%. If out of 100 only 20 went for labour and surplus time = 1/4, then the value created = 105 or 5%. On the other side, manufacture obtains this higher profit rate only through the employment of many workers at once. The greater surplus time can be gained only by collecting together the surplus time of many workers in relation to capital. Absolute, not relative surplus time predominates in manufacture. This is even more the case originally where the scattered, independent workers still realize a part of their own surplus labour for themselves. For capital to exist as capital, to be able to live off profit, as well as to accumulate, its gain must = the sum of the surplus time of many simultaneous living work days. In agriculture, the soil itself with its chemical etc. action is already a machine which makes direct labour more productive, and hence gives a surplus earlier, because work is done here at an earlier stage with a machine, namely anatural one. This the only correct basis of the doctrine of the Physiocrats, which in this respect considers agriculture in comparison with a still quite undeveloped system of manufacture. If the capitalist employed one worker in order to live from that one’s surplus time, then he would obviously gain doubly if he himself also worked, with his own funds, for then he would gain, in addition to the surplus time, the wage paid the worker. He would lose in the process. I.e. he would not yet be in the situation of working as a capitalist, or the worker would only be his helper, and thus he would not stand in relation to him as capital.

Thus, in order that money may become transformed into capital, it is necessary not only that it should be able to set surplus labour in motion, but also that there should be a certain quantity of surplus labour, the surplus labour of a given mass of necessary labour, i.e. of many workers at once, so that their combined sum is sufficient for it not only to lead an existence as capital, i.e. to represent wealth in consumption in contrast to the worker’s life, but also to set aside surplus labour for accumulation. From the outset, capital does not produce for use value, for immediate subsistence. Surplus labour must therefore be large enough from the beginning to allow a part of it to be re-employed as capital. Thus, whenever the stage is reached where a certain mass of social wealth is already concentrated in one hand, which is objectively capable of appearing as capital, first as the exchange with many workers, later as production by many workers in combination, and is capable of setting a certain quantity of living labour capacities to work simultaneously, then, at that point, production by capital begins, which thus from the outset appears as the collective force, the social force, the suspension of individual isolation, first that of exchange with the workers, then that of the workers themselves. The workers’ individual isolation still implies their relative independence. Hence their regroupment around the individual capital as the exclusive base of their subsistence implies full dependence on capital, complete dissolution of the ties between the workers and the conditions of production. The result will be the same — or it is the same in another form — when the point of departure is the particular form of exchange which is presupposed for capital to exchange as capital, where money must already represent many exchangers or possess abuying power surpassing that of the individual and his individual surplus, one which, while belonging to an individual, is already more than individual, and belongs to him as a social function, in his capacity as representative, within exchange, of the social wealth — and it arises on the other side from the conditions of free labour. The detachment of the individual from the production conditions of labour = the regroupment of many around one capital. [*]>

‘This continual progression of knowledge and of experience,’ says Babbage, ‘is our great power.’ [21] This progression, this social progress belongs [to] and is exploited by capital. All earlier forms of property condemn the greater part of humanity, the slaves, to be pure instruments of labour. Historical development, political development, art, science etc. take place in higher circles over their heads. But only capital has subjugated historical progress to the service of wealth.

<Before accumulation by capital, there is presupposed an accumulation which constitutes capital, which is a part of its conceptual determination; we can hardly call it concentration yet,because this takes place in distinction to many capitals; but if one still speaks only of capital generally, then concentration still coincides with accumulation or with the concept of capital. I.e. it does not yet form a particular aspect. However, capital does indeed exist from the outset as One or Unity as opposed to the workers as Many. And it thus appears as the concentration of workers as distinct from that of work, as a unity falling outside them. In this respect, concentration is contained in the concept of capital — the concentration of many living labour capacities for one purpose; a concentration which does not in any way need to have been established in production, or penetrated production, at the origin. Centralizing effect of capital on labour capacities, or positing of itself as the independent and external unity of these many available existences.>

<Rossi says in his Cours d’économie politique [22] (Notebook, p. 26): ‘Social progress cannot consist in the dissolution of all association, but in the replacement of the forced and oppressive associations of times past by voluntary and equitable associations. The highest degree of isolation is the condition of the savage; the highest degree of forced, oppressive association is barbarism. Apart from these extremes, history shows us a great diversity of varieties and shadings. Perfection is found in voluntary associations, which by their union multiply the forces, without taking away the energy, the morality and the responsibility of individual authority.’ (p. 354.) Under capital, the association of workers is not compelled through direct physical force, forced labour, statute labour, slave labour; it is compelled by the fact that the conditions of production are alien property and are themselves present as objective association, which is the same as accumulation and concentration of the conditions of production.>

Rossi. What is capital? Is raw material capital? Wages necessary for it? (Approvisionnement, capital?)

(The way of conceiving capital in its physical attribute only, as instrument of production, while entirely ignoring the economic form which makes the instrument of production into capital, entangles the economists in all manner of difficulties. Thus Rossi asks, loc. cit. (Notebook, 27): ‘Is the raw material truly an instrument of production? Is it not rather the object on which the productive instruments must act?’ (p. 367.) Thus capital is entirely identical for him here with the instrument of production in the technological sense, according to which every savage is a capitalist. (Which Mr Torrens in fact asserts in the case of the savage who throws a stone at a bird.) [23] Incidentally, even from the standpoint of the purely physical abstraction — i.e. of abstraction from the economic category itself — Rossi’s remark is one-sided and shows only that he has not understood his teachers in England. Accumulated labour used as instrument for new production; or produce pure and simple applied to production; the raw material is employed for production, i.e. submitted to transformation, just as well as the instrument, which is also a product.The finished result of production in turn becomes a moment of the production process. The statement means nothing more than that. Within the production process it may figure as raw material or as instrument. But it is an instrument of production not in so far as it serves as an instrument within the direct production process, but rather in so far as it is a means of the renewal of the production process itself — one of its presuppositions. More important and more to the point is the question whether the approvisionnement forms a part of capital, i.e. wages, and here the entire confusion of the economists is revealed. ‘It is said that the worker’s payment is capital, because the capitalist advances it him. If all workers’ families had enough to live for a year, there would be no wages. The worker could say to the capitalist: you advance the capital for our common project, and I contribute the labour; the product will be divided among us in such-and-such proportions. As soon as it is realized, each will take his share.’ (p. 369.) ‘Then there would be no advance to the workers. They would nevertheless consume even if the work stood still. What they would consume would belong to the consumption fund, and not at all to capital. Therefore: the advances to the workers are not necessary. Hence wages is not a constituent element of production. It is an accident, a form of our state of society. Capital, labour, land, by contrast, are necessary in order to produce. Secondly: the word wages is used in a double sense: one says that wages are a capital, but what do wages represent? Labour. He who says wages says labour and vice versa. Thus if the wages advanced are a component of capital, then there would be only two instruments of production to speak of: capital and land.’ (p. 370.) And further: ‘Basically the worker consumes not the capitalist’s possessions but his own; what is given to him as reward of labour is his proportional share of the product.’ (p. 370.) ‘The capitalist’s contract with the worker is not among the phenomena of production… The entrepreneur lends himself to this agreement, since it may facilitate production. But this agreement is nothing but a second operation, an operation of a quite different nature, grafted onto a productive operation. In another organization of labour it may disappear. Even today there are kinds of production where it has no place. The part of the fund which the entrepreneur devotes to the payment of wages does not make up a part of capital… It is a separate operation, which undoubtedly may speed the course of production, but which cannot be termed a direct instrument of production.’ (370.) ‘To conceive labour power, while abstracting from the workers’ means of subsistence during production, is to conceive a being existing only in the mind. He who says labour, who says labour power, thereby says worker and means of subsistence, labourer and wages… the same element reappears under the name of capital; as if the same thing could be simultaneously part of two different instruments of production.’ (370, 371.) Now here there is a great deal of confusion, legitimate because Rossi takes the economists at their word and equates the instrument of production as such with capital. First of all he is quite right that wage labour is not an absolute form of labour, but he forgets in the process that capital is not an absolute form of the means and materials of labour either, and that these two forms are two different moments of one and the same form, and hence rise and fall together; that it is nonsensical, therefore, for him to speak of capitalists without wage labourers. [Note] his example of the workers’ families who can live for a year without the capitalists, hence are owners of their conditions of production, who perform their necessary labour without the permission of Mr Capitalist. The capitalist whom Rossi has approaching the workers with his proposal thus is no other than a producer of instruments of production — the solicitation means nothing more than a division of labour mediated through exchange with the outside. The two then divide up the common product among themselves even without any agreement — through simple exchange. The exchange is the act of division. A further agreement is not necessary. What these worker families would then exchange would be surplus labour, absolute or relative, made possible for them by the instrument — either new secondary labour in addition to their old labour, from which they could live year after year before the appearance of the c[apitalist], or through the application of the instrument in their old branch of work. Here Mr Rossi makes the worker the owner and vendor of his surplus labour, and has thereby happily extinguished the last trace which might brand him a wage labourer, but has also thereby wiped out the last trace which makes the instrument of production into capital. It is true that the worker ‘basically does not consume the capitalist’s possessions, but his own’, but not exactly as Mr Rossi means, because it is only a proportional part of the product, but rather because it is a proportional part of his product, and because, if the semblance of exchange is stripped away, the payment consists of the fact that he works a part of the day for himself and another part for the capitalist, but only so long as he obtains permission to work at all, as his work permits this division. The act of exchange itself, as we have seen, is not a moment of the direct production process, but rather one of its conditions. Within the total production process of capital, which includes the different moments of its exchanges, its circulation, this exchange is, however, posited as a moment of the total process. But, says Rossi: wages appear twice in the account: once as capital, the other time as labour; thus the wage represents two distinct instruments of production. If the wage represents the instrument of production which is labour, then it cannot represent the instrument of production which is capital. Here another muddle, arising because Rossi takes the orthodox economic distinctions seriously. Wages figure only once in production, as a fund destined to be transformed into wages, as virtual wages. As soon as they have become real wages, they are paid out, and then only figure in consumption as the worker’s revenue. But what is exchanged for wages is labour capacity, and this does not figure in production at all, but only in the use made of it — labour. Labour appears as the instrument of the production of value because it is not paid for, hence not represented by wages. As the activity which creates use values, it likewise has nothing to do with itself as paid labour. In the hand of the worker, the wage is no longer a wage, but a consumption fund. It is wages only in the hand of the capitalist, i.e. the part of capital destined to be exchanged for labour capacity. It has reproduced a saleable labour capacity for the capitalist, so that in this regard even the worker’s consumption takes place in the service of the capitalist. He does not pay for labour itself at all, only for labour capacity. This he can do, however, only if this capacity is set to work. If the wage appears twice, it is not because it represents two different instruments of production, but because it appears the first time from the viewpoint of production, the second time from the viewpoint of distribution. This specific form of distribution, however, is not an arbitrary arrangement which could be different; it is, rather, posited by the form of production itself, is only one of its own moments considered from another angle. The value of the machine certainly forms a part of the capital laid out in it; but the machine does not produce, as value, although it brings the manufacturer income. The wage does not represent labour as an instrument of production, any more than value represents the machine as instrument of production. It represents only labour capacity, and, since the latter’s value exists separately from it as capital, a part of the capital. In so far as the capitalist appropriates alien labour and buys new alien labour with it, the wage — i.e. the representative of labour — does, if Mr Rossi wishes to put it this way, appear doubly, (1) as the property of capital, (2) as representative of labour. What actually worries Rossi is that the wage appears as the representative of two instruments of production, of capital and oflabour; he forgets that labour as a productive force is incorporated in capital, and that, as labour in esse, not in posse, [24]it is in no way aninstrument of production distinct from capital, but is, rather, that without which capital would not be an instrument of production. As for the distinction between wages as forming a part of capital and at the same time the worker’s revenue, we will come to that in the section on profit, interest, with which we shall conclude this first chapter on capital. >

Malthus. Theory of value and of wages. (Capital to do with proportion, labour only with portion. See my remarks onsurplus value and profit.) Ricardo’s theory. (Carey contra Ricardo.) Malthus: the wage [has] nothing to [do] with proportion. Malthus’s theory of value

(In connection with the above-mentioned work, The Measure of Value etc., Malthus returns to the theme again in his Definitions in Political Economy etc., London, 1827. He remarks in the latter: ‘No writer that I have met with, anterior to Mr Ricardo, ever used the term wages or real wages, as implying proportions. Profits, indeed, imply proportions; and the rate of profits had always justly been estimated by apercentage upon the value of the advances. But wages had uniformly been considered as rising and falling, not according to any proportion which they might bear to the whole produce obtained by a certain quantity of labour, but by the greater or smaller quantity of any particular produce received by the labourer, or by the greater or smaller power which such produce would carry of commanding the necessaries and conveniences of life.’ (M. 29, 30.) (Notebook X, p. 49.) The only value produced by capital in a given production is that added by the new amount of labour. This value, however, consists of necessary labour, which reproduces wages — the advances made by capital in the form of wages — and of surplus labour, hence surplus value above and beyond the necessary. The advances made in the form of material and machine are merely transposed from one form into another. The instrument passes into the product just as much as does the raw material, and its wearing-out is at the same time the product’s formation. If raw material and instrument cost nothing, as in some extractive industries where they are still almost = 0 (the raw material always, in every extractive industry, metal and coal mining, fishing, hunting, lumbering in virgin forests etc.), then they also add absolutely nothing to the value of the production. Their value is the result of previous production, not of the immediate production in which they serve as instrument and material. Surplus value can therefore be estimated only in proportion to necessary labour. Profits is only a secondary, derivative and transformed form of the surplus value, the bourgeois form, in which the traces of its origin are extinguished. Ricardo himself never grasped this, because he (1) always speaks only of the division of an available, ready amount, not of the original positing of this difference; (2) because this understanding would have forced him to see that there is a relation between capital and labour which is entirely different from that of exchange; and he was not allowed the insight that the bourgeois system of equivalents turns into appropriation without equivalent and is based on that; (3) his statement about proportionate profits and wages means only that [if] a certain total value is divided into two portions, any quantity at all is divided in two, then the magnitude of the two parts is necessarily in inverse relation. [25] And then his school justly reduced the matter to this triviality. His aim in asserting the proportionality of wages and profits was not to get to the bottom of the creation of surplus value — for since he begins with the presupposition that a given value is to be divided between wages and profit, between labour and capital, he thereby presupposes this division as self-evident — but rather, firstly, it was to counter the common determination of prices by asserting the correct one, of value, in that he showed that the limit of value is itself not affected by its distribution, different division among profits and wages; secondly: to explain not the merely transitory, but rather the continuing decline in the rate of profit, which was inexplicable to him on the presupposition that a fixed portion of value goes to labour; thirdly: in explaining the decline of profit by the rise of wages, and the latter in turn by the rise in value of agricultural products, i.e. the rising difficulty of their production, thereby at the same time to explain ground rent as not being in conflict with his determination of value. This at the same time furnished a polemical weapon for industrial capital, against the exploitation of the progress of industry by landed property. But at the same time, driven by simple logic, he had thereby proclaimed the contradictory nature of profit, of labour and of capital, despite his efforts to convince the worker afterwards that this contradictory character of profit and wages does not influence his real income, and that a proportional(not absolute) rise of wages is harmful to him, because it hinders accumulation, and the development of industry then benefits only the lazy landowner. Still, the contradictory form had been proclaimed, and Carey, who does not understand Ricardo, could therefore abuse him as the father of the communists etc., where he is again right in a sense he himself does not understand. [26] But the other economists, who, like Malthus, want to have absolutely nothing to do with the proportional (and hence contradictory) nature of wages, desire on the one hand to hush up the contradiction; on the other hand they cling to the notion that the worker simply exchanges a specific use value, his labour capacity, for capital, and hence gives up the productive force, the power of labour to create new value, and that he has nothing to do with the product, and hence the exchange between capitalists and workers, wages, is concerned, like every simple exchange where economic equivalents are presupposed, only with quantity, the quantity of use value. As correct as this is in one regard, it also introduces the apparent form of barter, of exchange, so that when competition permits the worker to bargain and to argue with the capitalists, he measures his demands against the capitalists’ profit and demands a certain share of the surplus value created by him; so that the proportion itself becomes a real moment of economic life itself. Further, in the struggle between the two classes — which necessarily arises with the development of the working class — the measurement of the distance between them, which, precisely, is expressed by wages itself as a proportion, becomes decisively important. The semblance of exchange vanishes in the course [Prozess] of the mode of production founded on capital. This course itself and its repetition posit what is the case in itself, namely that the worker receives as wages from the capitalist what is only a part of his own labour. This then also enters into the consciousness of the workers as well as of the capitalists. The question for Ricardo is actually only what proportion of the total value do necessary wages form in the course of development? It always remains only the necessary wage; hence its proportional nature does not interest the worker, who always obtains the same minimum, but only the capitalist, whose deductions from the total income vary, without the workers obtaining a greater amount of use values. But the fact that Ricardo formulated the contradictory nature of profit and wages, even if for quite different purposes, already shows by itself that the mode of production founded on capital had, by his time, taken on a form more and more adequate to its nature. In the cited Definitions (Notebook IX, p. 49, 50), Malthus remarks in regard to Ricardo’s theory of value: ‘Ricardo’s assertion, that as the value of wages rises, profits proportionally fall and vice versa, is true only on the presupposition that commodities in which the same amount of labour is contained, are always of the same value, and this is true in 1 case out of 500, and necessarily.so, because with the progress of civilization and improvement, the quantity of fixed capital employed steadily grows, and makes more various and unequal the times of the returns of the circulating capital.’ (loc. cit. 31, 32.) (This concerns prices, not value.) Malthus remarks in connection with his own discovery of the true standard of value: ‘Firstly: I had nowhere seen it stated, that the ordinary quantity of labour which a commodity will command must represent and measure the quantity of labour worked up in it, with the addition of profits… By representing the labour worked up in a commodity, with the addition of profits, labour represents the natural and necessary conditions of its supply, or the elementary costs of its production… Secondly: I had nowhere seen it stated that, however the fertility of the soil might vary, the elementary costs of producing the wages of a given quantity of labour must always necessarily be the same.’ (196, 197.) Means only: wages always equal to the labour time necessary for their production, which varies with the productivity of labour. The quantity of commodities remains the same. ‘If one regards value as the general power of purchase of a commodity, then this relates to the purchase of all commodities, of the general mass of commodities. But this is quite unmanageable…. Now, if any one [should] object, it cannot for a moment be denied that labour best represents an average of the general mass of productions.’ (205.) ‘A large class of commodities, like raw produce, rise with the progress of society, compared with labour, while the manufactured articles fall. Thus not far from truth to say that the average mass of commodities which a given quantity of labour will command in the same country, during the course of some century, may not very essentially vary.’ (206.) ‘Value must always be value in exchange for labour.’ (224, note, loc. cit.) In other words, the doctrine is: the value of a commodity, the labour worked up in it, is represented by the living work days which it commands, for which it may be exchanged, and hence by wages. Living work days contain both time and surplus time. Let us do for Malthus the biggest favour we can do for him. Let us namely assume that the relation of surplus labour to necessary labour, hence the relation of wages to profit, always remains constant. To begin with, the fact that Mr Malthus speaks of the labour worked up in the commodity with the addition of profits already demonstrates his confusion, since these profits can form nothing other than a part of the labour worked up. What he has in mind with this is profits above and beyond labour worked up, which are supposed to come out of fixed capital etc. This can only affect the distribution of the total profit among the different shareholders, but not its total quantity, for if everyone obtained for his commodity the labour worked up in it + profits, then where would these latter come from, Mr Malthus? If one person obtains the labour worked up in his commodity + profit, then the other has to obtain labour worked up — profit, profit here regarded as the excess quantity of real surplus value. This is therefore null and void. Now posit that the labour worked up = 3 working days, and, if the proportion of surplus labour time is as 1:2, then these have been obtained in payment for 1½ working days. The workers indeed worked 3 days, but each of them was paid only half a day. Or, the commodity which they obtain for their 3 days of labour had only 1½ days worked up in it. Thus, all other relations being the same, the capitalist would obtain 6 working days for the 3 working days worked up in his commodity. (The matter is correct only because surplus labour time is posited as = to necessary labour time, hence in the second caseonly the first is repeated.) (Relative surplus value obviously restricted not only by the relation cited earlier, but also by the degree to which the product enters into the worker’s consumption. If the capitalist could obtain twice the number of cashmere shawls, owing to an increase in the productive forces, and if he sold them at their value, then he would have created no relative surplus value because the workers do not consume such shawls, and thus the time necessary for the reproduction of their labour capacity would remain the same as before. But this not so in practice, because in such cases the price rises above the value. At this point in the theory it does not concern us yet because capital is here regarded in itself, not in a particular branch). That means, he will pay the wages of 3 days and get 6 days of work; with each ½ day he buys a day; hence with 6/2 days, = 3 days, 6 days. To assert, then, that the working days a commodity commands, or the wages it pays, express its value is to understand absolutely nothing of the nature of capital and wage labour. It is the pith of all value-creation and of capital-creation that objectified working days command a greater number of living ones. It would have been correct if Malthus had said that the living labour time a commodity commands expresses the measure of its realization, the measure of the surplus labour it posits. But this would only be the tautology that it posits more labour to the extent that it posits more, or it would be the expression of the opposite of what Malthus wants, that surplus value arises because the living labour time a commodity commands never represents the labour worked up in it. (Now we have finally done with Malthus.))



February 1858, continued

Aim of capitalist production value (money), not commodity, use value etc. Chalmers. [27] — Economic cycle. — Circulation process. Chalmers

(We have demonstrated above, in the development of the concept of capital, that it is value as such, money, which both preserves itself through circulation and also increases itself through exchange with living labour. That, hence, the aim of producing capital is never use value, but rather the general form of wealth as wealth. The cleric Th. Chalmers, in the otherwise in many respects ridiculous and repulsive work: On Political Economy in Connection with the Moral State and Moral Prospects of Society, 2nd. ed., Lond., 1832, has correctly struck upon this point, without at the same time falling into the asininity of types like Ferrier etc., who confuse money as the value of capital with the really available metallic money. [28] In crises, capital (as commodity) is not exchangeable, not because too few means of circulation are available; but, rather, it does not circulate because it is not exchangeable. The importance assumed by cash in times of crisis arises only because, while capital is not exchangeable for its value — and only for that reason does its value appear opposite it in the money form — there are obligations to pay off; alongside the interrupted circulation a forced circulation takes place. Chalmers says (Notebook IX, p. 57): ‘When a consumer refuses certain commodities, it is not always, as is assumed by the new economists, because he wants to purchase others in preference, but because he wants to reserve entire the general power of purchasing. And when a merchant brings commodities to market, it is generally not in quest of other commodities to be given in return for them … he will extend his general power of purchase of all commodities. It is useless to say thatmoney is also a commodity. The real metallic money for which a merchant has any use does not amount to more than a small fraction of his capital, even of his monied capital; all of which, though estimated in money, can be made, on the strength of written contracts, to describe its orbit, and be effective for all its purposes, with the aid of coin amounting to an insignificant proportion of the whole. The great object of the monied capitalist, in fact, is to add to the nominal amount of his fortune. It is that, if expressed pecuniarily this year by £20,000 e.g., it should be expressed pecuniarily next year by £24,000. To advance his capital, as estimated in money, is the only way in which he can advance his interest as a merchant. The importance of these objects for him is not affected by fluctuations in the currency or by a change in the real value of money. For example, in one year he comes from 20 to 24,000 pounds; through a fall in the value of money he may not have increased his command over the comforts etc. Nevertheless, this is his interest just as much as if money had not fallen; for else his monied fortune would have remained stationary and his real wealth would have declined in the proportion of 24 to 20… Commodities’ (i.e. use value, real wealth) ‘thus not the terminating object of the trading capitalist.’ (The illusion of the Monetary System, however, was that it regarded real metallic money (or paper, would change nothing), in short, the form of value, as real money, as the general form of wealth and of self-enrichment, whereas precisely as money increases as the accumulation of general power of purchase, it undergoes a relative decline in its specific form as medium of exchange or also as realized hoard.) As assignation in real wealth or productive power [the capitalist’s money] gains a thousand forms, ‘quite apart from expenditure of his revenue in purchases for the sake of consumption. In the outlay of his capital, andwhen he purchases for the sake of production, money is his terminating object’ (not coin, nota bene). (164 – 6.)

‘Profit,’ says the same Chalmers, ‘has the effect of attaching the services of the disposable population to other masters, besides the mere landed proprietors,… while their expenditure reaches higher than the necessaries of life.’ (78. Notebook IX, p.53.)>

In the book just referred to, Chalmers calls the whole circulation process the economic cycle: ‘The world of trade may be conceived to revolve in what we shall call an economic cycle, which accomplishes one revolution by business coming round again, through its successive transactions, to the point from which it set out. Its commencement may be dated from the point at which the capitalist has obtained those returns by which his capital is replaced to him: whence he proceeds anew to engage his workmen; to distribute among them, in wages, their maintenance, or rather the power of lifting it; to obtain from them in finished work, the articles in which he specially deals; to bring these articles to market, and there terminate the orbit of one set of movements, by effecting a sale, and receiving in its proceeds, a return for the whole outlays of the period. The intervention of money alters nothing in the real character of this operation…’ (85 loc. cit.) (Notebook, p. 54, 55.)

Difference in return. Interruption of the production process (or rather its failure to coincide with the labour process). Total duration of the production process. (Agriculture. Hodgskin.) Unequal periods of production

The difference in the return, in so far as it depends on the phase of the circulation process which coincides with the direct production process, depends not only on the longer or shorter labour time required to complete the article (e.g. canal building etc.), but also, in certain branches of industry — agriculture — on the interruptions of the work which are due to the nature of the work itself, where on the one hand the capital lies fallow, and, on the other, labour stands still. Thus the example given by A. Smith, that wheat is a crop taking 1 year, the ox a crop taking 5 years, etc. [29] Therefore 5 years of labour are employed on the latter, only 1 on the former. Little labour is employed e.g. on cattle raised on pasture. At the same time, in agriculture, the labour applied e.g. during the winter is also little. In agriculture (and to a greater or lesser degree in many another branch of production) there are interruptions given by the conditions of the production process itself, pauses in labour time, which must be begun anew at the given point in order to continue or to complete the process; the constancy of the production process here does not coincide with the continuity of the labour process. This is one moment of the difference. Secondly: the product generally requires a longer time to be completed, to be put into its finished state; this is the total duration of the production process, regardless of whether interruptions take place in the operations of labour or not; the different duration of the production phase generally. Thirdly: after the product is finished, it may be necessary for it to lie idle for some time, during which it needs relatively little labour, in order to be left in the care of natural processes, e.g. wine. (This will be, conceptually, approximately the same case as I.) Fourthly: a longer time to be brought to market, because destined for a more distant market. (This coincides conceptually with case II.) Fifthly: The shorter or longer period of the total return of a capital (its total reproduction), in so far as it is determined by the relation of fixed capital and circulating capital, is concerned obviously not with theimmediate production process and its duration, but rather takes its character from circulation. The total capital’s period of reproduction is determined by the total process, circulation included.

‘Inequality in the periods necessary for production.’ [30]

‘The difference of time required to complete the products of agriculture, and of other species of labour, is the main cause of the great dependence of the agriculturists. They cannot bring their commodities to market in less time than a year. For that whole period they are obliged to borrow from the shoemaker, the tailor, the smith, the wheelwright and the various other labourers, whose products they need and which are completed in a few days or weeks. Owing to this natural circumstance, and owing to the more rapid increase of the wealth produced by other labour than that of agriculture, the monopolizers of all the land, although they have also monopolized the legislation, are unable to save themselves and their servants, the farmers, from being the most dependent class in the community.’ (Thomas Hodgskin, Popular Polit. Econ. Four lectures etc. London, 1827, p. 147 note.) (Notebook IX, p. 44.) ‘The natural circumstance of all commodities being produced in unequal periods, while the wants of the labourer must be supplied daily… This inequality in the time necessary to complete different commodities, would in the savage state cause the hunter etc. to have a surplus of game etc., before the maker of bows and arrows etc. had any commodity completed to give for the surplus game. No exchange could be made; the bow-maker must be also a hunter and division of labour impossible. This difficulty contributed to the invention of money.’ (179, 180.) (loc. cit.)

The concept of the free labourer contains the pauper. Population and overpopulation etc.

<It is already contained in the concept of the free labourer, that he is a pauper: virtual pauper. According to his economic conditions he is merely a living labour capacity, hence equipped with the necessaries of life. Necessity on all sides, without the objectivities necessary to realize himself as labour capacity. If the capitalist has no use for his surplus labour, then the worker may not perform his necessary labour; not produce his necessaries. Then he cannot obtain them through exchange; rather, if he does obtain them, it is only because alms are thrown to him from revenue. He can live as a worker only in so far as he exchanges his labour capacity for that part of capital which forms the labour fund. This exchange is tied to conditions which are accidental for him, and indifferent to his organic presence. He is thus a virtual pauper. Since it is further the condition of production based on capital that he produces ever more surplus labour, it follows that ever more necessary labour is set free. Thus the chances of his pauperism increase. To the development of surplus labour corresponds that of the surplus population. In different modes of social production there are different laws of the increase of population and of overpopulation; the latter identical with pauperism. These different laws can simply be reduced to the different modes of relating to the conditions of production, or, in respect to the living individual, the conditions of his reproduction as a member of society, since he labours and appropriates only in society. The dissolution of these relations in regard to the single individual, or to part of the population, places them outside the reproductive conditions of this specific basis, and hence posits them as overpopulation, and not only lacking in means but incapable of appropriating the necessaries through labour, hence as paupers. Only in the mode of production based on capital does pauperism appear as the result of labour itself, of the development of the productive force of labour. Thus, what may be overpopulation in one stage of social production may not be so in another, and their effects may be different. E.g. the colonies sent out in antiquity were overpopulation, i.e. their members could not continue to live in the same space with the material basis of property, i.e. conditions of production. The number may appear very small compared with the modern conditions of production. They were, nevertheless, very far from being paupers. Such was, however, the Roman plebs with its bread and circuses. The overpopulation which leads to the great migrations presupposes different conditions again. Since in all previous forms of production the development of the forces of production is not the basis of appropriation, but a specific relation to the conditions of production (forms of property) appears as presupposed barrier to the forces of production, and is merely to be reproduced, it follows that the development of population, in which the development of all productive forces is summarized, must even more strongly encounter an external barrier and thus appear as something to be restricted. The conditions of the community [were] consistent only with a specific amount of population. On the other side, if the barriers to population posited by the elasticity of the specific form of the conditions of production change in consequence of the latter, if they contract or expand — thus overpopulation among hunting peoples was different from that among the Athenians, in turn different among the latter from that among the Germanic tribes — then so does the absolute rate of population increase, and hence the rate of overpopulation and population. The amount of overpopulation posited on the basis of a specific production is thus just as determinate as the adequate population. Overpopulation and population, taken together, are the population which a specific production basis can create. The extent to which it goes beyond its barrier is given by the barrier itself, or rather by the same base which posits the barrier. Just as necessary labour and surplus labour together [are] the whole of labour on a given base.

Malthus’s theory, which incidentally not his invention, but whose fame he appropriated through the clerical fanaticism with which he propounded it — actually only through the weight he placed on it — is significant in two respects: (1) because he gives brutal expression to the brutal viewpoint of capital; (2) because he asserted the fact of overpopulation in all forms of society. Proved it he has not, for there is nothing more uncritical than his motley compilations from historians and travelers’ descriptions. His conception is altogether false and childish (1) because he regards overpopulation as being of the same kind in all the different historic phases of economic development; does not understand their specific difference, and hence stupidly reduces these very complicated and varying relations to a single relation, two equations, in which the natural reproduction of humanity appears on the one side, and the natural reproduction of edible plants (or means of subsistence) on the other, as two natural series, the former geometric and the latter arithmetic in progression. In this way he transforms the historically distinct relations into an abstract numerical relation, which he has fished purely out of thin air, and which rests neither on natural nor on historical laws. There is allegedly a natural difference between the reproduction of mankind and e.g. grain. This baboon thereby implies that the increase of humanity is a purely natural process, which requires external restraints, checks, to prevent it from proceeding in geometrical progression. This geometrical reproduction is the natural reproduction process of mankind. He would find in history that population proceeds in very different relations, and that overpopulation is likewise a historically determined relation, in no way determined by abstract numbers or by the absolute limit of the productivity of the necessaries of life, but by limits posited rather by specific conditions of production. As well as restricted numerically. How small do the numbers which meant overpopulation for the Athenians appear to us! Secondly, restricted according to character. An overpopulation of free Athenians who become transformed into colonists is significantly different from an overpopulation of workers who become transformed into workhouse inmates. Similarly the begging overpopulation which consumes the surplus produce of a monastery is different from that which forms in a factory. It is Malthus who abstracts from these specific historic laws of the movement of population, which are indeed the history of the nature of humanity, the natural laws, but natural laws of humanity only at a specific historic development, with a development of the forces of production determined by humanity’s own process of history. Malthusian man, abstracted from historically determined man, exists only in his brain; hence also the geometric method of reproduction corresponding to this natural Malthusian man. Real history thus appears to him in such a way that the reproduction of his natural humanity is not an abstraction from the historic process of real reproduction, but just the contrary, that real reproduction is an application of the Malthusian theory. Hence the inherent conditions of population as well as of overpopulation at every stage of history appear to him as a series of external checks which have prevented the population from developing in the Malthusian form. The conditions in which mankind historically produces and reproduces itself appear as barriers to the reproduction of the Malthusian natural man, who is a Malthusian creature. On the other hand, the production of the necessaries of life — as it is checked, determined by human action — appears as a check which it posits to itself. The ferns would cover the entire earth. Their reproduction would stop only where space for them ceased. They would obey no arithmetic proportion. It is hard to say where Malthus has discovered that the reproduction of voluntary natural products would stop for intrinsic reasons, without external checks. He transforms the immanent, historically changing limits of the human reproduction process into outer barriers; and the outer barriers to natural reproduction into immanent limits or natural lawsof reproduction.

(2) He stupidly relates a specific quantity of people to a specific quantity of necessaries. [31] Ricardo immediately and correctly confronted him with the fact that the quantity of grain available is completely irrelevant to the worker if he has no employment; that it is therefore the means of employment and not of subsistence which put him into the category of surplus population. [32] But this should be conceived more generally, and relates to the social mediation as such, through which the individual gains access to the means of his reproduction and creates them; hence it relates to the conditions of production and his relation to them. There was no barrier to the reproduction of the Athenian slave other than the producible necessaries. And we never hear that there were surplus slaves in antiquity. The call for them increased, rather. There was, however, a surplus population of non-workers (in the immediate sense), who were not too many in relation to the necessaries available, but who had lost the conditions under which they could appropriate them. The invention of surplus labourers, i.e. of propertyless people who work, belongs to the period of capital. The beggars who fastened themselves to the monasteries and helped them eat up their surplus product are in the same class as the feudal retainers, and this shows that the surplus produce could not be eaten up by the small number of its owners. It is only another form of the retainers of old, or of the menial servants of today. The overpopulation e.g. among hunting peoples, which shows itself in the warfare between the tribes, proves not that the earth could not support their small numbers, but rather that the condition of their reproduction required a great amount of territory for few people. Never a relation to a non-existent absolute mass of means of subsistence, but rather relation to the conditions of reproduction, of the production of these means, including likewise the conditions of reproduction of human beings, of the total population, of relative surplus population. This surplus purely relative: in no way related to the means of subsistence as such, but rather to the mode of producing them. Hence also only a surplus at this state of development.

(3) What is not actually proper to Malthus at all, the introduction of the theory of rent — at bottom only a formula for saying that in the stage of industry familiar to Ricardo etc., agriculture remained behind industry, which incidentally inherent in bourgeois production although in varying relations — does not belong here.>

Necessary labour. Surplus labour. Surplus population. Surplus capital

<As to production founded on capital, the greatest absolute mass of necessary labour together with the greatest relative mass of surplus labour appears as a condition, regarded absolutely. Hence, as a fundamental condition, maximum growth of population — of living labour capacities. If we further examine the conditions of the development of the productive forces as well as of exchange, division of labour, cooperation, all-sided observation, which can only proceed from many heads, science, as many centres of exchange as possible — all of it identical with growth of population. On another side, it is also inherent in the condition of the appropriation of alien surplus labour that, in addition to the necessary population — i.e. that which represents necessary labour, labour necessary for production — there should be a surplus population, which does not work. The further development of capital shows that besides the industrial part of this surplus population — the industrial capitalist — a purely consuming part branches off: idlers, whose business it is to consume alien products and who, since crude consumption has its limits, must have the products furnished to them partly in refined form, as luxury products. This idle surplus population is not what the economists have in mind when they speak of surplus population. On the contrary, it — and its business of consuming — is treated by the population fanatics as precisely the necessary population, and justly logically) so. The expression, surplus population, concerns exclusively labour capacities, i.e. thenecessary population; surplus of labour capacities. But this arises simply from the nature of capital. Labour capacity can perform its necessary labour only if its surplus labour has value for capital, if it can be realized by capital. Thus, if this realizability is blocked by one or another barrier, then (1) labour capacity itself appears outside the conditions of the reproduction of its existence; it exists without theconditions of its existence, and is therefore a mere encumbrance; needs without the means to satisfy them; (2) necessary labour appears as superfluous, because the superfluous is not necessary. It is necessary only to the extent that it is the condition for the realization of capital. Thus the relation of necessary and surplus labour, as it is posited by capital, turns into its opposite, so that a part of necessary labour — i.e. of the labour reproducing labour capacity — is superfluous, and this labour capacity itself is therefore used as a surplus of the necessary working population, i.e. of the portion of the working population whose necessary labour is not superfluous but necessary for capital. Since the necessary development of the productive forces as posited by capital consists in increasing the relation of surplus labour to necessary labour, or in decreasing the portion of necessary labour required for a given amount of surplus labour, then, if a definite amount of labour Capacity is given, the relation of necessary labour needed by capital must necessarily continuously decline, i.e. part of these labour capacities must become superfluous, since a portion of them suffices to perform the quantity of surplus labour for which the whole amount was required previously. The positing of a specific portion of labour capacities as superfluous, i.e. of the labour required for their reproduction as superfluous, is therefore a necessary consequence of the growth of surplus labour relative to necessary. The decrease of relatively necessary labour appears as increase of the relatively superfluous labouring capacities — i.e. as the positing of surplus population. If the latter is supported, then this comes not out of the labour fund but out of the revenue of all classes. It takes place not through the labour of the labour capacity itself — no longer through its normal reproduction as worker, but rather the worker is maintained as a living being through the mercy of others; hence becomes a tramp and a pauper; because he no longer sustains himself through his necessary labour; hence, through the exchange with a part of capital; he has fallen out of the conditions of the relation of apparent exchange and apparent independence; secondly: society in its fractional parts undertakes for Mr Capitalist the business of keeping his virtual instrument of 6IO labour — its wear and tear — intact as reserve for later use. He shifts a part of the reproduction costs of the working class off his own shoulders and thus pauperizes a part of the remaining population for his own profit. At the same time, capital has the tendency both to posit and equally to suspend this pauperism, because it constantly reproduces itself as surplus capital. It acts in opposite directions, so that sometimes one, sometimes the other is predominant. Finally, the positing of surplus capital contains a double moment: (1) It requires a growing population in order to be set into motion; if the relative population it requires has become smaller, then it has itself become correspondingly larger; (2) it requires a part of the population which is unemployed (at least relatively); i.e. a relative surplus population, in order to find the readily available population for the growth of surplus capital; (3) at a given stage of the productive forces, the surplus value may be present, but not yet in the proportions sufficient to be employed as capital. Not only a minimum of the stage of production, but posited for its expansion. In this case surplus capital and surplus population. Likewise, a surplus population may be present, but not enough, not in the proportions required for more production. In all these investigations, the variations in sales, contraction of the market etc., in short, everything which presupposes the process of many capitals, has been intentionally abstracted away.>

A. Smith. Work as sacrifice. (Senior’s theory of the capitalist’s sacrifice.) (Proudhon’s surplus.) — A. Smith. Origin of profit. Original accumulation. Wakefield. — Slave and free labour. — Atkinson. — Profit. — Origin of profit. MacCulloch.

<A. Smith’s view, [is] that labour never changes its value, in the sense that a definite amount of labour is always a definite amount of labour for the worker, i.e., with A. Smith, a sacrifice of the same quantitative magnitude. Whether I obtain much or little for an hour of work — which depends on its productivity and other circumstances — I have worked one hour. What I have had to pay for the result of my work, my wages, is always the same hour of work, let the result vary as it may. ‘Equal quantities of labour must at all times and in all places have the same value for the worker. In his normal state of health, strength and activity, and with the common degree of skill and facility which he may possess, he must always give up the identical portion of his tranquillity, his freedom, and his happiness. Whatever may be the quantity or composition of the commodities he obtains in reward of his work, the price he pays is always the same. Of course, this price may buy sometimes a lesser, sometimes a greater quantity of these commodities, but only because their value changes, not the value of the labour which buys them. Labour alone, therefore, never changes its own value. It is therefore the real price of commodities, money is only their nominal value.’ (ed. by Garnier, Vol. I, pp. 64-6.) (Notebook, p. 7.) [33] In the sweat of thy brow shalt thou labour! was Jehovah’s curse on Adam. [34]And this is labour for Smith, a curse. ‘Tranquillity’ appears as the adequate state, as identical with ‘freedom’ and ‘happiness’. It seems quite far from Smith’s mind that the individual, ‘in his normal state of health, strength, activity, skill, facility’, also needs a normal portion of work, and of the suspension of tranquillity. Certainly, labour obtains its measure from the outside, through the aim to be attained and the obstacles to be overcome in attaining it. But Smith has no inkling whatever that this overcoming of obstacles is in itself a liberating activity — and that, further, the external aims become stripped of the semblance of merely external natural urgencies, and become posited as aims which the individual himself posits — hence as self-realization, objectification of the subject, hence real freedom, whose action is, precisely, labour. He is right, of course, that, in its historic forms as slave-labour, serf-labour, and wage-labour, labour always appears as repulsive, always as external forced labour; and not-labour, by contrast, as ‘freedom, and happiness’. This holds doubly: for this contradictory labour; and, relatedly, for labour which has not yet created the subjective and objective conditions for itself (or also, in contrast to the pastoral etc. state, which it has lost), in which labour becomes attractive work, the individual’s self-realization, which in no way means that it becomes mere fun, mere amusement, as Fourier, with grisette-like[35] naivete, conceives it. [36] Really free working, e.g. composing, is at the same time precisely the most damned seriousness, the most intense exertion. The work of material production can achieve this character only (1) when its social character is posited, (2) when it is of a scientific and at the same time general character, net merely human exertion as a specifically harnessed natural force, but exertion as subject, which appears in the production process not in a merely natural, spontaneous form, but as an activity regulating all the forces of nature. A. Smith, by the way, has only the slaves of capital in mind. For example, even the semi-artistic worker of the Middle Ages does not fit into his definition. But what we want here initially is not to go into his view on labour, his philosophical view, but into the economic moment. Labour regarded merely as asacrifice, and hence value-positing, as a price paid for things and hence giving them price depending on whether they cost more or less labour, is a purely negative characterization. This is why Mr Senior, for example, was able to make capital into a source of production in the same sense as labour, a source sui generis of the production of value, because the capitalist too brings a sacrifice, the sacrifice of abstinence, in that he grows wealthy instead of eating up his product directly. [37] Something that is merely negative creates nothing. If the worker should, e.g. enjoy his work — as the miser certainly enjoys Senior’s abstinence — then the product does not lose any of its value. Labour alone produces; it is the only substance of products as values. [*] Its measure, labour time — presupposing equal intensity — is therefore the measure of values. The qualitative difference between workers, in so far as it is not natural, posited by sex, age, physical strength etc. — and thus basically expresses not the qualitative value of labour, but rather the division and differentiation of labour — is itself only a product of history, and is in turn suspended for the great mass of labour, in that the latter is itself simple; while the qualitatively higher takes its economic measure from the simple. The statement that labour time, or the amount of labour, is the measure of values means nothing other than that the measure of labour is the measure of values. Two things are only commensurable if they are of the same nature. Products can be measured with the measure of labour — labour time — only because they are, by their nature, labour. They are objectified labour. As objects they assume forms in which their being as labour may certainly be apparent in their form (as a purposiveness posited in them from outside; however, this is not at all apparent with e.g. the ox, or with reproduced natural products generally), but in which this being has, apart from itself, no other features in common. They exist as equals as long as they exist as activity. The latter is measured by time, which therefore also becomes the measure of objectified labour. We will examine elsewhere to what extent this measurement is linked with exchange, not with organized social labour — a definite stage of the social production process. Use value is not concerned with human activity as the source of the product, with its having been posited by human activity, but with its being for mankind. In so far as the product has a measure for itself, it is its natural measure as natural object, mass, weight, length, volume etc. Measure of utility etc. But as effect, or as static presence of the force which created it, it is measured only by the measure of this force itself. The measure of labour is time. Only because products ARE labour can they be measured by the measure of labour, by labour time, the amount of labour consumed in them. The negation of tranquillity, as mere negation, ascetic sacrifice, creates nothing. Someone may castigate and flagellate himself all day long like the monks etc., and this quantity of sacrifice he contributes will remain totally worthless.The natural price of things is not the sacrifice made for them. This recalls, rather, the pre-industrial view which wants to achieve wealth by sacrificing to the gods. There has to be something besides sacrifice. The sacrifice of tranquillity can also be called the sacrifice of laziness, unfreedom, unhappiness, i.e. negation of a negative state.A. Smith considers labour psychologically, as to the fun or displeasure it holds for the individual. But it is something else, too, in addition to this emotional relation with his activity — firstly, for others, since A’s mere sacrifice would be of no use for B; secondly, a definite relation by his own self to the thing he works on, and to his own working capabilities. It is a positive, creative activity. The measure of labour — time — of course does not depend on labour’s productivity; its measure is precisely nothing but a unit of which the proportional parts of labour express a certain multiple. It certainly does not follow from this that the value of labour is constant; or, follows only in so far as equal quantities of labour are of the same measured magnitude. It is then found upon further examination that the values of products are measured not by the labour employed in them, but by the labour necessary for their production. Hence not sacrifice, but labour as a condition of production. The equivalent expresses the condition of the products’ reproduction, as given to them through exchange, i.e. the.possibility of repeating productive activity anew, as posited by its own product.> <By the way, Smith’s view of labour as a sacrifice, which incidentally correctly expresses the subjective relation of the wage worker to his own activity, still does not lead to what he wants — namely the determination of value by labour time. An hour of work may always be an equal sacrifice for the worker. But the value of commodities in no way depends on his feelings; nor does the value of his hour of work. Since A. Smith admits that one can buy this sacrifice sometimes more cheaply, sometimes more dearly, it becomes distinctly peculiar that it is supposed always to be sold for the same price. And he is indeed inconsistent. Later he makes w ages the measure of va lue, not the amount of labour. The slaughter of the ox is always the same sacrifice, for the ox. But this does not mean that the value of beef is constant.> <‘Now, although equal quantities of labour always have the same value as regards the worker, they appear sometimes of smaller, sometimes of larger value for him who employs the worker. He purchases them sometimes with a smaller, sometimes a larger quantity of commodities. For him, therefore, the price of labour varies like that of any other thing, although in reality it is only the commodities which are sometimes dearer, sometimes cheaper.’ (p. 66 A. Smith, loc. cit. Vol. I.) (Notebook, p. 8.)>

<The way in which A. Smith lets profit arise is very naive. “In the primitive state, the product of labour belongs wholly to the worker. The quantity’ (including also the greater difficulty etc.) ‘of labour employed to obtain or to produce an exchangeable object is the only circumstancewhich governs the quantity of labour which this object can on the average buy, command or obtain in exchange… BUT as soon as a stockaccumulates in the hands of private persons, the value which the workers add to the object dissolves into two parts, of which one pays their wages, the other the profit which the entrepreneur makes on the sum of the stock which has served him to advance these wages and the materials of labour. He would have no interest in employing these workers if he did not expect from the sale of their works something more than is necessary to replace this fund, and he would have no interest in employing a larger in preference over a small amount of funds if his profit did not stand in some proportion to the volume of the funds employed.’ (loc. cit. p. 96, 97.) (N., p. 9.) (See A. Smith’s peculiar view that before the division of labour, ‘where every one produced everything necessary, no stock was necessary’. As if, in this state, while he finds no stock in nature, he would not have to find the objective conditions of life, in order to work. Even the savage, even animals, set aside a reserve. Smith can at most have in mind a situation in which the impulse to labour is still a direct, momentary instinct, and then a stock still has to be present in nature in one way or another without labour. (Notebook, p. 19.) (Smith is confused here. Concentration of the stock in a single hand then not necessary.)>

<In Vol. III of his edition of A. Smith, Wakefield remarks: ‘The labour of slaves being combined, is more productive than the much divided labour of freemen. The labour of freemen is more productive than that of slaves, only when it comes to be combined by means of greater dearness of land, and the system of hiring for wages.’ (Note to p. 18.) (Notebook VIII, p. 1.) ‘In countries where land remains very cheap, either all the people are in a state of barbarism, or some of them are in a state of slavery.’ (Note to p. 20.)>

<‘Profit is a term signifying the increase of capital or wealth; so, failing to find the laws which govern the rate of profit, is failing to find the laws of the formation of capital.’ (p. 55. Atkinson (W.), Principles of Political Economy, London, 1840.) (Notebook, p. 2.)>

<‘Man is as much the produce of labour as any of the machines constructed by his agency; and it appears to us that in all economical investigations he ought to be considered in precisely the same point of view. Every individual who has arrived at maturity… may, with perfect propriety, be viewed as a machine which it has cost 20 years of assiduous attention and the expenditure of a considerable capital to construct. And if a further sum is laid out for his education or qualification for the exercise of a business etc., his value is proportionally increased, just as a machine is made more valuable through the expenditure of additional capital or labour in its construction, in order to give it new powers.’ (McCulloch, The Principles of Pol. Econ., London, 1825, p. 115.) (Notebook, p. 9.)) <‘In point of fact, a commodity will always exchange for more’ labour (than it was produced by): ‘and it is this excess that constitutes profits.’ (p. 221, McCulloch loc. cit.) (Notebook, p. 13.) The same gentle McCulloch, about whom Malthus rightly says that he sees it as the proper task of science to equate everything with everything else, says: [39] ‘the profits of capital are only another name for the wages of accumulated labour’ (p. 291) (loc. cit. Notebook, 14) and hence no doubt the wages of labour are only another name for the profits of living capital. ‘Wages… really consist of a part of the produce of the industry of the labourer; consequently, they have a high real value if the labourer receives a comparatively high share of the product of his industry, and vice versa.’ (295 loc. cit.) (Notebook, p. 15.)>

Surplus labour. Profit. Wages. Economists. Ramsay. Wade

The positing of surplus labour through capital has on the whole been so little understood by the economists that they present striking phenomena of its occurrence as something special, as a curiosity. Thus Ramsay, with night work. Likewise John Wade e.g., in History of the Middle and Working Classes, 3rd ed., London, 1835 (p. 241) (Notebook, p. 21) says: ‘The standard of wages is also connected with the hours of work and rest periods. It was the policy of the masters in recent years’ (before 1835) ‘to usurp on operatives in this respect, by cutting or abridging holidays and mealtimes and gradually stretching the hours of work; knowing that an increase of ¼ in the time of work is equivalent to a reduction in wages by the same amount.’

Immovable capital. Return of capital. Fixed capital. John St. Mill

John St. Mill: Essays on Some Unsettled Questions of Political Economy, London, 1844. (The few original ideas of Mill Junior are contained in this narrow little volume, not in his fat, pedantic magnum opus.)

‘Whatever is destined to be employed reproductively, be it in its existing form, or indirectly by a previous (or even subsequent) exchange, iscapital. Suppose I have laid out all my money in wages and machinery, and the article I produce is just finished: in the interval, before I can sell these articles, realize the gain, and lay it out again in wages and tools, will it be said that I have no capital? Certainly not: I have the same capital as before, perhaps a larger one, but it is tied down, and is not disposable.’ (p. 55.) (Notebook, p. 36.) ‘At all times a very large part of the capital in a country lies idle. The annual product of a country never achieves in height what it could, if all resources were devoted to reproduction, if, in short, all the country’s capital were in full employment. If every commodity on the average remained unsold for a length of time equal to that required for its production, then it is clear that at any one time not more than a half of the productive capital of the country would in reality perform the function of capital. The employed half is a fluctuating portion, composed of various elements; but the result would be that every producer would be capable of producing each year only half the supply of commodities which he could produce if he were sure of selling them at the moment of their completion.’ (loc. cit. p. 55, 56.) ‘This, or something similar, is, however, the usual state of a very great part of all capitalists in the world.’ (p. 56.) ‘The number of producers or vendors who turn over their capital in the very shortest time is very small. Few have so rapid a sale of their commodities that all goods which their own or borrowed capital can supply them can be cleared out as quickly as supplied. The majority do not have an extent of business at all adequate to the amount of capital they dispose of. It is true that in communities where industry and trade are practised with the greatest success, the contrivances of banking enable the owner of a capital greater than he can himself employ, to apply it productively and to derive a revenue from it. Still, even then, there is a great quantity of capital which remains fixed in the form of implements, machinery, buildings etc., whether only half employed or in complete employment: and every dealer keeps a stock in trade, to be ready for a possible sudden demand, although he may not be able to dispose of it for an indefinite period.’ (p. 56.) ‘This constant non-employment of a large part of capital is the price we pay for the division of labour. The purchase is worth what it costs; but the price is considerable.’ (56.) If I have 1,500 thalers in the shop and take in 10%, while 500 lie idle to ornament the shop, it is the same as if I invest 1,000 thalers at 7½%… ‘In many trades there are a few dealers who sell articles of equal quality at a lower ‘price than other dealers. This is not a voluntary sacrifice of profits; from the consequent overflow of customers they expect to turn over their capital more rapidly, and to be the winners by keeping the whole of their capital in more constant employment, although on a given operation their gains are smaller.’ (p. 56, 57.) ‘It is questionable whether there are any dealers for whom one additional buyer is of no use; and for the great majority, this hypothesis altogether inapplicable. An additional customer is for most dealers equivalent to a growth of their productive capital. It enables them to transform a part of their capital, which lay idle (and perhaps would never have become productive in their hands until a customer had been found), into wages and instruments of production… A country’s aggregate product for the following year is hence increased; not through pure exchange, but by calling into activity a portion of the national capital which, had it not been for the exchange, would have remained unemployed for some time longer.’ (57, 58.) ‘The advantages gained from a new customer are, for the producer or dealer: (1) say, a part of his capital lies in the form of unsold goods, producing (during a longer or shorter time) nothing at all; then a part thereof is called into greater activity and becomes more constantly productive. (2) If the additional demand exceeds what can be supplied through liberation of capital existing as unsold goods, and if the dealer has additional resources (e.g. in government bonds), but not in his own trade, then he is enabled to obtain on a portion of these, no longer interest, but profit, and thus to gain the difference between the rate of interest and of profits. (3) If all his capital is employed in his own business and no part stored up as unsold goods, then he can conduct a surplus business with borrowed capital and gain the difference between interest and profit.’ (59.)

[Fixed and Circulating Capital]

Turnover of capital. Circulation process. Production process. Turnover. Capital circulates. Likewise fixed capital. Circulation costs. Circulation time and labour time. (Capitalist’s free time.) (Transport costs)

Now back to our subject.

The phases through which capital travels, which form one turnover of capital, begin conceptually with the transformation of money into the conditions of production. Now, however, that we begin not with capital in the process of becoming, but capital which has become, [we can see that] it travels through the following phases: (1) Creation of surplus value, or immediate production process. Its result, the product. (2) Bringing the product to market. Transformation of product into commodity. (3) (a) Entry of the commodity into ordinary circulation. Circulation of the commodity. Its result: transformation into money. This appears as the first moment of ordinary circulation. (b) Retransformation of money into the conditions of production: money circulation; in ordinary circulation, the circulation of commodities and the circulation of money always appear distributed among two different subjects. Capital circulates first as a commodity, then as money, and vice versa. (4) Renewal of the production process, which appears here as reproduction of the original capital, and production process of surplus capital.

The costs of circulation break down into costs of movement; costs to bring the product to market; the labour time required to effect the transformation from one state to the other; all of which actually come down to accounting operations and the time they cost (this is the foundation of a special, technical money trade). (Whether the latter costs are to be considered deductions from the surplus value or not will be seen later.)

If we examine this movement, we find that the circulation of capital, through the operation of exchanges, opens up at one point to release the product into general circulation, and to constitute itself out of the latter as equivalent in money. What happens to this product, which has in this way fallen out of the circulation of capital and into ordinary circulation, is here beside the point. On the other side, capital throws its form as money out of its circulation process again (partially, that is, in so far as it is not wages), or, after having realized itself as value in ordinary circulation and at the same time posited itself as the measure of its own realization, it then moves in the money form only as medium of circulation, and thus sucks into itself out of general circulation the commodities necessary for production (conditions of production). As commodity, capital throws itself out of its own circulation into general circulation; and, again as commodity, capital leaves general circulation and enters its own course, issuing into the production process. The circulation of capital thus contains a relation to general circulation, of which its own circulation forms a moment, while the latter likewise appears as posited by capital. This to be examined later.

The total production process of capital includes both the circulation process proper and the actual production process. These form the two great sections of its movement, which appears as the totality of these two processes. On one side, labour time, on the other, circulation time. And the whole of the movement appears as unity of labour time and circulation time, as unity of production and circulation. This unity itself is motion, process. Capital appears as this unity-in-process of production and circulation, a unity which can be regarded both as the totality of the process of its production, as well as the specific completion of one turnover of the capital, one movement returning into itself.

The condition, for capital, of circulation time is — besides labour time — only the same as the condition of production based on division of labour and exchange, in adequate form, in the highest form. The costs of circulation are costs of the division of labour and of exchange, which are necessarily found in every previous, pre-capitalist form of production resting on this basis.

As the subject predominant [übergreifend] over the different phases of this movement, as value sustaining and multiplying itself in it, as the subject of these metamorphoses proceeding in a circular course — as a spiral, as an expanding circle — capital is circulating capital.Circulating capital is therefore initially not a particular form of capital, but is rather capital itself, in a further developed aspect, as subject of the movement just described„ which it, itself, is as its own realization process. In this respect, therefore, every capital is circulating capital. In simple circulation, circulation itself appears as the subject. One commodity is thrown out of it, another enters into it. But the same commodity is within it only fleetingly. Money itself, in so far as it ceases to be a medium of circulation and posits itself as independent value, withdraws from circulation. Capital, however, exists as the subject of circulation; circulation is posited as its own life’s course. But while capital thus, as the whole of circulation, is circulating capital, is the process of going from one phase into the other, it is at the same time, within each phase, posited in a specific aspect, restricted to a particular form, which is the negation of itself as the subject of the whole movement. Therefore, capital in each of its particular phases is the negation of itself as the subject of all the various metamorphoses. Not-circulating capital. Fixed capital, actuallyfixated capital, fixated in one of the different particular aspects, phases, through which it must move. As long as it persists in one of these phases — [as long as] the phase itself does not appear as fluid transition — and each of them has its duration, [then] it is not circulating, [but] fixated. As long as it remains in the production process it is not capable of circulating; and it is virtually devalued. As long as it remains in circulation, it is not capable of producing, not capable of positing surplus value, not capable of engaging in the process as capital. As long as it cannot be brought to market, it is fixated as product. As long as it has to remain on the market, it is fixated as commodity. As long as it cannot be exchanged for conditions of production, it is fixated as money. Finally, if the conditions of production remain in their form as conditions and do not enter into the production process, it is again fixated and devalued. As the subject moving through all phases, as the moving unity, the unity-in-process of circulation and production, capital is circulating capital; capital as restricted into any of these phases, as posited in its divisions, is fixatedcapital, tied-down capital. As circulating capital it fixates itself, and as fixated capital it circulates. The distinction between circulating capitaland fixed capital thus appears initially as a formal characteristic of capital, depending on whether it appears as the unity of the process or as one of its specific moments. The concept of dormant capital, capital lying fallow, can refer only to its barren existence in one of these aspects, and it is a condition of capital that part of it always lies fallow. This takes the visible form that a part of the national capital is always stuck in one of the phases through which capital has to move. Money itself, to the extent that it forms a particular part of the nation’s capital, but always remains in the form of medium of circulation, i.e. never goes through the other phases, is therefore regarded by A. Smith as a subordinate form of fixed capital.  [40]  Capital can likewise lie fallow, be fixated in the form of money, of value withdrawn from circulation. During crises — after the moment of panic — during the standstill of industry, money is immobilized in the hands of bankers, billbrokers etc.; and, just as the stag cries out for fresh water, money cries out for a field of employment where it may be realized as capital.

Much confusion in political economy has been caused by this, that the aspects of circulating and fixed are initially nothing more than capital itself posited in the two aspects, first as the unity of the process, then as a particular one of its phases, itself in distinction to itself as unity — not as two particular kinds of capital, not capital of two particular kinds, but rather as different characteristic forms of the same capital. While some held fast to the aspect of a material product in which it was supposed to be circulating capital, others had no difficulty in pointing out the opposite aspect, and vice versa. Capital as the unity of circulation and production is at the same time the division between them, and a division whose aspects are separated in space and time, at that. In each moment it has an indifferent form towards the other. For the individual capital, the transition from one into the other appears as chance, as dependent on external, uncontrollable circumstances. One and the same capital therefore always appears in both states; this is expressed by the appearance of one part of it in one [phase], another in another; one part tied down, another part circulating; circulating, here, not in the sense that it is in the circulatory phase proper as opposed to the production phase,but rather in the sense that in the phase in which it finds itself it is in a fluid phase, a phase in-process, a phase in transition to the next phase; not stuck in one of them as such and hence delayed in its total process. For example: the industrialist uses only a part of the capital at his disposal (whether borrowed or owned is beside the point here, nor, if we consider capital as a whole, does it affect the economic process) in production, because another part requires a certain amount of time before it comes back out of circulation. The part moving [prozessierend] within production is then the circulating part; the part in circulation is the immobilized part. His total productivity is thereby restricted; the reproduced part restricted, hence also the part thrown on to the market restricted. Thus the merchant; a part of his capital is tied down as stock in trade,the other part moves. To be sure, sometimes one and sometimes another part is in this phase, as with the industrialist, but his total capital is always posited in both aspects. Then again, since this limit arising out of the nature of the realization process itself is not fixed, but changes with circumstances, and since capital can approach its adequate character as that which circulates, to a greater or lesser degree; since the decomposition into these two aspects, in which the realization process appears at the same time as the devaluation process, contradicts the tendency of capital towards maximum realization, it therefore invents contrivances to abbreviate the phase of fixity; and at the same time also, instead of the simultaneous coexistence of both states, they alternate. In one period the process appears as altogether fluid — the period of the maximum realization of capital; in another, a reaction to the first, the other moment asserts itself all the more forcibly — the period of the maximum devaluation of capital and congestion of the production process. The moments in which both aspects appear alongside one another themselves only form interludes between these violent transitions and turnings-over. It is extremely important to grasp these aspects of circulating and fixated capital as specific characteristic forms of capital generally, since a great many phenomena of the bourgeois economy — the period of the economic cycle, which is essentially different from the single turnover period of capital; the effect of new demand; even the effect of new gold- and silver-producing countries on general production — [would otherwise be] incomprehensible. It is futile to speak of the stimulus given by Australian gold or a newly discovered market. If it were not in the nature of capital to be never completely occupied, i.e . always partially fixated, devalued, unproductive, then no stimuli could drive it to greater production. At th e same time, [note] the senseless contradictions into which the economists stray —even Ricardo — when they presuppose that capital is always fully occupied; hence explain an increase of production by referring exclusively to the creation of new capital. Every increase would then presuppose an earlier increase or growth of the productive forces.

These barriers to production based on capital are even more strongly inherent in the earlier modes of production, in so far as they rest on exchange. But they do not form a law of production pure and simple; [and,] as soon as exchange value no longer forms a barrier to material production, as soon as its barrier is rather posited by the total development of the individual, the whole story with its spasms and convulsions is left behind. As we saw earlier that money suspends the barriers of barter only by generalizing them — i.e. separating purchase and sale entirely — so shall we see later that credit likewise suspends these barriers to the realization of capital only by raising them to their most general form, positing one period of overproduction and one of underproduction as two periods.

The value which capital posits in one cycle, one revolution, one   turnover, is = to the value posited in the production process, i.e. = to the value reproduced + the new value. Whether we regard the turnover as completed at the point where the commodity is transformed into money, or at the point where the money is transformed back into conditions of production, the result, whether expressed in money or in conditions of production, is always absolutely equal to the value posited in the production process. We count the physical bringing of the product to market as = to 0; or, rather, we include it in the direct production process. The economic circulation of the product begins only when it is on the market as a commodity — only then does it circulate. We are dealing here only with the economic differences, aspects, moments of circulation; not with the physical conditions for bringing the finished product into the second phase, that of circulation as commodity; nor are we concerned with the technological process by which the raw material is transformed into product. The greater or lesser distance of the market from the producer etc. does not concern us here yet. What we want to determine here first of all is that the costs arising from the motion through the different economic moments as such, the costs of circulation as such, do not add anything to the value of the product, are not value-positing costs, regardless of how much labour they may involve. They are merely deductions from the created value. If, of two individuals, each one were the producer of his own product, but their labour rested on division of labour, so that they exchanged with each other, and the realization of their product depended on the satisfaction of their needs through this exchange, then obviously the time which this exchange would cost them, e.g. the mutual bargaining, calculating before closing the deal, would make not the slightest addition either to their products or to the latter’s exchange values. If A were to argue that the exchange takes up so much time, then B would respond in kind. Each of them loses just as much time in the exchange as the other. The exchange time is their common time. If A demanded 10 thalers for the product — its equivalent — and 10 thalers for the time it costs him to get the 10 thalers from B, then the latter would declare him a candidate for the madhouse. This loss of time arises from the division of labour and the necessity of exchange. If A produced everything himself, then he would lose no part of his time in exchanging with B, or in transforming his product into money and the money into product again. The costs  of circulation proper (and they achieve a significant independent development in the money trade) are not reducible to productive labour time. But they are also by nature restricted to the time it necessarily costs to transform the commodity into money and the money back into commodity; i.e. to the time it costs to transpose capital from one form into the other. B and A might now find that they could save time by inserting a third person C as middleman between them, who consumed his time in this circulation process — circumstances which would arise e.g. if there were enough exchangers, enough subjects of the circulation processes, so that the time needed by each pair of them alternately over a year = one year; each individual, say, had to spend 1/50 of a year alternately in circulation, and there are 50 of them, then 1 individual could spend his entire time in this occupation. For this individual, if only his necessary labour time were paid him, i.e. if he had to give up his entire time in exchange for the necessaries of life, then the reward which he would obtain would be wages. But if it amounted to his entire time, then the wage he would obtain would be an equivalent, objectified labour time. This individual then, would have added nothing to the value, but would, rather, have obtained a share of the surplus value belonging to capitalists A, B, etc. They would have gained, since, according to the presupposition, a lesser deduction from their surplus value would have taken place. (Capital is not a quantity simply, nor an operation simply; but both at the same time.) Money itself, to the extent that it consists of precious metals, or its production generally — e.g. in paper circulation — creates expense, to the extent that it also costs labour time, adds no value to the exchanged objects — to the exchange values; rather, its costs are a deduction from these values, a deduction which must be borne in proportional parts by’ the exchangers. The preciousness of the instrument of circulation, of the instrument of exchange, expresses only the costs of exchange. Instead of adding to value, they subtract from it. Gold money and silver money, e.g., are themselves values, like others (not in the sen se of money), in so far as labour is objectified in them. But that these values serve as medium of circulation is a deduction from disposable wealth. The same relation holds for the production costs of the circulation of capital. This adds nothing to the values. The costs of circulation as such do not posit value, they are costs of the realization of values — deductions from them. Circulation as a series of transformations, in which capital posits   itself; but, as regards value, circulation does not add to it, but posits it, rather, in the form of value. The potential value which is transformed into money through circulation is presupposed as a result of the production process. In so far as this series of processes takes place in time and involves costs, costs labour time, or objectified labour time, these circulation costs are deductions from the sum of value. When circulation costs are posited = 0, then the result of one turnover of capital, as regards value, = the value posited in the production process. That is, the value presupposed to circulation is the same as emerges from it. The most that can happen is that — owing to the circulation costs — a smaller value can come out than went in. In this respect, circulation time adds nothing to value; circulation time does not appear as value-positing time, the same as labour time. If production has created a commodity = to the value of £10, then circulation is necessary in order to equate this commodity to the £10, its value, which exists as money. The costs involved in this process, caused by this change of form, are a deduction from the value of the commodity. The circulation of capital is the change of forms by means of which value passes through different phases. The time which this process lasts or costs to bring about belongs among the production costs of circulation, of the division of labour, of production based on exchange.

This holds for one turnover of capital, i.e. for the single course of capital through this, its different moments. The process of capital as value has its point of departure in money and ends in money, but in a greater quantity of money. The difference is only quantitative. M-C-C-M has thus obtained a content. If we examine the cycle up to this point, we stand at the point of departure again. Capital has become money again. But it is now at the same time posited, it has now become a condition for this money that it becomes capital again, money which preserves and multiplies itself through the purchase of labour, by passing through the production process. Its form as money is posited as mere form; one of the many forms through which it moves in its metamorphosis. If we regard this point now not as a terminal point, but rather — as we must now regard it — as transition point, or new point of departure, itself posited by the production process as a vanishing terminal point and only a seeming point of departure, then it is clear that the retransformation of value, posited as money, into value-in-process, into value entering  into the production process, can only proceed — that the renewal of the production process can only take place — when the part of the circulation process which is distinct from the production process has been completed. The second turnover of capital — the retransformation of money into capital as such, or the renewal of the production process — depends on the time capital requires to complete its circulation; i.e. on its circulation time,the latter here as distinct from production time. But since we have seen that the total value created by capital (reproduced value as well as newly created), which is realized in circulation as such, is exclusively determined by the production process, it follows that the sum of values which can be created in a given period of time depends on the number of repetitions of the production process within this period. The repetition of the production process, however, is determined by circulation time, which is equal to the velocity of circulation. The more rapid the circulation, the shorter the circulation time, the more often can the same capital repeat the production process. Hence, in a specific cycle of turnovers of capital, the sum of values created by it (hence surplus values as well, for it posits necessary labour always merely as labour necessary for surplus labour) is directly proportional to the labour time and inversely proportional to the circulation time. In a given cycle, the total value (consequently also the sum of newly posited surplus values) = labour time multiplied by the number of turnovers of the capital. Or, the surplus value posited by capital now no longer appears as simply determined by the surplus labour appropriated by it in the production process, but rather [it is determined] by the coefficient of the production process; i.e. the number which expresses how often it is repeated in a given period of time. This coefficient, in turn, is determined by the circulation time required by the capital for one turnover. The sum of values (surplus values) is thus determined by the value posited in one turnover multiplied by the number of turnovers in a given period of time. One turnover of capital is = to the production time + the circulation time. If circulation time is presupposed as given, then the total time required for one turnover depends on the production time. If production time is given, the duration of the turnover depends on the circulation time. Hence, to the extent that circulation time determines the total mass of production time in a given period of time, and to the extent that the repetition of the production process, its renewal in a given period depends on the circulation time, to that extent is it itself a moment of production, or rather appears as a limit of production. This is the nature of capital, of production founded on capital, that circulation time becomes a determinant moment for labour time, for the creation of value. The independence of labour time is thereby negated, and the production process is itself posited as determined by exchange, so that immediate production is socially linked to it and dependent on this link — not only as a material moment, but also as aneconomic moment, a determinant, characteristic form. The maximum of circulation — the limit of the renewal of the production process through it — is obviously determined by the duration of production time during one turnover. Suppose the production process of a specific capital, i.e. the time it needs to reproduce its value and to posit surplus value, lasts 3 months. (Or, the time required to complete a quantity of product = to the total value of the producing capital + the surplus value.) Then this capital could under no circumstances renew the production or realization process more often than 4 times a year. The maximum turnover of this capital would be 4 turnovers per year; i.e. if no interruptions took place between the completion of one production phase and the renewal. The maximum number of turnovers would be = to the continuity of the production process, so that, as soon as the product was finished, new raw material would be worked up into product again. This continuity would extend not only to the continuity within a single production phase, but to the continuity of these phases themselves. But supposing now that this capital required one month of circulation time at the end of each phase — time to return to the form of conditions of production — then it could effect only 3 turnovers. In the first case the number of turnovers was = 1 phase×4; or 12 months divided by 3. The maximum value-creation by capital in a given space of time is this space of time divide d by the duration of the production process (by production time). In the second case, the capital would effect only 3 turnovers a year; it would repeat the realization process only 3 times. The sum of its realization process would be, then, = 12/4 = 3. The divisor here is the total circulation time it requires: 4 months; or the circulation time required for one circulation phase, multiplied by the number of times this circulation time is contained in a year. In the first case, the number of turnovers = 12 months, a year, a given time, divided by the time of one production phase, or by the duration of production time itself; in the second case, it equals the same time divided by circulation time. The maximum realization of capital, as also the maximum continuity of the production process, is circulation time posited as = 0; i.e. then, the conditions under which capital produces, its restriction by circulation time, the necessity of going through the different phases of its metamorphosis, are suspended. It is the necessary tendency of capital to strive to equate circulation time to 0; i.e. to suspend itself, since it is capital itself alone which posits circulation time as a determinant moment of production time. It is the same as to suspend the necessity of exchange, of money, and of the division of labour resting on them, hence capital itself. If we ignore for a moment the transformation of surplus value into surplus capital, then a capital of 100 thalers, which produced a surplus value of 4% on the total capital in the production process, would, in the first case, reproduce itself 4 times and would at the end of the year have posited a surplus value of 16. At the end of the year, the capital would be = 116. It would be the same as if a capital of 400 had turned over once a year, likewise with a surplus value of 4%. As regards the total production of commodities and values, these would have quadrupled. In the other case, a capital of 100 thalers only created a surplus value of 12; the total capital at the end of the year = 112. As regards total production — in respect of either values or use values — the difference still more significant. In the first case e.g. a capital of 100 transformed 400 thalers of leather into boots, in the second only 300 thalers of leather.

The total realization of capital is hence determined by the duration of the production phase — which we posit as identical with labour time, for the moment — multiplied by the number of turnovers, or renewals of this production phase in a given period of time. If the turnovers were determined only by the duration of one production phase, then the total realization would be simply determined by the number of production phases contained in a given period of time; or, the turnovers would be absolutely determined by production time itself. This would be themaximum of realization. It is clear, therefore, that circulation time, regarded absolutely, is a deduction from the maximum of realization, is absolute realization. It is therefore impossible for any velocity of circulation or any abbreviation of circulation to create a realization that posited by the production phase itself. The maximum that the velocity of circulation could effect, if it rose to [infinity], would be to posit circulation time = 0, i.e. to abolish itself. It can therefore not be a positive, value-creating moment, since its abolition — circulation without circulation time — would be the maximum of realization; its negation = to the highest position of the productivity of capital. [*] The total productivity of capital is = the duration of one production phase multiplied by the number of times it is repeated in a certain period of time. But this number is determined by circulation time.

Let us assume a capital of 100 turned over 4 times a year; posited the production process 4 times; then, if the surplus value = 5% each time, at the end of the year the surplus value created by the capital of 100 would = 20; then, for a capital of 400, which turned over once a year at the same percentage, would likewise = 20. So that a capital of 100, circulating 4 times, would give a gain of 20% a year, while a 4 times greater capital with a single turnover would give a profit of only 5%. (We shall see shortly, in more detail, that the surplus value is exactly the same.) It seems, therefore, that the magnitude of the capital can be replaced by the velocity of turnover, and the velocity of turnover by the magnitude of the capital. This is how it comes to appear as though circulation time were in itself productive. We must therefore clarify the matter by discussing this case.

Another question which arises: If the turnover of 100 thalers 4 times a year brings 5% each time, say, then at the beginning of the second turnover, the production process could be begun with 105 thalers, and the product would be 110¼; at the beginning of the third turnover,110¼, of which the product would be 115 61/80 at the beginning of the fourth turnover, 115 61/80, and at its end, 121 881/1600. The number itself here is beside the point. The point is that, in the case of a capital of 400 which turns over once a year at 5%, the total gain can only be 20; while, by contrast, a 4 times smaller capital turning over 4 times at the same percentage makes a gain of 1 + 881/1600 more. In this way it appears as if the mere moment of turnover — repetition — i.e. a moment determined by circulation time, or rather a moment determined bycirculation, not only realized value, but brought about an absolute growth of value. This also to be examined.

Circulation time only expresses the velocity of circulation; the velocity of circulation only the barrier to circulation. Circulation without circulation time — i.e. the transition of capital from one phase to the next at the speed of thought — would be the maximum, i.e. the identity of the renewal of the production process with its termination.

The act of exchange — and the economic operations through which circulation proceeds are reducible to a succession of acts of exchange — up to the point at which capital does not relate as commodity to money or as money to commodity, but as value to its specific use value, labour — the act of the exchange of value in one form for value in the other, money for commodity, commodity for money (and these are the moments of simple circulation), posits the value of one commodity in the other, and thus realizes it as exchange; or, also, posits the commodities as equivalents. The act of exchange is thus value-positing in so far as values are presupposed to it; it realizes the value-character of the subjects of exchange. [41] But an act which posits a commodity as value, or, what is the same, which posits another commodity as its equivalent — or, again the same, posits the equivalence of both commodities, obviously for its part adds nothing to value, as little as the sign + increases or decreases the number coming after it. If I posit 4 as plus or as minus — through this operation, 4, independently of the sign, remains equal to itself, 4, becomes neither 3 nor 5. Likewise, if I exchange a lb. of cotton with an exchange value of 6d. for 6d., then it is posited as value; and it can equally be said that the 6d, are posited as value in the lb. of cotton; i.e. the labour time contained in the 6d. (here 6d. regarded as value) is now expressed in another materialization of the same amount of labour time. But, since through this act of exchange the lb. of cotton as well as the 6d. of copper are each posited at = to their value, it is impossible that through this exchange the value either of the cotton, or of the 6d. or of the sum of both values should increase quantitatively. As the positing of equivalents, exchange only changes the form; realizes the potentially existing values; realizes the prices, if you like. To posit equivalents, e.g. A and B as equivalents, cannot raise the value of A, for it is the act in which A is posited as = to its own value, hence not as unequal to it; unequal only where the form is concerned, in so far as it was previously not posited as value; it is at the same time the act by means of which the value of A is posited as = to the value of B, and the value of B  as = the value of A. The sum of the values transposed in the exchange = value A + value B. Each remains = to its own value; hence their sum remains equal to the sum of their values. Exchange as the positing of equivalents cannot therefore by its nature increase the sum of values, nor the value of the commodities exchanged. (The fact that it is different with the exchange with labour arises because the use value of labour is itself value-positing, but is not directly connected with its exchange value.) And if a single operation of exchange cannot increase the value of the thing exchanged, neither can a sum of exchanges do it.[*] Whether I repeat an act which creates no value once or an infinite number of times, the repetition cannot change its nature. The repetition of a non-value-creating act can never become an act of value-creation. E.g. ¼ expresses a specific proportion. If I transform this ¼ into a decimal fraction, i.e. posit it = 0.25, then its form has been changed. This transformation leaves the value the same. Similarly, when I transform a commodity into the form of money, or money into the form of the commodity, then the value remains the same, but the form is changed. It is clear, therefore, that circulation — since it consists of a series of exchange operations with equivalents — cannot increase the value of circulating commodities. Therefore, if labour time is required to undertake this operation, i.e. if values have to be consumed, for all consumption of values reduces itself to the consumption of labour time or of objectified labour time, products; i.e. if circulation entails costs, and if circulation time costs labour time, then this is a deduction from, a relative suspension of the circulating values; their devaluation by the amount of the circulation costs. If one imagines two workers who exchange with each other, a fisherman and a hunter; then the time which both lose in exchanging would create neither fish nor game, but would be rather a deduction from the time in which both of them can create values, the one fish, the other hunt, objectify their labour time in a use value. If the fisherman wanted to get compensation for this loss from the hunter: demand more game, or give him fewer fish, then the latter would have the same right to compensation. The loss would be common to both of them. These costs of circulation, costs of exchange, could appear only as a deduction from the total production and value-creation of both of them. If they commissioned a third, C, with these exchanges, and thus lost no labour time directly, then each of them would have to cede ‘a proportional share of his product to C. What they could gain thereby would only be a greater or lesser loss. But if they worked as joint proprietors, then no exchange would take place, only communal consumption. The costs of exchange would therefore vanish. Not the division of labour; but the division of labour founded on exchange. It is wrong, therefore, for J. St. Mill to regard the cost of circulation as necessary price of the division of labour. It is the cost only of the [not-] spontaneous division of labour resting not on community of property, but on private property.

Circulation costs as such, i.e. the consumption of labour time or of objectified labour time, of values, in connection with the operation of exchange and a series of exchange operations, are therefore a deduction either from the time employed on production, or from the values posited by production. They can never increase the value. They belong among the faux frais de production, and these faux frais de productionbelong to the inherent costs of production resting on capital. The merchant’s trade and still more the money trade proper — in so far as they do nothing but carry on the operations of circulation as such, e.g. the determination of prices (measurement of values and their calculation), these exchange operations generally, as a function which has gained independence through the division of labour, in so far as they represent this function of the total process of capital — represent merely the faux frais de production of capital. In so far as they reduce these faux frais, they add to production, not by creating value, but by reducing the negation of created values. If they operate purely as such a function, then they would always only represent the minimum of faux frais de production. If they enable the producers to create more values than they could without this division of labour, and, more precisely, so much more that a surplus remains after the payment of this function, then they have in fact increased production. Values are then increased, however, not because the operations of circulation have created value, but because they have absorbed less value than they would have done otherwise. But they are a necessary condition for capital’s production.

The time a capitalist loses during exchange is as such not a deduction from labour time. He is a capitalist — i.e. representative of capital, personified capital, only by virtue of the fact that he relates to labour as alien labour, and appropriates and posits alien labour for himself. The costs of circulation therefore do not exist in so far as they take away the capitalist’s time. His time is posited as superfluous time: not-labour time, not-value-creating time, although it is capital which realizes the created value. The fact that the worker must work surplus labour time is identical with the fact that the capitalist does not need to work, and his time is thus posited as not-labour time; that he does not work thenecessary time, either. The worker must work surplus time in order to be allowed to objectify, to realize the labour time necessary for his reproduction. On the other side, therefore, the capitalist’s necessary labour time is free time, not time required for direct subsistence. Since all free time is time for free development, the capitalist usurps the free time created by the workers for society, i.e. civilization, and Wade is again correct in this sense, in so far as he posits capital = civilization.

Circulation time — to the extent that it takes up the time of the capitalist as such — concerns us here exactly as much as the time he spends with his mistress. If time is money, then from the standpoint of capital it is only alien labour time, which is of course in the most literal sense the capitalist’s money. In regard to capital as such, circulation time can coincide with labour time only in so far as it interrupts the time during which capital can appropriate alien labour time, and it is clear that this relative devaluation of capital cannot add to its realization, but can only detract from it; or, in so fat as circulation costs capital objectified alien labour time, values. (For example because it has to pay someone who takes over this function.) In both cases, circulation time is of interest only in so far as it is the suspension, the negation of alien labour time; either because it interrupts capital in the process of its appropriation; or because it forces it to consume a part of the created value, to consume it in order to accomplish the operations of circulation, i.e. to posit itself as capital. (Very much to be distinguished from the private consumption of the capitalist.) Circulation time is of interest only in its relation — as barrier, negation — to the production time of capital; this production time, however, is the time during which it appropriates alien labour, the alien labour time posited by it. To regard the time the capitalist spends in circulation as value-creating time or even surplus-value-creating time is to fall into the greatest confusion. Capital as such has no labour time apart from its production time. The capitalist absolutely does not concern us here except as capital. And he functions as such only in the total process we are examining. Otherwise, it could still be imagined that the capitalist draws compensation for the time during which he does not earn money as another capitalist’s wage labourer — or that he loses this time. [Or] that it belongs together with the costs of production. The time which he employs or loses as capitalist is lost time altogether, sunk and unrecoverable from this standpoint. We will later look at thecapitalist’s so-called labour time as distinct from the worker’s labour time, which former is alleged to form the basis of his profits, as a wage of its own type.

Nothing is more common than to bring transport etc., to the extent that they are connected with trade, into the pure circulation costs. In so far as trade brings a product to market, it gives it a new form. True, all it does is change the location. But the mode of the transformation does not concern us. It gives the product a new use value (and this holds right down to and including the retail grocer, who weighs, measures, wraps the product and thus gives it a form for consumption), and this new use value costs labour time, is therefore at the same time exchange value. Bringing to market is part of the production process itself. The product is a commodity, is in circulation only when it is on the market.

Circulation. Storch. — Metamorphosis of capital and metamorphosis of the commodity. — Capital’s change of form and of substance. Different forms of capital. — Turnover in a given period. — Circulating capital as general character of capital. — Year the measure of turnovers of circulating capital. Day the measure of labour time

<‘In every species of industry, the entrepreneurs become sellers of products, while the entire remainder of the nation and often even other nations are the buyers of these products… the constant and incessantly repeated path which circulating capital describes in order to take leave of the entrepreneur and in order to return to him in the first form is comparable to a circle; hence the name circulant given to this capital, and the use of the word circulation for its movement.’ (p. [404,] 405.) (Storch. Cours d’économie politique, Paris, 1823, Vol. I, p. 405, Notebook, p. 34.) ‘In the broad sense, circulation includes the motion of every commodity exchanged.’ (p. 405, loc. cit.) ‘Circulation proceeds by exchanges… from the instant of [the introduction of] currency, they [the commodities] are no longer exchanged but sold.’ (p. 406, loc. cit.) ‘For a commodity to be in circulation, it is sufficient that it be in supply… Wealth in circulation: commodity.’ (p. 407, loc. cit.) ‘Commerce only a part of circulation; the former includes only merchants’ purchases and sales; the latter, those of all entrepreneurs and even of all… inhabitants.’ (p. 408, loc. cit.) ‘Only so long as the costs of circulation are indispensable to allow the commodities to reach the consumers is circulation real, and does its valueincrease the annual product. From the instant when it exceeds this degree, circulation is artificial and no longer contributes anything to the wealth of the nation.’ (p. 409.) ‘In recent years we saw examples of artificial circulation in St Petersburg in Russia. The slack state of foreign trade had led the merchants to realize their unemployed capitals in another way; no longer being able to employ them to bring in foreign commodities and to export domestic ones, they decided to take advantage of this by buying and reselling the commodities on hand. Monstrous quantities of sugar, coffee, hemp, iron etc. rapidly passed from one hand to the other, and a commodity often changed proprietors twenty times, without leaving the warehouse. This kind of circulation offers the dealers all manner of speculative opportunities; but while it enriches some, it ruins the others, and the nation’s wealth gains nothing thereby. Likewise with the circulation of money… This kind of artificial circulation, based simply on a variation of prices, is termed agiotage.’ (p. 410, 411.) ‘Circulation brings no profit for society except in so far as it is indispensable to bring the commodity to the consumer. Every detour, delay, intermediate exchange which is not absolutely necessary for this purpose, or which does not contribute to diminishing the circulation costs, harms the national wealth, by uselessly raising the prices of commodities.’ (p. 411.) ‘Circulation is the more productive the more rapid it is; i.e. the less time it requires to relieve the entrepreneur of the finished product and bring it to market, and to bring the capital back to him in its first form.’ (p. 411.) ‘The entrepreneur can begin production again only after he has sold the completed product and has employed the price in purchasing new materials and new wages: hence, the more promptly circulation acts to bring about these two effects, the sooner is he in a position to begin his production anew, and the more profits does his capital bring in a given period of time.’ (p. 412.) ‘The nation whose capital circulates with a proper speed, so as to return several times a year to him who set it into motion, is in the same situation as the labourer of the happy climates who can raise three or four harvests in succession from the same soil in one year.’ (p. 412, 413.) ‘A slow circulation makes the objects of consumption more expensive (1) indirectly, through diminution of the mass of commodities which can exist; (2) directly because, as long as a product is in circulation, its value progressively increases by the interest of capital employed on its production; the slower the production, the more do these interest charges accumulate, which uselessly elevates the price of commodities.’ ‘Means for the abbreviation and acceleration of circulation: (1) the separating-out of a class of workers occupied exclusively with trade; (2) ease of transport; (3) currency; (4) credit.’ (p. 413.)>

Simple circulation consisted of a great number of simultaneous or successive exchanges. Their unity, regarded as circulation, was actually present only from the observer’s standpoint. (The exchange can be accidental, and it more or less has this character where it is restricted to the exchange of the excess product, and has not seized upon the totality of the production process.) In the circulation of capital we have a series of exchange operations, acts of exchange, each of which represents a qualitatively different moment towards the other, a moment in the reproduction and growth of capital. A system of exchanges, changes of substance, from the standpoint of value as such. Changes of form, from the standpoint of use value. The product relates to the commodity as use value to exchange value; thus the commodity to money. Here one series attains its peak. Money relates to the commodity into which it is retransformed as exchange value to use value; even more so, money to labour.

In so far as capital in every moment of the process is itself the possibility of going over into its other, next phase, and is thus the possibility of the whole process, which expresses capital’s act of life, to that extent each of the moments appears potentially as capital — hence commodity capital, money capital — along with the value positing itself in the production process as capital. The commodity can represent money as long as it can transform itself into money, i.e. can buy wage labour (surplus labour); this in respect of the formal side, which emerges from the circulation of capital. On the material, physical side, it remains capital as long as it consists of raw material (proper or semi-fabricated), instrument, or necessaries for the workers. Each of these forms is potential capital. Money is in one respect the realized capital, capital as realized value. In this respect (regarded as a terminal point of circulation, where it then has to be regarded as a point of departure as well), it is capital,cat exohn. It is then especially capital again in regard to the part of the production process in which it exchanges itself for living labour. By contrast, in its exchange for the commodity (new purchase of raw material etc.) by the capitalist, it appears not as capital, but as medium of circulation; merely a vanishing mediation, through which the capitalist exchanges his product for the latter’s original elements.

Circulation is not merely an external operation for capital. Just as it only becomes capital through the production process, in that value immortalizes and increases itself through that process, so does it become retransformed into the pure form of value — in which the traces of its becoming, as well as its specific presence in use value, have been extinguished —only through the first act of circulation; while the repetition of this act, i.e. the life process [of capital] is made possible only through the second act of circulation, which consists of the exchange of money for the conditions of production and forms the introduction to the act of production. Circulation therefore belongs within the concept of capital. Just as, originally, money or stockpiled labour appeared as presupposition before the exchange with free labour; the seeming independence of the objective moment of capital towards labour, however, was suspended, and objectified labour, become independent as value, appeared on all sides as the product of alien labour, the alienated product of labour itself; so does capital only now appear as presupposed to its circulation (capital as money was presupposed to its becoming capital; but capital as the result of value which has absorbed and assimilated living labour appeared as the point of departure not of circulation generally, but of the circulation of capital), so that it would exist independently and indifferently, even without this process. However, the movement of the metamorphoses through which it must pass now appears as a condition of the production process itself; just as much as its result. Capital, in its reality, therefore appears as a series of turnovers in a given period. It is no longer merely one turnover, one circulation; but rather the positing of turnovers; positing of the whole process. Its value-positing therefore appears as conditioned (and value is capital only as self-immortalizing and self-multiplying value) (1) qualitatively; in that it cannot renew the production phase without passing through the phases of circulation; (2) quantitatively; in that the mass of the values it posits depends on the number of its turnovers in a given period; (3) in that circulation time appears in both respects as limiting principle, as barrier of production time, and vice versa. Capital is therefore essentially circulating capital. While in the workshop of the production process capital appears as proprietor and master, in respect of circulation it appears as dependent and determined by social connections, which, from our present standpoint, make it enter into and figure in simple circulation alternately as C towards M and M towards C. But this circulation is a haze under which yet another whole world conceals itself, the world of the interconnections of capital, which binds this quality originating in circulation — in social intercourse — to itself, and robs it of the independence of self-sustaining property, as well as of its character. Two vistas into this presently still distant world have already opened up, at the two points at which the circulation of capital pushes the value posited and circulated by it in the form of the product out of its path, and, secondly, the point at which it pulls another product out of circulation into its own orbit; transforms this product itself into one of the moments of its presence [Dasein]. At the second point it presupposes production; not its own immediate production; at the first point it may presuppose production, if its product is itself raw material for other production; or consumption if it has obtained the final form for consumption. This much is clear, that consumption need not enter into its circle directly. The actual circulation of capital, as we shall see later, is still circulation between dealers and dealers. The circulation between dealers and consumers, identical with the retail trade, is a second circle which does not fall within the immediate circulation sphere of capital. An orbit which it describes after the first is described, and simul taneously alongside it. The simultaneity of the different orbits of capital, like that of its different aspects, bec omes clear only after many capitals are presupposed. Likewise, the course of human life consists of passing through different ages. But at the same time all ages exist side by side, distributed among different individuals.

Considering that the production process of capital is at the same time a technological process — production process absolutely — namely [the process] of the production of specific use values through specific labour, in short, in a manner determined by this aim itself; considering that the most fundamental of these production processes is that through which the body reproduces its necessary metabolism, i.e. creates the necessaries of life in the physiological sense; considering that this production process coincides with agriculture; and the latter also at the same time directly (as with cotton, flax etc.) or indirectly, through the animals it feeds (silk, wool, etc.), furnishes a large part of the raw materials for industry (actually all except those belonging to the extractive industries); considering that reproduction in agriculture in the temperate zone (the home of capital) is bound up with general terrestrial circulation; i.e. harvests are mostly annual; it follows that the year (except that it is figured differently for various productions) has been adopted as the general period of time by which the sum of the turnovers of capital is calculated and measured; just as the natural working day provided such a natural unit as measure of labour time. In the calculation of profit, and even more of interest, we consequently see the unity of circulation time and production time — capital — posited as such, and as its own measure. Capital itself as in process — hence, as accomplishing one turnover — is regarded as working capital, and the fruits, which it is supposed to yield, are calculated according to its working time — the total circulation time of one turnover. The mystification which thereby takes place lies in the nature of capital.

Fixed (tied down) capital and circulating capital. — (Surplus. Proudhon. Bastiat.) — Mill. Anderson. Say. Quincey. Ramsay. — Difficulty with interest on interest. — Creating market through trade. — Fixed and circulating capital. Ricardo. Money and capital. Eternity of value. — Necessity of rapid or less rapid reproduction. Sismondi. Cherbuliez. Storch. — Capital’s advance to labour

Now, before we go more closely into the above-mentioned considerations, we want to see what distinctions the economists draw between fixed capital and circulating capital. We have already found, above, a new moment which enters with the calculation of profit as distinct from surplus value. Likewise already at this point a new moment has to arise between profit and interest. Surplus value in connection with circulating capital obviously appears as profit, in distinction to interest as the surplus value in connection with fixed capital. Profit and interest are both forms of the surplus value. Profit contained in the price. Hence, profit comes to an end and is realized as soon as capital has come to the point of its circulation where it is retransformed into money or passes from its form as commodity into the form of money. The striking ignorance on which Proudhon’s polemic against interest rests, later. (Here one more time, so as not to forget, in regard to Proudhon: the surplus value which causes all Ricardians and anti-Ricardians so much worry is solved by this fearless thinker simply by mystifying it, ‘all work leaves a surplus, ‘I posit it as an axiom …’ [44] The actual formulation to be looked up in the notebook. The fact that work goes on beyond necessary labour is transformed by Proudhon into a mystical quality of labour. This not to be explained by the mere growth of the productive force of labour; this may increase the products of a given labour time; but it cannot give a surplus value. It enters only in so far as it liberates surplus time, time for labour beyond the necessary. The only extra-economic fact in this is that the human being does not need his entire time for the production of the necessaries, that he has free time at his disposal above and beyond the labour time necessary for subsistence, and hence can also employ it for surplus labour. But this is in no way something mystical, since his necessaries are small to the same degree that his labour power is in a primitive state. But wage labour as such enters only where the development of the productive force has already advanced so far that a significant amount of time has become free; this liberation is here already a historic product. Proudhon’s ignorance only equalled by Bastiat’s decreasing rate of profit which is supposed to be the equivalent of a rising rate of wages. [45] Bastiat expresses this nonsense, borrowed from Carey, in a double way: first, therate of profit falls (i.e. the proportion of surplus value in relation to the employed capital); secondly: prices decline, but value, i.e. the total sum of prices, rises, which is only another way of saying that the gross profit rises, not the rate of profit.)

Firstly, in the sense used by us above, of fixated capital, John St. Mill (Essays on some Unsettled Questions of Political Econ., Lond., 1844, p. 55), [speaks of it] as tied-down, not disposable, not available capital. Stuck in one phase of its total circulation process. In this sense he says correctly, like Bailey in the above quotations, that a great part of the capital of a nation always lies idle.

‘The difference between fixed and circulating capital is more apparent than real; e.g. gold is fixed capital; floating only in so far as it is consumed for gilding etc. Ships are fixed capital, although literally floating. Foreign railway shares are articles of commerce in our markets; so may our railways be in the markets of the world; and so far they are floating capital, on a par with gold.’ (Anderson, The Recent Commercial Distress etc., London, 1847, p. 4.) (Notebook I, 27.) [46]

According to Say: capital ‘so much involved in one kind of production that it can no longer be diverted from it to be devoted to another kind of production’. [47] The identification of capital with a specific use value, use value for the production process. This quality of capital,being tied down as value to a particular use value — use value within production — is, however, an important aspect. This expresses more than the inability to circulate, which actually only says that fixed capital is the opposite of circulating capital.

In his Logic of Political Economy (p. 114) (Notebook X, 4), de Quincey says: ‘Circulating capital, in its normal idea, means any agent whatever’ (beautiful logician) ‘used productively which perishes in the very act of being used.’ (According to this, coal would be circulating capital, and oil, but not cotton etc. It cannot be said that cotton perishes by being transformed into twist or calico, and such transformation certainly means using it productively); ‘capital is fixed when the thing serves repeatedly always for the same operation, and by how much larger has been the range of iterations, by so much more intensely is the tool, engine, or machinery entitled to the denomination of fixed.’ (p. 114.) (Notebook X, 4.) According to this, the circulating capital would die out, be consumed in the act of production; the fixed capital — which, for greater clarity, is characterized as tool, engine, or machinery (thus improvements incorporated in the soil are, for instance, excluded) — would serve repeatedly, always for the same operation. The distinction here concerns only technological differences in the act of production, not in the least the form-relation; circulating and fixed capital, in the differences  here indicated, do have distinguishing features by means of which one particular agent is fixed and the other circulating, but neither of them any qualification which would entitle it to the ‘denomination’ of capital.

According to Ramsay (IX, 84) [48] only ‘the approvisionnement is circulating capital, because the capitalist must part with it immediately, and it does not enter into the reproduction process at all, but is rather exchanged directly for living labour, for consumption. All other capital (including raw material) remains in the possession of its owner or employer until the produce is completed.’ (loc. cit. p. 21.)‘Circulating capital consists only of subsistence and other necessaries advanced to the workman, previous to the completion of the produce of his labour.’ (loc. cit. p. 23.) In regard to approvisionnement he is correct in so far as it is the only part of capital which circulates during the production phase itself, and which is in this respect circulating capital par excellence. In another respect it is false to say that fixed capital remains in the possession of its owner or employer ‘until the produce is completed’ and no longer than that. He consequently also later explains fixed capital as ‘any portion of that labour (bestowed upon any commodity) in a form in which, though assisting to raise the future commodity, it does not maintain labour’. (But how many commodities do not maintain labour! I.e. do not belong among the workers’ articles of consumption. These, according to Ramsay, are all fixed capital.) (If the interest on £100 at the end of the first year or of the first 3 months is £5, then the capital at the end of the first year 105 or 100(1 + 0.05); at the end of the 4th year = 100(1 + 0.05)4 = £121. £55/100 and £1/1600 = £121 11s. 3/20 farthing or £121 11s. 0.15 farthing. Hence £1 11s. 3/20 farthing more than 20.)

(In the question posed above, assume that a first capital of 400 turns over only once a year, a second [capital of 100,] 4 times, both at 5%. In the first case the capital would make 5% once a year, = 20 on 400; in the second case 4×5%, likewise = 20 per year on 100. The velocity of turnover would substitute for the size of the capital; just as in simple money circulation 100,000 thalers which circulate 3 times a year = 300,000, while 3,000 which circulate 100 times = 300,000 also. But if the capital circulates 4 times a year, then it is possible that the surplus gain itself is ploughed into the capital for the second turnover, and turned over with it, producing thereby the difference of £l 11s. 0.15 farthing. But this difference in no way follows from the presupposition. All that is there is the abstract possibility. What would follow, rather, from the presupposition is that 3 months are required for the turnover of a capital of £100. E.g. therefore, if the month = 30 days, then for £105 — with the same turnover relation, with the same relation between the turnover time and the size of the capital — not 3 months are required, [*] but rather 105:x = 100:90; x = (94 x 150) ÷ 100 = 9450÷100 = 94 5/10 days = 3 months, 4½ days. With that, the first difficulty is completely solved.)

(From the fact that a larger capital with a slower turnover does not create more surplus value than a smaller with a relatively more rapid turnover, it does not in the least automatically follow that a smaller capital turns over more rapidly than a larger. This is indeed the case in so far as the larger capital consists of more fixed capital and in so far as it has to search out more distant markets. The size of the market and the velocity of turnover are not necessarily inversely related. This occurs only as soon as the present, physical market is not the economic market; i.e. as the economic market becomes more and more distant from the place of production. To the extent, by the way, that [this relation] does not arise purely from the distinction between fixed and circulating capital, the moments which determine the circulation of different capitals cannot be at all developed yet here. An incidental remark: to the extent that trade posits new points of circulation, i.e. brings different countries into intercourse, discovers new markets etc., this is something entirely different from the mere costs of circulation required to carry out a given mass of exchange operations; it is the positing not of the operations of exchange, but of the exchange itself. Creation of markets. This point will have to be examined in particular before we have done with circulation.)

Now let us continue with our review of the opinions about ‘fixed’ and ‘circulating capital’. ‘Depending on whether capital is more or lesstransitory, hence must be more or less frequently reproduced in a given time, it is called circulating or fixed capital. Furthermore, capital circulates or returns to its employer in very unequal times; e.g. wheat which the farmer buys to sow is relatively fixed capital compared to the wheat a baker buys to make bread.’ (Ricardo VIII, 19.) Then he remarks also: ‘Different proportions of fixed capital and circulating capital in different trades; different durability of fixed capital itself.’ (Ricardo, loc. cit.) [49] ‘Two kinds of commerce can employ a capital of equal value, but which may be divided in a very different way as regards the fixed part and the circulating part. They may even employ an equal value of fixed capital and circulating capital, but the durability of the fixed capital may be very unequal. For example, one a steam engine of £10,000, the other, ships.’ (This out of Say’s translation of Ricardo, Vol. I, p. 29, 30.) The error from the outset is that, according to Ricardo, capital is supposed to be ‘more or less transitory’. Capital as capital — value — is not transitory. But the use value in which the value is fixated, in which it exists, is ‘more or less transitory’, and must therefore be ‘more or less frequently reproduced in a given time’. The difference between fixed capital and circulating capital is therefore reduced here to the greater or lesser necessity for reproducing the given capital in a given time. This is one distinction made by Ricardo. The other distinction concerns the different degrees of durability,or different degrees of fixed capital, i.e. different degrees, relative durability of the relatively fixed. So that fixed capital is itself more or less fixed. The same capital appears in the same business in the two different forms, the particular modes of existence of fixed and circulating, hence exists doubly. To be fixed or circulating appears as a particular aspect of capital apart from that of being capital. It must, however, proceed to this particularization. Finally, as for the third distinction, ‘that capital circulates or returns in very unequal times’, what Ricardo means by this, as his example of the baker and the farmer shows, is nothing more than the difference in the time during which capital isfixed, tied up in the production phase as distinct from the circulation phase, in different branches of business. Hence, fixed capital occurs here in the same way as we had it previously, as being fixated in each phase; except that the specifically longer or shorter fixation in the production phase, this phase in particular, is regarded as a peculiarity, particularity of capital [as value-] positing. Money attempted to posit itself as imperishable value, as eternal value, by relating negatively towards circulation, i.e. towards the exchange with real wealth, with transitory commodities, which, as Petty describes very prettily and very naively, dissolve in fleeting pleasures.’ [50] Capital posits the permanence of value (to a certain degree) by incarnating itself in fleeting commodities and taking on their form, but at the same time changing them just as constantly; alternates between its eternal form in money and its passing form in commodities; permanence is posited as the only thing it can be, a passing passage — process — life. But capital obtains this ability only by constantly sucking in living labour as its soul, vampire-like. The permanence — the duration of value in its form as capital — is posited only through reproduction, which is itself double, reproduction as commodity, reproduction as money, and unity of both these reproduction processes. In its reproduction as commodity, capital is fixated in a particular form of use value, and is thus not general exchange value, even less realized value, as it is supposed to be. The fact that it has posited itself as such in the act of reproduction, the production phase, is proved only through circulation. The greater or lesser perishability of the commodity in which value exists requires a slower or faster reproduction; i.e. repetition of the labour process. The particular nature of use value, in which the value exists, or which now appears as capital’s body, here appears as itself a determinant of the form and of the action of capital; as giving one capital a particular property as against another; as particularizing it. As we have already seen in several instances, nothing is therefore more erroneous than to assert [51] that the distinction between use value and exchange value, which falls outside the characteristic economic form in simple circulation, to the extent that it is realized there, falls outside it in general. We found, rather, that in the different stages of the development of economic relations, exchange value and use value were determined in different relations, and that this determination itself appeared as a different determination of value as such. Use value itself plays a role as an economic category. Where it plays this role is given by the development itself. Ricardo, e.g., who believes that the bourgeois economy deals only with exchange value, and is concerned with use value onlyexoterically, derives the most important determinations of exchange value precisely from use value, from the relation between the two of them: for instance, ground rent, wage minimum, distinction between fixed capital and circulating capital, to which he imputes precisely the most significant influence on the determination of prices (through the different reaction produced upon them by a rise or fall in the rate of wages); likewise in the relation of demand and supply etc. One and the same relation appears sometimes in the form of use value and sometimes in that of exchange value, but at different stages and with a different meaning. To use is to consume, whether for production or consumption. Exchange is the mediation of this act through a social process. Use can be posited as, and be, a mere consequence of exchange; then again, exchange can appear as merely a moment of use, etc. From the standpoint of capital (in circulation), exchange appears as the positing of its use value, while on the other side its use (in the act of production) appears as positing for exchange, as positing its exchange value. Likewise with production and consumption. In the bourgeois economy (as in every economy), they are posited in specific distinctions and specific unities. The point is to understand precisely these specific, distinguishing characteristics. Nothing is accomplished by the [assertions of] Mr Proudhon or of the social sentimentalists that they are the same.

The good thing in Ricardo’s explanation is that it begins by emphasizing the moment of the necessity of quicker or slower reproduction;hence that the greater or lesser durability — consumption (in the sense of self-consumption), slower or more rapid — is regarded in connection with capital itself. Hence a relation of use value for capital itself. Sismondi by contrast immediately introduces a determinant initially exoteric to capital; direct or indirect human consumption: whether the article is a direct or an indirect necessary of life for the human consumer; he thereby joins this with the quicker or slower consumption of the object itself. The objects which serve directly as necessaries of life are more perishable, because designed to perish, than those which help to produce the necessaries of life. With the latter, their duration is their character; their transitoriness — fate. He says: ‘Fixed, indirect capital is slowly consumed, in order to assist in consuming that which man destines for his use; circulating capital does not cease to be directly applied to the use of man… Whenever a thing is consumed, it never returnsfor him who consumes it; while a thing consumed for reproduction is there for him at the same time.’ (Sismondi VI.) He also presents the relation in such a way that: ‘the first transformation of annual consumption into durable foundations, suitable for increasing the productive powers of future labour — fixed capital; this first labour always accomplished by labour, represented by a wage, exchanged for necessaries which the worker consumes during labour. Fixed capital is consumed slowly’ (i.e. is slowly worn out). Second transformation: ‘Circulating capital consists of labour-seeds (raw material) and of the worker’s consumption.’ (loc. cit.) [52] This is more concerned with the origin. Firstly the transformation, that fixed capital is itself only circulating capital which has assumed a stationary form, fixated circulating capital; second, the destination: the one destined to be consumed as means of production, the other as product; or the different mode of itsconsumption, determined by its role among the conditions of production in the production process. Cherbuliez simplifies the matter to the point where circulating capital is the consumable, fixed capital the not consumable part of capital. [53] (One you can eat, the other not. A very easy method of taking the thing.) In a quotation already given above [54] (29 in the Notebook), Storch vindicates for circulating capital generally the circulating nature of capital. He contradicts himself by saying: ‘all fixed capital comes originally from a circulating capital, and needs continually to be maintained at the latter’s expense’ (hence comes out of circulation, or is itself circulating in its first moment and constantly renews itself throughcirculation; thus although it does not go into circulation, circulation goes into it). As for what Storch adds further: ‘No fixed capital can give a revenue EXCEPT by means of a circulating capital’ (26a. Notebook), [55] we shall return to that later.

<‘Reproductive consumption is not properly an expense, but only an advance, because it is reimbursed to its agent’; p. 54 in Storch’s polemic against Say [56] (p. 5b. Second notebook on Storch). (The capitalist gives the worker a part of the latter’s own surplus labour in the form ofadvance, as something for which he must reimburse the capitalist not merely with an equivalent, but with surplus labour as well.)>

(The formula for computing compound interest is: S = c(1 + i)n. (S, the total magnitude of capital c after years at an interest rate i.)

The formula for computing an annuity is:   

x (the annuity) =  _________c(1 + i)n__________ 1 + (1 + i) + (1 + i)2 + (1 + i)n – 1
Constant and variable capital

We divided capital above into constant and variable value; this is always correct as regards capital within the production phase, i.e. in its immediate realization process. How it is that capital itself, as presupposed value, can change its value as its reproduction costs rise or fall, or as a consequence of a decline in props also etc., evidently belongs to the section where capital is regarded as real capital, as the interaction of many capitals on one another, not here in its general concept.


<Because competition appears historically as the dissolution of compulsory guild membership, government regulation, internal tariffs and the like within a country, as the lifting of blockades, prohibitions, protection on the world market — because it appears historically, in short, as the negation of the limits and barriers peculiar to the stages of production preceding capital; because it was quite correctly, from the historical standpoint, designated and promoted by the Physiocrats as laissez faire, laissez passer; it has [therefore] never been examined even for this merely negative side, this, its merely historical side, and this has led at the same time to the even greater absurdity of regarding it as the collision of unfettered individuals who are determined only by their own interests as the mutual repulsion and attraction of free individuals, and hence as the absolute mode of existence of free individuality in the sphere of consumption and of exchange. Nothing can be more mistaken. While free competition has dissolved the barriers of earlier relations and modes of production, it is necessary to observe first of all that the things which were a barrier to it were the inherent limits of earlier modes of production, within which they spontaneously developed and moved. These limits became barriers only after the forces of production and the relations of intercourse had developed sufficiently to enable capital as such to emerge as the dominant principle of production. The limits which it tore down were barriers to its motion, its development and realization. It is by no means the case that it thereby suspended all limits, nor all barriers, but rather only the limits not corresponding to it, which were barriers to it. Within its own limits — however much they may appear as barriers from a higher standpoint, and are posited as such by its own historic development — it feels free, and free of barriers, i.e. as limited only by itself, only by its own conditions of life. Exactly as guild industry, in its heyday, found in the guild organization all the fullness of freedom it required, i.e. the relations of production corresponding to it. After all, it posited these out of itself, and developed them as its inherent conditions, and hence in no way as external and constricting barriers. The historical side of the negation of the guild system etc. by capital through free competition signifies nothing more than that capital, having become sufficiently strong, by means of the mode of intercourse adequate to itself, tore down the historic barriers which hindered and blocked the movement adequate to it. But competition is very far from having only this historic significance, or merely being this negative force. Free competition is the relation of capital to itself as another capital, i.e. the real conduct of capital as capital. The inner laws of capital — which appear merely as tendencies in the preliminary historic stages of its development — are for the first time posited as laws; production founded on capital for the first time posits itself in the forms adequate to it only in so far as and to the extent that free competition develops, for it is the free development of the mode of production founded on capital; the free development of its conditions and of itself as the process which constantly reproduces these conditions. It is not individuals who are set free by free competition; it is, rather, capital which is set free. As long as production resting on capital is the necessary, hence the fittest form for the development of the force of social production, the movement of individuals within the pure conditions of capital appears as their freedom; which is then also again dogmatically propounded as such through constant reflection back on the barriers torn down by free competition. Free competition is the real development of capital. By its means, what corresponds to the nature of capital is posited as external necessity for the individual capital; what corresponds to the concept of capital, is posited as external necessity for the mode of production founded on capital. The reciprocal compulsion which the capitals within it practice upon one another, on labour etc. (the competition among workers is only another form of the competition among capitals), is the free, at the same time the real development of wealth as capital. So much is this the case that the most profound economic thinkers, such as e.g. Ricardo, presuppose the absolute predominance of free competition[57] in order to be able to study and to formulate the adequate laws of capital — which appear at the same time as the vital tendencies governing over it. But free competition is the adequate form of the productive process of capital. The further it is developed, the purer the forms in which its motion appear. What Ricardo has thereby admitted, despite himself, is the historic nature of capital, and the limited character of free competition, which is just the free movement of capitals and nothing else, i.e. their movement within conditions which belong to no previous, dissolved stages, but are its own conditions. The predominance of capital is the presupposition of free competition, just as the despotism of the Roman Caesars was the presupposition of the free Roman ‘private law’. As long as capital is weak, it still itself relies on the crutches of past modes of production, or of those which will pass with its rise. As soon as it feels strong, it throws away the crutches, and moves in accordance with its own laws. As soon as it begins to sense itself and become conscious of itself as a barrier to development, it seeks refuge in forms which, by restricting free competition, seem to make the rule of capital more perfect, but are at the same time the heralds of its dissolution and of the dissolution of the mode of production resting on it. Competition merely expresses as real, posits as an external necessity, that which lies within the nature of capital; competition is nothing more than the way in which the many capitals force the inherent determinants of capital upon one another and upon themselves. Hence not a single category of the bourgeois economy, not even the most basic, e.g. the determination of value, becomes real through free competition alone; i.e. through the real process of capital, which appears as the interaction of capitals and of all other relations of production and intercourse determined by capital. Hence, on the other side, the insipidity of the view that free competition is the ultimate development of human freedom; and that the negation of free competition = negation of individual freedom and of social production founded on individual freedom. It is nothing more than free development on a limited basis — the basis of the rule of capital. This kind of individual freedom is therefore at the same time the most complete suspension of all individual freedom, and the most complete subjugation of individuality under social conditions which assume the form of objective powers, even of overpowering objects — of things independent of the relations among individuals themselves. The analysis of what free competition really is, is the only rational reply to the middle-class [58] prophets who laud it to the skies or to the socialists who damn it to hell. The statement that, within free competition, the individuals, in following purely their private interest, realize the communal or rather the general interest means nothing other than that they collide with one another under the conditions of capitalist production, and hence that the impact between them is itself nothing more than the recreation of the conditions under which this interaction takes place. By the way, when the illusion about competition as the so-called absolute form of free individuality vanishes, this is evidence that the conditions of competition, i.e. of production founded on capital, are already felt and thought of as barriers, and hence alreadyare such, and more and more become such. The assertion that free competition = the ultimate form of the development of the forces of production and hence of human freedom means nothing other than that middle-class rule is the culmination of world history — certainly an agreeable thought for the parvenus of the day before yesterday.>


February 1858, continued

Surplus value. Production time. Circulation time. Turnover time

<Before we go further with the review of opinions about fixed capital and circulating capital, we return for a moment to some thing developed earlier.

We assume for the time being that production time and labour time coincide. The case where interruptions take place within the production phase itself, owing to the technological process, will be looked at later.

Suppose the production phase of a capital equal to 60 working days; of which 40 are necessary labour time. Then, according to the law developed earlier, the surplus value, or the value newly posited by capital, i.e. appropriated alien labour time = 60 – 40; = 20. Let us call this surplus value (=20) S; the production phase — or the labour time employed in production — p. In a period of time which we shall call T — e.g. 360 days — the total value can never be greater than the number of production phases contained in, say, 360. The highest coefficient of S — i.e. the maximum of surplus value which.capital can create on the given presuppositions — equals the number of times the creation of is repeated in 360 days. The outer limit of this reproduction — the reproduction of capital, or rather, now, the reproduction of its production process — is determined by the relation of the production period to the total period of time in which the former can be repeated. If the given period = 360 days, and the duration of production = 60 days, then 360/60, or T/p, i.e. 6, is the coefficient indicating how many times is contained in T, or how often, given its own inherent limits, the reproduction process of the capital can be repeated within 360 days. It goes without saying that the maximum of the creation of S, i.e. the positing of surplus value, is given by the number of processes in which can be produced, in a given period of time. This relation is expressed by T/p.The quotient of T/p, or q, is the highest coefficient of in the period of 360 days, in Tgenerally. ST/p or Sq is the maximum of value. If T/p = q, then T = pq; i.e. the entire duration of would be production time; the production phase, p, would be repeated as often as it is contained in T. The total value created by capital in a certain time would be = to the surplus labour it appropriates in one production phase, multiplied by the number of times this production phase is contained in the given time. Thus in the above example, = 20 × 360/60 = 20 × 6 = 120 days. q, i.e. T/p, would express the number of turnovers of the capital; but since T = pq, thereforep = T/1; i.e. the duration of one production phase would be equal to the total time divided by the number of turnovers. Thus one production phase of capital would be equal to one of its turnovers. Turnover time and production time would be completely identical; the number of turnovers therefore [would be] exclusively determined by the relation of one production phase to the total time.

However, on this assumption, circulation time is posited as = 0. Yet circulation time has a definite magnitude, which can never become = 0. Now assume additionally that there are 30 days for circulation for every 60 days of production time; call this circulation time added to p, c. In this case, one turnover of capital, i.e. the total time it requires before it can repeat the realization process — the positing of surplus value — would be = 30 + 60 = 90 days (= p + c) (1R (turnover) = c). One turnover of 90 days can be repeated in 360 days only 360/90 times, i.e. 4 times. The surplus value of 20 could therefore be posited only 4 times; 20 × 4 = 80. In 60 days the capital produces 20 surplus days; but it has to circulate for 30 days; i.e. during these 30 days it can posit no surplus labour, no surplus value. This is the same for it (as regards the result) as if it had posited a surplus value of only 20 in the period of 90 days. While previously the number of turnovers was determined by T/p, it is now determined by T ÷ (p + c) or T/R; the maximum of value was ST ÷ (p + c) ; (20 × 300 ÷ (60 + 30) = 20 ÷ 360/90 = 20 ÷4 = 80). The number of turnovers hence = the total time divided by the sum of production time and circulation time, and the total value = multiplied by the number of turn-overs. But this formulation does not yet suffice for us to express the relations of surplus value, production time and circulation time.

The maximum of value creation contained in the formula ST/p; value creation restricted by circulation, ST/(p + c) (or ST/R); when we subtract the second amount from the first, then ST/p minus ST/(p + c) =

ST(p + c) – STp = STp + STc – STp =    STc    
p(p +c)   p(p + c)   p(p + c)

As difference we then obtain STc ÷ p(p + c) or ST ÷ p × [c ÷ (p + c)]; ST ÷ p + c or S’, as we may call this value in the second form, S’ = ST ÷ p minus ( ST ÷ p × [c ÷ p + c]). But before we develop this formula further, there are still others to be introduced.

If we call the quotient of T ÷ p + c q’, then q’ expresses the number of times R = (p + c) is contained in T, the number of turnovers. T ÷ p + c = q’ ; hence T = pq’ + cq’.  pq’ then expresses the total production time and cq’ the total circulation time.

Let us call total circulation time C (hence cq’ = C). (T(360) = 4 × 60 (240) + 4 × 30 (120).) With our presupposition, q’ = 4, C = cq’ = 4c; 4 being = to the number of turnovers. We saw previously that the maximum of value-creation = ST ÷ p; but in this case T was posited as = to production time. But the real production time is now T – q;as indeed follows from the equation. T = pq’ (total production time) + cq’ (total circulation time, or ). Hence T – C = cq’. Hence S × [(T – C) ÷ p] the maximum value creation. Because production time not 360 days, but 360 – cq’, i.e. – 4 × 30 [=] 120; hence 20 × [(360 – 120) ÷ 60]; 20 × 240 ÷ 60 = 80.


Now, finally, as regards the formula

S’ = ST/p – (ST/p × c/[c + p]) = (360 × 20)/60 – 20(360/60 × 30/{30 + 60])

= 120 – (120 × 30/90) = 6 × 20 – (6 × 20 × 3/9)

= 20 × 6 – (20 × 6 × 1/3) or

= 120 – (120 × 1/3) = 120 – 40 = 80,

it signifies that value is equal to the maximum of value, i.e. to value determined only by the relation of production time to total time, minus the number which expresses how often the circulation time is contained in this maximum, plus c/(c + p) = c/R; c/R expresses the relation of circulation time to one turnover of capital. If we multiply numerator and denominator by q’ then cq’/(c + p)q’ = C/T; c/(c + p) = 30/(30 + 60) = 1/3. c/(c + p) or 1/3 expresses the relation of circulation time to total time, for 360/3 = 120. The turnover (c + p) is contained in C, c/(c + p) or 1/3 times (or c/T times), and this number is the maximum itself multiplied by the number of times a turnover is contained in c, in the circulation time added to one turnover, or divided by the number which expresses how often c is contained in c + p or C in T. If c = 0, then S’would be ST/p and would be at its maximum. S’ becomes smaller in the same degree as C grows, is inversely related to it, for the factor c/(c + p) and ST/p grows to the same degree. The number to be subtracted [from] the maximum value, ST/p × c/(c + p) or ST/p × c/R.

We have, then, the three equations:

  1. S’ = ST/(p + c) = ST/R;
  2. S’ = S(T – C)/p
  3. S’ = ST/p – (ST/p × c/[c + p]) = S (T/p – [T/p ×c/(c + p)].

Hence: S:S’ = ST/p: S(T – C)/p; or S:S’ = T:(T – C). The maximum of value is to the real value as a given period of time is to this period of time minus total circulation time. Or, as well, S:S’ = pq’:(pq’ – q’c), i.e. = p:(p – c).

On (3) S’ = ST/p – (ST/p × c/[c + p]) = S[T/p – (T/p × c/[c + p])] or, since T/p = q, S’ = S (q – q × c/[c + p]) = S(q – qc/R). The total surplus value, therefore, = to the surplus value posited in one production phase, whose coefficient is the number of times the production time is contained in the total time minus the number of times the circulation time of one turnover is contained in this latter number.

S(q – qc/) = Sq(1 – 1c/R) = Sq([R – c]/R) = Sqp/R = ST/(p + c), which is the first equation. Thus equation 3 means …. equation 1:the total surplus value equals the surplus value of one production phase multiplied by the total time, divided by turnover time or multiplied by the number of times the sum of production time and ciculation time is contained in total time.

Equation 2: The total value equals surplus value multiplied by total time minus the total circulation time, divided by the duration of one production phase.>


(The fundamental law in competition, as distinct from that advanced about value and surplus value, is that it is determined not by the labour contained in it, or by the labour time in which it is produced, but rather by the labour time in which it can be produced, or, the labour time necessary for reproduction. By this means, the individual capital is in reality only placed within the conditions of capital as such, although it seems as if the original law were overturned. Necessary labour time as determined by the movement of capital itself; but only in this way is it posited. This is the fundamental law of competition. Demand, supply, price (production costs) are further specific forms; price as market price; or general price. Then the positing of a general rate of profit. As a consequence of the market price, the capitals then distribute themselves among different branches. Reduction of production costs etc. In short, here all determinants appear in a position which is the inverse of their position in capital in general. There price determined by labour, here labour determined by price etc. etc. The influence of individual capitals on one another has the effect precisely that they must conduct themselves as capital; the seemingly independent influence of the individuals, and their chaotic collisions, are precisely the positing of their general law. Market here obtains yet another significance. The influence of capitals as individuals on each other thus becomes precisely their positing as general beings, and the suspension of the seeming independence and independent survival of the individuals. This suspension takes place even more in credit. And the most extreme form to which the suspension proceeds, which is however at the same time the ultimate positing of capital in the form adequate to it — is joint-stock capital.) (Demand, supply, price, production costs, contradiction of profit and interest, different relations of exchange value and use value, consumption and production.)

Surplus value. Production time. Circulation time. Turnover time. Part of capital in production time, part in circulation time. Circulation time. – Surplus value and production phase. Number of reproductions of capital = number of turnovers. Total surplus value etc.

We have seen, then, that the surplus value a capital can posit in a given period of time is determined by the number of times the realization process can be repeated, or the capital can be reproduced in a given period of time; and that the number of these reproductions is determined by the relation of the duration of the production phase not to the total period of time, but rather to this total time minus circulation time. Circulation time thus appears as time during which the ability of capital to reproduce itself, and hence to reproduce surplus value, is suspended. Its productivity – i.e. its creation of surplus values – is therefore inversely related to circulation time, and would reach its maximum if the latter declined to 0. Circulation is an inescapable condition for capital, a condition posited by its own nature, since circulation is the passing of capital through the various conceptually determined moments of its necessary metamorphosis – its life process. In so far as it costs time for capital to run through this course, in this time capital cannot increase its value, because it is not-production time, time in which it does not appropriate living labour. Hence this circulation time can never increase the value created by capital, but can only posit not-value-positing time, hence appear as barrier to the increase of value, in the same relation as it stands towards labour time. This circulation time cannot be counted as part of value-creating time, for the latter is labour time which objectifies itself in value, and nothing else. It does not belong to the production costs of value, nor to the production costs of capital; but it is a condition which makes its self-reproduction more difficult. The obstacles which capital encounters in the path of its realization – i.e. its appropriation of living labour – do not, of course, form a moment of its realization, of its value-creation. Hence it is ridiculous to take production costs here in the original sense. Or we have to distinguish production costs as a particular form from the labour time which objectifies itself in value (as we must distinguish profit from.surplus value). But even then, circulation time does not belong among capital’s production costs in the same sense as wages etc.; but rather it is an item which comes into consideration as part of the capitalists’ settling of accounts with one another, because they distribute the surplus value among themselves according to certain general proportions. Circulation time is not time during which capital creates value, but rather during which it realizes the value created in the production process. It does not increase its quantity, but rather transposes it into another form, from the form of product into that of commodity, from commodity to that of money etc.; the fact that the price which previously existed ideally in the commodity is now really posited, that it is now really exchanged for its price – money – does not, of course, increase this price. Thus circulation time appears as time which does not determine the price; and the number of turnovers, in so far as it is determined by circulation time, appears not in such a way that capital brings in a new value-determining element, an element proper to it, sui generis, as distinct from labour; but rather as a limiting, negative principle. The necessary tendency of capital is therefore circulation without circulation time, and this tendency is the fundamental determinant of credit and of capital’s credit contrivances. At the same time, credit is then also a form in which capital tries to posit itself as distinct from the individual capitals, or the individual capital [tries to posit] itself as capital as distinct from its quantitative barrier. But the highest result it achieves in this line is, on one side,fictitious capital; on the other side, credit only appears as a new element of concentration, of the destruction of capitals by individual, centralizing capitals. Circulation time is in one respect objectified in money. Attempt by credit to posit money as a merely formal moment; so that it mediates the formal transformation without itself being capital, i.e. value. This is one form, of circulation without circulation time. Money is itself a product of circulation. It will be shown how capital, in credit, creates new products of circulation. But if the striving of capital in one direction iscirculation without circulation time, it strives in the other direction to give circulation time value, the value of production time, in the various organs which mediate the process of circulation time and of circulation; to posit them all as money, and, more broadly, as capital. This is another side of credit. All this springs from the same source. All the requirements of circulation, money, transformation of commodity into money, transformation of money into commodity etc. — although they take on different and seemingly 1uite heterogeneous forms, are all derived from circulation time. The machinery for abbreviating it is itself a part of it. Circulation time is that part of capital which may be regarded as the time it takes to perform its specific motion as capital, as distinct from production time, in which it reproduces itself; and in which it lives not as finished capital which must merely pass through formal metamorphoses, but as capital-in-process, creative capital, sucking its living soul out of labour. 

The contradiction of labour time and circulation time contains the entire doctrine of credit, to the extent, namely, that the history of currency etc. enters here. Now, of course, later, where circulation time is not the only deduction from possible production time, there also appear real costs of circulation, i.e. values which have already been really posited must be spent on circulation. But these are all in fact only costs — deductions from already created surplus values — which capital undertakes in order to increase the sum of surplus values possible e.g. in a year, i.e. to increase the proportion of production time out of a given total time — i.e. to abbreviate circulation time. Of course, in practice, production time does not really appear interrupted by circulation time (except in crises and depressions of trade). But this is only because every capital is divided into parts, one part in the production phase, the other in the circulation phase. Thus, for example, it is not the entire capital that is active (depending on the relation of circulation time to production time), but only 1/3, l/x of it; the other is engaged in circulation. Or the matter can further take the form that a given capital doubles (through credit, e.g.). For this capital — the original capital — it is then the same as if circulation time did not exist at all. But then the capita! borrowed by it is in this plight. And if ownership is disregarded, again exactly the same as if one capital were divided in two. Instead of a dividing into two and b dividing into two, a absorbs b and divides into a and b. Illusions about this process frequent among credit-mystics (who are rarely creditors, but rather debtors).

We already pointed out above that the double and contradictory condition of capital, the continuity of production and the necessity of circulation time, and also the continuity of circulation (not circulation time) and the necessity of production time, can be mediated only by capital dividing itself into parts, of which one circulates as finished product, and the other reproduces itself in the production process. These parts alternate; when one part returns into phase (production process), the other departs. This process takes place daily, as well as at longer intervals (dimensions of time). The whole capital and the total value are reproduced as soon as both parts have passed through the production process and circulation process, or as soon as the second part enters anew into circulation. The point of departure is thereby the terminal point. The turnover therefore depends on the size of the capital, or rather, here, still on the total sum of these two parts. Only when the total sum is reproduced has the entire turnover been completed; otherwise only ½, 1/3, 1/x, depending on the relation of the constantly circulating part.

It has further been emphasized that each part can be regarded as fixed or as circulating in contrast to the other, and that they really relate to each other in this alternating way. The simultaneity of the process of capital in different phases of the process is possible only through its division and break-up into parts, each. of which is capital, but capital in a different aspect. This change of form and matter is like that in the organic body. If one says e.g. the body reproduces itself in 24 hours, this does not mean it does it all at once, but rather the shedding in one form and renewal in the other is distributed, takes place simultaneously. Incidentally, in the body the skeleton is the fixed capital; it does not renew itself in the same period of time as flesh, blood. There are different degrees of speed of consumption (self-consumption) and hence of reproduction. (Here, then, already transition to many capitals.) The important thing here above all is to examine capital as such for itself first of all; since the aspects being developed here are those which make value in general into capital; which constitute the specific distinguishing characteristics of capital as such.

Before we go further, let us call attention once more to the important point that circulation time — i.e. the time during which capital is separated from the process in which it absorbs labour, i.e. the labour time of capital as capital — is only the transposition of previously created value from one form into the other, but not value-creating, value-increasing element. The transformation of a value of 4 working days existing in the form of twist into the form of 4 working days existing as money, or of a symbol recognized as the representative of 4 working days as such, 4 working days in general, transposes the previously created and measured value from one form into another, but that value is not increased. The exchange of equivalents leaves the working days after the exchange just as they were before, qua amounts of value. If one thinks of one capital, or one thinks of the various capitals of a country as one capital (national capital) as distinct from that of other countries, then it is clear that the time during which this capital does not act as productive capital, i.e. posits no surplus value, is a deduction from the realization time available to this capital. In this abstract conception, still without any regard to the costs of circulation itself, it appears as the negation not of the really posited realization time, but of the possible realization time, i.e. possible if circulation time = 0. It is clear, now, that the national capital cannot regard the time during which it does not multiply itself as time in which it does multiply itself, no more than e.g. an isolated peasant can regard the time during which he can neither harvest nor sow, during which his labour generally is interrupted, as time which makes him rich. The fact that capital regards itself, and necessarily so, as productive and fruit-bearing independently of labour, of the absorption of labour, assumes itself as fertile at all times, and calculates its circulation time as value-creating time — as production cost — is quite another thing. In this way one can see what is wrong when e.g. Ramsay says: ‘the use of fixed capital modifies to a considerable extent the principle that value depends on quantity of labour. For some commodities on which the same quantity of labour has been expended require very different periods before they are fit for consumption. But as during this time the capital brings no return, in order that the employment in question should not be less lucrative than others in which the produce is sooner ready for use, it is necessary that the commodity, when at last brought to market, should be increased in value by all the amount of profit withheld.’ (This already assumes that capital as such regularly brings profit, like a healthy tree brings fruit.) ‘This shews… how capital may regulate value independently of labour.’ [60] E.g. wine in the cellar. (Ramsay, IX, 84.) Here as if circulation time as well as labour time — or on the same level with it — produced value. Capital, of course, contains both moments in itself. (1) Labour time as a value-creating moment. (2) Circulation time as a moment which restricts labour time and thus restricts the total value creation of capital; as necessary, because value, or capital, as an.immediate result of the production process, is indeed value, but value not posited in its adequate form. The time which is required for these changes of form — i.e. which elapses between production and reproduction — is time which devalues capital. Thus, like continuity, so is the interruption of continuity contained in the character of capital as circulating, in process.

The economists who correctly characterize circulation, the revolution which capital must go through to fire itself up for new production, as a series of exchanges thereby admit that this circulation time is not time which increases the quantity of values — hence it cannot be time which posits new values — because a series of exchanges, no matter how many exchanges it may include, and how much time the completion of these operations may cost, is merely the exchange of equivalents. The positing of values — the extremes of the mediation — as equivalents naturally cannot posit them as non-equivalents. Regarded quantitatively, they can have neither increased nor diminished through the exchange.

The surplus value of a production phase is determined by the surplus labour set in motion (appropriated) by capital during it; the sum of the surplus values a capital can create in a given period of time is determined by the repetition of the production phase in this period of time; or by theturnover of capital. The turnover, however, equals the duration of the production phase plus the duration of circulation, equals the sum of circulation time and production time. The turnover approaches production time as circulation time diminishes, i.e. the time which elapses between capital’s departure from production and its return to it.

Surplus value is in fact determined by the labour time objectified during one production phase. The more frequent the reproduction of capital, the more often does the production of surplus value take place. The number of reproductions = the number of turnovers. Hence the total surplus value = × nR (if is the number of turnovers). S’ = S × nR; hence S = S’/nR . If the production time required by a capital of £100 in a certain branch of industry equals 3 months, then it could turn over 4 times a year, and if the S-value created each time = 5, then the total surplus value = 5 (the created in one production phase) ÷ 4 (the number of turnovers, determined by the relation of production time to the year) = 20. But if circulation time = e.g. ¼ of production time, then 1 turnover would = 3 + 1 months, equals 4 months, and the capital of 100 could turn over only 3 times a year = 15. Hence, although the capital posits an S-value of £5 in 3 months, it is the same for it as if it posited a value of 5 in only 4 months, because it can only posit 5 × 3 per year. It is the same for it as if it produced an of 5 every 4 months; hence produced only 15/4 or 3¾ in 3 months, and in the one circulation month, 1¼. In so far as turnover is distinct from the duration posited by the conditions of production, it is = to circulation time. The latter, however, is not determined by labour time. In this way the sum of surplus values which capital posits in a given period of time appears determined not simply by labour time, but by labour time as well as circulation time, in the relations indicated above. But, as shown above, the determination which capital here brings into the positing of value is negative, limiting.

If e.g. a capital of £100 needs 3 months for production, say 90 days, then, if circulation time = 0, the capital could turn over 4 times a year; and it would be entirely active as capital the whole time, i.e. positing surplus labour, multiplying its value. If 80 of the 90 days represented necessary labour, then 10, surplus labour. Now posit that circulation time amounts to 33 1/3% of production time, or 1/3 of it. Hence 1 month for every 3. Circulation time then

90/3; a third of production time = 30 days, c = 1/3 p; (c = p/3).

Well. The question is, what part of the capital can now continuously be occupied in production (during the whole year)? If the capital of 100 had worked 90 days, and then circulated as a product of 105 for one month, then during this month it could employ no labour at all. (The 90 working days can of course equal 3, 4, 5, times 90, depending on the number of workers employed during the 90 days. These would be = to only 90 days if only 1 worker were employed. But this is beside the point for now.) (In all these calculations it is presupposed that the surplus value is not in turn capitalized, but that capital rather continues to work with the same number of workers; but at the same time as the surplus is realized, the entire capital is only then realized as money.) That is, during one month the capital could not be employed at all. (The capital of 100 employs e.g. 5 workers continuously; this contains their surplus labour, and the product which is circulated is never the original capital, but rather that which has absorbed this surplus labour and hence has a surplus value. Hence the circulation of a capital of 100 actually means e.g. circulation of the capital of 105; i.e. of capital together with the profit posited in one act of production. But this error irrelevant here, particularly in the above question.)

(Posit that at the end of 3 months £100 worth of twist have been produced.) Now it will be 1 month before the money comes in and I can begin production again. Now, in order to set the same number of workers to work during the I month while the capital is circulating, I would have to have a surplus capital of £33 1/3; for if £100 set a given quantity of labour in motion for 3 months, then 1/3 of £100 would set it in motion for 1 month. At the end of the fourth month, the capital of 100 would return to the production phase, and that of 33 1/3 would enter the circulation phase. The latter would require 1/3 of a month for circulation, given the same relations; would hence return into production after 10 days. The first capital could enter into circulation again only at the end of the seventh month. The second, which entered into circulation at the beginning of the fifth month, would have returned say on the 10th of the fifth month, would re-enter circulation on the 10th of the sixth month and would return on the 20th of the sixth month, to re-enter circulation on the 20th of the seventh month; at the end of the seventh month it would be back again, at which time the first capital would just be beginning its course again at the same moment when the second was returning. Beginning of the eighth month, and return on the etc. Beginning of the ninth etc. In a word: if the capital were 1/3 larger — just the amount the circulation time adds up to — then it could continuously employ the same number of workers. Or, alternately, it could continuously remain in the production phase if it continuously employed 1/3 less labour. If the capitalist began with a capital of only 75, then production would finish at the end of the third month; then the capital would circulate for one month; but during this month he could continue production because he would have retained a capital of 25, and, if he needs 75 to set a given mass of labour in motion during 3 months, he needs 25 to set the same in motion for 1 month. He would continuously have the same number of workers at work. Each of his commodities requires 1/12 of a year before it is sold.

If he always needs 1/3 of the production time to sell his commodities, then etc. This matter must be reducible to a very simple equation, to which we shall return later. It does not actually belong here. But the question is important because of the credit questions later. This much is clear, however. Call production time pt, circulation time ct. Capital, C. C cannot be in its production phase and its circulation phase at the same time. If it is to continue to produce while it circulates, then it must break into two parts, of which one in the production phase, while the other in the circulation phase, and the continuity of the process is maintained by part being posited in the former aspect, part in the latter. Let the portion which is always in production be x; then x = C – b (let be the part of the capital always in circulation). C = x. If ct, circulation time, were = 0, then likewise would be = 0, and x = C. (the part of the capital in circulation): (the total capital) = ct (circulation time): pt(production time); b: C = ct: pt; i.e. the relation of circulation time to production time is the relation of the part of capital in circulation to the total capital.

If a capital of 100 at a profit of 5% turns over every 4 months, so that there is 1 month of circulation time for every 3 months of production time, then the total surplus value, as we saw, will be

5 × 12/4 M (month) = 5 × 3 = 15; instead of 20 as when c = 0; for then S’ = 5 × 12/3 = 20.

But now 15 is the gain on a capital of 75 at 5% whose circulation time = 0; which turned over 4 times a year; was continuously occupied. At the end of the first quarter 3¾; at the end of the year 15. (But only a total capital of 300 would turn over; while one of 400 if in the above case ct = 0.) Hence a capital of 100, with respect to which circulation time amounts to 1 month on every 3 production time, can constantly employ productively a capital of 75; a capital of 25 is constantly circulating and unproductive. 75:25 =3 M:1 M, or, if we call the part of the capital occupied in production p, the part in circulation c, and the corresponding times c’ and p’, then p:c = p’:c’ (p:c = 1:1/3). The part of the in production constantly relates to the part in circulation as 1:1/3; this 1/3 constantly represented by changing component parts. But p: C = 75:100 = ¾; c = ¼; p: C = 1:4/3 and c:C = 1:4. The total turnover =4 Mp:R =3 M; 4 M =1:4/3.

Change of form and of matter in the circulation of capital. — C-M-C. M-C-M.

A change of form [Formwechsel] and a change of matter [Stoffwechsel] take place simultaneously in the circulation of capital. We must begin here not with the presupposition of M, but with the production process. In production, as regards the material side, the instrument is used up and the raw material is worked up. The result is the product — a newly created use value, different from its elemental presuppositions. As regards the material side, a product is created only in the production process. This is the first and essential material change. On the market, in the exchange for money, the product is expelled from the circulation of capital and falls prey to consumption, becomes object of consumption, whether for the final satisfaction of an individual need or as raw material for another capital. In the exchange of the commodity for money, the material and the formal changes coincide; for, in money, precisely the content itself is part of the economic form. The retransformation of money into commodity is here, however, at the same time present in the retransformation of capital into the material conditions of production. The reproduction of a specific use value takes place, just as well as of value as such. But, just as the material element here was posited, from the outset, at its entry into circulation, as a product, so the commodity in turn was posited as a condition of production at the end of it. To the extent that money figures here as medium of circulation, it does so indeed only as mediation of production, on one side with consumption, in the exchange where capital discharges value in the form of the product, and as mediation, on the other side, between production and production, where capital discharges itself in the form of money and draws the commodity in the form of the condition of production into its circulation. Regarded from the material side of capital, money appears merely as a medium of circulation; from the formal side, as the nominal measure of its realization, and, for a specific phase, as value-for-itself; capital is therefore C-M-M-C just as much as it is M-C- C-M, and this in such a way, specifically, that both forms of simple circulation here continue to be determinants, since M-M is money, which creates money, and C-C a commodity whose use value is both reproduced and increased. In regard to money circulation, which appears here as being absorbed into and determined by the circulation of capital, we want only to remark in passing — for the matter can be thoroughly treated only after the many capitals have been examined in their action and reaction upon one another — that money is obviously posited in different aspects here.

Difference between production time and labour time. — Storch Money. Mercantile estate. Credit. Circulation

Until now it has been assumed that production time coincides with labour time. But now there take place, e.g. in agriculture, interruptions of work within the production process itself, before the product is finished. The same labour time may be applied and the duration of the production phase may differ, because work is interrupted. If the difference is only that the product in one case requires a longer working time in order to be finished than in another case, then no case at all is constituted, because it is then clear according to the general law that the product in which a greater quantity of labour is contained is of that much greater value, and if the reproduction is less frequent in a given period of time, then the reproduced value is all the greater. And 2 × 100 is just as much as 4 × 50. As with the total value, then, so with the surplus value. The question is constituted by the unequal duration required by different products, although the same amount of labour time (namely stored-up and living labour together) is employed upon them. The fixed capital here allegedly acts quite by itself, without human labour, like e.g. the seed entrusted to the earth’s womb. In so far as additional labour is required, this is to be deducted. The question to be posed in pure form. If circulation time here the same, then the turnover is less frequent because the production phase longer. Hence production time + turnover time = 1R, larger than in the case where production time coincides with labour time. The time required here for the product to reach maturity, the interruptions of work, here constitute conditions of production. Not-labour time constitutes a condition for labour time, in order to turn the latter really into production time. The question obviously belongs only with the equalization of the rate of profit. Still, the ground must be cleared here. The slower return — this is the essential part — here arises not from circulation time, but rather from the conditions themselves in which labour becomes productive; it belongs with the technological conditions of the production process. It must absolutely be denied, it is.downright nonsensical to claim, that a natural circumstance which hinders a capital in a specific branch of production from exchanging with the same amount of labour time in the same amount of time as another capital in another branch of production can in any way contribute to increasing the former’s value. Value, hence also surplus value, is not = to the time which the production phase lasts, but rather to the labour time, objectified and living, employed during this production phase. The living labour time alone — and, indeed, in the proportion in which it is employed relative to objectified labour time — can create surplus value, because [it creates] surplus labour time. [*] It has therefore correctly been asserted that in this regard agriculture for instance is less productive (productivity is concerned here with the production of values) than other industries. Just as in another respect — in so far as a growth of productivity in it DIRECTLY reduces necessary labour time — it is more productive than all the others. But this circumstance can accrue to its advantage only where capital already rules, together with the general form of production corresponding to it. This interruption in the production phase already signifies that agriculture can never be the sphere in which capital starts; the sphere in which it takes up its original residence. This contradicts the primary fundamental conditions of industrial labour. Hence agriculture is claimed for capital and becomes industrial only retroactively. Requires a high development of competition on one side, on the other a great development of chemistry, mechanics etc., i.e. of manufacturing industry. History shows, consequently, that agriculture never appears in pure form in the modes of production preceding capital, or which correspond to its own undeveloped stages. A rural secondary industry, such as spinning, weaving etc. must make up for the limit on the employment of labour time posited here — and located in these interruptions. The non- identity of production time with labour time can be due generally only to natural conditions, which stand directly in the path of the realization of labour, i.e. the appropriation of surplus labour by capital. These obstacles in its path do not of course constitute advantages, but rather, from its point of view, losses. The whole case is worth mentioning here actually only as an example of fixated capital, capital fixated in one phase. The point to remember here is only that capital creates no surplus value as long as it employs no living labour. The reproduction of the employed fixed capital itself is of course not the positing of surplus value.

(In the human body, as with capital, the different elements are not exchanged at the same rate of reproduction, blood renews itself more rapidly than muscle, muscle than bone, which in this respect may be regarded as the fixed capital of the human body.)

As means of speeding up circulation, Storch lists: (1) formation of a class of ‘workers’ who busy themselves only with trade; (2) easy means of transport; (3) money; (4) credit. (See above.) This motley combination reveals the whole confusion of the political economists. Money and money circulation — what we called simple circulation — is the presupposition, condition, of capital itself, as well as of the circulation of capital. Money as it exists, hence, as a relation of intercourse belonging to a stage of production preceding capital, money as money, in its immediate form, can therefore not be said to speed up the circulation of capital, but is rather its presupposition. When we speak of capital and of its circulation, we stand on a stage of social development where the introduction of money does not enter as a discovery etc., but is rather apresupposition. To the extent that money in its immediate form itself has value, and is not merely the value of other commodities, the symbol of their value — for, if something which is itself immediate is supposed to be something else which is also immediate, then it can only represent the latter, in one way or another, as symbol — but rather, itself has value, is itself objectified labour in a specific use value, to that extent, money, so far from speeding up the circulation of capital, rather delays it. Regarded in both of the aspects in which it occurs in the circulation of capital, both as medium of circulation and as the realized value of capital, money belongs among the costs of circulation in so far as it is itself labour time employed to abbreviate circulation time on the one hand, and, on the other hand, to represent a qualitative moment of circulation — the retransformation of capital into itself as value-for-itself. In neither aspect does it increase the value. In one aspect it is a precious form of representing value, i.e. a costly form, costing labour time, hence representing a deduction from surplus value. In the other aspect it can be regarded as a machine which saves circulation time, and hence frees time for production. But, in so far as it itself, as such a machine, costs labour and is a product of labour, it represents for capital faux frais de production. It figures among the costs of circulation. The original cost of circulation is circulation time itself as opposed to labour time. The real costs of circulation are themselves objectified labour time — machinery for the purpose of abbreviating the original costs of circulation. Money in its immediate form, as it belongs to a historic stage of production preceding capital, thus appears to capital as a cost of circulation, and the efforts of capital hence tend in the direction of transforming it into a form adequate for its own ends; hence attempting to make it into a representative of one moment of circulation which does not itself cost labour, and has itself no value. Capital hence tends in the direction of suspending money in its inherited, immediate reality, and transforming it into something merelyposited and at the same time suspended by capital, into something purely ideal. It cannot be said, therefore, as does Storch, that money as such is a means of speeding up the circulation of capital; it must rather be said to the contrary that capital attempts to transform money into a merelyideal moment of its circulation, and first to raise it into the adequate form corresponding to it. Suspension of money in its immediate form appears as a demand made by money circulation once it has become a moment of the circulation of capital; because in its immediate, presupposed form it is a barrier to the circulation of capital. The tendency of capital is circulation without circulation time; hence also the positing of the instruments which merely serve to abbreviate circulation time as mere formal aspects posited by it, just as the different moments through which capital passes in its circulation are qualitative aspects of its own metamorphosis.

As regards the formation of a special mercantile estate — i.e. a development of the division of labour which has transformed the business of exchanging into a particular kind of work — for which, of course, the sum of exchange operations must already have reached a certain height — (if the exchange among 100 people occupied the 100th part of their labour time, then each man is 1/100 of an exchanger; 100/100 exchangers would represent one single man. Then one merchant could arise per 100. The separation of commerce from production itself, or the development of exchange itself as a representation opposite the exchangers, requires as such that exchange and intercourse have developed to a certain degree. The merchant represents all buyers to the seller, all sellers to the buyer and vice versa, hence he is not an extreme, but rather the middle of the exchange itself; appears hence as mediator, middleman) — the formation of the merchant estate, which presupposes that of money, even if not developed in all its moments, is likewise a presupposition for capital, and hence cannot be listed as being a mediator of its specific circulation. Since commerce is both historically as well as conceptually a presupposition for the rise of capital, we shall have to return to it before concluding this chapter, since it belongs before or in the section on the origin of capital.

The facilitation of the means of transport, to the extent that it means facilitation of the physical circulation of commodities, does not belong here, where we are examining merely the characteristic forms of the circulation of capital. The product becomes a commodity, leaves the production phase, only when it is on the market. On the other side, the means of transportation do belong here in so far as the returns of capital — i.e. circulation time — must grow with the distance of the market from the point of production. Its abbreviation by means of transport thus appears as belonging directly, in this respect directly, to the examination of the circulation of capital. But this actually belongs to the doctrine of the market, which itself belongs to the section on capital.

Finally, credit. This form of circulation etc. directly posited by capital — which arises, hence, specifically from the nature of capital, this specific characteristic of capital — is mixed up here by Storch etc. together with money, mercantile estate, etc., which belong generally with the development of exchange and of the production more or less founded on it. The presentation of the specific, distinguishing characteristics is here both the logical development and the key to the understanding of the historical development. Thus we find in history, too, e.g. in England (likewise in France), [attempts] to replace money by paper; then also to give capital, in so far as it exists in the form of value, a form purely posited by itself; finally attempts to found credit directly with the rise of capital. (E.g. Petty, Boisguillebert.)

Small-scale circulation. The process of exchange between capital and labour capacity generally. Capital in the reproduction of labour capacities

Within circulation as the total process, we can distinguish between large-scale and small-scale circulation. The former spans the entire period from the moment when capital exits from the production process until it enters it again. The second is continuous and constantly proceeds simultaneously with the production process. It is the part of capital which is paid out as wages, exchanged for labouring capacity. The circulation process of capital, which is posited in the form of an exchange of equivalents, but is in fact suspended as such, and posited as such only formally (the transition from value to capital, where the exchange of equivalents turns into its opposite, and where, on the basis of exchange, exchange becomes purely formal, and the mutuality is all on one side), is to be developed in this way: Values which become exchanged are always objectified labour time, an, objectively available, reciprocally presupposed quantity of labour (present in a use value). Value as such is always an effect, never a cause. It expresses the amount of labour by which an object is produced, hence — presupposing the same stage of the productive forces — the amount of labour by which it can be reproduced. The capitalist does not exchange capital directly for labour or labour time; but rather time contained, worked up in commodities, for time contained, worked up in living labour capacity. The living labour time he gets in exchange is not the exchange value, but the use value of labour capacity. Just as a machine is not exchanged, paid for as cause of effects, but as itself an effect; not according to its use value in the production process, but rather as product — definite amount of objectified labour. The labour time contained in labour capacity, i.e. the time required to produce living labour capacity, is the same as is required — presupposing the same stage of the productive forces — to reproduce it, i.e. to maintain it. Hence, the exchange which proceeds between capitalist and worker thus corresponds completely to the laws of exchange; it not only corresponds to them, but also is their highest development. For, as long as labour capacity does not itself exchange itself, the foundation of production does not yet rest on exchange, but exchange is rather merely a narrow circle resting on a foundation of non-exchange, as in all stages preceding bourgeois production. But the use value of the value the capitalist has acquired through exchange is itself the element of realization and its measure, living labour and labour time, and, specifically, more labour time than is objectified in labour capacity, i.e. more labour time than the reproduction of the living worker costs. Hence, by virtue of having acquired labour capacity in exchange as an equivalent, capital has acquired labour time — to the extent that it exceeds the labour time contained in labour capacity — in exchange without equivalent; it has appropriated alien labour time without exchange by means of the form of exchange. This is why exchange becomes merely formal, and, as we saw, in the further development of capital even the semblance is suspended that capital exchanges for labour capacity anything other than the latter’s own objectified labour; i.e. that it exchanges anything at all for it. The turn into its opposite [Umschlag] therefore comes about because the ultimate stage of free exchange is the exchange of labour capacity as a commodity, as value, for a commodity, for value; because it is given in exchange as objectified labour, while its use value, by contrast, consists of living labour, i.e. of the positing of exchange value. The turn into its opposite arises from the fact that the use value of labour capacity, as value, is itself the value-creating force; the substance of value, and the value-increasing substance. In this exchange, then, the worker receives the equivalent of the labour time objectified in him, and gives his value-creating, value-increasing living labour time. He sells himself as an effect. He is absorbed into the body of capital as a cause, as activity. Thus the exchange turns into its opposite, and the laws of private property — liberty, equality, property — property in one’s own labour, and free disposition over it — turn into the worker’s propertylessness, and the dispossession [Entäusserung] of his labour, [i.e.] the fact that he relates to it as alien property and vice versa.

The circulation of the part of capital which is posited as wages accompanies the production process, appears as an economic form-relation alongside it, and is simultaneous and interwoven with it. This circulation alone posits capital as such; is the condition of its realization process, and posits not only the latter’s characteristic form, but also its substance. This is the constantly circulating part of capital, which at no time enters into the production process itself, [but] constantly accompanies it. It is the part of capital which does not even for a single instant enter into its reproduction process, which is not the case with raw material. The worker’s approvisionnement arises out of the production process, as product, as result; but it never enters as such into the production process, because it is a finished product for individual consumption, enters directly into the worker’s consumption, and is directly exchanged for it. This, therefore, as distinct from raw material as well as instrument, is the circulating capital cat exochn. Here is the only moment in the circulation of capital where consumption enters directly. At the point where the commodity becomes exchanged for money, it may be acquired by another capital as raw material for new production. Further, given the presuppositions, capital encounters not the individual consumer but rather the merchant; someone who buys the commodity itself in order to sell it for money. (This presupposition is to be developed in connection with the merchant estate in general. The circulation among dealers thereby different from that between dealers and consumers.) Thus the circulating capital here appears directly as that which is specified for the workers’ individual consumption; specified for direct consumption generally, and hence existing in the form of finished product. Thus, while in one respect capital appears as the presupposition of the product, the finished product also at the same time appears as the presupposition of capital — which means, historically, that capital did not begin the world from the beginning, but rather encountered production and products already present, before it subjugated them beneath its process. Once in motion, proceeding from itself as basis, it constantly posits itself ahead of itself in its various forms as consumable product, raw material and instrument of labour, in order constantly to reproduce itself in these forms. They appear initially as the conditions presupposed by it, and then as its result. In its reproduction it produces its own conditions. Here, then — through the relation of capital to living labour capacity and to the natural conditions of the latter’s maintenance — we find circulating capital specified in respect of its use value as well, as that which enters directly into individual consumption, to be directly used up by the latter. It is a mistake to conclude from this, as has been done, [62] that circulating capital is therefore consumable capital generally, as if coal, oil, dye etc., instruments etc., improvements of the land etc. factories etc. were not all consumed likewise, if by consumption is meant the suspension of their use value and of their form; however, one could just as well say that none of them is consumed, if this is taken to mean individual consumption, i.e. consumption in the proper sense. In this circulation, capital constantly expels itself as objectified labour, in order to assimilate living labour power, its life’s breath. Now, as regards the worker’s consumption, this reproduces one thing — namely himself, as living labour capacity. Because this, his reproduction, is itself a condition for capital, therefore the worker’s consumption also appears as the reproduction not of capital directly, but of the relations under which alone it is capital. Living labour capacity belongs just as much among capital’s conditions of existence as do raw material and instrument. Thus it reproduces itself doubly, in its own form, [and] in the worker’s consumption, but only to the extent that it reproduces him as living labour capacity. Capital therefore calls this consumption productive consumption — productive not in so far as it reproduces the individual, but rather individuals as labour capacities. If Rossi is offended that wages are allegedly counted twice, first as the worker’s revenue, then as reproductive consumption of capital, [63] then the objection holds only against those who let wages enter directly into the production process of capital as value. For the payment of wages is an act of circulation which proceeds simultaneously with and alongside the act of production. Or, as Sismondi says from this perspective — the worker consumes his wages unreproductively; but the capitalist consumes them productively, since he gets labour in the exchange, which reproduces the wages and more than the wages. This concerns capital itself regarded merely as an object. But in so far as capital is a relation, and, specifically, a relation to living labour capacity, [to that extent] the worker’s consumption reproduces this relation; or, capital reproduces itself doubly, as value through purchase of labour — as a possibility of beginning the realization process anew, of acting as capital anew — and as a relation through the worker’s consumption, which reproduces him as labour capacity exchangeable for capital — wages as part of capital.

This circulation between capital and labour, then, yields the characterization of one part of capital as constantly circulating, theapprovisionnement; constantly consumed; constantly to reproduce. This circulation strikingly reveals the difference between capital and money; the circulation of capital and the circulation of money. Capital pays wages e.g. weekly; the worker takes his wages to the grocer etc.; the latter directly or indirectly deposits them with the banker; and the following week the manufacturer takes them from the banker again, in order to distribute them among the same workers again, etc. and so forth. The same sum of money constantly circulates new portions of capital. The sum of money itself, however, does not determine the portions of capital which are thus circulated. If the money value of wages rises, then the circulating medium will increase, but the mass of the medium does not determine the rise. If the production costs of money did not fall, then no increase of money would exercise an influence on the portion of it entering into this circulation. Here money appears as mere medium of circulation. Since many workers are to be paid at the same time, a certain sum of money is required at one time, which grows with the number of workers. Then, however, the velocity of the circulation of the money makes a lesser sum necessary than in situations where there are fewer workers but the machinery of monetary circulation is not so arranged. This circulation is a condition of the production process and thereby of the circulation process as well. On the other hand, if capital does not return from circulation, then this circulation between worker and capital could not begin anew; hence it is itself conditional upon capital passing through the various moments of its metamorphosis outside the production process. If this did not happen, it would be not because there was not enough money as medium of circulation, but rather either because capital was not available in the form of products, because this part of circulating capital was lacking, or because capital did not posit itself in theform of money, i.e. did not realize itself as capital, which in turn, however, would arise not from the quantity of the medium of circulation, but because capital did not posit itself in the qualitative aspect of money, which in no way requires that it posit itself in the form of hard cash, in the immediate money form; and whether or not it posited itself in that form would again depend not on the quantity of money circulating as medium of circulation, but rather on the exchange of capital for value as such; again a qualitative, not a quantitative, moment, as we shall point out in more detail when we speak of capital as money. (Interest etc.)

Threefold character, or mode, of circulation. — Fixed capital and circulating capital. — Turnover time of the total capital divided into circulating and fixed capital. — Average turnover time of such a capital. — Influence of fixed capital on the total turnover time of capital. — Circulating fixed capital. Say. Smith. Lauderdale. (Lauderdale on the origin of profit)

Regarded as a whole, circulation thus appears threefold: (1) the total process — the course of capital through its different moments; accordingly, it is posited as being in flow; as circulating; in so far as the continuity is virtually interrupted, and may resist the passage into the next phase, capital here likewise appears as fixated in different relations, and the various modes of this fixation constitute different capitals, commodity capital, money capital, capital as conditions of production.

(2) Small-scale circulation between capital and labour capacity. This accompanies the production process and appears as contract, exchange, form of intercourse; these things are presupposed before the production process can be set going. The part of capital entering into this circulation — the approvisionnement — is circulating capital cat exochn It is specified not only in respect to its form; in addition to this, its use value, i.e. its material character as a consumable product entering directly into individual consumption, itself constitutes a part of its form.

(3) Large-scale circulation; the movement of capital outside the production phase, where its time appears in antithesis to labour time, as circulation time. The distinction between fluid and fixed capital is the product of this opposition between the capital engaged in the production phase and the capital which issues from it. Fixed is that which is fixated in the production process and is consumed within it; comes out of large-scale circulation, certainly, but does not return into it, and, in so far as it circulates, circulates only in order to be consumed in, confined to, the consumption process.

The three different distinctions in the circulation of capital yield the three distinctions between circulating and fixated capital; they posit one part of capital as circulating cat exochn, because it never enters into the production process, but constantly accompanies it; and thirdly, [they yield] the distinction between fluid and fixed capital. Circulating capital in form No. 3 also includes No. 2, since the latter is also in antithesis to the fixed; but No. 2 does not include No. 3. The part of capital which belongs as such to the production process is the part of it which serves, materially, only as means of production; forms the link between living labour and the material to be worked on. A part of the liquid capital, such as coal, oil etc., also serves merely as means of production. Everything which serves merely as a means to keep the machine, or the engine, running. This distinction will have to be examined yet more closely. First of all, this does not contradict aspect 1, since the fixed capital as valuealso circulates in proportion as it is worn out. Precisely in this aspect as fixed capital — i.e. in the character in which capital has lost its fluidity and become identified with a specific use value, which robs it of its ability to transform itself — does developed capital — to the extent we know it so far, as productive capital — most strikingly manifest itself, and it is precisely in this seemingly inadequate form, and in the latter’s increasing relation to the form of circulating capital in No. 2, that the development of capital as capital is measured. This contradiction pretty. To be developed.

The different kinds of capital, which, in economics, fall out of the sky, here appear as so many precipitates of the movements . arising out of the nature of capital itself, or rather of this movement itself in its different moments.

Circulating capital constantly ‘parts’ from the capitalist, in order to return to him in the first form. Fixed capital does not (Storch). [64]‘Circulating capital is that portion of the capital which does not yield profit till it is parted with; fixed etc. yields such profit, while it remains in the possession of the owner.’ (Malthus.) [65] ‘Circulating capital gives its master no revenue or profit, so long as it remains in his possession; fixed capital gives this profit without changing masters, and without requiring circulation.’ (A. Smith.) [66]

In this respect, since capital’s departure on a voyage away from its owner (‘partir de son possesseur’) [67] means nothing more than thesale of property or possessions which takes place in the act of exchange, and since it is the nature of all exchange value, hence all capital, to become value for its owner by means of sale, the definition in its above formulation cannot be correct. If fixed capital were [capital] for its owner without the mediation of exchange and of the use value [68] included in it, then, in fact, fixed capital would be a mere use value, hence not capital. But the basis of the above definition is this: fixed capital circulates as value (even if only in portions, successively, as we shall see). It does not circulate as use value. As. far as its material aspect is concerned, as a moment of the production process, fixed capital never leaves its boundaries; is not sold by its possessor; remains in his hand. It circulates as capital only in its formal aspect, as self-eternalizing value. This distinction between form and content, use value and exchange value, does not take place in circulating capital. In order to circulate, to exist, as the latter, it has to step into circulation as the former, must be sold. Use value for capital as such is only value itself. Circulating capital realizes itself as value for capital as such only when it is sold. As long as it remains in its hand, it only has value in itself; but it is not posited; only in potency — but not in act. Fixed capital, by contrast, realizes itself as value only as long as it remains in the capitalist’s hand as a use value, or, expressed as an objective relation, as long as it remains in the production process, which may be regarded as the inner organic movement of capital, its relation to itself, as opposed to its animal movement, its presence for another. Hence, since fixed capital, once it has entered the production process, remains in it, it also passes away in it, is consumed in it. The duration of this consumption does not yet concern us here. In this respect, then, fixed capital also includes what Cherbuliez calls the matiéres instrumentales, [69] such as coal, oil, wood, grease etc., which are completely destroyed in the production process, which only have a use value for the process of production itself. The same materials, however, also have a use value outside production, and can also be consumed in another way, just as buildings, houses, etc. are

not necessarily specified for production. They are fixed capital not because of the specific mode of their being, but rather because of their use. They become fixed capital as soon as they step into the production process. They are fixed capital, as soon as they are posited as moments of the production process of capital; because they then lose their property of being potentially circulating capital.

Therefore, just as the part of capital entering into the small-scale circulation of capital — or capital, in so far as it enters into this movement — circulation between capital and labour capacity, the part of capital circulating as wages — never leaves the circulation process and never enters into the production process of capital, as regards its material aspect, as use value, but rather is always ejected from a previous production process as its product, result, so, inversely, does the part of capital specified as fixed capital, as a use value, as regards its material presence, never leave the production process and never go back into circulation. While the latter only enters into circulation as value (as part of the value of the finished product), the former only enters into the production process as value, in that necessary labour is the reproduction of wages, of the part of the capital’s value which circulates as wages. This, then, is the first characteristic of fixed capital, and in this respect it also includes the matières instrumentales.

Secondly: Fixed capital can enter into circulation as value, however, only to the extent that it passes away as use value in the production process. It passes, as value, into the product — i.e. as labour time worked up or stored up in it — in so far as it passes away in its independent form as use value. In being used, it is used up, but in such a way that its value is carried over from its form into the form of the product. If it is not used, not consumed in the production process itself — if the machinery stands still, the iron rusts, the wood rots — then of course its value passes away together with its transitory presence as use value. Its circulation as value corresponds to its consumption in the production process as use value. Its total value is completely reproduced, i.e. is fully returned via circulation only when it has been completely consumed as use value in the production process. As soon as it is completely dissolved into value, and hence completely absorbed into circulation, it has completely passed away as use value and hence must be replaced, as a necessary moment of production, by a new use value of the same kind, i.e. must be reproduced. The necessity of reproducing it, i.e. its reproduction time, is determined by the time in which it is used up, consumed within the production process. With circulating capital, reproduction is determined by circulation time; with fixed capital, circulation is determined by the time in which it is consumed as use value, in its material presence, within the act of production, i.e. by the period of time within which it must be reproduced. A thousand pounds of twist can be reproduced as soon as they are sold and the money obtained for them is again exchanged for cotton, in short, for the elements of the production of twist. Their reproduction is determined, hence, by circulation time. A machine of a value of £1,000 which lasts 5 years, which is used up in 5 years and then becomes nothing more than scrap iron, is used up, say, by 1/5 per year, if we take the average consumption in the production process. Hence every year only 1/5 of its value enters into circulation, and only with the passing of the 5 years has it completely gone into circulation and returned from it. Its entry into circulation is thus purely determined by the time of its wearing out; and the time which its value needs to enter totally into circulation and to return from it is determined by its total reproduction time, the time in which it must be reproduced. Fixed capital enters into the product only as value; while the use value of circulating capital has remained in the product as the latter’s substance, and has merely obtained another form. This distinction essentially modifies the turnover time of a total capital divided into circulating and fixed capital. Let total capital = S; its circulating part = c; its fixed part = f; let the fixed capital form 1/x S; the circulating capital S/y. Let the circulating capital turn over 3 times a year, the fixed capital only twice every 10 years. In 10 years, or S/x will turn over twice; while in the same 10 years S/y will turn over 3 × 10 = 30 times. If were = S/y, i.e. circulating capital only, then R, its turnover, would be = 30; and the total capital turned over = 30 × S/y ; the total capital turned over in 10 years. But the fixed capital turns over only twice in 10 years. Its R’ = 2; and the total fixed capital turned over = 2S/x. But S = S/yS/x and its total turnover time = the total turnover time of both these parts. If the fixed capital turns over twice in 10 years, then in one year 2/10 or 1/5 of it turns over; while in one year the circulating capital Sturns over 3 times. S/5x turns over once a year.

The question simply this: if a capital of 1,000 thalers = 600 circulating capital and 400 fixed capital; thus 3/5 circulating and 2/5 fixed capital; if the fixed capital lasts 5 years, hence turns over once in 5 years and the circulating turns over 3 times a year, then what is the average turnover or turnover time of the total capital? If it were circulating capital only, then it would turn over 5 × 3, 15 times; the total capital turned over in the 5 years would be 15,000. But 2/5 of it turn over only once in 5 years. Hence, of the 400 thalers, 400/5 = 80 thalers turn over in one year. Of the 1,000 thalers, 600 annually turn over 3 times, 80 once; or, in one year, only 1,880 would turn over; hence in 5 years 5 ×1,880 = 9,400 turn over; i.e. 5,600 less than if the total capital consisted only of circulating capital. If the entire capital consisted only of circulating capital, then it would turn over once in 1/3 of a year.

If the capital = 1,000; c = 600, turns over twice a year; f = 400, turns over once a year; then 600 (3/5S) turns over in half a year; 400/2 or 2S ÷ (5 × 2) likewise in half a year. Hence in half a year, 600 + 200 = 800 (i.e. c + f/2) turns over. IN A WHOLE YEAR, hence, 2 × 800 or 1,600 turn over; 1,600 thalers in 1 year; hence 100 in 12/16 months, hence 1,000 in 120/16 months = 7½ months. The total capital of 1,000 thus turns over in 7½ months, while it would turn over in 6 months if it consisted of circulating capital only. 7½: 6 = 1:1¼ or as 1:5/4. If the capital = 100, circulating = 50, fixed = 50; the former turns over twice a year, the latter once; then ½ 100 turns over once in 6 months; and ¼ 100 likewise once in 6 months; hence in 6 months ¾ of the capital turns over, ¾ 100 in 6 months; or 75 in 6 months, and 100 in 8 months. If 2/4 100 turn over in 6 months, and in the same 6 months ¼ 100 (½ of the fixed capital), then ¾ 100 turn over in 6 months. Hence ¼ in 6/3 = 2 [months]; hence 4/4 100 or 100 in 6 + 2, in 8 months. The total turnover time of the capital = 6 (the turnover time of the entire circulating capital and ½ of the fixed capital or ¼ of the total capital) + 6/3 i.e. + this turnover time divided by the number expressing the ratio of the remaining fixed capital to the capital turned over in the turnover time of circulating capital. Thus in the above example: 3/5 100 turns over in 6 months; ditto 1/5 100; hence 4/5 100 in 6 months; hence the remaining 1/5 100 in 6/4 months; hence the total capital in 6 + 6/4 months = 6 + l½ or 7½ months. Thus, expressed in general terms:

Average turnover time = the turnover time of circulating capital + this turnover time divided by the number which expresses how often the remaining part of the fixed capital is contained in the total sum of the capital which was circulated in this turnover time.

If there are two capitals of 100 thalers, one of them entirely composed of circulating capital, the other half fixed capital, each at 5% profit, the one turning over twice a year, and in the other the circulating capital likewise twice, but the fixed capital only once; then the total capital turning over would be = 200 in the first case, and the profit = 10; in the second = 3 turnovers in 8 months, l½ in 4; or 150 would turn over in 12 months; profit then = 7½. This kind of calculation has strengthened the common prejudice that circulating capital or fixed capital through some mysterious innate power brings a gain, as even in Malthus’s phrase ‘the circulating capital brings a gain when its possessors part with it etc.’ [70]; likewise, in the above-quoted lines from his Measure of Value etc., the way in which he makes fixed capital accumulate profits. [71] The greatest confusion and mystification has arisen because the doctrine of surplus profit has not been examined in its pure form by previous economists, but rather mixed in together with the doctrine of real profit, which leads up to distribution, where the various capitals participate in the general rate of profit. The profit of the capitalists as a class, or the profit of capital as such, has to exist before it can be distributed, and it is extremely absurd to try to explain its origin by its distribution. According to the above, profit declines because the turnover time of capital increases* in proportion as the component part of it which is called fixed capital increases. A capital of the same size, 100 in the above case, would turn over entirely twice a year if it consisted only of a circulating capital. But it turns over only twice in 16 months, or only 150 thalers are turned over in one year, because half of it consists of fixed capital. As the number of its reproductions in a given period declines, or the amount of it reproduced in this given time declines, so does the production of surplus time or surplus value decline, since capital posits value at all only in so far as it posits surplus value. (This at least is its tendency, its adequate action.)

Fixed capital, as we saw, circulates as value only to the degree that it is used up or consumed as use value in the production process. But the time in which it is consumed and in which it must be reproduced in its form as use value depends on its relative durability. Hence its durability, or its greater or lesser perishability — the greater or smaller amount of time during which it can continue to perform its function within the repeated production processes of capital — this aspect of its use value here becomes a form-determining moment, i.e. a determinant for capital as regards its form, not as regards its matter. The necessary reproduction time of fixed capital, together with the proportion of the total capital consisting of it, here modify, therefore, the turnover time of the total capital, and thereby its realization. The greater durability of capital (the diminution (duration) of its necessary reproduction time) and the proportion of fixed capital to the total capital, then, here influence realization just as does a slower turnover due either to a greater distance in space of the market from which the capital returns as money, so that a longer time is required to complete the path of circulation (as e.g. capitals working in England for the East India market return more slowly than those working for nearer foreign markets or for the domestic market), or to the production phase being itself interrupted by natural conditions, as in agriculture. Ricardo, who was the first to emphasize the influence of fixed capital on the realization process, throws all these aspects into one motley heap, as one can see from the excerpts quoted above.

In the first case (fixed capital), the turnover of capital is reduced because the fixed capital is consumed slowly within the production process; or the cause lies in the duration of the time required for its reproduction. In the second case the reduced turnover arises from the prolongation ofcirculation time (in the first case the fixed capital necessarily always circulates as rapidly as the product, in so far as it circulates, enters circulation at all, because it circulates not in its material existence, but only as value, i.e. as an ideal component part of the total value of the product) and, specifically, from the circulation time of the second half of the circulation process proper, the retransformation into money; in the third case the reduced turnover arises from the longer time the capital requires, not, as in the first case, to pass away in the production process, but rather to emerge from it as product. The first case is peculiar specifically to fixed capital; the other belongs to the category of capital which is not liquid, but fixated, fixated in one or another phase of the total circulation process (fixed capital of a considerable degree of durability, orcirculating capital returnable at distant periods. McCulloch, Principles of Political Economy. Notebook, p. 15.)[73]

Thirdly: We have regarded fixed capital so far only from the aspect in which its particular relation, its specific relation, distinguishes it from the circulation process proper. Still further distinctions will arise in this respect. Firstly, the return of its value in successive parts, whereas each part of circulating capital is exchanged in its entirety; this because in the former, the existence of the value coincides with that of the use value. Secondly, not merely [because of] its influence on the average turnover time of a given capital, as we have indicated up to now, but also [because of ] its own turnover time. The latter circumstance becomes important where the fixed capital appears not as a mere instrument of production within the production process, but rather as an independent form of capital, e.g. in the form of railways, canals, roads, aqueducts, improvements of the land, etc. This latter aspect becomes notably important for the proportion in which the total capital of a country is divided into these two forms. Then, the way in which it is renewed and maintained; which the economists formulate in the form that it can bring revenue only by means of circulating capital etc. This last is basically nothing but the examination of the moment where it appears, not as a particular independent existence alongsideand outside circulating capital, but rather as circulating capital transformed into fixed capital. But what we want to examine here first of all is the relation of fixed capital not towards the outside, but rather the extent to which the relation is given through its continued enclosure within the production process. It is thereby posited that it is a definite moment of the production process itself.

<It is not necessarily the case that fixed capital is capital which in all its aspects serves not for individual consumption, but only for production. A house can serve for production as well as for consumption; likewise all vehicles, a ship and a wagon, for pleasure outings as well as a means of transport; a street as a means of communication for production proper, as well as for taking walks etc. Fixed capital in this second aspect does not concern us here at all, since we regard capital here only as process of realization and process of production. The second aspect will enter when we study interest. Ricardo can have only this aspect in mind when he says: ‘Depending on whether the capital is more or less perishable, hence must be more or less frequently reproduced in a given time, it is called circulating or fixed capital.’ (Ricardo, VIII, 19.) [74]According to this, a coffee-pot would be fixed capital, but coffee circulating capital. The crude materialism of the economists who regard as thenatural properties of things what are social relations of production among people, and qualities which things obtain because they are subsumed under these relations, is at the same time just as crude an idealism, even fetishism, since it imputes social relations to things as inherent characteristics, and thus mystifies them. (The difficulty of defining a thing as fixed capital or circulating capital on the basis of its natural qualities has here, by way of exception, led the economists to the discovery that things in themselves are neither fixed nor circulating, hence not capital at all, any more than it is a natural quality of gold to be money.>

(Also included in the points listed above, so that it is not forgotten, is the circulation of fixed capital as circulating capital, i.e. transactions through which it changes its owners.)

‘Fixed capital — tied up: capital so tied up in one kind of production that it can no longer be diverted to another kind of production.’(Say, 24.) [75] ‘Fixed capital is consumed in order to help produce the things useful to man… it consists of durable foundations which increase the productive powers of future labour.’ (Sismondi, VL) [76] ‘Fixed capital the capital necessary to maintain the instruments, machines etc. of labour.’ (Smith, Vol. II, p. 226.) ‘Floating capital is consumed, fixed capital merely used in the great work of production.’(Economist,. Notebook VI, p. 1.) [77] ‘We shall show that the first stick or the first stone which he took in his hand to assist him in the pursuit of these objects, by accomplishing a part of his labour, performed precisely the function of the capitals presently employed by the commercial nations.’ (Lauderdale, p. 120. Notebook, 8a.) ‘It is one of the characteristic and distinguishing traits of the human species to replace labour in this way with a capital transformed into machines.’ (p. 120.) (p. 9, Notebook Lauderdale.) ‘It may now be seen that the profit of capitals always arises either because they replace a portion of the work which man must do by hand, or because they accomplish a portion of work which is beyond the personal effort of man, and which he could not perform by himself.’ (p. 119 loc. cit.) Lauderdale polemicizes against Smith and Locke, whose view that labour is the creator of profit, has the following result, according to him: ‘if this idea of capital’s benefits were rigorously correct, then it would follow that it would not be an original source of wealth, but rather a derived one; and one could not consider capital as one of the principles of wealth, its profit being nothing more than a transfer from the worker’s pocket to that of the capitalist.’ (loc. cit. 116, 117.) ‘The profit of capitals always arises either because they replace a portion of the work which man must do by hand, or because they accomplish a portion of work which is beyond the personal effort of man, and which he could not perform by himself.’ (p. 119, loc. cit., p. 9b.) ‘It is well to remark that while the capitalist, with the use he makes of his money, saves the class of consumers a certain amount of labour, he does not substitute for it an equal portion of his own; which proves that his capital performs it, and not he himself.’ (10, Notebook, loc. cit., p. 132.) ‘If Adam Smith, instead of imagining that the effect of a machine is to facilitate labour, or, as he expresses it, to increase the productive power of labour (it is only through a strange confusion of ideas that Mr Smith has been able to assert that the effect of capital is to increase the productive power of labour. With the same logic one could very well claim that to shorten by half a roundabout path between two points is to double the walker’s speed) had perceived that the money spent on machinery brings a profit by replacing labour, he would have attributed the origin of profit to the same circumstance.’ (p. 11, p. 137.) ‘Capitals in domestic commerce, whether fixed or circulating, far from serving to set labour in motion, far from increasing its productive power, are, on the contrary, useful and profitable only in two circumstances, either when they obviate the necessity of a portion of the work which man would otherwise have to do with his hands; or when they perform a particular piece of work which man does not have the power to do unaided.’ This, says Lauderdale, is not merely a semantic difference. ‘The idea that capital sets labour into action, and adds to its productive power, gives rise to the opinion that labour is everywhere proportional to the quantity of existing capitals; that a country’s industry is always in proportion to the funds employed: from which it would follow that the increase of capital is the sovereign and unlimited means of increasing wealth. Instead of that, if one admits that capital can have no profitable or useful employment other than to replace a certain work, or to perform it, then one will draw the natural conclusion that the State would gain no benefit whatever from the possession of more capitals than it can employ in doing the work or in substituting for it in the production and fabrication of the things the consumer demands.’ (p. 151, 152, pp. 11, 12.) To prove his view that capital is a source sui generis of profit and hence of wealth, independently of labour, he points to the surplus profits which the owner of a newly invented machine has before his patent runs out and competition presses down the prices, and concludes then with the words: ‘This change of rule for the price does not prevent the benefit’ (as regards use value) ‘of the machine from coming from a fund of the same nature as that from which it came before the expiration of the patent: this fund is always that part of a country’s revenues which was formerly destined to pay the wages of the labour which the new invention replaces.’ (loc. cit. 125, p. 10b.) By contrast, Ravenstone (IX, 32): ‘Machinery can seldom be applied with success to abridge the labours of an individual; more time would be lost in its construction than could be saved by its application. It is only really useful when it acts on great masses, when a single machine can assist the labours of thousands. It is accordingly in the most populous countries where there are most idle men that it is always most abundant. It is not called into action by a scarcity of men, but by the facility with which they are brought together.’ (loc. cit.) [78]

[Fixed Capital and the Development of the Productive Forces of Society]

‘Division of machines into (1) machines employed to produce power; (2) machines whose purpose is simply to transmit power and to perform the work.’ (Babbage, Notebook, p. 10.) [79] ‘Factory signifies the cooperation of several classes of workers, adults and non-adults, watching attentively and assiduously over a system of productive mechanisms, continually kept in action by a central force … excludes any workshop whose mechanism does not form a continuous system, or which does not depend on a single source of power. Examples of this latter class among textile factories, copper foundries etc…. In its most rigorous sense, this term conveys the idea of a vast automaton, composed of numerousmechanical and intellectual organs operating in concert and without interruption, towards one and the same aim, all these organs being subordinated to a motive force which moves itself.’ (Ure, 13.)[80]

The labour process. — Fixed capital. Means of labour. Machine. — Fixed capital. Transposition of powers of labour into powers of capital both in fixed and in circulating capital. — To what extent fixed capital (machine) creates value. — Lauderdale. Machine presupposes a mass of workers.

Capital which consumes itself in the production process, or fixed capital, is the means of production in the strict sense. In a broader sense the entire production process and each of its moments, such as circulation — as regards its material side — is only a means of production for capital, for which value alone is the end in itself. Regarded as a physical substance, the raw material itself is a means of production for the product etc.

But the determination that the use value of fixed capital is that which eats itself up in the production process is identical to the

proposition that it is used in this process only as a means, and itself exists merely as an agency for the transformation of the raw material into the product. As such a means of production, its use value can be that it is merely the technological condition for the occurrence of the process (the site where the production process proceeds), as with buildings etc., or that it is a direct condition of the action of the means of production proper, like all matières instrumentales. Both are in turn only the material presuppositions for the production process generally, or for the employment and maintenance of the means of labour. The latter, however, in the proper sense, serves only within production and for production, and has no other use value.

Originally, when we examined the development of value into capital, the labour process was simply included within capital, and, as regards its physical conditions, its material presence, capital appeared as the totality of the conditions of this process, and correspondingly sorted itself out into certain qualitatively different parts, material of labour (this, not raw material, is the correct expression of the concept), means of labourand living labour. On one side, capital was divided into these three elements in accordance with its material composition; on the other, thelabour process (or the merging of these elements into each other within the process) was their moving unity, the product their static unity. In this form, the material elements — material of labour, means of labour and living labour — appeared merely as the essential moments of the labour process itself, which capital appropriates. But this material side — or, its character as use value and as real process — did not at all coincide with its formal side. In the latter,

(1) the three elements in which it appears before the exchange with labour capacity, before the real process, appeared merely as quantitatively different portions of itself, as quantities of value of which it, itself, as sum, forms the unity. The physical form, the use value, in which these different portions existed did not in any way alter their formal identity from this side. As far as their formal side was concerned, they appeared only as quantitative subdivisions of capital;

(2) within the process itself, as regards the form, the elements of labour and the two others were distinct only in so far as the latter were specified as constant values, and the former as value-positing. But as far as their distinctness as use values, their material side was concerned, this fell entirely outside the capital’s specific character as form. Now, however, with the distinction between circulating capital (raw material and product) and fixed capital (means of labour), the distinctness of the elements as use values is posited simultaneously as a distinction within capital as capital, on its formal side. The relation between the factors, which had been merely quantitative, now appears as a qualitative division within capital itself, and as a determinant of its total movement (turnover). Likewise, the material of labour and the product of labour, this neutral precipitate of the labour process, are already, as raw material and product, materially specified no longer as material and product of labour, but rather as the use value of capital itself in different phases.

As long as the means of labour remains a means of labour in the proper sense of the term, such as it is directly, historically, adopted by capital and included in its realization process, it undergoes a merely formal modification, by appearing now as a means of labour not only in regard to its material side, but also at the same time as a particular mode of the presence of capital, determined by its total process — as fixed capital. But, once adopted into the production process of capital, the means of labour passes through different metamorphoses, whose culmination is themachine, or rather, an automatic system of machinery (system of machinery: the automatic one is merely its most complete, most adequate form, and alone transforms machinery into a system), set in motion by an automaton, a moving power that moves itself; this automaton consisting of numerous mechanical and intellectual organs, so that the workers themselves are cast merely as its conscious linkages. In the machine, and even more in machinery as an automatic system, the use value, i.e. the material quality of the means of labour, is transformed into an existence adequate to fixed capital and to capital as such; and the form in which it was adopted into the production process of capital, the direct means of labour, is superseded by a form posited by capital itself and corresponding to it. In no way does the machine appear as the individual worker’s means of labour. Its distinguishing characteristic is not in the least, as with the means of labour, to transmit the worker’s activity to the object; this activity, rather, is posited in such a way that it merely transmits the machine’s work, the machine’s action, on to the raw material — supervises it and guards against interruptions. Not as with the instrument, which the worker animates and makes into his organ with his skill and strength, and whose handling therefore depends on his virtuosity. Rather, it is the machine which possesses skill and strength in place of the worker, is itself the virtuoso, with a soul of its own in the mechanical laws acting through it; and it consumes coal, oil etc. (matières instrumentales), just as the worker consumes food, to keep up its perpetual motion. The worker’s activity, reduced to a mere abstraction of activity, is determined and regulated on all sides by the movement of the machinery, and not the opposite. The science which compels the inanimate limbs of the machinery, by their construction, to act purposefully, as an automaton, does not exist in the worker’s consciousness, but rather acts upon him through the machine as an alien power, as the power of the machine itself. The appropriation of living labour by objectified labour — of the power or activity which creates value by value existing for-itself — which lies in the concept of capital, is posited, in production resting on machinery, as the character of the production process itself, including its material elements and its material motion. The production process has ceased to be a labour process in the sense of a process dominated by labour as its governing unity. Labour appears, rather, merely as a conscious organ, scattered among the individual living workers at numerous points of the mechanical system; subsumed under the total process of the machinery itself, as itself only a link of the system, whose unity exists not in the living workers, but rather in the living (active) machinery, which confronts his individual, insignificant doings as a mighty organism. In machinery, objectified labour confronts living labour within the labour process itself as the power which rules it; a power which, as the appropriation of living labour, is the form of capital. The transformation of the means of labour into machinery, and of living labour into a mere living accessory of this machinery, as the means of its action, also posits the absorption of the labour process in its material character as a mere moment of the realization process of capital. The increase of the productive force of labour and the greatest possible negation of necessary labour is the necessary tendency of capital, as we have seen. The transformation of the means of labour into machinery is the realization of this tendency. In machinery, objectified labour materially confronts living labour as a ruling power and as an active subsumption of the latter under itself, not only by appropriating it, but in the real production process itself; the relation of capital as value which appropriates value-creating activity is, in fixed capital existing as machinery, posited at the same time as the relation of the use value of capital to the use value of labour capacity; further, the value objectified in machinery appears as a presupposition against which the value-creating power of the individual labour capacity is an infinitesimal, vanishing magnitude; the production in enormous mass quantities which is posited with machinery destroys every connection of the product with the direct need of the producer, and hence with direct use value; it is already posited in the form of the product’s production and in the relations in which it is produced that it is produced only as a conveyor of value, and its use value only as condition to that end. In machinery, objectified labour itself appears not only in the form of product or of the product employed as means of labour, but in the form of the force of production itself. The development of the means of labour into machinery is not an accidental moment of capital, but is rather the historical reshaping of the traditional, inherited means of labour into a form adequate to capital. The accumulation of knowledge and of skill, of the general productive forces of the social brain, is thus absorbed into capital, as opposed to labour, and hence appears as an attribute of capital, and more specifically of fixed capital, in so far as it enters into the production process as a means of production proper. Machinery appears, then, as the most adequate form of fixed capital, and fixed capital, in so far as capital’s relations with itself are concerned, appears as the most adequate form of capital as such. In another respect, however, in so far as fixed capital is condemned to an existence within the confines of a specific use value, it does not correspond to the concept of capital, which, as value, is indifferent to every specific form of use value, and can adopt or shed any of them as equivalent incarnations. In this respect, as regards capital’s external relations, it is circulating capital which appears as the adequate form of capital, and not fixed capital.

Further, in so far as machinery develops with the accumulation of society’s science, of productive force generally, general social labour presents itself not in labour but in capital. The productive force of society is measured in fixed capital, exists there in its objective form; and, inversely, the productive force of capital grows with this general progress, which capital appropriates free of charge. This is not the place to go into the development of machinery in detail; rather only in its general aspect; in so far as the means of labour, as a physical thing, loses its direct form, becomes fixed capital, and confronts the worker physically as capital. In machinery, knowledge appears as alien, external to him; and living labour [as] subsumed under self-activating objectified labour. The worker appears as superfluous to the extent that his action is not determined by [capital’s] requirements.


End of February, March. End of May — Beginning of June 1858

The Chapter on Capital (continuation)

The full development of capital, therefore, takes place — or capital has posited the mode of production corresponding to it — only when the means of labour has not only taken the economic form of fixed capital, but has also been suspended in its immediate form, and when fixed capital appears as a machine within the production process, opposite labour; and the entire production process appears as not subsumed under the direct skillfulness of the worker, but rather as the technological application of science. [It is,] hence, the tendency of capital to give production a scientific character; direct labour [is] reduced to a mere moment of this process. As with the transformation of value into capital, so does it appear in the further development of capital, that it presupposes a certain given historical development of the productive forces on one side — science too [is] among these productive forces — and, on the other, drives and forces them further onwards.

Thus the quantitative extent and the effectiveness (intensity) to which capital is developed as fixed capital indicate the general degree to which capital is developed as capital, as power over living labour, and to which it has conquered the production process as such. Also, in the sense that it expresses the accumulation of objectified productive forces, and likewise of objectified labour. However, while capital gives itself its adequate form as use value within the production process only in the form of machinery and other material manifestations of fixed capital, such as railways etc. (to which we shall return later), this in no way means that this use value — machinery as such — is capital, or that its existence as machinery is identical with its existence as capital; any more than gold would cease to have use value as gold if it were no longer money. Machinery does not lose its use value as soon as it ceases to be capital. While machinery is the most appropriate form of the use value of fixed capital, it does not at all follow that therefore subsumption under the social relation of capital is the most appropriate and ultimate social relation of production for the application of machinery.

To the degree that labour time — the mere quantity of labour — is posited by capital as the sole determinant element, to that degree does direct labour and its quantity disappear as the determinant principle of production — of the creation of use values — and is reduced both quantitatively, to a smaller proportion, and qualitatively, as an, of course, indispensable but subordinate moment, compared to general scientific labour, technological application of natural sciences, on one side, and to the general productive force arising from social combination [Gliederung] in total production on the other side — a combination which appears as a natural fruit of social labour (although it is a historic product). Capital thus works towards its own dissolution as the form dominating production.

While, then, in one respect the transformation of the production process from the simple labour process into a scientific process, which subjugates the forces of nature and compels them to work in the service of human needs, appears as a quality of fixed capital in contrast to living labour; while individual labour as such has ceased altogether to appear as productive, is productive, rather, only in these common labours which subordinate the forces of nature to themselves, and while this elevation of direct labour into social labour appears as a reduction of individual labour to the level of helplessness in face of the communality [Gemeinsamkeit] represented by and concentrated in capital; so does it now appear, in another respect, as a quality of circulating capital, to maintain labour in one branch of production by means of coexisting labour in another. In small-scale circulation, capital advances the worker the wages which the latter exchanges for products necessary for his consumption. The money he obtains has this power only because others are working alongside him at the same time; and capital can give him claims on alien labour, in the form of money, only because it has appropriated his own labour. This exchange of one’s own labour with alien labour appears here not as mediated and determined by the simultaneous existence of the labour of others, but rather by the advance which capital makes. The worker’s ability to engage in the exchange of substances necessary for his consumption during production appears as due to an attribute of the part of circulating capital which is paid to the worker, and of circulating capital generally. It appears not as an exchange of substances between the simultaneous labour powers, but as the metabolism [Stoffwechsel] of capital; as the existence of circulating capital. Thus all powers of labour are transposed into powers of capital; the productive power of labour into fixed capital (posited as external to labour and as existing independently of it (as object [sachlich]); and, in circulating capital, the fact that the worker himself has created the conditions for the repetition of his labour, and that the exchange of this, his labour, is mediated by the co-existing labour of others, appears in such a way that capital gives him an advance and posits the simultaneity of the branches of labour. (These last two aspects actually belong to accumulation.) Capital in the form of circulating capital posits itself as mediator between the different workers.

Fixed capital, in its character as means of production, whose most adequate form [is] machinery, produces value, i.e. increases the value of the product, in only two respects: (1) in so far as it has value; i.e. is itself the product of labour, a certain quantity of labour in objectified form; (2) in so far as it increases the relation of surplus labour to necessary labour, by enabling labour, through an increase of its productive power, to create a greater mass of the products required for the maintenance of living labour capacity in a shorter time. It is therefore a highly absurd bourgeois assertion that the worker shares with the capitalist, because the latter, with fixed capital (which is, as far as that goes, itself a product of labour, and of alien labour merely appropriated by capital) makes labour easier for him (rather, he robs it of all independence and attractive character, by means of the machine), or makes his labour shorter. Capital employs machinery, rather, only to the extent that it enables the worker to work a larger part of his time for capital, to relate to a larger part of his time as time which does not belong to him, to work longer for another. Through this process, the amount of labour necessary for the production of a given object is indeed reduced to a minimum, but only in order to realize a maximum of labour in the maximum number of such objects. The first aspect is important, because capital here — quite unintentionally — reduces human labour, expenditure of energy, to a minimum. This will redound to the benefit of emancipated labour, and is the condition of its emancipation. From what has been said, it is clear how absurd Lauderdale is when he wants to make fixed capital into an independent source of value, independent of labour time. It is such a source only in so far as it is itself objectified labour time, and in so far as it posits surplus labour time. The employment of machinery itself historically presupposes — see above, Ravenstone — superfluous hands. Machinery inserts itself to replace labour only where there is an overflow of labour powers. Only in the imagination of economists does it leap to the aid of the individual worker. It can be effective only with masses of workers, whose concentration relative to capital is one of its historic presuppositions, as we have seen. It enters not in order to replace labour power where this is lacking, but rather in order to reduce massively available labour power to its necessary measure. Machinery enters only where labour capacity is on hand in masses. (Return to this.)

Lauderdale believes himself to have made the great discovery that machinery does not increase the productive power of labour, because it rather replaces the latter, or does what labour cannot do with its own power. It belongs to the concept of capital that the increased productive force of labour is posited rather as the increase of a force [Kraft] outside itself, and as labour’s own debilitation [Entkräftung]. The hand tool makes the worker independent — posits him as proprietor. Machinery — as fixed capital — posits him as dependent, posits him as appropriated. This effect of machinery holds only in so far as it is cast into the role of fixed capital, and this it is only because the worker relates to it as wage-worker, and the active individual generally, as mere worker.


End of February, March. End of May – Beginning of June 1858 continued

Fixed capital and circulating capital as two particular kinds of capital. Fixed capital and continuity of the production process. – Machinery and living labour. (Business of inventing)

While, up to now, fixed capital and circulating capital appeared merely as different passing aspects of capital, they have now hardened into two particular modes of its existence, and fixed capital appears separately alongside circulating capital. They are now two particular kinds of capital. In so far as a capital is examined in a particular branch of production, it appears as divided into these two portions, or splits into these two kinds of capital in certain p[rop]ortions.

The division within the production process, originally between means of labour and material of labour, and finally product of labour, now appears as circulating capital (the last two) and fixed capital [the first]. [1] The split within capital as regards its merely physical aspect has now entered into its form itself, and appears as differentiating it.

From a viewpoint such as Lauderdale’s etc., who would like to have capital as such, separately from labour, create value and hence alsosurplus value (or profit), fixed capital – namely that whose physical presence or use value is machinery – is the form which gives their superficial fallacies still the greatest semblance of validity. The answer to them, e.g. in Labour Defended, [is] that the road-builder may share [profits] with the road-user, but the ‘road’ itself cannot do so.’ [2]

Circulating capital – presupposing that it really passes through its different phases – brings about the decrease or increase, the brevity or length of circulation time, the easier or more troublesome completion of the different stages of circulation, a decrease of the surplus value which could be created in a given period of time without these interruptions – either because the number of reproductions grows smaller, or because the quantity of capital continuously engaged in the production process is reduced. In both cases this is not a reduction of the initial value, but rather a reduction of the rate of its growth. From the moment, however, when fixed capital has developed to a certain extent – and this extent, as we indicated, is the measure of the development of large industry generally – hence fixed capital increases in proportion to the development of large industry’s productive forces – it is itself the objectification of these productive forces, as presupposed product – from this instant on, every interruption of the production process acts as a direct reduction of capital itself, of its initial value. The value of fixed capital is reproduced only in so far as it is used up in the production process. Through disuse it loses its use value without its value passing on to the product. Hence, the greater the scale on which fixed capital develops, in the sense in which we regard it here, the more does the continuity of the production process or the constant flow of reproduction become an externally compelling condition for the mode of production founded on capital.

In machinery, the appropriation of living labour by capital achieves a direct reality in this respect as well: It is, firstly, the analysis and application of mechanical and chemical laws, arising directly out of science, which enables the machine to perform the same labour as that previously performed by the worker. However, the development of machinery along this path occurs only when large industry has already reached a higher stage, and all the sciences have been pressed into the service of capital; and when, secondly, the available machinery itself already provides great capabilities. Invention then becomes a business, and the application of science to direct production itself becomes a prospect which determines and solicits it. But this is not the road along which machinery, by and large, arose, and even less the road on which it progresses in detail. This road is, rather, dissection [Analyse] – through the division of labour, which gradually transforms the workers’ operations into more and more mechanical ones, so that at a certain point a mechanism can step into their places. (See under economy of power.) Thus, the specific mode of working here appears directly as becoming transferred from the worker to capital in the form of the machine, and his own labour capacity devalued thereby. Hence the workers’ struggle against machinery. What was the living worker’s activity becomes the activity of the machine. Thus the appropriation of labour by capital confronts the worker in a coarsely sensuous form; capital absorbs labour into itself – ‘as though its body were by love possessed’. [3]

Contradiction between the foundation of bourgeois production (value as measure) and its development. Machines etc.

The exchange of living labour for objectified labour – i.e. the positing of social labour in the form of the contradiction of capital and wage labour – is the ultimate development of the value-relation and of production resting on value. Its presupposition is – and remains – the mass of direct labour time, the quantity of labour employed, as the determinant factor in the production of wealth. But to the degree that large industry develops, the creation of real wealth comes to depend less on labour time and on the amount of labour employed than on the power of the agencies set in motion during labour time, whose ‘powerful effectiveness’ is itself in turn out of all proportion to the direct labour time spent on their production, but depends rather on the general state of science and on the progress of technology, or the application of this science to production. (The development of this science, especially natural science, and all others with the latter, is itself in turn related to the development of material production.) Agriculture, e.g., becomes merely the application of the science of material metabolism, its regulation for the greatest advantage of the entire body of society. Real wealth manifests itself, rather – and large industry reveals this – in the monstrous disproportion between the labour time applied, and its product, as well as in the qualitative imbalance between labour, reduced to a pure abstraction, and the power of the production process it superintends. Labour no longer appears so much to be included within the production process; rather, the human being comes to relate more as watchman and regulator to the production process itself. (What holds for machinery holds likewise for the combination of human activities and the development of human intercourse.) No longer does the worker insert a modified natural thing [Naturgegenstand] as middle link between the object [Objekt] and himself; rather, he inserts the process of nature, transformed into an industrial process, as a means between himself and inorganic nature, mastering it. He steps to the side of the production process instead of being its chief actor. In this transformation, it is neither the direct human labour he himself performs, nor the time during which he works, but rather the appropriation of his own general productive power, his understanding of nature and his mastery over it by virtue of his presence as a social body – it is, in a word, the development of the social individual which appears as the great foundation-stone of production and of wealth. The theft of alien labour time, on which the present wealth is based, appears a miserable foundation in face of this new one, created by large-scale industry itself. As soon as labour in the direct form has ceased to be the great well-spring of wealth, labour time ceases and must cease to be its measure, and hence exchange value [must cease to be the measure] of use value. The surplus labour of the mass has ceased to be the condition for the development of general wealth, just as the non-labour of the few, for the development of the general powers of the human head. With that, production based on exchange value breaks down, and the direct, material production process is stripped of the form of penury and antithesis. The free development of individualities, and hence not the reduction of necessary labour time so as to posit surplus labour, but rather the general reduction of the necessary labour of society to a minimum, which then corresponds to the artistic, scientific etc. development of the individuals in the time set free, and with the means created, for all of them. Capital itself is the moving contradiction, [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth. Hence it diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition – question of life or death – for the necessary. On the one side, then, it calls to life all the powers of science and of nature, as of social combination and of social intercourse, in order to make the creation of wealth independent (relatively) of the labour time employed on it. On the other side, it wants to use labour time as the measuring rod for the giant social forces thereby created, and to confine them within the limits required to maintain the already created value as value. Forces of production and social relations – two different sides of the development of the social individual – appear to capital as mere means, and are merely means for it to produce on its limited foundation. In fact, however, they are the material conditions to blow this foundation sky-high. ‘Truly wealthy a nation, when the working day is 6 rather than 12 hours. Wealth is not command over surplus labour time’ (real wealth), ‘but rather, disposable time outside that needed in direct production, for every individual and the whole society.’ (The Source and Remedy etc. 1821, p. 6.)

Nature builds no machines, no locomotives, railways, electric telegraphs, self-acting mules etc. These are products of human industry; natural material transformed into organs of the human will over nature, or of human participation in nature. They are organs of the human brain, created by the human hand; the power of knowledge, objectified. The development of fixed capital indicates to what degree general social knowledge has become a direct force of production, and to what degree, hence, the conditions of the process of social life itself have come under the control of the general intellect and been transformed in accordance with it. To what degree the powers of social production have been produced, not only in the form of knowledge, but also as immediate organs of social practice, of the real life process.

Significance of the development of fixed capital (for the development of capital generally). Relation between the creation of fixed capital and circulating capital. Disposable time. To create it, chief role of capital. Contradictory form of the same in capital. – Productivity of labour and production of fixed capital. (The Source and Remedy.) – Use and consume: Economist. Durability of fixed capital

The development of fixed capital indicates in still another respect the degree of development of wealth generally, or of capital.The aim of production oriented directly towards use value, as well as of that directly oriented towards exchange value, is the product itself, destined for consumption. The part of production which is oriented towards the production of fixed capital does not produce direct objects of individual gratification, nor direct exchange values; at least not directly realizable exchange values. Hence, only when a certain degree of productivity has already been reached – so that a part of production time is sufficient for immediate production – can an increasingly large part be applied to the production of the means of production. This requires that society be able to wait; that a large part of the wealth already created can be withdrawn both from immediate consumption and from production for immediate consumption, in order to employ this part for labour which is not immediately productive (within the material production process itself). This requires a certain level of productivity and of relative overabundance, and, more specifically, a level directly related to the transformation of circulating capital into fixed capital. As the magnitude of relative surplus labour depends on the productivity of necessary labour, so does the magnitude of labour time – living as well as objectified – employed on the production of fixed capital depend on the productivity of the labour time spent in the direct production of products. Surplus population (from this standpoint), as well as surplus production, is a condition for this. That is; the output of the time employed in direct production must be larger, relatively, than is directly required for the reproduction of the capital employed in these branches of industry. The smaller the direct fruits borne by fixed capital, the less it intervenes in the direct production process, the greater must be this relative surplus population and surplus production; thus, more to build railways, canals, aqueducts, telegraphs etc. than to build the machinery directly active in the direct production process. Hence – a subject to which we will return later – in the constant under- and overproduction of modern industry – constant fluctuations and convulsions arise from the disproportion, when sometimes too little, then again too much circulating capital is transformed into fixed capital.

<The creation of a large quantity of disposable time apart from necessary labour time for society generally and each of its members (i.e. room for the development of the individuals’ full productive forces, hence those of society also), this creation of not-labour time appears in the stage of capital, as of all earlier ones, as not-labour time, free time, for a few. What capital adds is that it increases the surplus labour time of the mass by all the means of art and science, because its wealth consists directly in the appropriation of surplus labour time; since value directly its purpose, not use value. It is thus, despite itself, instrumental in creating the means of social disposable time, in order to reduce labour time for the whole society to a diminishing minimum, and thus to free everyone’s time for their own development. But its tendency always, on the one side,to create disposable time, on the other, to convert it into surplus labour. If it succeeds too well at the first, then it suffers from surplus production, and then necessary labour is interrupted, because no surplus labour can be realized by capital. The more this contradiction develops, the more does it become evident that the growth of the forces of production can no longer be bound up with the appropriation of alien labour, but that the mass of workers must themselves appropriate their own surplus labour. Once they have done so – and disposable timethereby ceases to have an antithetical existence – then, on one side, necessary labour time will be measured by the needs of the social individual, and, on the other, the development of the power of social production will grow so rapidly that, even though production is now calculated for the wealth of all, disposable time will grow for all. For real wealth is the developed productive power of all individuals. The measure of wealth is then not any longer, in any way, labour time, but rather disposable time. Labour time as the measure of value posits wealth itself as founded on poverty, and disposable time as existing in and because of the antithesis to surplus labour time; or, the positing of an individual’s entire time as labour time, and his degradation therefore to mere worker, subsumption under labour. The most developed machinery thus forces the worker to work longer than the savage does, or than he himself did with the simplest, crudest tools.>

‘If the entire labour of a country were sufficient only to raise the support of the whole population, there would be no surplus labour,consequently nothing that could be allowed to accumulate as capital. If in one year the people raises enough for the support of two years, one year’s consumption must perish, or for one year men must cease from productive labour. But the possessors of [the] surplus produce or capital… employ people upon something not directly and immediately productive, e.g. in the erection of machinery. So it goes on.’ (The Source and Remedy of the National Difficulties, p. 4.)

<As the basis on which large industry rests, the appropriation of alien labour time, ceases, with its development, to make up or to create wealth, so does direct labour as such cease to be the basis of production, since, in one respect, it is transformed more into a supervisory and regulatory activity; but then also because the product ceases to be the product of isolated direct labour, and the combination of social activity appears, rather, as the producer. ‘As soon as the division of labour is developed, almost every piece of work done by a single individual is a part of a whole, having no value or utility of itself. There is nothing on which the labourer can seize: this is my produce, this I will keep to myself.’ (Labour Defended, p. 25, 1, 2, XI.) In direct exchange, individual direct labour appears as realized in a particular product or part of the product, and its communal, social character – its character as objectification of general labour and satisfaction of the general need – as posited through exchange alone. In the production process of large-scale industry, by contrast, just as the conquest of the forces of nature by the social intellect is the precondition of the productive power of the means of labour as developed into the automatic process, on one side, so, on the other, is the labour of the individual in its direct presence posited as suspended individual, i.e. as social, labour. Thus the other basis of this mode of production falls away.>

The labour time employed in the production of fixed capital relates to that employed in the production of circulating capital, within the production process of capital itself, as does surplus labour time to necessary labour time. To the degree that production aimed at the satisfaction of immediate need becomes more productive, a greater part of production can be directed towards the need of production itself, or the production of means of production. In so far as the production of fixed capital, even in its physical aspect, is directed immediately not towards the production of direct use values, or towards the production of values required for the direct reproduction of capital – i.e. those which themselves in turn represent use value in the value-creation process – but rather towards the production of the means of value creation, that is, not towards value as an immediate object, but rather towards value creation, towards the means of realization, as an immediate object of production – the production of value posited physically in the object of production itself, as the aim of production, the objectification of productive force, the value-producing power of capital – to that extent, it is in the production of fixed capital that capital posits itself us end-in-itself and appears active as capital, to a higher power than it does in the production of circulating capital. Hence, in this respect as well, the dimension already possessed by fixed capital, which its production occupies within total production, is the measuring rod of the developmentof wealth founded on the mode of production of capital.

‘The number of workers depends as much on circulating capital as it depends on the quantity of products of co-existing labour, which labourers are allowed to consume.’ (Labour Defended, p. 20.)

In all the excerpts cited above from various economists fixed capital is regarded as the part of capital which is locked into the production process. ‘Floating capital is consumed; fixed capital is merely used in the great process of production.’ (Economist, VI, 1.) This wrong, and holds only for the part of circulating capital which is itself consumed by the fixed capital, the matières instrumentales. The only thing consumed ‘in the great process of production’, if this means the immediate production process, is fixed capital. Consumption within the production process is, however, in fact use, wearing-out. Furthermore, the greater durability of fixed capital must not be conceived as a purely physical quality. The iron and the wood which make up the bed I sleep in, or the stones making up the house I live in, or the marble statue which decorates a palace, are just as durable as iron and wood etc. used for machinery. But durability is a condition for the instrument, the means of production, not only on the technical ground that metals etc. are the chief material of all machinery, but rather because the instrument is destined to play the same role constantly in repeated processes of production. Its durability as means of production is a required quality of its use value. The more often it must be replaced, the costlier it is; the larger the part of capital which would have to be spent on it uselessly. Its durability is its existence as means of production. Its duration is an increase of its productive force. With circulating capital, by contrast, in so far as it is not transformed into fixed capital, durability is in no way connected with the act of production itself and is therefore not a conceptually posited moment. The fact that among the articles thrown into the consumption fund there are some which are in turn characterized as fixed capitalbecause they are consumed slowly, and can be consumed by many individuals in series, is connected with further determinations (renting rather than buying, interest etc.) with which we are not yet here concerned.

‘Since the general introduction of soulless mechanism in British manufactures, people have with rare exceptions been treated as a secondary and subordinate machine, and far more attention has been given to the perfection of the raw materials of wood and metals than to those of body and spirit.’ (p. 31. Robert Owen: Essays on the Formation of the Human Character, 1840, London.)

Real saving – economy – = saving of labour time = development of productive force. Suspension of the contradiction between free time and labour time. – True conception of the process of social production

<Real economy – saving – consists of the saving of labour time (minimum (and minimization) of production costs); but this saving identical with development of the productive force. Hence in no way abstinence from consumption, but rather the development of power, of capabilities of production, and hence both of the capabilities as well as the means of consumption. The capability to consume is a condition of consumption, hence its primary means, and this capability is the development of an individual potential, a force of production. The saving of labour time [is] equal to an increase of free time, i.e. time for the full development of the individual, which in turn reacts back upon the productive power of labour as itself the greatest productive power. From the standpoint of the direct production process it can be regarded as the production of fixed capital, this fixed capital being man himself. It goes without saying, by the way, that direct labour time itself cannot remain in the abstract antithesis to free time in which it appears from the perspective of bourgeois economy. Labour cannot become play, as Fourier would like, [5]although it remains his great contribution to have expressed the suspension not of distribution, but of the mode of production itself, in a higher form, as the ultimate object. Free time – which is both idle time and time for higher activity – has naturally transformed its possessor into a different subject, and he then enters into the direct production process as this different subject. This process is then both discipline, as regards the human being in the process of becoming; and, at the same time, practice [Ausübung], experimental science, materially creative and objectifying science, as regards the human being who has become, in whose head exists the accumulated knowledge of society. For both, in so far as labour requires practical use of the hands and free bodily movement, as in agriculture, at the same time exercise.

As the system of bourgeois economy has developed for us only by degrees, so too its negation, which is its ultimate result. We are still concerned now with the direct production process. When we consider bourgeois society in the long view and as a whole, then the final result of the process of social production always appears as the society itself, i.e. the human being itself in its social relations. Everything that has a fixed form, such as the product etc., appears as merely a moment, a vanishing moment, in this movement. The direct production process itself here appears only as a moment. The conditions and objectifications of the process are themselves equally moments of it, and its only subjects are the individuals, but individuals in mutual relationships, which they equally reproduce and produce anew. The constant process of their own movement, in which they renew themselves even as they renew the world of wealth they create.>

Owen’s istorical conception of industrial (capitalist) production

(In his Six Lectures Delivered at Manchester, 1837, Owen speaks about the difference which capital, by its very growth (and widespread appearance, and it obtains the latter only with large-scale industry, which is connected with the development of fixed capital), creates between workers and capitalists; but formulates the development of capital as a necessary condition for the recreation of society, and recounts about himself: ‘It was by being gradually trained to create and conduct some of these large’ (manufacturing) ‘establishments, that your lecturer’ (Owen himself) ‘was taught to understand the great errors and disadvantages of the past and present attempts to ameliorate the character and situation of his fellow beings.’ (p. 58.) We here put down the entire excerpt, to be used on another occasion.

‘The producers of developed wealth can be divided into workers in soft and workers in hard materials, under the immediate direction generally of masters whose object it is to make money through the labour of those they employ. Before the introduction of the chemical and mechanical manufacturing system, operations were carried out on a limited scale; there were many small masters, each with a few day-labourers, who expected in due time to become small masters themselves. They usually ate at the same table and lived together; a spirit and feeling of equality reigned among them. Since the period when scientific power began by and large to be employed in the business of manufacturing, a gradual change has taken place in this regard. Almost all manufactures, to be successful, must now be carried out extensively and with a great capital; small masters with small capitals have only little chance of success, particularly in the manufactures of soft materials, such as cotton, wool, flax etc.; and it is indeed evident now, that so long as the present classification of society and the mode of directing business life should endure, the small masters will be increasingly displaced by those who possess great capitals, and that the former relatively happier equality among the producers must give way to the greatest inequality between master and worker, such as has never before occurred in the history of mankind. The large capitalist is now elevated to the position of a commanding lord, treating the health, the life and death, indirectly, of his slaves, as he likes. He obtains this power through combination with other great capitalists, engaged in the same interest with himself, and thus effectively bends to his purpose those he employs. The large capitalist now swims in wealth, whose proper use he has not been taught and does not know. Through his wealth, he has gained power. His wealth and his power blind his reason; and when he oppresses altogether grievously, he believes he is bestowing favours… His servants, as they are called, his slaves in fact, are reduced to the most hopeless degradation; the majority robbed of health, of domestic comfort, of the leisure and healthy open-air pleasures of earlier days. Through excessive exhaustion of their powers, brought about by lengthy, drawn-out monotonous occupations, they are seduced into habits of intemperance, and made unfit for thinking or reflection. They can have no physical, intellectual or moral amusements other than of the worst sort; all real pleasures of life are far distant from them. The life which a very large part of the workers lead under the present system is, in a word, not worth having. But the individuals are not to blame for the changes of which these are the result; they proceed in the regular order of nature and are preparatory and necessary stages towards the great and important social revolution now in. progress. Without great capitals no great establishments can be founded; men cannot be brought to understand the practicability of effecting new combinations, in order to ensure a superior character to all and the production of more annual wealth than can be consumed by all; and that wealth, too, should be of a higher kind than that hitherto generally produced.’ (loc. cit. 56, 57.) ‘It is this new chemical and mechanical manufacturing system which now expands human abilities, and prepares men to understand and to adopt other principles and practices, and thus to effect the most beneficial change in affairs which the world has yet known. And it is this new manufacturing system which now creates the necessity for another and higher classification of society.’ (loc. cit. 58.))

[Circulation and Reproduction of Fixed and Circulating Capital

Capital and value of natural agencies. – Scope of fixed capital indicates the level of capitalist production. – Determination of raw material, product, instrument of production, consumption. – Is money fixed capital or circulating capital? – Fixed capital and circulating capital in regard to individual consumption

We remarked earlier that the force of production (fixed capital) only has value, hence only imparts value, in so far as it is itself produced, itself a given quantity of objectified labour time. But now natural agencies enter in, such as water, land (this notably), mines etc., which are appropriated, hence possess exchange value, and hence come as values into the calculation of production costs. This is, in a word, the entry of landed property (which includes earth, mines, water). The value of means of production which are not the product of labour does not belong here yet, since it does not arise out of the examination of capital itself. They appear for capital, initially, as given, historic presupposition. And we leave them as such, here. Only the form of landed property – or of natural agencies as value-determining magnitudes – modified to correspond to capital belongs within the examination of the system of bourgeois economy. It does not affect the examination of capital at the point we have so far reached, to regard land etc. as a form of fixed capital.

Since fixed capital, in the sense of a produced production force, as agency of production, increases the mass of use values created in a given time, it cannot grow without the raw material it works on also growing (in manufacturing industry. In the extractive industries, such as fishery, mining, labour merely consists in overpowering the obstacles in the way of the seizure and appropriation of the raw products or primary products. There is no raw material to be worked up for production; rather, the existing raw product is appropriated. By contrast, in agriculture the raw material is the earth itself; seed the circulating capital etc.). Its employment on a larger scale thus presupposes expansion of the part of circulating capital consisting of raw materials; hence growth of capital generally. It likewise presupposes (relative) decrease of the portion of capital exchanged for living labour.

In fixed capital, capital exists materially, too, not only as objectified labour, destined to serve as the means of new labour, but rather as value, whose use value is to create new values. The existence of fixed capital is therefore cat exochn its existence as productive capital. Hence the stage of development reached by the mode of production based on capital – or the extent to which capital itself is already presupposed as the condition of its own production, has presupposed itself – is measured by the existing scope of fixed capital; not only by its quantity, but just as much by its quality.

Finally: in fixed capital, the social productivity of labour [is] posited as a property inherent in capital; including the scientific power as well as the combination of social powers within the production process, and finally, the skill transposed from direct labour into the machine, into the dead productive force. In circulating capital, by contrast, it is the exchange of labours, of the different branches of labour, their interlacing and system-forming quality, the co-existence of productive labour, which appear as property of capital. [*]


We have now to examine the other relations of fixed capital and circulating capital.

We said above that the social relation between different labours is posited as a property of capital in circulating capital, as the social productive power of labour in fixed capital.

‘The circulating capital of a nation is: money, necessaries of life, raw materials, and finished products.’ (Adam Smith, tome II, p. 218.) Smith is in a quandary whether he should call money circulating or fixed capital. In so far as it always serves merely as instrument of circulation, which is itself a moment of the total reproduction process, it is fixed capital – as instrument of circulation. But its use value itself is only to circulate and never to be absorbed either into the production process proper nor into individual consumption. It is the part of capital constantly fixed in the circulation phase, and in this respect it is the most perfect form of circulating capital; in the other respect, because it is fixed as an instrument, it isfixed capital.

In so far as a distinction between fixed capital and circulating capital enters in from the perspective of individual consumption, this is already given in the fact that fixed capital does not enter into circulation as use value. (A part of the seed in agriculture does enter into circulation as use value, because it multiplies itself.) This non-entry-into-circulation supposes that it does not become the object of individual consumption.

Turnover time of capital consisting of fixed capital and circulating capital. Reproduction time of fixed capital. With circulating capital, the only requirement is that the interruption should be not so great as to ruin its use value. With fired capital, continuity of production absolutely necessary etc. – Unit of labour time the day; for circulating capital, the year. Longer total period as unit with the entry of fixed capital. – Industrial cycle. – Circulation of fixed capital. – The so-called risk. – All parts of capital yield an equal profit – false. Ricardo etc. – The same commodity sometimes fixed capital, sometimes circulating capital. – Sale of capital as capital. – Fixed capital which enters into circulation as use value. – Every moment which a presupposition of production, at the same time its result. Reproduction of its own conditions. Reproduction of capital as fixed capital and circulating capital

’Fixed capital’ serves over and over again for the same operation, ‘and by how much larger has been the range of these iterations, by so much [the] more intensely is the tool, engine, or machinery, entitled to the denomination of fixed’. (De Quincey, X, 4.) [7] If a capital consists of £10,000, of which 5,000 is fixed and 5,000 circulating; the latter turns over 1 time in 1 year, the former 1 time in 5 years; then 5,000 turn over, or 1/2 of the total capital, 1 time in one year. During the same year, 1/5 of the fixed capital or £1,000 turn over; hence in 1 year £6,000 or 3/5 of the total capital turn over. Hence 1/5 of the total capital turns over in 12/3 months and the total capital, in 12 × 5/3 months, in 60/3 = 20 months = 1 year and 8 months. In 20 months the total capital of £10,000 is turned over, although the fixed capital is replaced only in 5 years. This turnover time holds, however, only for the repetition of the production process and thus for the creation of surplus value; not for the reproduction of the capital itself. If the capital begins the process anew less frequently – returns from circulation into the form of fixed capital – then it returns all the more often into the form of circulating capital. But the capital itself is not replaced thereby. So with the circulating capital itself. If a capital of 100 returns 4 times a year and hence brings in 20%, like a capital of 400 which circulates only once, then the capital remains 100 at the end of the year as at the beginning, and the other capital remains 400, although it has effected a production of use values and a positing of surplus value equal to a 4 times larger capital. The fact that the velocity of turnover here substitutes for the magnitude of the capital shows strikingly that it is only the amount of surplus labour set into motion, and of labour generally, which determines the creation of value as well as the creation of surplus value, and not the magnitude of the capital for itself. The capital of 100 has, during the year, set in motion successively as much labour as one of 400, and hence created the same surplus value.

But the issue here is this. In the above example, the circulating capital of 5,000 first returns in the middle of the first year; then at the end of the second half; in the middle of the second; in the second half of the second (in the first 4 months) £3,333 2/6 of it have returned and the rest will have come back at the end of this half year.

But, of the fixed capital, only 1/5 was returned in the first year, 1/5 in the second. At the end of the first year, the owner has on hand £6,000; at the end of the second, 7,000; the third, 8,000; the fourth, 9,000; the fifth, 10,000. Only at the end of the fifth is he again in possession of his total capital, with which he began the production process; although in the creation of surplus value his capital acted as if it had wholly turned over in 20 months; thus the total capital itself is only reproduced in 5 years. The former aspect of turnover important for the relation of its realization; the latter, however, brings in a new relation which does not take place with circulating capital at all. Since circulating capital is completely absorbed into circulation and returns from it as a whole, it follows that it is reproduced as capital as many times as it is realized as surplus value or as surplus capital. But since fixed capital never enters circulation as a use value, and enters it as value only to the extent that it is consumed as a use value, it follows that it is by no means reproduced as soon as the surplus value determined by the average turnover time of the total capital is posited. The turnover of the circulating capital must take place 10 times in the 5 years before the fixed capital is reproduced; i.e. the period of the revulsions of circulating capital must be repeated 10 times while that of fixed capital is repeated once, and the total average turnover of the capital – 20 months – has to be repeated 2 times before the fixed capital is reproduced. Hence, the larger is the part of the capital consisting of fixed capital – i.e. the more capital acts in the mode of production corresponding to it, with great employment of produced productive force – and the more durable the fixed capital is, i.e. the longer its reproduction time, the more its use value corresponds to its specific economic role – the more often must the part of capital which is determined as circulating repeat the period of its turnover, and the longer is the total time the capital requires for the achievement of its total circulation. Hence the continuity of production becomes an external necessity for capital with the development of that portion of it which is determined as fixed capital. For circulating capital, an interruption, if it does not last so long as to ruin its use value, is only an interruption in the creation of surplus value. But with fixed capital, the interruption, in so far as in the meantime its use value is necessarily destroyed relatively unproductively, i.e. without replacing itself as value, is the destruction of its original value itself. Hence the continuity of the production process which corresponds to the concept of capital is posited as conditio sine qua [non] for its maintenance only with the development of fixed capital; hence likewise the continuity and the constant growth of consumption.

This is No. I. But No. II, the formal side, even more important. The total time in which we measured the return of capital was the year, while the time unit in which we measure labour is the day. We did [so] firstly because the year is more or less the natural reproduction time, or duration of the production phase, for the reproduction of the largest part of the vegetable raw materials used in industry. The turnover of circulating capital was determined, therefore, by the number of turnovers in the total time of a year. In fact, the circulating capital begins its reproduction at the end of each turnover, and while the number of turnovers during the year affects the total value, and the fate it encounters during each turnover appears as a determinant of the conditions under which it begins reproduction anew, yet each of them for itself is a complete lifespan for the circulating capital. As soon as capital is transformed back into money, it can transform itself e.g. into conditions of production other than the original ones, throw itself from one branch of production into another one, so that reproduction, regarded materially, is not repeated in the same form.

The introduction of fixed capital changes this; and neither the turnover time of capital, nor the unit in which their number is measured, the year, henceforth appear as the measure of time for the motion of capital. This unit is now determined, rather, by the reproduction time required for fixed capital, and hence the total circulation time it needs to enter into circulation as value, and to come back from it in the totality of its value. The reproduction of the circulating capital must also proceed in the same material form during this whole time, and the number of its necessary turnovers, i.e. the turnovers necessary for the reproduction of the original capital, is distributed over a longer or shorter series of years. Hence a longer total period is posited as the unit in which its turnovers are measured, and their repetition is now not merely externally, but rather necessarily connected with this unit. According to Babbage, the average reproduction of machinery in England 5 years; [8]the real one hence perhaps 10 years. There can be no doubt whatever that the cycle which industry has passed through since the development of fixed capital on a large scale, at more or less 10-yearly intervals, is connected with this total reproduction phase of capital. We shall find other determinant causes as well. But this is one of them. There were good and bad times for industry before, too, as well as for harvests (agriculture). But the industrial cycle of a number of years, divided into characteristic periods, epochs, is peculiar to large-scale industry.

Now the new distinction, No. III, appears.

Circulating capital was ejected from the production process in the form of the product, of the newly created use value, and thrown wholly into circulation; when transformed back into money, the entire value of the product (the entire labour time objectified in it, necessary and surplus labour time) was realized, and thereby the surplus value realized and all conditions of reproduction fulfilled. With the realization of the price of the commodity, all these conditions were fulfilled, and the process could begin anew. This holds, however, only for that part of the circulating capital which entered into large-scale circulation. As to the other portion of it, which continuously accompanies the process of production itself, the circulation of that part of it which is transformed into wages, it naturally depends on whether the labour is used for the production of fixed capital or of circulating capital whether these wages themselves are replaced by a use value entering into circulation or not.

Fixed capital, by contrast, does not itself circulate as a use value, but rather enters as value into the manufactured raw material (in manufactures and agriculture) or into the directly extracted raw material (mining industry etc.) only to the extent that it is used up as use value in the production process. Fixed capital in its developed form hence only returns in a cycle of years which embraces a series of turnovers of circulating capital. It is not at once exchanged as product for money, in such a way that its reproduction process might coincide with the turnovers of circulating capital. It enters into the price of the product only in successive bits, and hence returns as value only successively. It returns fragmentarily over longer periods, while circulating capital circulates wholly in shorter periods. To the extent that fixed capital remains as such, [it] does not return, because it does not enter into circulation; to the extent that it enters into circulation, it no longer remains as fixed capital, but rather forms an ideal value-component of the circulating capital. It returns in principle only to the extent that it transposes itself directly or indirectly into the product, hence into circulating capital. Because it is not a direct use value for consumption, it does not enter into circulation as use value.

This different kind of return of fixed and circulating capital will appear significant later as the difference between selling and renting, annuity, interest and profit, rent in its different forms, and profit; and the incomprehension of this merely formal distinction has led Proudhon and his gang to the most confused conclusions; as we shall see. In its observations on the last crisis, the Economist reduces the whole difference between fixed capital and circulating capital to the ‘resale of articles within a short period and at a profit’ (Economist No. 754, 6 Feb. 1858) and ‘production of a revenue large enough to provide for expenses, risk, wear and tear, and the market rate of interest’. [*] The shorter return through the sale of the whole article, and the merely annual return of a part of the fixed capital, analysed above. As to profit – merchant’s profit does not concern us here – each part of the circulating capital which leaves and returns to the production process, i.e. contains objectified labour (the value of the advances), necessary labour (the value of wages) and surplus labour – brings profit as soon as it passes fully through circulation, because the surplus labour which the product contains is realized with it. But it is neither the circulating capital nor the fixed capital which create the profit, but rather the appropriation of alien labour which both of them mediate, hence at bottom only the part of circulating capital which enters into small-scale circulation. This profit is realized in practice, however, only through the entry of capital into circulation, hence only in its form as circulating capital, never in its form as fixed capital. But what the economist here understands by fixed capital is – as far as revenues from it are concerned – the form of fixed capital in which it does not directly enter into the production process as machinery, but rather in railways, buildings, agricultural improvements, drainings etc., [**] where, hence, the realization of the value and surplus value contained in it appears in the form of an annuity, where interest represents the surplus value and the annuity the successive return of the value advanced. This is therefore not in fact a case (although it is the case with agricultural improvements) of fixed capital entering into circulation as value by forming a part of the product, but rather of the sale of fixed capital in the form of its use value. It is here sold not all at once, but as an annuity. Now, it is clear, firstly, that some forms of fixed capital figure initially as circulating capital, and become fixed capital only when they become fixed in the production process; e.g. the circulating products of a machine-maker are machines just as those of a cotton-weaver are calico, and they enter into circulation in just the same way, for him. For him they are circulating capital; for the manufacturer who uses them in the production process, fixed capital; because product for the former, and instrument of production only for the latter. Likewise even houses, despite their immovability, are circulating capital for the building-trade; for him who buys them to rent them out again, or to use them as buildings for production, they are fixed capital. Now in so far as fixed capital itself circulates as use value, i.e. is sold, changes hands, we shall speak of it further, below.

But the viewpoint that capital is sold as capital – whether as money or in the form of fixed capital – is obviously not relevant here, where we are considering circulation as the movement of capital in which it posits itself in its various conceptually specific moments. Productive capital becomes product, commodity, money, and is transformed back into the conditions of production. It remains capital in each of these forms, and it becomes capital only by realizing itself as such. So long as it remains in one of these phases, it is fixed as commodity capital, money capital, or industrial capital. But each of these phases forms only one moment of its movement, and in the form from which it must propel itself to pass over into another phase it ceases to be capital. If it rejects itself as commodity and becomes money, or vice versa, then it does not exist as capital in the rejected form, but rather in the newly reached one. Of course, the rejected form can in turn become the form of another capital, or it can be the direct form of the consumable product. But this does not concern us and does not concern capital as far as the course it traces out in its internal circulation is concerned. Rather, it rejects each of the forms as its not-capital-being, so as to assume them again later. But if capital is lent out as money, as land and soil, house etc., then it becomes a commodity as capital, or, the commodity put into circulation is capital as capital. This to be further pursued in the next section.

What is paid for in the transposition of the commodity into money, as far as the part of the price which is the value of part of the fixed capital is concerned, is the part required for its partial reproduction, the part worn out and used up in the production process. What the buyer pays, then, is the use or wear of the fixed capital, in so far as it is itself value, objectified labour. Since this wear takes place successively, he pays it in portions in the product, whereas in the price he pays for the product he replaces the whole value of the fractional part of the raw material contained in the product. The worn-out, used-up fractional part of fixed capital is paid for not only successively, but also by a mass of buyers simultaneously, in relation as they buy products. Since capital appears in the first half of its circulation as C and the buyer as M, since its aim is value while the buyer’s is use (whether in turn productive, no matter here, where we are examining only the formal aspect such as it appears towards capital in its circulation), it follows that the relation of the buyer to the product is that of the consumer generally. Indirectly, then, in all commodities the buyer successively and bit by bit pays for the wear and use of fixed capital, even though the latter does not enter into circulation as use value. But there are forms of fixed capital where he pays directly for its use value – as with means of communication, transport etc. In all these cases the fixed capital in fact never leaves the production process, as with railways etc. But while it serves for some as means of communication within the production process itself, to bring the product to market, and for the producers themselves [as] means of circulation, it can serve others as means of consumption, as use value, for holiday travel, etc. Regarded as a means of production, it distinguishes itself from machinery etc. here in that it is used up by various capitals at the same time, as a common condition for their production and circulation. (We are not yet concerned with consumption as such here.) It does not appear as locked within a particular production process, but rather as the connecting artery of a mass of such production processes of particular capitals, who use it up only in portions. In contrast to all these particular capitals and their particular production processes, then, fixed capital is here cast as the product of a particular branch of production separate from them, in which, however, it is not sold by one producer as circulating capital and bought by another as fixed capital, as with machinery, but, rather, in which it can be sold only in the form of fixed capital itself. Then its successive return, hidden in the commodity, becomes apparent. But this fixed capital then also includes the surplus value, since it is itself a. sold product (for the industrialist, the machine he uses is not a product), hence the return of interest and profit, if any. Since it can be consumed in the same common and successive form, can be use value for direct consumption, it follows that its sale – not as an instrument of production but as a commodity generally – also appears in the same form. But in so far as it is sold as an instrument of production – a machine is sold as a mere commodity and only becomes an instrument of production in the industrial process – i.e. as its sale directly coincides with its use in the general social production process, this is a determination which has no place within the examination of the simple circulation of capital. In the latter, fixed capital, in so far as it enters as an agency of production, appears as a presupposition of the production process, not as its result. It can therefore only be a matter of the replacement of its value, in which no surplus value for the user is included. What is rather the case is that he has paid this surplus value to the machine-maker. Railways, however, or buildings rented for production, are simultaneously instruments of production, and are simultaneously realized by their seller as product, as capital.

Since each moment which appears as presupposition of production is at the same time its result – in that it reproduces its own conditions – the original division of the capital within the production process now appears in such a way that the production process divides into three production processes, in which different portions of the capital – which now also appear as particular capitals – are at work. (Here we can still assume a form in which one capital is at work, because we are examining capital as such, and this way of looking at it simplifies what needs to be said about the proportion of these different kinds.) The capital is annually reproduced in different and changing portions as raw material, as product, and as means of production; in a word, as fixed capital and as circulating capital. The minimum presupposition which appears in all of these production processes is the part of circulating capital destined for exchange with, labouring capacity and for the maintenance and consumption of the machinery or the instrument, and the means of production. In purely extractive industries, e.g. mining, the mine itself exists as the material of labour, but not as raw material passing over into product, which latter must, in the manufacturing industry, by contrast, have a particular existence in all forms. In agriculture, seed, fertilizer, cattle etc., may be regarded as raw material as well as matières instrumentales.Agriculture forms a mode of production sui generis, because the organic process is involved, in addition to the mechanical and chemical process, and the natural reproduction process is merely controlled and guided; extractive industry (mining the most important) is likewise an industry sui generis, because no reproduction process whatever takes place in it, at least not one under our control or known to us. (Fishery, hunting etc. can involve a reproduction process; likewise forestry; this is therefore not necessarily purely extractive industry.) Now, in so far as the means of production, fixed capital as the product of capital and hence containing objectified surplus time, is itself constituted in such a way that it can be ejected by its producer as circulating capital, e.g. like machinery by the machine builder, before it becomes fixed capital, i.e. first enters into circulation as use value, [to that extent] its circulation contains no new aspect whatever. But in so far as it can never be sold while it serves at the same time as instrument of production, as e.g. railways, or in proportion as it is used up as such, it shares with fixed capital generally the quality that its value returns only successively; but there is also the addition that this return of its value includes the return of its surplus value, of the surplus labour objectified in it. It then has a special form of return.

The important thing now is that the production of capital thus appears as the production in definite portions of circulating capital and fixed capital, so that capital itself produces its double way of circulating as fixed capital and circulating capital.

Fixed capital and circulating capital. Economist. Smith. Counter-value of circulating capital must be produced within the year. Not so for fixed capital. It engages the production of subsequent years

Before we settle the last point, first a few secondary matters. ‘Floating capital is consumed, fixed capital merely used, in the great work of production.’ (Economist, VI, p. 1.) The distinction between consume and use dissolves into gradual or rapid destruction. We need dwell on this point no further.

‘Floating capital assumes an infinite variety of forms, fixed capital has only one.’ (Economist, VI, p. 1.)’ [10] This ‘infinite variety of forms’, as regards the production process of capital itself, is much more correctly reduced by Adam Smith to a mere change of form. Fixed capital is of use to its master ‘so long as it continues to remain in the same form’. That means it remains within the production process as use value, in a specific material presence. Circulating capital, by contrast (A. Smith, tome II, p. 197, 198) ‘constantly passes out of his hands in a specific form’ (as product) ‘to return in another’ (as condition of production) ‘and brings profit only by means of this circulation and successive changes’. Smith does not speak here of the ‘infinite variety of forms’ in which circulating capital appears. Regarded materially, ‘fixed capital’ also assumes ‘an infinite variety of forms’; but this proceeds from the metamorphoses which circulating capital passes through as itself a use value, and the ‘infinite variety of forms’ reduces itself, therefore, to the qualitative differences of the various phases of circulation. Regarded within a specific production process, circulating capital always returns in the same form of raw materials and money for wages., The material presence is the same at the end of the process as at the beginning. Incidentally, elsewhere the Economist itself reduces the ‘infinite variety of forms’ to the conceptually determined change of forms in circulation. ‘The commodity is wholly consumed in the shape in which it is produced’ (i.e. enters into circulation as use value and is ejected from it) ‘and replaced in his hands in a new shape’ (as raw material and wages), ‘ready to repeat asimilar operation’ (rather, the same operation). (loc. cit. VI, p. 1.) [11] Smith also says explicitly that fixed capital ‘requires no circulation’. (tome II, 197, 198.) With fixed capital, the value is imprisoned within a specific use value; with circulating capital, value takes the form of various different use values, likewise assumes as well as rejects the independent form distinct from every particular use value (as money); hence constant change of matter and form goes on.

‘Circulating capital supplies him’ (the entrepreneur) ‘with the materials and wages of the workers, and sets industry into activity.’ (A. Smith, tome II, p. 226.) ’Every fixed capital comes originally from a circulating capital, and needs to be continually maintained by means of a circulating capital.’ (loc.. cit. p. 207.) ‘Since so great a part of the circulating capital is being withdrawn continuously to be spent in the other two branches of the general social fund, this capital needs in turn to be renewed by continual replenishment, otherwise it would soon be reduced to nothing. These replenishments are drawn from three principal sources: the produce of the soil, of mines, and of fisheries.’ (loc. cit. p. 208.)

<We have already developed one distinction emphasized by the Economist: ’Every production the whole cost of which is returned to the producer out of the current income of the country is floating capital; but every production, in respect of which only an annual sum is paid for the use, is – fixed capital.’ (Notebook VI, p. 1.) [12] ‘In the first case, the producer is entirely dependent on the country’s current income.’ (loc. cit.) We have seen that only part of the fixed capital returns in the time determined by circulating capital, which serves as the unit of its turnovers because it is the natural unit for the reproduction of the greatest part of food products and raw materials, just as, and because, it appears as the natural epoch in the life process (cosmic process) of the earth. This unit is the year, whose bourgeois calculation deviates more or less, but insignificantly, from its natural magnitude. The more the material presence of fixed capital corresponds to its concept, the more adequate its material mode of existence is, the more does its turnover time span a cycle of years. Since circulating capital is wholly exchanged first for money, secondly for its elements, it presupposes that a countervalue has been produced equal to its whole value (including the surplus value). It cannot be said that it enters or can enter into consumption entirely; since it must also in part serve in turn as raw material, or as an element for fixed capital; in short itself, in turn, as an element of production – a counter-production. A part of the use value ejected by capital as the product, as the result of the production process, becomes an object of consumption and thus drops out of the circulation of capital altogether; another part enters into another capital as a condition of production. This is itself posited in the circulation of capital as such, since it ejects itself from itself in the first half of circulation, as commodity, i.e. as use value; i.e. dismisses itself with respect to itself in this form from its own circulation as use value, article of consumption; but exchanges itself as money for commodity as condition of production, in the second half of its circulation. Thus, as circulating use value itself, it posits its material presence both as an article of consumption and as a new element of production, or rather an element of reproduction. But in both cases the whole of its countervalue must be on hand; i.e. it must have been wholly produced during the year. For example, the sum of manufactured products which can be exchanged during a year for agricultural products is determined by the mass of the raw products produced in a year, counted from harvest to harvest. Since we speak here of capital as such, capital in the process of becoming, we are not yet concerned with anything else in addition – in that the many capitals are not yet present for us – nothing but it itself and simple circulation, out of which it absorbs value in the double form of money and commodity and into which it throws it in the double form of money and commodity. When an industrial people producing on the foundation of capital, such as the English, e.g., exchange with the Chinese, and absorb value in the form of money and commodity from out of their production process, or rather absorb value by drawing the latter within the sphere of the circulation of their capital, then one sees right away that the Chinese do not therefore need to produce as capitalists. Within a single society, such as the English, the mode of production of capital develops in one branch of industry, while in another, e.g. agriculture, modes of production predominate which more or less antedate capital. Nevertheless, it is (1) its necessary tendency to conquer the mode of production in all respects, to bring them under the rule of capital. Within a given national society this already necessarily arises from the transformation, by this means, of all labour into wage labour; (2) as to external markets, capital imposes this propagation of its mode of production through international competition. Competition is the mode generally in which capital secures the victory of its mode of production. Still, this much is clear: quite regardless of whether it is another capital or whether it is capital itself as another which stands on both sides of the successive exchanges, each time in the opposite aspect, both aspects are already posited before we proceed to examine this double movement from the circulation of capital as suchitself. In the first phase it ejects itself out of the movement of capital as use value, as commodity, and exchanges itself for money. The commodity expelled from the circulation of capital is no longer the commodity as a moment of self-perpetuating value, as the presence of value. It is, thus, its presence as use value, its being for consumption. Capital is transposed out of the form of commodity into the form of money only because an exchanger appears opposite it in ordinary circulation as consumer, who transposes M into C; [completes] this transposition in its material aspect, so that he relates to the use value as use value, as consumer, and only in this way is the use value replaced for capital as value. Thus, capital creates articles of consumption, but ejects them from itself in this form, ejects them from its circulation. On the basis of the aspect developed so far, no other relations exist. The commodity which is ejected as such from the circulation of capital loses its character as value and fulfills the role of use value for consumption, as distinct from fulfilling it for production. But in the second phase of circulation, capital exchanges money for commodity, and its transformation into commodity now itself appears as a moment of value-positing, because the commodity is accepted as such into the circulation process of capital. While it presupposes consumption in the first phase, in the second it presupposes production, production for production; for value in the form of the commodity is here taken into the circulation of capital from the outside, or, the inverse process is undertaken in the first phase. The commodity, as use value for capital itself, can only be the commodity as an element, use value, for its production process. In its double form, the process presents itself in this way: capital exchanges its product as C for capital b’s M in the first phase; in the second, capital as C exchanges for capital a’s M. Or, in the first phase, capital as M exchanges for capital a’s C, in the second, a as M for capital b’s C. That is, capital is simultaneously posited in each of the two circulation phases as M and C; but in two different capitals, which are always in the opposite phase of their circulation process. In the simple circulation process, the acts of exchange, C – M or M – C appear either as directly coinciding or as directly divided. Circulation is not only the succession of both forms of exchange, but it is at the same time each of them distributed to two different sides. But we are not yet concerned here with exchange among many capitals. This belongs to the theory of competition or to that of the circulation of capitals (of credit). What concerns us here is the presupposition of consumption on one side – of the commodity ejected from the movement of value as use value – and the presupposition of production for production – of value, posited as use value, as a condition of its reproduction posited externally to the circulation of capital on the other side – so that these two sides arise out of the examination of the simple form of the circulation of capital. This much is clear: Since the entire circulating capital exchanges as C for M in the first phase, and as M for C in the second, then, if we regard the year as the unit of time of its evolutions, its transformations are limited both by the annual reproduction of raw materials etc. (the commodity for which it exchanges as money must have been produced, a simultaneous production must correspond to it), and by the constant creation of an annual revenue (the part of M which exchanges for commodity as use value) to consume the product of capital which is ejected as use value. Since further-developed relations are not present yet, such revenues are only those of the capitalists themselves and those of the workers. The examination of the exchange of capital and revenue, by the way, another form of the relation of production and consumption, does not belong here yet. In another respect, since fixed capital is exchanged only to the extent it enters as value into circulating capital, since it is, thus, realized only in part during the year, it presupposes only apartial counter-value, i.e. only the partial production of this counter-value during the course of the year. It is paid for only in proportion to its wear. This much clear, then, which already follows from the difference introduced by fixed capital into the industrial cycle, namely that it engages the production of subsequent years, and, just as it contributes to the creation of a large revenue, it anticipates further labour as a counter-value. The anticipation of future fruits of labour is therefore in no way a consequence of the state debt etc., in short, not an invention of the credit system. It has its roots in the specific mode of realization, mode of turnover, mode of reproduction of fixed capital.>

Since we are essentially concerned here with grasping the pure, specific economic forms, hence with not joining together things that do not belong, it has thus become clear from the above that the different forms in which circulating capital and fixed capital bring revenue – as well as the examination of revenue generally – do not yet belong here at all; but only the different ways in which they return and affect the total turnover of capital, the movement of its reproduction generally. Nevertheless, the incidental points made here are important – in that they reject the economists’ motley compilations, which have no place yet in the examination of the simple distinction between fixed capital and circulating capital – and because they showed us that the differences in revenue etc. have their basis in the difference of form between the reproduction of fixed and circulating capital. The issue here is still only the simple return of the value. Only later will it be found how the latter becomes the return of revenue, and that in turn becomes the difference in the determination of revenue.

Maintenance costs

We have said nothing so far about the maintenance costs, the frais d’entretien of fixed capital. These are partly the matières instrumentales it consumes in its action. They make up fixed capital in the first sense, as we have regarded it within the production process. These are circulating capital and may just as well serve for consumption. They become fixed capital only in so far as they are consumed in the production process, but do not have, like fixed capital proper, a material substance determined purely by their formal presence. The second part of these maintenance costs consists of the labour necessary for repairs.

Revenue of fixed capital and circulating capital

A. Smith’s determination that every fixed capital comes originally from a circulating capital and must be constantly maintained by a circulating capital: ‘Every fixed capital originally comes from a circulating capital and must be continually kept up at the latter’s expense. No fixed capital can yield revenue except at the expense of a circulating capital.’ (Storch, 26a.) [13] As to Storch’s remark about revenue – an aspect which does not belong here – it is clear: fixed capital returns as value only in proportion as it becomes extinguished as use value, as fixed capital, and enters into circulating capital as value. Hence it can return in the form of a circulating capital only in so far as its value is concerned. But it does not circulate at all as use value. Further, since it has a use value only for production, it can return for individual use, for consumption, also only in the form of circulating capital. Improvements of the soil can directly enter chemically into the reproduction process and in this way be directly transformed into use values. But then they are consumed in their form as fixed capital. A capital can bring revenue at all only in the form in which it enters into and returns from circulation, because the production of revenue in direct use values, use values not mediated through circulation, contradicts the nature of capital. Hence, since fixed capital returns as value only in the form of circulating capital, it can bring revenue only in this form. Revenue is nothing whatsoever other than the part of the surplus value destined for immediate consumption. Its returns thus depend on the mode of return of value itself. Hence the different forms in which fixed capital and circulating capital bring revenue. Likewise, since fixed capital as such never enters circulation as use value, hence is never thrown out of the realization process as use value, it never serves for immediate consumption.

Now as to Smith, his view becomes clearer for us when he says that circulating capital must be annually replaced and constantly renewed by constantly drawing it from the sea, the soil, and from mines. Here, then, circulating capital becomes purely material for him; it is fished out by the hairs, chipped out, harvested; they are the movable primary products which are released from their connection with the earth, isolated, made movable thereby, or separated from their element in their ready-made individuality, like fish etc. Still regarded as pure material, it is further certain that, if Smith presupposes the production of capital and does not suppose himself at the beginning of the world, then every circulating capital likewise comes originally from a fixed capital. Without nets he can catch no fish; without a plough, till no fields; and without a hammer, etc., drive no mines. If he uses even so little as a stone for a hammer etc., then this stone is certainly no circulating capital, no capital of any sort, but rather a means of labour. As soon as he has to produce, man possesses the resolve to use a part of the available natural objects directly as means of labour, and, as Hegel correctly said it, subsumes them under his activity without further process of mediation. [14] The place where all capital, circulating as well as fixed, not only originally but continually comes from is the appropriation of alien labour. But this process presupposes, as we have seen, a continuous small- scale circulation, the exchange of wages for labour capacity, or approvisionnement. Assuming the production process of capital: All capital returns only in the form of a circulating capital; hence fixed capital can be renewed only by a process in which a part of circulating capital becomes fixed; hence, by the employment of part of the raw materials produced, and a part of labour consumed (hence also a part of the approvisionnement exchanged for living labour) for the production of fixed capital. In agriculture, e.g., part of the product is consumed by labour to build irrigation systems or a part of the grain is exchanged for guano, chemical substances etc., which are incorporated into the earth, but also in fact have no use value except in so far as they are surrendered to the chemical process of the soil. A part of the circulating capital has a use value only for the reproduction of the fixed capital, and is produced (even if its production consisted only of the labour time spent in changing its location) only for fixed capital. But fixed capital itself can be renewed as capital only by becoming a value-component of circulating capital, and its elements are thus reproduced through the transformation of circulating capital into fixed capital. Fixed capital is as much a presupposition for the production of circulating capital as circulating capital is for the production of fixed capital. Or, the reproduction of fixed capital requires: (1) the return of its value in the form of a circulating capital, for only in this way can it in turn be exchanged for the conditions of its production; (2) that a part of living labour and of the raw material be used to produce instruments of production, direct or indirect ones, instead of producing exchangeable products. Circulating capital enters as use value into fixed capital, just as does labour, while fixed capital enters as value into circulating capital; and, as movement (where it is direct machinery), as static motion, as form, into the use value.

Free labour = latent pauperism. Eden [15]

<In connection with our statements developed above, that pauperism latent in free labour, the following statements by Sir Fr. Morton Eden, Bt:The State of the Poor, or an History of the Labouring Classes in England from the Conquest etc., 3 vols., London, 1797. (The quotations from Vol. I, bk I.) (In book I, chapter I, it says: ‘Our zone requires labour for the satisfaction of needs, and therefore at least one part of society must always tirelessly labour; others labour in the arts etc., and some, who do not work, still have the products of diligence at their disposal. For this, these proprietors have only civilization and order to thank; they are purely the creatures of civilized institutions. For these have recognized that one can also obtain the fruits of labour through ways other than labour; the men of independent fortune owe theirwealth almost entirely to the labour of others, not to their own ability, which is not at all better. What divides the rich from the poorer is not the ownership of land or of money, but rather the command of labour.’ Poverty as such begins with the tiller’s freedom – the feudal fetters to the soil, or at least the locality, had until then spared the legislature the task of occupying itself with the vagrants, poor etc. Eden believes that the various commercial guilds etc. also fed their own poor. He said: ‘Without the most distant idea, then, of disparaging the numberless benefits derived for the country from manufactures and commerce, the result of this investigation seems to lead to this inevitable conclusion that manufactures and commerce’ (i.e. the first sphere of production in which capital became predominant) ‘are the true parents of our national poor.’ In the same place: Beginning with Henry VII (where at the same time there began the clearing of the land of superfluous mouths through transformation of the tilled fields into pasture, continuing for more than 150 years, at least the litigation and legislative interference; hence the number of hands made available for industry grew), wages in industry were no longer fixed, only in agriculture. 11, Henry VII. (With free labour, wage labour is not yet completely posited. The labourers still have support in the feudal relations; their supply is still too small; capital hence still unable to reduce them to the minimum. Hence statutory determination of wages. So long as wages are still regulated by statute, it cannot yet be said either that capital has subsumed production under itself as capital, or that wage labour has attained the mode of existence adequate to it.) The act cited also mentions linen weavers, building craftsmen, shipwrights. The same act also fixes the hours of labour: ‘Because many day labourers waste half the day, arrive late, leave early, take a long afternoon nap, spend a long time at breakfast, lunch and dinner, etc. etc.,’ it ordains the following hours: ‘from 15 March to 15 September, from 5 a.m., 1/2 hour breakfast, l 1/2 dinner and siesta, 1/2 hour for noon meal, and work until between 7 and 8 p.m. In winter, however, no siesta during daylight; this permitted only from 15 May to 15 August.>

<Wages again regulated in 1514, almost like the previous time. Hours of work again fixed. Whoever will not work upon application, arrested. Hence still compulsory labour by free workers at the given wages. They must first be forced to work within the conditions posited by capital. The propertyless are more inclined to become vagabonds and robbers and beggars than workers. The last becomes normal only in the developed mode of capital’s production. In the prehistory of capital, state coercion to transform the propertyless into workers at conditions advantageous for capital, which are not yet here forced upon the workers by competition among one another.> (Very bloody means of coercion of this sort employed under Henry VIII et. al.) (Suppression of the monasteries under Henry VIII likewise frees many hands.) (Under Edward VI still sharper laws against able-bodied labourers who do not want to work. ‘1 Edw. VI, 3: Who is able to work, refuses to labour, and lives idle for 3 days, shall be branded with redhot iron on the breast with the letter V – and shall be adjudged the slave for two years of the person who should inform against such idler etc.’ ‘If he runs away from his master for 14 days he shall become his slave for life and be branded on forehead or cheek with letter S, and if he runs away a second time and shall be convicted thereof by two sufficient witnesses, he shall be taken as a felon and suffer pains of death.’ (1376 first mention of the vagrants, sturdy rogues, 1388 the paupers.) (Similar cruel statute 1572 under Elizabeth) [16]

The smaller the value of fixed capital in relation to its product, the more useful. – Movable, immovable, fixed and circulating. – Connection of circulation and reproduction. necessity of reproducing use value in definite time

Circulating capital and fixed capital, which appeared earlier as changing forms of the same capital in the different phases of its turnover, are now, when fixed capital is developed to its highest form, posited at the same time as two different modes of the existence of capital. They become such through the difference in kind of their return. Circulating capital which returns slowly has a quality in common with fixed capital. But it distinguishes itself from it because its use value itself – its material presence – enters into circulation and is at the same time shed by it, thrown beyond the bounds of the turnover process; while fixed capital – to the extent that it has been developed at this point – enters into circulation only as value, and, as long as it is still in circulation as a use value, such as e.g. the machine in circulation, it is fixed capital only dunamei. However, this distinction between fixed capital and circulating capital, resting initially on the relation of the material presence of the capital, or of its presence as use value, towards circulation, must, with reproduction, be posited at the same time as the reproduction of the capital in the double form of fixed capital and circulating capital. In so far as the reproduction of capital in every form is the positing not only of objectified labour time, but rather of surplus labour time, not only reproduction of its value but of a surplus value, the production of fixed capital cannot therefore be different in this regard from the production of circulating capital. Hence, in the manufacture of instruments or machines – in all the forms where fixed capital appears first as circulating capital in its material presence, in its presence as use value before becoming fixed as fixed capital, i.e. before it is consumed, for it is precisely its consumption which binds it to the production phase and distinguishes it as fixed capital – there is no difference at all, as to the realization of capital, whether it reproduces itself in the form of fixed or of circulating capital. Hence no new economic determination enters here, either. But where fixed capital as such is thrown into circulation by its producer – and not as circulating capital – hence where its proportionate use is sold, either for production or for consumption – for in the transformation of C into M, which takes place in the first section of the circulation of capital, it is irrelevant to the latter whether the commodity in turn enters into the circulation sphere of another productive capital, or whether it serves the purpose of direct consumption; for the first capital, it is rather always determined as a use valuewhenever it ejects it from itself, exchanges it for M – there the mode of return must be different for the producer of fixed capital from that for the producer of circulating capital. The surplus value created by him can return only proportionately and successively with the value itself. This to be looked at in the next section. Finally, although circulating capital and fixed capital now appear as two different kinds, circulating capital is still posited through the consumption, the wear of fixed capital; while fixed capital, for its part, exists only as a circulating capital transformed into this specific form. All capital transformed into objectified productive power – all fixed capital – is a use value fixated in this form, and hence a use value snatched away from consumption as well as from circulation. The transformation of wood, iron, coal and living labour (hence also indirectly that of the products consumed by the worker) into the specific use values of a machine or a railway would not by itself turn them into fixed capital if the other determinants developed above were absent. When circulating capital is transformed into fixed capital, then a part of the use values in whose form capital circulated, as well as indirectly the part of the capital which exchanges for living labour, are transformed into capital whose counter-value is created only over a longer cycle; which enters into circulation as value only proportionately and successively; and which can be realized as value only through being used up in production. The transformation of circulating capital into fixed capital presupposes relative surplus capital, since it is capital employed not for direct production but rather for new means of production. Fixed capital itself can in turn serve as a direct instrument of production – as a means within the immediate production process. In this case its value enters into the product and is replaced by the successive return of the products. Or it does not enter into the immediate production process – appears rather as a general condition for production processes, such as buildings, railways etc., and its value can be replaced only through circulating capital, to whose creation it indirectly contributed. Questions of greater detail about the proportion in the production of fixed capital and circulating capital belong to the following section. If valuable machinery were employed to supply a small quantity of products, then it would not act as a force of production, but rather make the product infinitely more expensive than if the work had been done without machinery. It creates value not in so far as it has value – for the latter is simply replaced – but rather only in so far as it increases relative surplus time, or decreases necessary labour time. In the same proportion, then, as that in which its scope grows, the mass of products must increase, and the living labour employed relatively decrease. The less the value of the fixed capital in relation to its effectiveness, the more does it correspond to its purpose. All unnecessary fixed capital appears as faux frais de production, like all unnecessary circulation costs. If capital could possess the machinery without employing labour for the purpose, then it would raise the productive power of labour and diminish necessary labour without having to buy labour. The value of the fixed capital is therefore never an end in itself in the production of capital.

Circulating capital, then, is transformed into fixed capital, and fixed capital reproduces itself in circulating capital; both, only in so far as capital appropriates living labour.

‘Every saving in fixed capital is an increase in the net revenue of society.’ (A. Smith.) [17]

The final and last distinction cited by economists is that between movable and immovable; not in the sense that the former enters into the movement of circulation, the latter does not; rather in the sense that the former is physically fixed, immovable, in the same way as movable and immovable property is distinguished. For example, improvements sunk in the soil, aqueducts, buildings; and machinery itself in great part, since it must be physically fixed, to act; railways; in short, every form in which the product of industry is welded fast to the surface of the earth. This basically adds nothing to the determination of fixed capital; but it is indeed part of this character that it becomes fixed capital in a more eminent sense the more its use value, its material presence, corresponds to its specific economic form. The immovable use value, such as house, railway etc., is therefore the most tangible form of fixed capital. Of course, it can then still circulate in the same sense as immovable property generally – as title; but not as use value; it cannot circulate in the physical sense. Originally, the growth of movable property, its increase as against immovable, indicates the ascendant movement of capital as against landed property. But once the mode of production of capital is presupposed, the level to which it has conquered the conditions of production is indicated in the transformation of capital into immovable property. It thereby establishes its residence on the land itself, and the seemingly solid presuppositions given by nature, themselves [appear], in landed property, as merely posited by industry.

(Originally, life in the community and, through its mediation, the relationship to the earth as property, are basic presuppositions of the reproduction both of the individual and of the community. Among pastoral peoples, land and soil appear merely as precondition of the migratory life, hence appropriation does not take place. Fixed settlements with soil cultivation follow – thus landed property is initially held in common, and even where it advances to private property the individuals’ connection to it appears as posited by his relation to the community. It appears as a mere fief of the community; etc. etc. The transformation of the latter into mere exchangeable value – its mobilization – is the product of capital and of the complete subordination of the state organism to it. Land and soil, even where they have become private property, are therefore exchange value only in a restricted sense. Exchange value begins in the isolated natural product, separated from the earth and individualized through industry (or mere appropriation). Individual labour first arises here too. Exchange as such does not begin within the original communes, but on their boundaries, where they cease to be. Of course, to exchange the land, their residence, to pawn it to alien communes, would be treason. Exchange can expand only little by little from its original realm, movable property, to immovable property. Only through expansion of the former does it little by little gain control over the latter. Money is the chief agent in this process.)

A. Smith at first distinguishes circulating capital and fixed capital by their role in the production process. Only later does he adopt the expression: ‘One can gainfully lay out a capital in different ways, (1) as circulating capital, (2) as fixed capital.’ [18] This second expression obviously does not belong to the examination of this distinction as such, since fixed capital and circulating capital first have to be presupposed as two kinds of capital before we can speak about how to lay out capital gainfully in both forms.

‘The total capital of each entrepreneur is necessarily divided into his fixed capital and his circulating capital. If the sum is equal, then the one becomes larger as the other diminishes.’ (A. Smith, tome II, p. 226.)

Since capitals are (1) divided into fixed and circulating capital in unequal portions; (2) [have] an interrupted or uninterrupted production phase and return from more distant or nearer markets, hence, unequal circulation time; it follows that the determination of the surplus value created in a given time, e.g. annually, must be unequal because the number of reproduction processes in the given period is unequal. The amount of value created appears determined not simply by the labour employed during the immediate production process, but by the degree to which this exploitation of labour can be repeated within a given period of time.

Finally, then: While, in the examination of the simple production process, capital appeared to realize itself as value only in connection with wage labour, and circulation lay alongside, without connection to it, here, in its reproduction process, circulation is included in it in both the moments of circulation, C-M-M-C (as a system of exchanges through which it must pass, and to which the same number of qualitative changes within it correspond). In so far as its form as money is the point of departure and hence of return, circulation appears included in it as M-C-C-M. It contains both circular courses, and not merely as either change of form or change of substance, but rather as both of them included within the determination of value itself. The production process, as containing within itself the conditions of its renewal, is a reproduction process whose speed is determined by various relations developed above, which all arise from differences of circulation. The reproduction of capital also contains the reproduction of the use values in which it is realized – or the constant renewal and reproduction by human labour of the use values which enter human consumption and are themselves perishable. The change of substance and of form subordinated to human need through human labour appears from the viewpoint of capital as its own reproduction. It is at bottom the constant reproduction of labour itself. ‘Capital values perpetuate themselves by reproduction: the products which compose a capital are consumed just like any others; but their value, at the same time as it is destroyed by consumption, is reproduced in other materials or in the same one.’ (Say, 14.) [19] Exchange and a system of exchanges, and, included in that, the transformation into money as independent value, appears as condition and barrier for the reproduction of capital. With capital, production itself is on all sides subordinate to exchange. These exchange operations, circulation as such, produce no surplus value, but are conditions for its realization. They are conditions of the production of capital itself, in so far as its form us capital is posited only to the extent that it passes through them. The reproduction of capital is at the same time the production of specific formal conditions; of specific modes of relationship in which personified objectified labour is posited. Circulation is thus not merely the exchange of the product for the conditions of production – i.e. of produced wheat, e.g., for seed, new labour etc. The worker must exchange his product for the conditions of production, so as to begin anew, in every form of production. The peasant producing for immediate consumption also transforms part of the product into seed, instrument of labour, beasts of burden, fertilizer etc., and begins his labour anew. The transformation into money is necessary for the reproduction of capital as such, and its reproduction is necessarily the production of surplus value. [*] Although labour must merely maintain the value of what we earlier called constant capital in one production process, it must constantly reproduce it in another, since what appears as presupposition of material and instrument in one production process is product in the other, and this renewal, reproduction, must constantly proceed simultaneously.


End of February, March. End of May — Beginning of June 1858 continued

Capital as Fructiferous. Transformation of Surplus Value into Profit


Rate of profit.—Fall of the rate of profit.—Rate of profit.—Sum of profit.—Atkinson. A. Smith. Ramsay. Ricardo.—Surplus value as profit always expresses a lesser proportion.—Wakefield. Carey. Bastiat

Capital is now posited as the unity of production and circulation; and the surplus value it creates in a given period of time, e.g. in one year, is =ST/p + c = ST/R or = S(T/p – T/p × c/c + p. Capital is now realized not only as value which reproduces itself and is hence perennial, but also as value which posits value. Through the absorption of living labour time and through the movement of its own circulation (in which the movement of exchange is posited as its own, as the inherent process of objectified labour), it relates to itself as positing new value, as producer of value. It relates as the foundation to surplus value as that which it founded. Its movement consists of relating to itself, while it produces itself, at the same time as the foundation of what it has founded, as value presupposed to itself as surplus value, or to the surplus value as posited by it. In a definite period of time which is posited as the unit measure of its turnovers because it is the natural measure of its reproduction in agriculture, capital produces a definite surplus value, which is determined not only by the surplus value it posits in one production process, but rather by the number of repetitions of the production process, or of its reproductions in a specified period of time. Because of the inclusion of circulation, of its movement outside the immediate production process, within the reproduction process, surplus value appears no longer to be posited by its simple, direct relation to living labour; this relation appears, rather, as merely a moment of its total movement. Proceeding from itself as the active subject, the subject of the process—and, in the turnover, the direct production process indeed appears determined by its movement as capital, independent of its relation to labour—capital relates to itself as self-increasing value; i.e. it relates to surplus value as something posited and founded by it; it relates as well-spring of production, to itself as product; it relates as producing value to itself as produced value. It therefore no longer measures the newly produced value by its real measure, the relation of surplus labour to necessary labour, but rather by itself as its presupposition. A capital of a certain value produces in a certain period of time a certain surplus value. Surplus value thus measured by the value of the presupposed capital, capital thus posited as self-realizing value—is profit; regarded not sub specie aeternitatis, but sub specie—capitalis, the surplus value is profit; and capital as capital, the producing and reproducing value, distinguishes itself within itself from itself as profit, the newly produced value. The product of capital is profit. The magnitude, surplus value, is therefore measured by the value-magnitude of the capital, and the rate of profit is therefore determined by the proportion between its value and the value of capital. A very large part of what belongs here has been developed above. But the anticipated material is to be put here. In so far as the newly posited value, which is of the same nature as the capital, is itself in turn taken up into the production process, itself in turn maintains itself as capital, to that extent the capital itself has grown, and now acts as a capital of greater value. After it has distinguished the profit, as newly reproduced value, from itself as presupposed, self-realizing value, and has posited profit as the measure of its realization, it suspends the separation again, and posits it in its identity to itself as capital which, grown by the amount of the profit, now begins the same process anew in larger dimensions. By describing its circle it expands itself as the subject of the circle and thus describes a self-expanding circle, a spiral.

The general laws developed previously here briefly summarized thus: The real surplus value is determined by the relation of surplus labour to necessary labour, or by the portion of the capital, the portion of objectified labour, which exchanges for living labour, relative to the portion of objectified labour by which it is replaced. But surplus value in the form of profit is measured by the total value of the capital presupposed to the production process. Presupposing the same surplus value, the same surplus labour in proportion to necessary labour, then, the rate of profit depends on the relation between the part of capital exchanged for living labour and the part existing in the form of raw material and means of production. Hence, the smaller the portion exchanged for living labour becomes, the smaller becomes the rate of profit. Thus, in the same proportion as capital takes up a larger place as capital in the production process relative to immediate labour, i.e. the more the relative surplus value grows—the value-creating power of capital—the more does the rate of profit fall. We have seen that the magnitude of the capital already presupposed, presupposed to reproduction, is specifically expressed in the growth of fixed capital, as the produced productive force, objectified labour endowed with apparent life. The total value of the producing capital will express itself in each of its portions as a diminished proportion of the capital exchanged for living labour relative to the part of capital existing as constant value. Take e.g. manufacturing industry. In the same proportion as fixed capital grows here, machinery etc., the part of capital existing in raw materials must grow, while the part exchanged for living labour decreases. Hence, the rate of profit falls relative to the total value of the capital presupposed to production—and of the part of capital acting as capital in production. The wider the existence already achieved by capital, the narrower the relation of newly created value to presupposed value (reproduced value). Presupposing equal surplus value, i.e. equal relation of surplus labour and necessary labour,there can therefore be an unequal profit, and it must be unequal relative to the size of the capitals. The rate of profit can rise although real surplus value falls. Indeed, the capital can grow and the rate of profit can grow in the same relation if the relation of the part of capital presupposed as value and existing in the form of raw materials and fixed capital rises at an equal rate relative to the part of the capital exchanged for living labour. But this equality of rates presupposes growth of the capital without growth and development of the productive power of labour. One presupposition suspends the other. This contradicts the law of the development of capital, and especially of the development of fixed capital. Such a progression can take place only at stages where the mode of production of capital is not yet adequate to it, or in spheres of production where it has assumed predominance only formally, e.g. in agriculture. Here, natural fertility of the soil can act like an increase of fixed capital—i.e. relative surplus labour can grow—without the amount of necessary labour diminishing. (E.g. in the United States.) The gross profit, i.e. the surplus value, regarded apart from its formal relation, not as a proportion but rather as a simple magnitude of value without connection with any other, will grow on the average not as does the rate of profit, but as does the size of the capital. Thus, while the rate of profit will be inversely related to the value of the capital, the sum of profit will be directly related to it. However, even this statement is true only for a restricted stage of the development of the productive power of capital or of labour. A capital of 100 with a profit of 10% yields a smaller sum of profit than a capital of 1,000 with a profit of 2%. In the first case the sum is 10, in the second 20, i.e. the gross profit of the larger capital is twice as large as that of the 10 times smaller capital, although the rate of the smaller capital’s profit is 5 times greater than that of the larger. But if the larger capital’s profit were only 1%, then the sum of its profit would be 10, like that for the 10 times smaller capital, because the rate of profit would have declined in the same relation as its size. If the rate of profit of the capital of 1,000 were only 1/2%, then the sum of its profit would be only half as large as that of the smaller capital, only 5, because the rate of profit would be 20 times smaller. Thus, expressed in general terms: if the rate of profit declines for the larger capital, but not in relation with its size, then the gross profit rises although the rate of profit declines. If the profit rate declines relative to its size, then the gross profit remains the same as that of the smaller capital; remains stationary. If the profit rate declines more than its size increases, then the gross profit of the larger capital decreases relative to the smaller one in proportion as its rate of profit declines. This is in every respect the most important law of modern political economy, and the most essential for understanding the most difficult relations. It is the most important law from the historical standpoint. It is a law which, despite its simplicity, has never before been grasped and, even less, consciously articulated. Since this decline in the rate of profit is identical in meaning (1) with the productive power already produced, and the foundation formed by it for new production; this simultaneously presupposing an enormous development of scientific powers; (2) with the decline of the part of the capital already produced which must be exchanged for immediate labour, i.e. with the decline in the immediate labour required for the reproduction of an immense value, expressing itself in a great mass of products, great mass of products with low prices, because the total sum of prices is = to the reproduced capital + profit; (3) [with] the dimension of capital generally, including the portion of it which is not fixed capital; hence intercourse on a magnificent scale, immense sum of exchange operations, large size of the market and all-sidedness of simultaneous labour; means of communication etc., presence of the necessary consumption fund to undertake this gigantic process (workers’ food, housing etc.); hence it is evident that the material productive power already present, already worked out, existing in the form of fixed capital, together with the population etc., in short all conditions of wealth, that the greatest conditions for the reproduction of wealth, i.e. the abundant development of the social individual—that the development of the productive forces brought about by the historical development of capital itself, when it reaches a certain point, suspends the self-realization of capital, instead of positing it. Beyond a certain point, the development of the powers of production becomes a barrier for capital; hence the capital relation a barrier for the development of the productive powers of labour. When it has reached this point, capital, i.e. wage labour, enters into the same relation towards the development of social wealth and of the forces of production as the guild system, serfdom, slavery, and is necessarily stripped off as a fetter. The last form of servitude assumed by human activity, that of wage labour on one side, capital on the other, is thereby cast off like a skin, and this casting-off itself is the result of the mode of production corresponding to capital; the material and mental conditions of the negation of wage labour and of capital, themselves already the negation of earlier forms of unfree social production, are themselves results of its production process. The growing incompatibility between the productive development of society and its hitherto existing relations of production expresses itself in bitter contradictions, crises, spasms. The violent destruction of capital not by relations external to it, but rather as a condition of its self- preservation, is the most striking form in which advice is given it to be gone and to give room to a higher state of social production. It is not only the growth of scientific power, but the measure in which it is already posited as fixed capital, the scope and width in which it is realized and has conquered the totality of production. It is, likewise, the development of the population etc., in short, of all moments of production; in that the productive power of labour, like the application of machinery, is related to the population; whose growth in and for itself already the presupposition as well as the result of the growth of the use values to be reproduced and hence also to be consumed. Since this decline of profit signifies the same as the decrease of immediate labour relative to the size of the objectified labour which it reproduces and newly posits, capital will attempt every means of checking the smallness of the relation of living labour to the size of the capital generally, hence also of the surplus value, if expressed as profit, relative to the presupposed capital, by reducing the allotment made to necessary labour and by still more expanding the quantity of surplus labour with regard to the whole labour employed. Hence the highest development of productive power together with the greatest expansion of existing wealth will coincide with depreciation of capital, degradation of the labourer, and a most straitened exhaustion of his vital powers. These contradictions lead to explosions, cataclysms, crises, in which by momentaneous suspension of labour and annihilation of a great portion of capital the latter is violently reduced to the point where it can go on. These contradictions, of course, lead to explosions, crises, in which momentary suspension of all labour and annihilation of a great part of the capital violently lead it back to the point where it is enabled [to go on] fully employing its productive powers without committing suicide. [21] Yet, these regularly recurring catastrophes lead to their repetition on a higher scale, and finally to its violent overthrow. There are moments in the developed movement of capital which delay this movement other than by crises; such as e.g. the constant devaluation of a part of the existing capital: the transformation of a great part of capital into fixed capital which does not serve as agency of direct production; unproductive waste of a great portion of capital etc. (Productively employed capital is always replaced doubly, as we have seen, in that the positing of value by a productive capital presupposes a counter-value. The unproductive consumption of capital replaces it on one side, annihilates it on the other. [*] That the fall of the rate of profit can further be delayed by the omission of existing deductions from profit, e.g. by a lowering of taxes, reduction of ground rent etc., is actually not our concern here, although of importance in practice, for these are themselves portions of the profit under another name, and are appropriated by persons other than the capitalists themselves. [**] The fall [in the rate of profit] likewise delayed by creation of new branches of production in which more direct labour in relation to capital is needed, or where the productive power of labour is not yet developed, i.e. the productive power of capital.) (Likewise, monopolies.) ‘Profit is a term signifying the increase of capital or wealth; so failing to find the laws which govern the rate of profit, is failing to find the laws of the formation of capital.’ (William Atkinson, Principles of Political Economy etc., London, 1840, p. 55.) He has however failed to understand even what the rate of profit is. A. Smith explained the fall of the rate of profit, as capital grows, by the competition among capitals.[22] To which Ricardo replied that competition can indeed reduce profits in the various branches of business to an average level, can equalize the rate, but cannot depress this average rate itself. [23] A. Smith’s phrase is correct to the extent that only in competition—the action of capital upon capital—are the inherent laws of capital, its tendencies, realized. But it is false in the sense in which he understands it, as if competition imposed laws on capital from the outside, laws not its own. Competition can permanently depress the rate of profit in all branches of industry, i.e. the average rate of profit, only if and in so far as a general and permanent fall of the rate of profit, having the force of a law, is conceivable prior tocompetition and regardless of competition. Competition executes the inner laws of capital; makes them into compulsory laws towards the individual capital, but it does not invent them. It realizes them. To try to explain them simply as results of competition therefore means to concede that one does not understand them. Ricardo, for his part, says: ‘No accumulation of capitals can permanently reduce profits unless an equally permanent cause raises wages.’ (p. 92, tome II, Paris 1835, translated by Constancio.) He finds this cause in the growing, relatively growing unproductivity of agriculture, ‘the growing difficulty of increasing the quantity of subsistence’, i.e. in the growth of proportionate wages, so that labour’s real wage is no greater, but the product obtains more labour; in a word, a greater portion of necessary labour is required for the production of agricultural products. The falling rate of profit hence corresponds, with him, to the nominal growth of wages and real growth of ground rent. His one-sided mode of conceiving it, which seizes on only one single case, just as the rate of profit can fall because wages momentarily rise etc., and which elevates a historical relation holding for a period of 50 years and reversed in the following 50 years to the level of a general law, and rests generally on the historical disproportion between the developments of industry and agriculture—in and for itself it was strange that Ricardo, Malthus, etc. constructed general and eternal laws about physiological chemistry at a time where the latter hardly existed—this method that Ricardo has of conceiving the matter has therefore been attacked from all sides, partly because of an instinct that it is wrong and unsatisfactory; but mostly for its true rather than for its false aspects.

‘A. Smith thought that accumulation or increase of stock in general lowered the rate of profits in general, on the same principle which makes the increase of stock in any particular trade lower the profits of that trade. But such increase of stock in a particular trade means an increase in a greater proportion than stock is at the same time increased in other trades. It is relative.’ (p. 9, An Inquiry into those Principles respecting the Nature of Demand and the Necessity of Consumption, lately advocated by Mr Malthus. London, 1821.) ‘The competition among the industrial capitalists can level profits which rise particularly above the level, but cannot lower this ordinary level.’ (Ramsay, IX, 88.) [24](Ramsay and other economists correctly distinguish between whether productivity grows in the branches of industry which make fixed capital, and naturally wages, or in other industries, e.g. luxury-goods industries. The latter cannot diminish necessary labour time. This they can do only through exchange for agricultural products of other countries, which is then the same as if productivity had increased in agriculture. Hence the importance of free trade in grain for the industrial capitalists.) Ricardo says (English edition On the Principles of Political Economy and Taxation. 3rd edition, London, 1821): ‘The farmer and manufacturer can no more live without profits, than the labourer without wages.’ (p. 23 loc. cit.) ‘There is a natural tendency for profits to fall, because in the progress of society and of wealth, the additional food requires more and more labour. This tendency, this gravitation of profits, is delayed in repeated intervals by improvement of the machinery involved in the production of necessaries, as well as by discoveries in the science of agriculture, which reduce the costs of production.’ (loc. cit. p. 121.) Ricardo at once identifies profit directly with surplus value; he did not make this distinction at all. But whereas the rate of surplus value is determined by the relation of surplus labour employed by the capital to necessary labour, the rate of profit is nothing but the relation of the surplus value to the total value of the capital presupposed to production. Its proportion falls and rises, hence, in relation with the part of the capital exchanged for living labour relative to the part existing as material and fixed capital. Under ALL circumstances, the surplus value regarded as profit must express a smaller proportion of the gain than the real proportion of the surplus value. For, under all circumstances, it is measured by the total capital, which is always larger than that employed for wages and exchanged for living labour. Since Ricardo simply mixes surplus value and profit together in this way, and since the surplus value can constantly decline, can tendentially decline only if the relation of surplus labour to necessary labour, i.e. to the labour required for the reproduction of labouring capacity, declines, but since the latter is possible only if the productive force of labour declines, Ricardo assumes that the productive force of labour decreases in agriculture, although it grows in industry, with the accumulation of capital. He flees from economics to seek refuge in organic chemistry. We have demonstrated the necessity of this tendency without any reference to ground rent, nor did we have to refer e.g. to rising demand for labour etc. The connection between ground rent and profit is to be treated only in the examination of ground rent itself, does not belong here. But modern chemistry has demonstrated that Ricardo’s physiological postulate, expressed as a general law, is false. [25] As for Ricardo’s disciples, in so far as they are more than his pious echoes, they have quietly let drop whatever is unpleasant to them in their master’s principles, as has the newer economics generally. To drop the problem is their general method of solving it. Other economists, such as e.g. Wakefield, seek refuge in the examination of the field of employment for the growing capital. This belongs in the examination of competition, and is rather the difficulty for capital to realize the growing profit, hence denial of the inherent tendency towards the fall of the rate of profit. But the need for capital to seek a constantly more extensive field of employment is itself again a consequence. One cannot count Wakefield and similar people among those who have posed the question itself. (Is in certain respects a reproduction of A. Smith’s view.) Finally, the harmonists among the most modern economists, at their head the American, Carey, whose most obnoxious adherent was the Frenchman Bastiat (by the way, it is the nicest irony of history that the Continental free-traders worship Mr Bastiat, who, for his part, gets his wisdom from the protectionist Carey), accept the fact of the tendency of the rate of profit to fall in measure as productive capital grows. But they explain it simply and entirely as due to growth in the value of labour’s share; growth of the proportion of the total product obtained by the worker, while the capital is allegedly compensated for this by the growth of gross profits. The unpleasant contradictions, antagonisms within which classical economics moves, and which Ricardo emphasizes with scientific ruthlessness, are thus watered down into well-to-do harmonies. In Carey’s development, it sometimes seems as if he still had a mind of his own. This concerns a law which we need look at only in the doctrine of competition, where we will then settleaccounts with him. We can finish up here with the witlessness of Bastiat, who expresses commonplaces in a paradoxical way, grinds and polishes them into facets, and hides an utter poverty of ideas under a cover of formal logic. [*] In the Gratuité du Crédit. Discussion entre M. Fr. Bastiat et M. Proudhon, Paris, 1850 (Proudhon, by the way, cuts a highly ridiculous figure in this polemic, where he hides his dialectical feebleness under a great show of rhetoric), it says in Bastiat’s letter No. VIII (where this noble spirit, by the way, simply transforms, with his conciliatory dialectic, the gain resulting from the simple division of labour both for the road-builder and for the road-user into a gain owed to the ‘road’ (i.e. to capital) itself): ‘To the degree that capitals increase (and the products with them), the absolute part returning to capital increases, and its proportional part diminishes. To the degree that capitals increase (and the products with them), labour’s proportional part and its absolute part increase… Since capital’s absolute part grows even while it successively obtains only 1/2, 1/3, 1/4, 1/5 of the total product, it follows that labour, which successively obtains 1/2, 2/3, 3/4, 4/5, evidently receives a progressively increasing share of the whole, both in the proportional and in the absolute sense.’ He gives as illustration:

Total product Capital’s share Labour’s share
1st period 1,000 1/2 or 500 1/2 or 500
2nd 1,800 1/3 or 600 2/3 or 1,200
3rd 2,800 1/4 or 700 3/4 or 2,100
4th 4,000 1/5 or 800 4/5 or 3,200 (p. 130, 131.)

The same joke is repeated (p. 288) in the form of increasing gross profit with declining rate of profit, but increasing mass of products sold at lower prices, and weighty words are spoken on that occasion about ‘the law of unlimited decline which never reaches zero, a law well known to mathematicians’. (p. 288.) ‘Here we have’ (hawking his wares) ‘an endlessly decreasing multiplier, because the multiplicand is ever growing.’ (p. 288 loc. cit.)

Ricardo had anticipated his Bastiat. Emphasizing that the sum of profit grows as capital grows despite the decline of the rate of profit—thus anticipating Bastiat’s whole profundity—he does not fail to note that this progression ‘is true only for a certain time’. He says, word for word: ‘Regardless of how the rate of profit on stock may decline in consequence of the accumulation of capital on the land and of a rise of wages’ (by which Ricardo understands, N.B., the rise of the cost of production of the agricultural products necessary for the maintenance of labour capacity), ‘the aggregate amount of profits must nevertheless grow. Supposing, then, that in repeated accumulations of £100,000 the rate of profits fell from 20 to 19, 18, 17%, we should expect that the whole amount of profits received by the successive owners of capital would be always progressive; that it would be greater with the capital of £200,000 than with that of 100,000; yet greater with 300,000; and so on, increasing, although at a decreasing rate, with every increase of capital. However, this progress is true only for a certain time: thus 19% on £200,000 is more than 20 on 100,000; 18% on 300,000 more than 19% on 200,000; but after capital has accumulated to a large amount and profits have fallen, further accumulation diminishes the sum of profits. Thus, supposing the accumulation of 1,000,000 and profits of 7%, then the total amount of profit will be £70,000; now if an addition of 100,000 is made to the million, and profits fall to 6%, then £66,000 or a decrease of £4,000 will be received by the owners of the stock, although the amount of capital will be increased from 1,000,000 to 1,100,000.’ (loc. cit. p. 124, 125.) Of course this does not prevent Mr Bastiat from undertaking the operation of making a growing multiplicand grow in such a way that, with the declining multiplier, it produces a growing product, in true elementary-school pupil style, just as the laws of production did not prevent Dr Price from constructing his compound interest calculations. Because the rate of profit declines, it declines relative to wages, which must consequently grow proportionally and absolutely. So reasons Bastiat. (Ricardo observed this tendency towards the decline of the profit rate with the growth of capital; and since he confuses profit with surplus value, he was forced to make wages rise in order to let profits fall. But since he saw at the same time that wages really declined more than they rose, he let the value of wages grow, i.e. the quantity of necessary labour, without letting its use value grow. Thus in fact he only let ground rent increase. The harmonic Mr Bastiat discovers, however, that, with the accumulation of capitals, wages rise proportionally and absolutely.) He assumes what he has to prove, that the decline of the profit rate is identical with the increase in the rate of wages, and then ‘illustrates’ his presupposition with an arithmetical example which appears to have amused him greatly. If the decline of the profit rate expresses nothing more than the decline of the relation in which the total capital requires living labour for its reproduction, then it is another matter. Mr Bastiat overlooks the trifling circumstance that, in his presupposition, while the profit rate on capital declines, the capital itself increases, the capital presupposed to production. Now even Mr Bastiat ought to have had an inkling that the value of the capital cannot grow without appropriating surplus labour. The misery of agricultural overproduction, recorded in French history, could have shown him that the mere increase of products does not increase their value. The question would then revolve simply around an investigation of whether the fall of the profit rate is identical with the growth of the rate of surplus labour relative to necessary labour, or, instead, with the fall of the total rate of living labour employed relative to the reproduced capital. Mr Bastiat also therefore divides the product simply between capitalist and worker, instead of dividing it into raw material, instrument of production and labour, and asking himself in what proportional parts its value in exchange is applied against these different portions. The part of the product exchanged for raw material and instrument of production is obviously none of the workers’ business. What they divide with capital, as wages and profit, is nothing other than the newly added living labour itself. But what particularly worries Bastiat is who, after all, is to eat up the increased product? Since the capitalist eats up a relatively small part, does not the worker have to eat up a relatively large one? Particularly in France, whose total production is sufficient only in Bastiat’s fantasy to give anyone at all very much to eat, Mr Bastiat could have found convincing testimony that a mass of parasitic bodies come to cluster around capital, and, under one or another title, they lay hands on so much of the total production as to leave little danger of the workers being overwhelmed by abundance. It is clear, of course, that with large-scale production the total mass of labour employed can increase although the proportion of labour employed relative to capital decreases, and that there is no obstacle, therefore, which prevents an increasing working population from requiring a greater mass of products as capital increases. Incidentally, Bastiat — in whose harmonic brain all cows are grey— confuses the decline of interest with the increase of wages, since this is rather an increase of industrial profit, which concerns the workers not at all, but concerns only the relation in which different species of capitalists divide up the total profit among themselves.

Capital and revenue (profit). Production and distribution. Sismondi.—Production costs from capital’s viewpoint. Profit, ditto.—Inequality of profits. Equalization and communal rate of profit.—Transformation of surplus value into profit.—Laws

Back to our topic. The product of capital, then, is profit. By relating to itself as profit, it relates to itself as the source of the production of value, and the rate of profit expresses the proportion to which it has increased its own value. But the capitalist is not merely capital. He has to live, and since he does not live by working he must live from profit, i.e. from the alien labour he appropriates. Thus capital is posited as the source of wealth. Since capital has incorporated productivity into itself as its inherent quality, capital relates to profit as revenue. It can consume a part of it (seemingly all of it, but this will prove to be false) without ceasing to be capital. After consumption of this fruit it can bear new fruit. It can represent consumption wealth without ceasing to represent the general form of wealth, something which money in simple circulation could not possibly do. The latter had to abstain in order to remain the general form of wealth; or, if it exchanged for real wealth, for consumer gratifications, it ceased to be the general form of wealth. Thus profit appears as a form of distribution, like wages. But since capital can grow only through the retransformation of profit into capital—into surplus capital—profit is at the same time a form of production for capital; just exactly as wages are a mere relation of production from the standpoint of capital, a relation of distribution from the worker’s standpoint. This shows that the relations of distribution are themselves produced by the relations of production, and represent the latter themselves from another point of view. It shows further that the relation of production to consumption is posited by production itself. Note the fatuousness of all bourgeois economists, including e.g. J. St. Mill, who considers the bourgeois relations of production as eternal, but their forms of distribution as historical, and thereby shows that he understands neither the one nor the other. As to simple exchange, Sismondi correctly remarks: ‘An exchange always presupposes two values; each may have a different share; but the quality of capital and revenue does not follow from the object exchanged; it attaches to the person who is its owner.’ (Sismondi, VI.) [29] Hence the simple exchange relation provides no basis for the explanation of revenue. The quality of a value obtained in exchange, whether it represents capital or revenue, is determined by relations lying outside simple exchange. Absurd, therefore, to want to reduce these more complex forms to the earlier, simpler exchange relations, as do the harmonic freetraders. From the standpoint of simple exchange, and considering accumulation as the mere accumulation of money (exchange value),’ capital’s profit and revenue are impossible. ‘If the rich spend the accumulated wealth for luxury products—and they can obtain commodities only through exchange—then their funds would soon be exhausted … But, in the social order, wealth has achieved the quality of reproducing itself through alien labour. Wealth, like labour, and through labour, yields an annual fruit which may be destroyed each year without the rich man thereby becoming poorer. This fruit is the revenue springing from capital.’ (Sismondi, IV.) [30] While profit thus appears in one respect as the result of capital, it appears in the other as the presupposition of capital formation. Thus is posited anew the circular movement in which the result appears as presupposition. ‘Thus a part of the revenue became transformed into capital, into a permanent, self-multiplying value, which did not perish; this value tore itself free from the commodity which created it; like a metaphysical, insubstantial quality it always remained in possession of the same cultivateur’ (capitalist), ‘assuming various forms for him.’ (Sismondi, VI) [31]

When capital is posited as profit-creating, as a source of wealth independently of labour, each part of the capital is thereby assumed to be equally productive. Just as surplus value in the form of profit is measured against the total value of the capital, so does it appear to be created by its different components to an equal degree. Thus its circulating part (the part consisting of raw materials andapprovisionnement) brings no more profit than the component which consists of the fixed capital, and, more particularly, profit accrues to these component parts in proportion to their magnitude.

Since the profit of capital is realized only in the price which is paid for it, for the use value created by it, profit is determined by the excess of the price obtained over the price which covers outlays. Since, furthermore, this realization proceeds only through exchange, the individual capital’s profit is not necessarily restricted by its surplus value, by the surplus labour contained in it; but is relative, rather, to the excess of price obtained in exchange. It can exchange more than its equivalent, and then its profit is greater than its surplus value. This can be the case only to the extent that the other party to the exchange does not obtain an equivalent. The total surplus value, as well as the total profit,which is only surplus value itself, computed differently, can neither grow nor decrease through this operation, ever; what is modified thereby is not it, but only its distribution among the different capitals. However, this examination belongs only with that of the many capitals, it does not yet belong here. In relation to profit, the value of the capital presupposed in production appears as advances—production costs which must be replaced in the product. After deduction of the part of the price which replaces them, the excess forms the profit. Since surplus labour—of which profit and interest are, both, only portions—costs capital nothing, hence does not figure as part of the value advanced by it—not as part of the value which it possessed before the production process and the realization of the product—it follows that this surplus labour, which is included in the production costs of the product and forms the source of surplus value and hence of profit as well, does not figure as part of the production costs of capital. The latter are equal only to the values actually advanced by it, not including the surplus value appropriated in production and realized in circulation. The production costs from the standpoint of capital are therefore not the real production costs, precisely because surplus labour does not cost it anything. The excess of the price of the product over the price of the production costs gives it its profit. Thus profit can exist for capital even without the realization of the real production costs—i.e. the whole surplus labour set to work by capital. Profit—the excess over the advances made by capital—may be smaller than surplus value—the surplus of living labour gained in exchange by capital in excess of the objectified labour it has given in exchange for labour city. However, through the separation of interest from profit—which we will look at immediately—a part of the surplus value is posited as production cost even for productive capital itself. The confusion of production costs from the standpoint of capital with the amount of labour objectified in capital’s product, surplus labour included, has given rise to statements such as that ‘profit is not included in the natural price’. It is allegedly ‘absurd to call the excess, or profit, a part of the expenditure’. (Torrens, IX, 30.) [32] This then leads to a mass of confusion; either by having profit not realized in, but rather arising from, exchange (which can always be the case only relatively, if one of the parties to the exchange does not obtain his equivalent), or by ascribing to capital some magic power which makes something out of nothing. Since the value posited in the production process realizes its price through exchange, the price of the product appears in fact determined by the sum of money which expresses an equivalent for the total quantity of labour contained in raw material, machinery, wages and in unpaid surplus labour. Thus price still appears here merely as a formal modification of value; as value expressed in money; but the magnitude of this price is presupposed in the production process of capital. Capital thereby appears as a determinant of price, so that price is determined by the advances made by capital + the surplus labour realized by it in the product. We shall see later that price, on the contrary, appears as determining profit. And, while here the total real production costs appear as determining price, price appears later as determining the production costs. So as to impose the inherent laws of capital upon it as external necessity, competition seemingly turns all of them over. Inverts them.

To repeat once more: the profit of capital does not depend on its magnitude; but rather, given an equal magnitude, on the relation between its component parts (the constant and the variable part); and then on the productivity of labour (which is expressed, however, in the above proportion, since, with diminished productivity, the same capital could not work up the same material with the same portion of living labour); on the turnover time, which is determined by the different proportions between fixed and circulating capital, different durability of fixed capital, etc. etc. (see above). The inequality of profit in different branches of industry with capitals of equal magnitudes is the condition and presupposition for their equalization through competition.

In so far as capital obtains raw material, instrument, labour, through exchange, buys them, its elements are themselves already present in the form of prices; already posited as prices; presupposed to it. The comparison of the market price of its product with the prices of its elements then becomes decisive for it. But this belongs only in the chapter on competition.

Thus the surplus value which capital posits in a given turnover period obtains the form of profit in so far as it is measured against the total value of the capital presupposed to production. While surplus value is measured directly by the surplus labour time which capital gains in the exchange with living labour. Profit is nothing but another form of surplus value, a form developed further in the sense of capital. Surplus value no longer ‘regarded here as exchanged for capital itself in the production process; not for labour. Hence capital appears as capital, as presupposed value relating to itself, through the mediation of its own process, as posited, produced value, and the value posited by it is called profit.

The two immediate laws which this transformation of surplus value into the shape of profit yields for us are these: (1) Surplus value expressed as profit always appears as a smaller proportion than surplus value in its immediate reality actually amounts to. For, instead of being measured by a part of the capital, the part exchanged for living labour (a relation which turns out to be that of necessary to surplus labour), it is measured against the whole. Whatever may be the surplus value which a capital A posits, and whatever may be the proportion within A of c and v, the constant and the variable part of the capital, the surplus value s must appear smaller when measured against cv than when measured against its real measure, v. Profit, or—if it is regarded not as an absolute sum but rather, as is usually done, as aproportion (the rate of profit is profit expressed as the relation in which capital has posited surplus value)—the rate of profit never expresses the real rate at which capital exploits labour, but always a much smaller relation, and the larger the capital, the more false is the relation it expresses. The rate of profit could express the real rate of surplus value only if the entire capital were transformed solely into wages; if the entire capital were exchanged for living labour, i.e. if the approvisionnement alone existed, and if it not only existed not in the form of already produced raw material (which has happened in extractive industry), hence if not only the raw material were = 0, but if the means of production, also, whether in the form of instruments or in the form of developed fixed capital, were = 0. The latter case cannot occur on the basis of the mode of production corresponding to capital. If A = c + v, whatever the numerical value of s, then s/c + v < s/v[33]

(2) The second great law is that the rate of profit declines to the degree that capital has already appropriated living labour in the form of objectified labour, hence to the degree that labour is already capitalized and hence also acts increasingly in the form of fixed capital in the production process, or to the degree that the productive power of labour grows. The growth of the productive power of labour is identical in meaning with (a) the growth of relative surplus value or of the relative surplus labour time which the worker gives to capital; (b) the decline of the labour time necessary for the reproduction of labour capacity; (c) the decline of the part of capital which exchanges at all for living labour relative to the parts of it which participate in the production process as objectified labour and as presupposed value. The profit rate is therefore inversely related to the growth of relative surplus value or of relative surplus labour, to the development of the powers of production, and to the magnitude of the capital employed as [constant] capital within production. In other words, the second law is the tendency of the profit rate to declinewith the development of capital, both of its productive power and of the extent in which it has already posited itself as objectified value; of the extent within which labour as well as productive power is capitalized.

Other causes which additionally act upon the rate of profit, which can depress it for longer or shorter periods, do not yet belong here. It is quite correct, as regards the production process as a whole, that the capital acting as material and as fixed capital not only is objectified labour, but must also be reproduced, and continuously reproduced, by new labour. Its presence assumes, therefore—the extent which its presence has attained assumes, therefore, the extent of the labouring population, population on a large scale, which in and for itself is the condition of all productive power—but this reproduction everywhere proceeds on the presupposition of the action of fixed capital and of raw material and of scientific power, both as such, and as appropriated within production and already realized within it. This point is to be developed in more detail only in the examination of accumulation.

It is clear, further, that although the part of capital exchanged for living labour declines in relation to the total capital, the total mass of living labour employed can increase or remain the same if capital grows in the same or a larger relation. Hence a constant growth in the population may accompany a relative decline in necessary labour. If capital A lays out 1/2 in c and 1/2 in v, while capital A’ lays out 3/4 in c and 1/4 in v, then capital A’ could employ 2/4 v for 6/4 c. But if it was originally = 3/4 c + 1/4 v, then it is now = 6/4 c + 2/4 v, or it grew by 4/4; i.e. it doubled. However, this relation also is to be examined more closely only in connection with the theory of accumulation and population. All in all we must not at this point be sidetracked by drawing the consequences which follow from the laws, and by turning them over in the mind from one angle or another.

The rate of profit is determined, then, not only by the relation of surplus labour to necessary labour, or by the relation in which objectified labour is exchanged for living labour, but by the overall relation of living labour employed to objective labour; by the portion of capital exchanged for living labour relative to the part which participates in the production process as objectified labour. This portion, however, declines in the same relation as surplus labour increases in relation to necessary labour.

Surplus value = relation of surplus labour to necessary labour

(Since the worker must reproduce the part of the capital which is exchanged for his labour capacity just as much as he must reproduce the other parts of the capital, the relation in which the capitalist gains from the exchange with labour capacity appears as determined by the relation of surplus labour to necessary labour. Originally this appears in such a way that the necessary labour only replaces his outlay. But since he lays out nothing other than labour itself—as is shown in reproduction—the relation can be expressed simply in this way—the relation of surplus value as the relation of surplus labour to necessary labour.)

Value of fixed capital and its productive power. Durability of fixed capital, ditto.—The powers of society, division of labour etc. cost capital nothing.—Distinction between this and machinery (capitalist’s economy in the employment of machinery).—Profit and surplus value

<We have still to note in regard to fixed capital—and its durability, as one of its conditions which does not enter in from the outside: To the extent that the instrument of production is itself a value, objectified labour, it does not contribute as a productive force. If a machine which cost 100 working days to make replaced only 100 working days, then it would in no way increase the productive power of labour and in no way decrease the cost of the product. The more durable the machine, the more often can the same quantity of product be created with it, or the more often can the circulating capital be renewed, its reproduction be repeated, and the smaller is the value-share (that required to replace the depreciation, the wear and tear of the machine); i.e. the more is the price of the product and its unit production cost decreased. However, we may not introduce the price relation at this point in the development. The reduction of the price as condition for conquest of the market belongs only to competition. It must therefore be developed in a different way. If capital could obtain the instrument of production at no cost, for 0, what would be the consequence? The same as if the cost of circulation = 0. That is, the labour necessary for the maintenance of labour capacity would be diminished, and thus surplus labour, i.e.’ surplus value, [increased], without the slightest cost to capital. Such an increase of the force of production, a piece of machinery which costs capital nothing, is the division of labour and the combination of labour within the production process. This assumes, however, work proceeding on a large scale, i.e. development of capital and wage labour. Another productive force which costs it nothing is scientific power. (It goes without saying that it must always pay a certain contribution for parsons, schoolmasters and scholars, whether the scientific power they develop is great or small.) But it can appropriate the latter only through the employment of machinery (and in part through the chemical process). The growth of population is a productive force of this kind, and it costs it nothing. In short, all the social powers developing with the growth of population and with the historic development of society cost it nothing. To the extent, however, that a substratum which itself exists in the form of objectified labour, i.e. is itself produced by labour, is required to employ them within the direct production process, hence to the extent that they are themselves values, it can appropriate them only through equivalents. Well. Fixed capital whose employment required more labour for its production or maintenance than it replaced would be a nuisance. The kind that would cost nothing, but merely needed to be appropriated by capital, would have the maximum value for capital. It follows from the simple proposition that machinery is most valuable for capital when its value =0, that every reduction of its cost is a gain for capital. While it is the tendency of capital, on one side, to increase the total value of the fixed capital, [so], at the same time, [is its tendency] to decrease the value of each of its fractional parts. To the extent that fixed capital enters into circulation as value, it ceases to act as use value within the production process. Its use value is precisely that it increases the productive power of labour, decreases necessary labour, and increases relative surplus labour and hence surplus value. To the extent that it enters into circulation, its value is merely replaced, not increased. By contrast, the product, the circulating capital, is the vehicle of the surplus value, which is realized only when it steps outside the production process and into circulation. If machinery lasted for ever, if it did not itself consist of transitory material which must be reproduced (quite apart from the invention of more perfect machines which would rob it of the character of being a machine), if it were a perpetuum mobile, then it would most completely correspond to its concept. Its value would not need to be replaced because it would continue to last in an indestructible materiality. Since fixed capital is employed only to the extent that its value is smaller than the value it posits, it follows that, even if it never itself entered into circulation as value, the surplus value realized in the circulating capital would nevertheless soon replace the advances, and it would thus act to posit value after its costs for the capitalist, as well as the cost of the surplus labour he appropriates, were = 0. It would continue to act as a productive power of labour and at the same time be money in the third sense, constant value for-itself. Take a capital of £1,000. Let one-fourth be machinery; the sum of surplus value = 50. The value of the machinery then equal to 200. After 4 turnovers the machinery would be paid for. And, in addition, since the capital would continue to possess, in the machine, objectified labour to the amount of 200, then, beginning with the fifth turnover, it would be the same as if it made 50 on a capital which only costs it 800; hence 6 1/4% instead of 5%. As soon as fixed capital enters into circulation as value, its use value for the capital realization process ceases, or, it enters into it only as soon as the latter ceases. Hence, the more durable, the less it requires repair, total or partial reproduction, the longer its circulation time, the more does it act as productive power of labour, as capital; i.e. as objectified labour, which posits living surplus labour. The durability of fixed capital, which is identical with the circulation time of its value, or with the time required for its reproduction, arises from its concept itself, as its value-moment. (That in and for itself, as regards its material side only, it lies in the concept of the means of production is something which needs no elucidation.) The rate of surplus value is determined simply by the relation of surplus labour to necessary labour; the rate of profit is determined not only by the relation of surplus to necessary labour, but by the relation of the part of capital exchanged for living labour to the total capital entering into production.>

Profit as we still regard it here, i.e. as the profit of capital as such, not of an individual capital at the expense of another, but rather as theprofit of the capitalist class, concretely expressed, can never be greater than the sum of the surplus value. As a sum, it is the sum of the surplus value, but it is this same sum of values as a proportion relative to the total value of the capital, instead of to that part of it whose value really grows, i.e. is exchanged for living labour. In its immediate form, profit is nothing but the sum of the surplus value expressed as a proportion of the total value of the capital.

Machinery and surplus labour. Recapitulation of the doctrine of surplus value generally

The transformation of surplus value into the form of profit, this method by which capital calculates surplus value, is necessary from the standpoint of capital, regardless of how much it rests on an illusion about the nature of surplus value, or rather veils this nature. [*]

If we look at a single worker’s day, then the decrease of necessary labour relative to surplus labour expresses itself in the appropriation of a larger part of the working day by capital. The living labour employed here remains the same. Suppose that an increase of the force of production, e.g. employment of machinery, made 3 workers superfluous out of 6, each of whom worked 6 days a week. If these 6 workers themselves possessed the machinery, then each of them would thereafter work only half a day. Now, instead, 3 continue to work a whole day every day of the week. If capital were to continue to employ the 6, then each of them would work only half a day, but perform no surplus labour. Suppose that necessary labour amounted to 10 hours previously, the surplus labour to 2 hours per day, then the total surplus labour of the 6 workers was 2 x 6 daily, equal to a whole day, and was equal to 6 days a week = 72 hours. Each one worked one day a week for nothing. Or it would be the same as if the sixth worker had worked the whole week long for nothing. The 5 workers represent necessary labour, and if they could be reduced to 4, and if the one worker worked for nothing as before—then the relative surplus value would have grown. Its relation previously was = 1:6, and would now be 1 5. The previous law, of an increase in the number of hours of surplus labour, thus now obtains the form of a reduction in the number of necessary workers. If it were possible for this same capital to employ the 6 workers at this new rate, then the surplus value would have increased not only relatively, but absolutely as well. Surplus labour time would amount to 14 2/5 hours. 2 2/5 hours [each] performed by 6 workers is of course more than 2 2/5 performed by 5.

If we look at absolute surplus value, it appears determined by the absolute lengthening of the working day above and beyond necessary labour time. Necessary labour time works for mere use value, for subsistence. Surplus labour time is work for exchange value, for wealth. It is the first moment of industrial labour. The natural limit is posited—presupposing that the conditions of labour are on hand, raw material and instrument of labour, or one of them, depending on whether the work is merely extractive or formative, whether it merely isolates the use value from nature orwhether it shapes it—the natural limit is posited by the number of simultaneous work days or of living labour capacities, i.e. by the labouring population. At this stage the difference between the production of capital and earlier stages of production is still merely formal. With kidnapping, slavery, the slave trade and forced labour, the increase of these labouring machines, machines producing surplus product, is posited directly by force; with capital, it is mediated through exchange.

Use values grow here in the same simple relation as exchange values, and for that reason this form of surplus labour appears in the slave and serf modes of production etc., where use value is the chief and predominant concern, as well as in the mode of production of capital, which is oriented directly towards exchange value, and only indirectly towards use value. This use value may be purely imaginary, as e.g. with the Egyptian pyramids, in short, with the works of religious ostentation which the mass of the nation in Egypt, India etc. was forced [to undertake]; or may be directed at immediate utility as e.g. with the ancient Etruscans.

In the second form of surplus value, however, as relative surplus value, which appears as the development of the workers’ productive power,as the reduction of necessary labour time relative to the working day, and as the reduction of the necessary labouring population relative to the population (this is the antithetical form), in this form there directly appears the industrial and the distinguishing historic character of the mode of production founded on capital.

The forcible transformation of the greater part of the population into wage labourers, and the discipline which transforms their existence into that of mere labourers, correspond to the first form. Throughout a period of 150 years, e.g. from Henry VII on, the annals of English legislation contain the bloody handwriting of coercive measures employed to transform the mass of the population, after they had become propertyless and free, into free wage labourers. The dissolution of the monastic orders, the confiscation of church lands, the abolition of the guilds and confiscation of their property, the forcible ejection of the population from the land through the transformation of tillage into pasture, enclosures of commons etc., had posited the labourers as mere labour capacities. But they now of course preferred vagabondage, beggary etc. to wage labour, and had still to be accustomed forcibly to the latter. This is repeated in a similar fashion with the introduction of large industry, of factories operating with machines. Cf. Owen. [34]

Only at a certain stage of the development of capital does the exchange of capital and labour become in fact formally free. One can say that wage labour is completely realized in form in England only at the end of the eighteenth century, with the repeal of the law of apprenticeship.

The tendency of capital is, of course, to link up absolute with relative surplus value; hence greatest stretching of the working day with greatest number of simultaneous working days, together with reduction of necessary labour time to the minimum, on one side, and of the number of necessary workers to the minimum, on the other. This contradictory requirement, whose development will show itself in different forms as overproduction, over-population etc., asserts itself in the form of a process in which the contradictory aspects follow closely upon each other in time. A necessary consequence of them is the greatest possible diversification of the use value of labour—or of the branches of production—so that the production of capital constantly and necessarily creates, on one side, the development of the intensity of the productive power of labour, on the other side, the unlimited diversity of the branches of labour, i.e. thus the most universal wealth, in form and content, of production, bringing all sides of nature under its domination.

Capital pays nothing for the increase of the productive force arising by itself, in large-scale production, from division and combination of labour, from savings on certain expenses—conditions for the labour process—which remain the same or diminish when labour is done in common, such as heating etc., industrial buildings etc.; it obtains this increased productive power of labour free of charge. If the force of production increased simultaneously in the production of the different conditions of production, raw material, means of production and means of subsistence, and in the [branches of production] determined [by them], then their growth would bring about no change in the relation between the different component parts of the capital. If e.g. the productive force of labour grows simultaneously in the production of flax and of looms and of weaving itself (by division of labour), then a greater quantity of raw material etc. would correspond to the greater quantity woven in a day. In extractive work, e.g. the mining industry, it is not necessary for raw materials to increase when labour becomes more productive, since no raw material is used. To make harvests more productive, it is not even necessary for the number of instruments to have grown, but rather merely for them to be concentrated and for the work, previously done fragmentarily by hundreds, to be done communally. However, what is required for all forms of surplus labour is growth of population; of the labouring population for the first form; of population generally for the second, since it requires the development of science etc. Population, however, appears here as the basic source of wealth.

Relation between the objective conditions of production. Change in the proportion of the component parts of capital

But as we regard capital originally, raw material and instrument appear to come out of circulation, not to be produced by capital itself; just as, in reality, the individual capital obtains the condition of its production from circulation, although they are in turn produced by capital, but by another capital. From this follows, on one side, capital’s necessary tendency to subjugate production to itself on all sides; its tendency to posit the production of labour materials and of raw materials, as well as instruments, as likewise produced by capital, even if it is a different capital; the propagandistic tendency of capital. Secondly, however, it is clear that if the objective conditions of production which it obtains from circulation remain unchanged in value, i.e. if the same amount of labour objectifies itself in the same amount of use value, then a lesser part of the capital can be laid out for living labour, or, there is a change in the proportion of the component parts of capital. If the capital amounts to e.g. 100, raw material 2/5, the instrument 1/5, labour 2/5, and if, owing to a doubling of the productive force (division of labour), the same labour using the same instrument could work up double the raw material, then the capital would have to grow by 40; hence a capital of 140 would have to work; of which 80 in raw material, 20 in instrument, 40 for labour. Labour would now relate 40:140 (previously = 40:100); labour previously related as 4:10; now only as 4:14. Or, of the same capital of 100, now 3/5 would go for raw material, 1/5 for the instrument, and 1/5 for labour. The gain would be 20, as before. But surplus labour would be 60%, whereas it was 50 earlier. It now only takes 20 in labour for 60 in raw material and 20 in instrument. 80/20/100. A capital of 80 gives the capitalist a profit of 20. Now if the capital were to employ all the labour at this stage of production, it would have to grow to 160; namely 80 for raw material, instrument 40, and 40 for labour. This would give a surplus value of 40. At the earlier stage, where the capital of 100 gives a surplus value of only 20, a capital of 160 would give a surplus value of only 32, i.e. 8 less, and the capital would have to grow to 200 in order to produce the same surplus value of 40.

The following distinctions must be drawn: (1) Labour, increasing (or intensity, speed of labour ), requires no greater advance in material or instrument of labour. E.g. the same 100 workers with instruments of the same value catch more fish, or till the soil better, or draw more ores from the mines or coal from the pits, or beat more leaf from the same amount of gold as a result of greater skill, better combination and division of labour etc., or waste less raw material, hence get further with the same value of raw materials. In this case then, if we assume either that their products enter into their own consumption, then their necessary labour time diminishes; they perform a greater amount of work at the same maintenance costs. Or, a smaller part of their labour is necessary for the reproduction of labour capacity. The necessary part of labour time diminishes relative to surplus labour time, and, although the value of the product remains the same 100 working days, the part going to capital, the surplus value, increases. If the total surplus worker was = 1/10, i.e. = 10 working days, and if it is now 1/5, then surplus labour time has grown by 10 days. The workers work 80 days for themselves and 20 for the capitalists, whereas in the first case 90 for themselves and only 10 for the capitalist. (This calculation by working days, and labour time as the only substance of value, shows itself in this open way where relations of bondage exist. With capital, covered up by money.) Of the newly created value, a greater portion accrues to capital. But the relations between the various component parts of the invariable capital remain the same, on this presupposition. That is, although the capitalist employs a greater mass of surplus labour, because he pays less wages, he does not employ more capital in raw materials and instruments. He gives a smaller part of objectified labour in exchange for the same amount of living labour, or the same amount of objectified for a greater amount of living labour. This possible only in extractive industry; in manufacturing, only in so far as there is greater economy in use of raw materials; further, where chemical processes increase the material, in agriculture; in the transporting industry.

(2) Productivity increases at the same time not only in the given branch of production, but also in its conditions; in the case, namely, where raw material or instrument or both must be increased along with an increase in the intensity of labour, the increase of the number of products produced by labour in the same time. (The raw material need not cost anything, e.g. reeds for basket-making; free wood etc.) In this case the relation of capital remains the same. That is, with the growing productivity of labour the capital need not lay out a greater value in raw material and instruments.

(3) The increased productivity of labour requires a greater outlay of capital for raw material and instrument. If an unchanged number of workers has become more productive merely through division of labour etc., then the instrument remains the same; the raw material alone must grow; since the same labour time processes a greater amount of it in the same time; and, according to the presupposition, the productivity arose only from greater skill on the part of the workers, division and combination of labour etc. In this case the part of the capital exchanged for living labour not only diminishes (it remains the same if absolute labour time alone increases; decreases, if relative time grows) relative to the other component parts of capital, which remain the same, by an amount equal to its own decline, but likewise by an amount equal to their growth.

If it was

  Raw Material: Instruments: Labour: Surplus:
Working days: 180 90 80 10
  411 3/7 90 70 20

in the first case: so that out of 90 working days, 10 are surplus working days; surplus labour 12 1/2%. In the second case, the relation of the raw material rose in the same proportion as the relation of surplus labour rose, compared to the first case.

While the growth of the surplus value in all cases presupposes growth of the population, in this case [it presupposes] additionally accumulation, or a greater capital entering into production. (This ultimately comes down to a larger population of workers occupied in the production of raw material.) In the first case the total part of the capital employed for labour forms 1/4 of the total capital, and relates to the constant part of the capital as = 1:3; in the second case capital employed for labour forms less than 1/6 of the total capital, and the total part of the capital employed for labour relates as less than 1:5 to the constant part of the capital. Hence, although the increase of productive power resting on division and combination of labour rests on absolute increase of the labour power employed, it is necessarily linked with a decrease of the latter, relative to the capital which sets it in motion. And while, in the first form, the form of absolute surplus labour, the mass of labour employed must grow in the same relation as the capital employed, in the second case it grows in a lesser relation, and, more precisely, in inverse relation to the growth of the force of production.

If the productivity of the soil doubled owing to employment of the latter method of agricultural labour, if the same amount of labour yielded 1 quarter of wheat instead of 1/2, then necessary labour would fall by 1/2, and capital could employ twice the number for the same wages. (This, if expressed in grain only.) But the capitalist would not need additional workers to work his land. Hence he will employ the same labour with half the previous wages; a part of his capital, the part earlier laid out in money, becomes free; the labour time employed has remained the same relative to the capital employed, but its surplus part has risen relative to the necessary part. If the relation of necessary labour to the total working day was = 3/4 of the working day or 9 hours, before, then it will now be equal to 3/8 or = 4 1/2 hours. In the first case the surplus value was 3 hours; in the second = 7 1/2.

The course of the process is this: With a given population of workers and length of the working day, i.e. length of the working day multiplied by the number of simultaneous working days, surplus labour can be increased only relatively, by means of greater productive power of labour, the possibility of which is already posited in the presupposed growth of the population and [its] training for labour (including thereby also a certain amount of free time for non-labouring, not directly labouring population, hence development of mental capacities etc.; mental appropriation of nature). Given a certain stage of the development of the productive forces, surplus labour can be absolutely increased only through transformation of a greater part of the population into workers, and increase of the number of simultaneous working days. The first process is decrease of the relative working population, although it remains the same in absolute terms; the second is its increase. Both tendencies necessary tendencies of capital. The unity of these contradictory tendencies, hence the living contradiction, only with machinery, which we will discuss in a moment. The first form obviously allows only a small non-labouring population relative to the labouring one. The second, since the quota of living labour required in it increases more slowly than the quota of capital employed, allows a larger non-labouring population relative to the labouring one.

During the formative stages of capital, where it obtains raw material and instrument, the conditions of the product, from circulation, it relates to these component parts and to their relations as given presuppositions. Although this appearance vanishes on closer examination, since all these moments appear as equally the products of capital, and since it would otherwise not have conquered the total conditions of its production, they nevertheless remain always in the same relation for the individual capital. Hence, one part of it can always be regarded as constant value, and only the part laid out in labour varies. These component parts do not develop evenly, but, as will be seen in competition, [it is] the tendency of capital to distribute the force of production evenly.

Since the growing productivity of labour would lead capital to encounter a barrier in the not-growing mass of raw material and machinery, industrial development takes the following course: the introduction of labour on a large scale, as well as the employment of machinery, begins in the branches which are closest to being production of raw materials for industry, raw material both for the material of labour and [for the] instrument, where the material of labour most closely approaches mere raw material. Thus, in spinning before in weaving, in weaving before printing etc. First of all in the production of metals, which are the chief raw material for the instruments of labour themselves. If the actual raw product which makes up the raw material for industry at the lowest stage cannot itself be rapidly increased—then refuge is sought in more rapidly increasable substitutes. (Cotton for linen, wool and silk.) The same happens for the necessaries of life in the substitution of potatoes for grain. The higher productivity in the latter case through production of a worse article containing fewer nourishing substances and hence cheaper organic conditions of the worker’s reproduction. The latter belongs in the examination of wages. In the discussion of the minimum wage, not to forget Rumford. [35]

Now we come to the third case of relative surplus labour as it presents itself in the employment of machinery.

<It has become apparent in the course of our presentation that value, which appeared as an abstraction, is possible only as such an abstraction, as soon as money is posited; this circulation of money in turn leads to capital, hence can be fully developed only on the foundation of capital, just as, generally, only on this foundation can circulation seize hold of all moments of production. This development, therefore, not only makes visible the historic character of forms, such as capital, which belong to a specific epoch of history; but also, [in its course] categories such as value, which appear as purely abstract, show the historic foundation from which they are abstracted, and on whose basis alone they can appear, therefore, in this abstraction; and categories which belong more or less to all epochs, such as e.g. money, show the historic modifications which they undergo. The economic concept of value does not occur in antiquity. Value distinguished only juridically from pretium, against fraud etc. The concept of value is entirely peculiar to the most modern economy, since it is the most abstract expression of capital itself and of the production resting on it. In the concept of value, its secret betrayed.>

What distinguishes surplus labour founded on machinery is the reduction of necessary labour time, which takes the form that fewer simultaneous working days are employed, fewer workers. The second moment, that the increase in productive power must be paid for by capital itself, is not free of charge. The means by which this increase in the force of production is set to work is itself objectified direct labour time, value, and, in order to lay hands upon it, capital must exchange a part of its value for it. It is easy to develop the introduction of machinery out of competition and out of the law of the reduction of production costs which is triggered [36] by competition. We are concerned here withdeveloping it out of the relation of capital to living labour, without reference to other capitals.

If a capitalist annually employed 100 workers at spinning cotton, which annually cost him £2,400, and if he replaced 50 workers with a machine costing £1,200, but in such a way that the machine would likewise be worn out within the year and have to be replaced again at the beginning of the second year, then he would obviously have gained nothing; nor could he sell his product more cheaply. The remaining 50 workers would do the same work as 100 did earlier; each individual worker’s surplus labour would have increased in the same relation as their number had diminished, hence would have remained the same. If previously it was = 200 hours of work daily, i.e. 2 hours for each of the 100 working days, then it would now likewise be = 200 hours of work, i.e. = 4 for each of the 50 working days. Relative to the worker, his surplus time would have increased; for capital the matter would be unchanged, since it would now have to exchange 50 working days (necessary and surplus time together) for the machine. The 50 days of objectified labour which it exchanged for machinery would only give him an equivalent, hence no surplus time, as if it had exchanged 50 days of objectified labour for 50 living ones. This would be replaced, however, by the surplus labour time of the remaining 50 workers. If the form of exchange is stripped off, the matter would be the same as if the capitalist employed 50 workers whose entire working day were necessary labour only, and 50 additional ones whose working day made good this ‘loss’. But posit now that the machine cost only £960, i.e. only 40 working days, and that the remaining workers produce 4 hours of surplus labour time each, as before, i.e. 200 hours or 16 days, 4 hours (16 1/3 days), then the capitalist would have saved £240 on outlays. While he gained only 16 days 4 hours with his previous outlay of 2,400, he would now likewise gain 200 hours of work on an outlay of 960. 200 is to 2,400 as 1:12; while 200:2,160 = 20:216 = 1:10 4/5. Expressed in days of work, in the first case he would gain 16 days 4 hours per 100 working days, in the second, the same amount on 90; in the first, on 1,200 hours of work daily, 200; in the second, on 1,080. 200:1,200 = 1:6, 200:1,080 = 1:5 2/3. In the first case the individual worker’s surplus time = 1/6 working day = 2 hours. In the second case = 2 6/27 hours per worker. Furthermore, with the employment of machinery, the part of the capital which was previously employed in instruments must be deducted from the additional cost caused by the machinery.

[Addenda to the Chapters on Money and on Capital

Money and fixed capital: presupposes certain amount of wealth. (Economist.)—Relation of fixed capital and circulating capital. Cotton-spinner< (Economist)

<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, p. 520.)> <‘What is the practice? A manufacturer obtains £500 from his banker on Saturday, for wages; he distributes these among his workers. On the same day the majority of money is brought to the shopkeepers, and through them returned to their various bankers.’ (loc. cit. p. 575.)>

<‘A cotton spinner, with a capital of £100,000, who laid out £,95,000 for his mill and machinery, would soon find he wanted means to buy cotton and pay wages. His trade would be hampered and his finances deranged. And yet men expect that a nation, which has recklessly sunk the bulk of its available means in railways, should nevertheless be able to conduct the infinite operations of manufacture and commerce.’ (loc. cit. p. 1271.)>

Slavery and wage labour (Steuart).—Profit upon alienation. Steuart

‘Money… an adequate equivalent for any thing alienable.’ (J. Steuart.) (p. 13) (Vol. I, p. 32, ed. Dublin, 1770.)

<‘In the old times to make mankind labour beyond their wants, to make one part of a state work, to maintain the other gratuitously, to be brought about only through slavery … If mankind be not forced to labour, they will only labour for themselves; and if they have few wants, there will be few [who] labour. But when states come to be formed and have occasion for idle hands to defend them against the violence of their enemies, food at any rate must be procured for those who do not labour; and as, by the supposition, the wants of the labourers are small, a method must be found to increase their labour above the proportion of their wants. For this purpose slavery was calculated… Here then was a violent method of making men laborious in raising food;… men were then forced to labour because they were slaves of others; men are now forced to labour because they are slaves to their own wants.’ (Steuart, Vol. I, p. 38-40.) ‘It is the infinite variety of wants, and of the kinds of commodities necessary to their gratification, which alone renders the passion for wealth indefinite and insatiable.’ (Wakefield on A. Smith, p. 64 note.)> [37]

‘Machines I consider as a method of augmenting (virtually) the number of industrious, without the expense of feeding an additional number.’ (Steuart, Vol. I, p. 123.) ‘When manufacturers get together in bodies, they depend not directly upon consumers, but upon merchants.’ (Steuart, Vol. I, p. 154.) ‘The abusive agriculture is no trade, because it applies no alienation, but is purely a method of subsisting.’ (loc. cit. p. 156.)‘Trade is an operation, by which the wealth, or work, either of individuals, or of societies, may be exchanged, by a set of men called merchants,for an equivalent, proper for supplying every want, without any interruption to industry, or any check upon consumption.’ (Steuart, I, p. 166.) ‘While wants continue simple and few, a workman finds time enough to distribute all his work; when wants become more multiplied, men must work harder: time becomes precious; hence trade is introduced. The merchant as mediator between the workman and consumer.’ (loc. cit. p. 171.) ‘Money the common price of all things.’ (loc. cit. p. 177.) ‘Money represented by the merchant. To the consumers, the merchant represents the totality of manufacturers, towards the latter, the totality of consumers, and to both classes his credit supplies the use of money. He represents wants, manufacturers and money by turns.’ (loc. cit. p. 177, 178.) (Steuart, see Vol. I, p. 181-3, regards profit as distinct from real value, which he defines very confusedly (has production costs in mind) as the amount of objectified labour (what a workman can perform in a day etc.), necessary expense of the workmen, price of the raw material, as profit upon alienation fluctuating with demand.) (With Steuart the categories still vary greatly; they have not yet become fixed, as with A. Smith. We just saw that real value identical with production costs, in which, besides the labour of the workmen and the value of the material, wages, also, confusingly, figure as a separate component part. At anotherpoint he takes the intrinsic value of a commodity to mean the value of its raw material or the raw material itself, while, by useful value, he understands the labour time employed on it. ‘The first is something real in itself; e.g. the silver in a silver lattice-work. The intrinsic worth of a silk, woolen or linen manufacture is less than the primitive value employed, because it is rendered almost unserviceable for any other use but that for which the manufacture is intended; the useful value by contrast must be estimated according to the labour it has cost to produce it. The labour employed in the modification represents a portion of a man’s time, which having been usefully employed, has given a form to some substance which has rendered it useful, ornamental, or in short, fit for man, mediately or immediately.’ (p. 361, 362, Vol. I loc. cit.) (The real use value is the form given to the substance. But this form itself is only static labour.) ‘When we suppose a common standard on the price of any thing, we must suppose the alienation of it to be frequent and familiar. In countries where simplicity reigns, … it is hardly possible to determine any standard for the price of articles of first necessity… in such states of society the articles of food and necessaries are hardly found in commerce: no person purchases them; because the principal occupation of everybody is to procure them for himself… Sale alone am determine prices, and frequent sale can only fix a standard. Now the frequent sale of articles of the first necessity marks a distribution of inhabitants in labourers and free hands’ etc. (Vol. I, p. 395 seq. loc. cit.) (The doctrine of the determination of prices by the mass of the circulating medium first advanced by Locke, repeated in the Spectator, 19 October 1711, developed and elegantly formulated by Hume and Montesquieu, its basis raised to its formal peak by Ricardo, and with all its absurdities in practical application to the banking system, by Loyd, Colonel Torrens etc.). Steuart polemicizes against it, and his development materially anticipates more or less everything later advanced by Bosanquet, Tooke, Wilson. (Notebook, p. 26.) [38] (He says among other things as historic illustration: ‘It is a fact that at the time when Greece and Rome abounded in wealth, when every rarity and the work of choicest artists was carried to an excessive price, an ox was bought for a mere trifle and grain was cheaper perhaps than ever it was in Scotland… The demand is proportioned, not to the number of those who consume, but of those who buy; now those who consume are all the inhabitants, but those who buy are only the few industrious who are free… In Greece and Rome, slavery: Those who were fed by the labour of their own slaves, the slaves of the state, or by grain distributed free of charge among the people, had no occasion to go to the market: they did not enter into competition with the buyers … The few manufacturers then known made wants in general less extensive; consequently, the number of the industrious free was small, and they were the only persons who could have occasion to purchase food and necessaries: consequently, the competition of the buyers must have been small in proportion, and price low; further the markets were supplied partly from the surplus produced on the lands of the great men, laboured by slaves; who being fed from the lands, the surplus cost in a manner nothing to the proprietors; and since the number of those who had occasion to buy, very small, this surplus was sold cheap. Also, the grain distributed to the people free of charge must necessarily have held the market down, etc. By contrast, for a fine mullet or an artist, etc. great competition and hence prices rising extraordinarily. The luxury of those times, though excessive, was confined to a few, and as money, in general, circulated but slowly through the hands of the multitude, it was constantly stagnating in those of the rich who found no measure, but their own caprice, in regulating the prices of what they wished to possess.’) (26, 27, Notebook. Steuart.) [39] ‘Money of account is nothing but an arbitrary scale of equal parts, invented for measuring the respective value of things vendible. Money of account quite different from money-coin,which is price, and could exist, even if there were no substance in the world which was the proportional equivalent for all commodities.’ (Vol. II, p. 102.) ‘Money of account does the same service for value as things like minutes, seconds etc. do for angles, or scales for geographical maps etc. In all these inventions some denomination is always taken for the unit.’ (loc. cit.) ‘The usefulness of all those inventions being solely confined to the marking of proportion. Just so, the unit in money can have no invariable determinate proportion to any part of value, i.e. it cannot be fixed to any particular quantity of gold, silver or any other commodity whatsoever. The unit once fixed, we can, by multiplying it, ascend to 782 the greatest value’ etc. (p. 103.) ‘So money a scale for measuring value.’ (p. 102.) ‘The value of commodities, therefore, depending upon a general combination of circumstances relative to themselves and to the fancies of men, their value ought to be considered as changing only with respect to one another; consequently, any thing which troubles or perplexes the ascertaining those changes of proportion by the means of a general, determinate and invariable scale, must be hurtful to trade and a clog upon alienation.’ (loc. cit.) ‘It is absolutely necessary to distinguish between price (i.e. coin) considered as a measure and price considered as an equivalent for value. The metals do not perform both functions equally well … Money is an ideal scale of equal parts. If it be demanded what ought to be the standard of value of one part? I answer by putting another question: What is the standard length of a degree, a minute, a second? It has none—but so soon as one part becomes determined, by the nature of a scale, all the rest must follow in proportion.’ (p. 105.) ‘Examples of this ideal money are the bank money of Amsterdam and the Angola money on the African coast.—The bank money stands invariable like a rock in the sea. According to this ideal standard are the prices of all things regulate’ (p. 106, 107 seq.)

In Custodi’s anthology of the Italian economists, Parte Antica, Tomo III: Montanari (Geminiano), Della moneta, written about 1683, [40]says of the ‘invention’ of money: ‘Intercourse between nations spans the whole globe to such an extent that one may almost say all the world is but a single city in which a permanent fair comprising all commodities is held, so that by means of money all the things produced by the land, the animals and human industry can be acquired and enjoyed by any person in his own home. A wonderful invention!’ (p. 40.) ‘But, since it is another peculiarity of measures that they enter into such a relation with the things measured that in a certain manner the thing measured becomes the measure of the measuring unit, it follows that, just as motion is the measure of time, time may be the measure of the motion itself; hence it occurs that not only are the coins measures of our wants, but also our wants are, reciprocally, the measure of the coins themselves and of value.’ (p. 41, 42.) ‘It is quite clear that the greater the number of coins circulating in commerce within the confines of a given district, in proportion to the marketable goods there are in that place, the more expensive will they be. Can a thing be said to be expensive because it is worth a large quantity of gold in countries where gold is abundant? Should not the gold itself, which is estimated as of the same quantity as another thing which comes to be considered elsewhere as cheap, be rather described as cheap in that case?’ (p. 48.)

‘100 years earlier the chief feature in the commercial policy of nations was the amassing of gold and silver, as a kind of wealth par excellence.’ (p. 67.) (Gouge, Wm. A Short History of Paper Money and Banking in the United States. Philadelphia, 1833.) (Barter in United States (see Gouge Notebook VIII, p. 81 seq.): ‘In Pennsylvania as in the other colonies, significant traffic was carried on by barter… as late as 1723 in Maryland, an act was passed making tobacco a legal tender at one penny a pound, and Indian corn at 20d. a bushel.’ (p. 5.) (Part II.) Soon however, ‘their trade with the West-Indies and a clandestine commerce with the Spanish made silver so plentiful, that in 1652 a mint was established in New England for coining shillings, sixpences and threepenny pieces.’ (p. 5.) (loc. cit.) ‘Virginia in 1645 forbade dealings by barter, and established the Spanish piece of 8 to 6s. as the standard currency of the colony (the Spanish dollar)… The other colonies affixed different denominations to the dollar… The money in account was everywhere nominally the same as in England. The coin of the realm was especially Spanish and Portuguese’ etc. cf. p. 81 Notebook VIII). (p. 6. By an act of Queen Anne an attempt was made to put an end to this confusion.)

Wool industry in England since Elizabeth (Tuckett).—Silk-manufacture (Same). Ditto Iron. Cotton

Tuckett: A History of the Past and Present State of the Labouring Population etc., 2 vols., London, 1846.

‘ Wool manufactures: During Elizabeth’s time the clothier occupied the place of the mill-owner or manufacturer; he was the capitalist who brought the wool, and delivered it to the weaver, in portions of about 12 pounds, to be made into cloth. At the beginning, manufacture wasconfined to cities and corporate and market-towns, the inhabitants of the villages making little more than [sufficed] for the use of their families. Later, in non-corporate 784 towns favoured by local advantages, and also in country places by farmers, graziers and husbandmen, who commenced making cloth for sale, as well as for domestic use.’ (The cruder sorts.) ‘In 1551 a statute was passed, restricting the number of looms and apprentices which might be held by clothiers and weave residing out of cities; and that no country weaver should have a tucking mill, nor any tucker a loom. By a law of the same year, all weavers of broad cloth had to undergo an apprenticeship of 7 years. Nevertheless, village manufacture, as an object of mercantile profit, took firm root. 5 and 6 Edward VI, c. 22, a statute, prohibits the use of machinery… The Flemish and Dutch thus maintained superiority in this manufacture until the end of the seventeenth century… In 1668 the Dutch loom was introduced from Holland.’ (p. 138-41.) ‘Owing to the introduction of machinery, in 1800 one person could do as much work as 45 in the year 1785. In the year 1800 the capital invested in mills, machinery etc. appropriate for the woolen trade was not less than 6 million pounds sterling and the total number of persons of all ages occupied in England in this branch was 1,500,000.’ (p. 142-3.) Thus the productive power of labour grew 4,600%. But, firstly, this number only about 1/6 of the fixed capital alone; relative to the total capital (raw material etc.) perhaps only 1/29. ‘Hardly any manufacture had such an advantage from the improvements in science as the art of dyeing cloth through the application of the laws of chemistry.’ (loc. cit. p. 144.)

Silk manufacture. Until the beginning of the eighteenth century, ‘the art of silk throwing most successful in Italy, where machinery of a particular description adopted to this purpose. In 1715 John Lombe, one of three brothers who had a business as throwers and silk-merchants, travelled to Italy and was able to obtain a model in one of the mills… A silk mill, with the improved machinery, erected in 1719 in Derby by Lombe and his brothers. This mill contained 26,586 wheels, all turned by one water wheel… Parliament gave him £14,000 for throwing open the secret to the trade. This mill came nearer to the idea of a modern factory than any previous establishment of the kind. The machine had 97,746 wheels, movements, and individual parts working day and night, all of which were moved by one large water wheel and were governed by one regulator: and it employed 300 persons to attend and supply it with work.’ (133-4.) (No spirit of invention showed itself in the English silk trade; first introduced by the weavers of Antwerp, who fled after the sacking of the town by the Duke of Parma; then different branches by the French refugees 1685-92.)

In 1740, 1,700 tons of iron were produced by 59 high furnaces; 1827: 690,000 by 284. Furnaces thus increased = 1:4 48/49; less than quintupled; the tons = 1:405 15/17. (Comp. on the relation over a series of years loc. cit. Notebook p. 12.) [41]

Glass manufacturing, among other things, best shows how dependent [is] the progress of science on manufactures. On the other side e.g. the invention of quadrants arose from the needs of navigation, parliament offered a prize for inventions.

8 cotton machines, which cost £5,000 in 1825, were sold in 1833 for £300. (On cotton spinning, see loc. cit. p. 13, Notebook.) [40]

‘A first rate cotton spinning factory cannot be built, filled with machinery, and fitted with gas work and steam engine, under £100,000. A steam engine of one hundred horse power will turn 50,000 spindles, which will produce 62,500 miles of fine cotton-thread per day. In such a factory, 1,000 persons will spin as much thread as 250,000 persons could without machinery. McCulloch estimates the number in Britain at 130,000.’ (p. 218, loc. cit.)

Origin of free wage labour. Vagabondage. Tuckett

‘Where there are no regular roads, there can hardly be said to be a community; the people could have nothing in common.’ (p. 270. Tuckett loc. cit.)

‘Of the produce of the earth, useful to men, 99/100 are the produce of men.’ (loc. cit. p. 348.)

‘When slavery or life-apprenticeship was abolished, the labourer became his own master and was left to his own resources. But if without sufficient employment etc., men will not starve whilst they can beg or steal; consequently the first character the poor assumed was that of thieves and mendicants.’ (p. 637.note, Vol. II, loc. cit.) ‘One remarkable distinction of the present state of society, since Elizabeth, is that her poor law was especially a law for the enforcement of industry, intended to meet the mass of vagrancy that grew out of the suppression of the monasteries and the transition from slavery to free labour. As example, the 5th act of Elizabeth, directing households using half a plough of land in tillage, to require any person they might find unemployed, to become their apprentice in husbandry, or in any art or mystery; and, if unwilling, to bring him before a justice, who was almost compelled to commit him to ward until he consented to be bound. Under Elizabeth, out of every 100 people, 85 were required for the production of food. At present, not a lack of industry, but a profitable employment … The great difficulty then was to overcome the propensity of idleness and vagabondage, not to procure them remunerative occupation. During this reign there were several acts of the legislature to enforce the idle to labour.’ (p. 643, 644. Vol. II, loc. cit.)

‘Fixed capital, when once formed, ceases to affect the demand for labour, but during its formation it gives employment to just as many hands as an equal amount would employ, either of circulating capital, or of revenue.’ (p. 56. John Barton, Observations on the Circumstances which Influence the Condition of the Labouring Classes of Society, London, 1817.)

Blake on accumulation and rate of profit. (Shows that prices etc. not indifferent because a class of mere consumers does not at the same time consume and reproduce.)—Dormant capital

‘The community consists of two classes of persons, one, which consumes and reproduces, the other, which consumes without reproduction. If the entire society consisted of producers, then of little consequence at what price they exchanged their commodities among one another; but those who are only consumers form too numerous a class to be overlooked. Their power of demanding arises from seats, mortgages, annuities, professions and services of various descriptions rendered to the community. The higher the price at which the class of consumers can be made to buy, the greater will be the profit of the producers upon the mass of commodities which they sell to them. Among these purely consuming classes, the government takes up the most prominent station.’ (W. Blake, Observations on the Effects Produced by the Expenditure of Government during the Restriction of Cash Payments, London, 1823, p. 42, 43.) In order to show that the capital lent to the state is not necessarily such as was previously employed productively—and we are concerned here only with the admission that a part of capital is always dormant—Blake says: ‘The error lies in the supposition (1) that the whole capital of the country is fully employed; (2) that there is immediate employment for successive accumulations of capital as it accrues from saving. I believe there are at all times some portions of capital devoted to undertakings that yield very slow returns and slender profits, and some portions lying wholly dormant in the form of goods, for which there is no sufficient demand… Now, if these dormant portions and savings could be transferred into the hands of government in exchange for its annuities, they would become sources of new demand, without encroaching upon existing capital.’ (p. 54, 55 loc. cit.) ‘ Whatever amount of produce is withdrawn from market by the demand of the saving capitalist, is poured back again, with addition, in the goods that he reproduces. The government, by contrast, takes it away from consumption without reproduction … Where savings are made from revenue, it is clear that the person entitled to enjoy the portion saved is satisfied without consuming it. It proves that the industry of the country is capable of raising more produce than the wants of the community require. If the quantity saved is employed as capital in reproducing a value equivalent to itself, together with a profit, this new creation, when added to the general fund, can be drawn out by that person alone who made the savings, i.e. by the very person who has already shown his disinclination to consume… If everyone consumes what he has a right to consume, there must of necessity be a market. Whoever saves from his revenues, foregoes this right, and his share remains undisposed of. Should this spirit of economy be general, the market is necessarily overstocked, and it must depend on the degree, to which this surplus accumulates, whether it can find new employments as capital.’ (56, 57.) (Cf. this work generally in the section on accumulation.) (Cf. Notebook p. 68 and p. 70, where it is shown that the rate of profits and wages rose owing to prices, caused by war demand, without any respect ‘to the quantity of land taken last into cultivation’.) ‘During the revolutionary war the market rate of interest rose to 7, 8, 9 and even 10%, although during the whole time lands of the lowest quality were cultivated.’ (loc. cit. p. 64-6.) ‘The rise of interest to 6, 8, 10 and even 12% proves the rise of profit. The depreciation of money, supposing it to exist, could not change the relation of capital and interest. If £200 are worth only £100; £10 interest worth only £5, whatever affected the value of the principal would equally affect the value of profits. It could not alter the relation between the two.’ (p. 73.) ‘Ricardo’s reasoning, that the price of wages cannot make the prices of commodities rise, does not apply to a society where a large class are not producers.’ (loc. cit.) ‘More than the just share is obtained by the producers at the expense of that portion, which of right belongs to the class who are only consumers.’ (74.) This of course important, since capital exchanges not only for capital, but also for revenue, and each capital can itself be eaten up as revenue. Still, this does not affect the determination of profit in general. Under the various forms of profit, interest, rent, pensions, taxes etc., it may be distributed (like a part of wages even) under different titles among different classes of the population. They can never divide up among them more than the total surplus value of the total surplus product. The ratio in which they distribute it is of course economically important; [but] does not affect the question before us.

‘If the circulation of commodities of 400 million required a currency of 40 million, and this proportion of 1/10 were the due level, then, if the value of the commodities to be circulated grows to 450 million, from natural causes, the currency, in order to continue at its level, would have to grow to 45 million, or the 40 million must be made to circulate with such increased rapidity, by banking or other improvements, as to perform the functions of 45 million … such an augmentation, or such rapidity, the consequence and not the cause of the increase of prices.’ (W. Blake. loc. cit., p. 80 seq. cf. Notebook p. 70.)

‘The upper and middle class of Rome gained great wealth by Asiatic conquest, but not being created by commerce or manufactures, it resembled that obtained by Spain from her American colonies.’ (p. 66 Vol. I, Mackinnon, History of Civilisation, London, 1846, Vol. I.)

Domestic agriculture at the beginning of the sixteenth century. Tuckett

‘In the fifteenth century, Harrison asserts’ (see also Eden), [43] ‘that the farmers are barely able to pay their rents without selling a cow, or a horse, or some of their produce, although they paid at the most £4 for a farm… The farmer in these times consumed the chief part of the produce to be raised, his servants taking their seats with him at his table… The principal materials for clothing were not bought, but were obtained by the industry of each family. The instruments of husbandry were so simple that many of them were made, or at least kept in repair, by the farmer himself. Every yeoman was expected to know how to make yokes or bows, and plough gear; such work employed their winter evenings.’ (p. 324, 325 loc. cit. Tuckett, Vol. II.)

Profit. Interest. Influence of machinery on the wage fund. Westminster Review

Interest and Profit: ‘Where an individual employs his own savings productively, the remuneration of his time and skill—agency for superintendence (profit further includes the risk to which his capital may have been exposed in his particular business); and the remuneration for the productive employment of his savings, Interest. The whole of this remuneration, Gross Profit; where an individual employs the savings of another, he obtains the agency only. Where one individual lends his savings to another, only the interest or the net profit.’ (Westminster Review, January 1826, p. 107, 108.) Thus here interest = net profit = remuneration for the productive employments of savings; the actual profit the remuneration for the agency for superintendence during his productive employment. The same philistine says: ‘Every improvement in the arts of production, that does not disturb the proportion between the portions devoted to capital and not devoted to the payment for wages, is attended with an increase of employment to the labouring classes: every fresh application of machinery and horse labour isattended with an increase of produce and consequently of capital; to whatever extent it may diminish the ratio which that part of the national capital forming the fund for the payment of wages bears to that which is otherwise employed, its tendency is not to diminish but to increase the absolute amount of that fund and hence to increase the quantity of employment.’ (loc. cit. p. 123.)

[Money as Measure of Value]

[Money as measure of values and yardstick of prices. Critique of theories of the standard measure of money.]

The role of money as measure, as well as, secondly, the fundamental law that the mass of the circulating medium, at a definite velocity of circulation, is determined by the prices of the commodities and by the mass of commodities circulating at definite prices, or by the total price, the aggregate amount of commodities, which is itself in turn determined by two circumstances: (1) the level of the commodity price; (2) the mass of circulating commodities at definite prices; further, (3) the law that money as medium of circulation becomes coin, mere vanishing moment, meresymbol of the values it exchanges—all this leads to more particular aspects which we shall develop only when and in so far as they coincide with more complicated economic relations, credit circulation, exchange rate etc. It is necessary to avoid all detail, and where detail must be brought in, it is to be brought in only at the point where it loses the elementary character.

First of all, money circulation, as the most superficial (in the sense of: driven out onto the surface) and the most abstract form of the entire production process, is in itself quite without content, except in so far as its own formal distinctions, precisely the simple aspects developed in section II, make up its content. It is clear that simple money circulation, regarded in itself, is not bent back into itself, [but] consists of an infinite number of indifferent and accidentally adjacent movements. The coin, e.g., may be regarded as the point of departure of money circulation, but there is no law of any reflux back to the coin except for depreciation through wear and tear, which necessitates melting-down and new issue of coins. This concerns only the material side and does not at all form a moment of circulation itself. Within circulation itself, the point of return may be different from the point of departure; in so far as it bends back into itself, money circulation appears as the mere appearance of a circulation going on behind it and determining it, e.g. when we look at the money circulation between manufacturer, worker, shopkeeper and banker. Furthermore, the factors which affect the mass of commodities thrown into circulation, the rise and fall of prices, the velocity of circulation, the amount of simultaneous payments etc., are all circumstances which lie outside simple money circulation itself. They are relations which express themselves in it; it provides the names for them, as it were; but they are not to be explained by its own differentiation. Different metals serve as money, and they have a different and changing value relation to one another. Thus the question of the double standard etc. enters, which takes on world-historical forms. But it takes them on, and the double standard itself enters, only through external trade, hence, to be usefully examined, supposes the development of much higher relations than that of the simple money relation.

Money as the measure of value is not expressed in amounts of bullion, but rather in accounting money, arbitrary names for fractional parts of a specific amount of the money-substance. These names can be changed, the relation of the coin to its metallic substance can be changed, while the name remains the same. Hence counterfeiting, which plays a great role in the history of states. Further, the different kinds of money in various countries. This question [is of] interest only in exchange rate. [44]

Money is a measure only because it is labour time materialized in a specific substance, hence itself value, and, more particularly, because this specific materiality counts as its general objective one [allgemeingegenständliche], as the materiality of labour time as such, as distinct from its merely particular incarnations; hence because it is an equivalent. But since, in its function as measure, money is only an imagined point of comparison, only needs to exist ideally—only the ideal transposition of commodities into their general value-presence takes place –; since, further, in this quality as measure it figures first as accounting coin, and I say a commodity is worth so many shillings, francs etc., when I transpose it into money; this has given rise to the confused notion of an ideal measure, developed by Steuart and refurbished at various periods, even recently, in England, as a profound discovery. Namely in this sense, that the names, pound, shillings, guinea, dollar etc., which count as accounting units are not specific names for specific quantities of gold, silver etc., but merely arbitrary points of comparison which do not themselves express value, no definite quantity of objectified labour time. Hence the whole nonsense about fixing the price of gold and silver—price understood here as the name by which fractional parts are called. An ounce of gold now divided into £3 17s. 10d. This is called fixing the price; it is, as Locke correctly remarks, only fixing the name of fractional parts of gold and silver etc. Expressed in itself, gold, silver is naturally equal to itself. An ounce is an ounce, whether I call it £3 or £20. In short, this ideal measure in Steuart’s sense means this: if I say commodity A is worth £12., commodity B 6, commodity C 3, then their relation to one another = 12: 6:3. Prices express only the relations in which they are exchanged for one another. 2B are exchanged for 1A and 1½B for 3C. Now, instead of expressing the relation of A, B, C in real money, money which itself has value, is value, could I not, instead of the £ which expresses a specific mass of gold, just as well take any name you like, without content (this means, here, ideally), e.g. mackerels? A = 12 mackerels; B = 6M, C = 3M. This word M is here only a name, without any relation to a content belonging to itself. Steuart’s example with a degree, line, second, proves nothing; for although degree, line, second have changing magnitudes, they are not merely names, but rather always express the fractional part of a specific magnitude of space or of time. They thus have in fact a substance. The fact that money in the role of measure functions only as something imagined is here transformed into it supposedly being any imagined thing you like, a mere name, namely a name for the numerical value-relation. In that case, however, it would be correct to express no names at all, but merely a numerical relation, for the whole affair comes down to this: I obtain 6B for 12A, 3C for 6B; this relation can also be expressed in this way, A = 12x, B = 6x, C = 3x, where the x is itself only a name for the relation of A:B and B:C. The mere, unnamed numerical relation would not do. For A:B = 12:6 = 2:1, and B:C = 6:3 = 2:1. Hence C = 1/2. Hence B = 1/2, hence B = C. Hence A = 2 and B = 2; hence A = B.

Let me take any price list, e.g. potash, 35s. the ton; cocoa, lb., 60s.; iron (bars) (p. ton) 145s. etc. In order to have the relation of these commodities to one another, not only can I forget the silver in the shilling; the numbers alone, 35, 60, 145 suffice to define the reciprocal value relations of potash, cocoa, iron bars. Undenominated numbers now suffice; and not only can I give their unit, 1, any name, regardless of any value; I need not give it any name at all. Steuart insists that I must give it one or another name, but that this name then, as mere arbitrary name of the unit, as mere marking of proportion itself, cannot be fixed to any portion of the quantity of gold, silver or any other commodity.

With every measure, as soon as it serves as point of comparison, i.e. as soon as the different entities to be compared are put into a numerical relation to the measure as unit, and are now related to one another, the nature of the measure becomes irrelevant and vanishes in the act of comparison itself; the unit of measure has become a mere unit of numbers; the quality of this unit has vanished, e.g. that it is itself a specific magnitude of length or of time or of an angle. But is it only when the different entities are already presupposed as measured that the unit of measure marks only proportion between them, thus e.g. in our case the proportion of their values. The accounting unit not only has different names in different countries; but is the name for different fractional parts of an ounce of gold, e.g. But the exchange rate reduces all of them to the same unit of weight of gold or silver. Thus if I presuppose the various magnitudes of commodities, e.g. as above, = 35s., 60s., 145s., then, to compare them, since the 1 is presupposed as equal in all of them, since they have been made commensurable, it is wholly superfluous to bring in the observation that s. is a specific quantity of silver, the name for a specific amount of silver. But, as mere numerical magnitudes, as amounts of any unit of the same name, they only become comparable to one another, and only express proportions towards one another, when each individual commodity is measured with the one which serves as unit, as measure. But I can only measure them against one another, only make them commensurable, if they have a unit—the latter is the labour time contained in both. The measuring unit must therefore [be] a certain quantity of a commodity in which a quantity of labour is objectified. Since the same quantity of labour is not always expressed in the same quantity of e.g. gold, it follows that the value of this measuring unit itself variable. But, in so far as money is regarded only as measure, this variability is no obstacle. Even in barter, to the extent that it is somewhat developed as barter, i.e. is a repeated, normal operation, not merely an isolated act of exchange, some other commodity appears as measuring unit, e.g. cattle with Homer. Among the savage Papuans of the coast, who, in order ‘to obtain a foreign article, barter 1 or 2 of their children, and if they are not to hand, borrow those of their neighbours, promising to give their own in exchange, when they come to hand, this request being rarely refused’, there exists no measure for exchange. The only side of exchange which exists for the Papuan is that he can obtain the alien thing only by dispossessing himself of something he possesses. This dispossession [Entäusserung] itself is regulated for him by nothing but his fancy on one side, and the scope of his movable possessions on the other. In theEconomist of 13 March 1858, we read, in a letter addressed to the editor: ‘As the substitution in France of gold for silver in the coinage (which has been the principal means hitherto of absorbing the new discoveries of gold) must be approaching its completion, particularly as less coinage will be wanted for a stagnant trade and reduced prices, we may expect ere long that our fixed price of £3 17s. 10 1/2d. an ounce will attract the gold here. [45] Now what does this, our ‘fixed price of an ounce’ of gold, mean? Nothing other than that a certain aliquot part of an ounce is called pence, a certain multiple of this penny-weight of gold a shilling, and a certain multiple of this shilling-weight of gold a pound? Does the gentleman imagine that in other countries the golden Guilder, the Louis d’or etc. do not likewise signify a specific quantity of gold, i.e. that a specific quantity has a fixed name? and that this is an English privilege? or a speciality? That, in England, a monetary coin expressed in gold is more than a monetary coin, and in other countries, less? It would be interesting to know what this noble spirit imagines the exchange rate to be.

What leads Steuart astray is this: the prices of commodities express nothing but the relations in which they are exchangeable for one another, the proportions in which they exchange for one another. These proportions given, I can call the unit any name whatever, because the undenominated abstract number would suffice, and instead of saying that this commodity = 6 stivers, the other = 3 etc., I could say this one = 6 ones, the other = 3; I would not have to give the unit any name at all. Since the numerical relation is all that matters at that point, I can give it any name whatever. But it is already presupposed here that these proportions are given, that the commodities have previously become commensurable magnitudes. As soon as magnitudes have once been posited as commensurable, their relations become simple numerical relations. Money appears as measure, and a specific quantity of the commodity in which it represents itself appears as measuring unit, precisely in order to find the proportions, and to articulate and to handle commodities as commensurable ones. This real unit is the labour time relatively objectified in them. However, it is labour time itself posited as general. The process by which values within the money system are determined by labour time does not belong in the examination of money itself, and falls outside circulation; proceeds behind it as its effective base and presupposition. The question here could only be this: instead of saying this commodity is = to one ounce of gold, why does one not say directly it is = to x labour time, objectified in the ounce of gold? Why is labour time, the substance and measure of value, not at the same time the measure of prices, or, in other words, why are price and value different at all? Proudhon’s school believe it a great deed to demand that this identity be posited and that the price of commodities be expressed in labour time. The coincidence of price and value presupposes the equality of demand and supply, exchange solely of equivalents (hence not of capital for labour) etc.; in short, formulated economically, it reveals at once that this demand is the negation of the entire foundation of the relations of production based on exchange value. But if we suppose this basis suspended, then on the other side the problem disappears again, which exists only of it and with it. That the commodity in its unmediated presence as use value is not value, is not the adequate form of value = that it is [the adequate form of value] as an objective other, or that it is this as equated to another object; or, that value possesses its adequate form in a specific object as distinct from another. Commodities, as values, are objectified labour; the adequate value must therefore itself appear in the form of a specific thing, as a specific form of objectified labour.

Steuart illustrates this drivel about an ideal standard with two historic examples, of which the first, the bank money of Amsterdam, shows just the opposite, since it is nothing but the reduction of circulating coins to their bullion content (metal content); the second one has been repeated after him by all the moderns who follow the same tendency. For example, Urquhart cites the example of the Barbary Coast, where an ideal bar, an iron bar, a merely imaginary iron bar, counts as standard which neither rises nor falls. If e.g. the real iron bar falls, say by 100%, then the bar is worth 2 iron bars; if it rises again by 100%, then only one. Mr Urquhart claims to have observed at the same time that the Barbary Coast knows neither commercial nor industrial crises, but least of all monetary crises, and ascribes this to the magical effects of this ideal standard of value. [46]This ‘ideal’ imaginary standard is nothing but an imagined real value; an imagined notion, however, which, because the monetary system has not developed its further determinants—a development depending on quite different relations—achieves no objective reality. It is the same as if, in mythology, one were to consider as the higher religions those whose god-figures are not worked out in visible form but remain stuck in the imagination, i.e. where they obtain at most an oral, but not a graphic presence; The bar rests on a real iron bar, which was later transformed into a fantasy-creature and fixated as such. An ounce of gold, expressed in English accounting money, = £3 17s. l0 1/2d. Well. Well. Say a pound of silk had had exactly this price; but that it had later fallen to where Milanese raw silk stood on 12 March ’58 in London, the lb. at £1 8s. It is the imaginary conception of an amount of iron, an iron bar, which keeps the same value (1) relative to all other commodities, (2) relative to the labour contained in it. This iron bar is of course purely imaginary, but it is not so fixed and ‘standing like a rock in the sea’ as Steuart, and nearly a 100 years later Urquhart, believes. The only thing fixed in the iron bar is the name; in one case the real iron bar contains 2 ideal ones, in the other, only 1. This is expressed in such a way that the same, unchangeable ideal one is first = 2, then = 1 real bar. Thus, this posited, only the relation of the real iron bar has changed, not the ideal one. But in fact the ideal iron bar is twice as long in one case as in the other, and only its name is unchanged. In one case 100 lb. of iron are called e.g. a bar, in the other, 200 a bar. Suppose money were issued which represented labour time, e.g. time-chits; this time-chit itself could be baptized any name one wished, e.g. one pound, a twentieth of an hour ls., 1/240th of an hour 1d. Gold and silver, like all other commodities, depending on the production time they cost, would express different multiples or fractional parts of pounds, shillings, pence etc., and an ounce of gold could just as well be = £8 6s. 3d. as £3 17s. 10 1/2d. These numbers would always be the expression of the proportion in which a specific quantity of labour is contained in the ounce. Instead of saying that £3 17s. l0 1/2d. = one ounce of gold, now cost only 1/2 lb. of silk, one can imagine that the ounce is now = £7 15s. 9d. or that £3 17s. 10 1/2d. are now only equal to half an ounce, because they are now only half the value. If we compare prices in England in e.g. the fifteenth century with those of the eighteenth, then we may find that two commodities had e.g. entirely the same nominal money value, e.g. 1 pound sterling. In this case the pound sterling is the standard, but expresses four or five times as much value in the first case as in the second, and we could say that, if the value of this commodity is = 1 ounce in the fifteenth century, then it was = 1/4 ounce of gold in the eighteenth; because in the eighteenth, 1 ounce of gold expresses the same labour time as 1/4 ounce in the fifteenth century. It could be said, therefore, that the measure, the pound, had remained the same, but in one case = four times as much gold as in the other. This is the ideal standard. The comparison we make here could have been made by the people of the fifteenth century themselves, if they had lived on into the eighteenth; they would say that 1 ounce of gold, which is now worth £l, was only worth 1/4 before. 4 pounds of gold now worth no more than 1 in the fifteenth century. If this pound previously had the name of livre, then I can imagine that one livre had been = 4 pounds at that time, and is now = to only 1; the value of gold had changed but that the standard, the livre, had remained the same. In fact, one livre in France and England originally meant 1 pound of silver, and now only 1/x. It can be said, therefore, that the name, livre, the standard, had remained nominally the same always, but that silver had changed its value in comparison to it. A Frenchman who had lived from the time of Charlemagne until today could say that the livre of silver had always remained the standard of value, unchanged; it had once been worth 1 pound of silver, but, owing to a variety of misfortunes, had finished up being worth only 1/x of a pennyweight. The ell is the same; only its length is different in different countries. It is in fact the same as if the product of one working day, the gold brought to light in one day of work, were given the name livre; this livre would always remain the same, although it would express very different amounts of gold in different periods.

What do we do in fact when we compare £1 of the fifteenth century with £1 of the eighteenth? Both are the same mass of metal (each = 20s.), but of a different value; since the metal was then worth 4 times as much as now. We say therefore that, compared with today, the livre was = 4 times the mass of metal it contains today. And one could imagine that the livre had remained unchanged, but had been = 4 real livres of gold then, only = 1 today. The matter would be correctly comparable not in regard to the quantity of metal contained in a livre, but rather in regard to its value; this value, however, in turn expresses itself quantitatively in such a way that 1/4 livre gold, then, = 1 livre gold today. Well; the livreidentical, but at that time = 4 real livres of gold (by today’s value) and now only = l. If gold falls in value, and its relative fall or rise as regards other articles is expressed in their price, then, instead of saying that an object which cost £l of gold before now costs 2, it could be said that it still costs 1 pound, but 1 pound is now worth 2 real livres of gold etc.; i.e. 1 livre of 2 real gold livres etc. Instead of saying: I sold this commodity yesterday at £1, today I sell it at £4, I might say that I sell it at £l, but yesterday at 1 pound of 1 real pound, today at 1 pound of 4 real pounds. The remaining prices all follow by themselves as soon as the relation of the real bar to the imaginary one is established; but this simply the comparison between the past value of the bar and its present one. The same as if we calculated everything in the £ of the fifteenth century for instance. This Berber or Negro does the same thing that every historian must do who pursues one kind of coin, one accounting name for a coin of the same metallic content, from one century to the next; if he computes it in contemporary money, he must equate it to more or less gold depending on its changing value in different centuries. [49] It is semi-civilized man’s effort to establish an unchanging value for the unit of money, for the mass of metal which counts as measure; to fix this value, also, as a constant measure. But at the same time, the cleverness to know that the bar has changed its real value. With the small number of commodities which this Berber has to measure, and with the vigour of tradition among the uncivilized, this complicated method of calculating is not as difficult as it looks.

1 ounce is = £3 17s. 10 1/2d., i.e. not quite = £4 But for convenience’s sake let us assume it to be exactly = £4. Then 1/4 of an ounce of gold therefore obtains the name pound, and serves under this name as accounting coin. But this pound changes its value, partly relative to the value of other commodities which change their value, partly in so far as it is itself the product of more or less labour time. The only firm thing about it is the name, and the quantity, the fractional part of the ounce, of the weight-unit of gold, whose baptismal name it is; which is contained, thus, in one piece of money, called one pound.

The savage wants to hold it constant as unchangeable value, and thus the quantity of metal it contains changes for him. If the value of gold falls by 100%, then the pound is the measure of value for him as before; but a pound of 2/4 ounces of gold etc. The pound for him always equals a mass of gold (iron) which has the same value. But since this value changes, it sometimes equals a greater, sometimes a smaller quantity of real gold or iron, depending on whether more or less of them must be given in exchange for other commodities. He compares the contemporary value with the past value, which latter counts as standard for him, and survives only in his imagination. Thus, instead of calculating in 1/4 ounce of gold, whose value changes, he calculates in the value which 1/4 ounce of gold previously had, hence in an imaginary unchanged 1/4 ounce-value, which expresses itself, however, in varying quantities. On one side the effort to establish a fixed value for the value-standard; on the other side, the cleverness of nevertheless avoiding trouble by making a detour. But it is altogether absurd to take this accidental displacement, this way in which semi-savages have assimilated the measurement of values in money, forced on them from the outside, by first displacing it and then getting themselves straight again in the displacement, and to regard this as an organic historical form, or even to erect it as a higher form compared to more developed relations. These savages also take a quantity, the iron bar, as point of departure; but they hold fast to the value which this traditionally had, as accounting unit etc.

This question achieved significance in the modern economy chiefly owing to two circumstances: (1) It has been experienced at various times, e.g. in England during the Revolutionary War [50] that the price of raw gold rose above the price of minted gold. This historic phenomenon thus seemed irrefutably to prove that the names which are given to certain fractional weight-parts of gold (precious metal), pound, shilling, pence etc., by some inexplicable process act in an independent way towards the substance of which they are the name. How else could an ounce of gold be worth more than the same ounce of gold minted in £3 17s. 10 1/2d.? Or how could an ounce of gold be worth more than 4 livres of gold, if livreis merely the name for 1/4 ounce? On closer inspection it was found, however, that the coins which circulated under the name pound in fact no longer contained the normal metallic content, so that, for instance, 5 circulating pounds in fact weighed only 1 ounce of gold (of the same refinement). Since a coin which allegedly represented 1/4 ounce of gold (thereabouts) in fact represented only 1/5, it was very simple that the ounce = 5 of this kind of circulating £; hence that the value of the bullion price rose above the mint price, in that in fact no longer 1/4 but merely 1/5 of an ounce of gold was called pound, represented money, had that name; was merely the name, now, for 1/5 of an ounce. The same phenomenon took place when, although the metal content of the circulating coins had not fallen below their normal measure, they circulated at the same time as depreciated paper money, while to melt them down and to export them was prohibited. In that case, the 1/4 ounce of gold circulating in the form of £ shared in the depreciation of the notes; a fate from which gold in bars was exempt. [*] The fact was again the same; the accounting name, pound, had ceased to be the name for 1/4 ounce, became the name for a lesser amount. Thus the ounce equalled e.g. 5 of such pounds. This means, then, that the bullion price rose above the mint price. These or analogous historical phenomena, all capable of equally simple solution and all belonging to the same series, led therefore to the notion of the ideal measure, or, that money as measure was only a point of comparison, not a specific quantity. Hundreds of volumes have been written about this case in England in the past 150 years.

That a specific sort of coin should rise above its bullion content is not in itself something strange, since new labour (to give it form) is added to the coin. But regardless of that, it happens that the value of a specific sort of coin rises above its bullion content. This is of no economic interest whatever, and has as yet led to no economic studies. It means nothing more than that, for certain purposes, gold and silver was requisite in precisely this form, say of British pounds or of Spanish dollars. The directors of the Bank had, of course, a particular interest in proving that the value of notes had not fallen, but rather that of gold had risen. As to the last question, this can be treated only later.

(2) But the theory of the ideal measure was first brought up at the beginning of the eighteenth century and again in the second decade of the nineteenth, where questions were at issue in which money figures not as measure, nor as medium of exchange, but rather as constantly self-identical equivalent, as value for-itself (in the third aspect) and hence as the universal material of contracts. The issue both times was whether or not debts of state, and other debts, contracted in a depreciated money, should be acknowledged and paid back in full-valued money. It was a question simply between the creditors of the state and the mass of the nation. This question itself does not concern us here. Those who demanded a readjustment of claims on the one side, and of payments (obligations) on the other, chose the wrong battlefield in asking whether or not thestandard of money ought to be changed. On this occasion, then, crude theories of this type were brought forward about the standard of money, fixing of the price of money, etc. (‘Altering the standard like altering the national measures or weights.’) Steuart. It is clear at the first glance that the mass of grain in a nation does not change by the unit measure of e.g. the bushel being doubled or halved. But the change would be very important for e.g. farmers who had to pay grain rent in a specific number of bushels, if, were the measure doubled, they then had to supply the same number of bushels as before.) In this case, it was the creditors of the state who clung to the name ‘pound’, regardless of the fractional weight-unit of gold which it expressed, i.e. to the ‘ideal standard’—for the latter is in fact only the accounting name for the weight-unit of metal which serves as measure. Strangely enough, however, it was precisely their opponents who advanced this theory of the ‘ideal standard’, and they themselves who combated it. Instead of simply demanding a readjustment, or that the creditors of the state ought to be paid back only the amount, in gold, which they had in fact advanced, they demands that the standard be reduced in accordance with depreciation; thus e.g. if the pound sterling had fallen to 1/5 of an ounce of gold, that this 1/5 ounce should henceforth carry the name pound, or that the pound ought perhaps to be minted in 21 shillings instead of in 20. This reduction of the standard was called raising the value of money; in that the ounce now = £5 instead of = 4 as previously. Thus, they did not say that those who had advanced e.g. 1 ounce of gold in 5 depreciated pounds now ought to get 4 full-valued pounds back; they said, rather, that they should be repaid 5 pounds, but that the pound ought henceforth to express 1/20 of an ounce less than before. When they raised this demand in England after the resumption of cash-payment, the accounting coin had regained its old metal value. On this occasion yet further crude theories about money as the measure of value were constructed, and, on the pretense of refuting these theories, whose falsity was simple to prove, the interests of the creditors of the state were smuggled through. The first battle of this sort between Locke and Lowndes. From 1688 to 1695 the state contracted debts in depreciated money—depreciated owing to all full-weighted money having been melted down, and only the lightweight being in circulation. The guinea had risen to 30s. Lowndes (mintmaster?) (secretary to the treasury) wanted to have the £ reduced by 20%; Locke stood by the old standard of Elizabeth. In 1695 the general recoinage. Locke won the day. Debts contracted at 10 and 14s. the guinea, paid back at the rate of 20s. This equally advantageous for the state and for the landed proprietors. Lowndes posed the question on the wrong basis. First he asserted that his scheme was not a debasement of the old standard. Then he ascribed the rise of the bullion price to the inherent value of silver and not to the lightness of the coin with which it was bought. He always supposed that it was the stamp and not the substance which made the currency … For his part, Locke only asked himself whether or not Lowndes’s scheme included a debasement, but never inquired into the interests of those who are engaged by permanent contracts. Mr Lowndes’s great argument for reducing the standard was that silver bullion was risen to 6s. 5d. per ounce (i.e. that it might have been bought with 77 pence of shillings of 1/77 part of a pound troy) and was therefore of the opinion that the pound troy should be coined into 77s., which was a diminution of the value of the £ by 20% or 1/5. Locke replied to him that the 77s. were paid in clipped money and that they were not more than 62 pence standard coin, by weight … But ought a man who had borrowed £1,000 in this clipped money to be obliged to pay back £1,000 in standard weight? Both Lowndes and Locke developed only quite superficially the influence of a change of standard on the relation of debtors and creditors,… the credit system then still little developed in England… the landed interest and the interest of the crown, were only attended to. Trade at that time was almost at a stop, and had been raised at a piratical war… Restoring the standard was the most favourable, both for the landed interest and the exchequer; and so it was gone in for.’ (Steuart loc. cit. Vol. II. p. 178, 119.) Steuart ironically remarks on the whole transaction: ‘By this raising of the standard the government gained significantly as regards taxes, and creditors on their capital and interest; and the nation, which was the principal loser, was satisfied (pleased) (quite joyful) because its standard’ (i.e. the measure of its own value) ‘was not debased; so were all the three parties satisfied.’ (loc. cit. Vol. II, p. 156.) Compare John Locke. Works. 4 vols. 7th ed., London, 1768; as well as the essay ‘Some Considerations on the Lowering of Interest and Raising the Value of Money’ (1691); and also: ‘Further Considerations Concerning Raising the Value of Money, wherein Mr Lowndes’s arguments for it, in his late Report concerning ‘An Essay for the amendment of the silver coins’, are particularly examined’, both in Vol. II. In the first monograph it says, among other things:

‘The raising of money, about which so much nonsense is now being uttered, is either raising value of our money, and that you cannot do; or raising the denomination of our coin.’ (p. 53.) ‘For example, term a crown what previously was called 1/2 a crown. The value remains determined by the metal content. If the abating 1/20 of the quantity of the silver of any coin, does not lessen its value, the abating 19/20 of the quantity of the silver of any coin, will not abate its value. Thus, according to this theory, a single three pence or a single farthing, being called a crown, will buy as much spice or silk, or any other commodity, as a crown-piece which contains 20 or 60 times as much silver.’ (p. 54.) ‘The raising of money is thus nothing but giving a less quantity of silver the stamp and denomination of a greater.’ (loc. cit.) ‘The stamp of the coin a guarantee to the public; it must contain so much silver under such a denomination.’ (57.) ‘It is silver, and not names, that pays debts and purchases commodities.’ (p. 58.) ‘The mint stamp suffices as guarantee for the weight and the fineness of the piece of money, but lets the thus-coined gold money, find its own rate, like other commodities.’ (p. 66.) In general one can do nothing with the raising of money but make ‘more money in tale’, but not more ‘money in weight and worth’. (p. 73.) ‘Silver is altogether a different standard from the others. The ell or the quart with which people measure may remain in the hands of the seller, of the buyer or of a third person: it matters not whose it is. But silver is not only the measure of bargains, it is the thing bargained for, and passes in trade from the buyer to the seller, as being in such a quantity equivalent to the thing sold: and so it not only reassumes the value of the commodity it is applied to, but is given in exchange for it, as of equal value. But this it does only by its quantity, and nothing else.’ (p. 92.) ‘The raising being but giving of names at pleasure to aliquot parts of any piece, viz. that now the sixtieth part of an ounce still be called a penny, may be done with what increase you please.’ (118.) ‘The privilege that bullion has, to be exported freely, will give it a little advance above our coin, let the denomination of that be raised, or fall as you please, whilst there is need of its exportation, and the exportation of our coin is prohibited by law.’ (p. 119, 120.) The same position adopted by Lowndes against Locke, in that the former believed the rise of the bullion price to be due to a rise in the value of bullion, as a result of which the value of the accounting coin had declined (i.e. because the value of bullion rose, the value of a fractional part of it, called £, fell), was adopted by the little-shilling-men—Attwood and the others of the Birmingham school 1819 seq. (Cobbett had posed the question on the correct ground: non-adjustments of national debts, rents etc.; but spoiled it all by his false theory which condemned paper money as such. [51] (Strangely enough, he came to this conclusion by beginning, like Ricardo, who comes to the opposite conclusion, from the same false premise, the determination of price by the quantity of the medium of circulation).) Their entire wisdom in the following phrases: ‘In his dispute with the Birmingham Chamber of Commerce, Sir R. Peel asks: ‘What will your pound note represent’ ‘ (p. 266. ‘The Currency Question’, The Gemini Letters, London, 1844) (namely, the pound note if not paid in gold). ‘Now what is meant by the present standard of value?… £3 17s. 10 1/2d., do they signify one ounce of gold or its value? If the ounce itself, why not call things by their names and say, instead of pound, shilling, pence, ounces, pennyweights and grains? Then we go back to adirect system of barter.’ (p. 269. Not quite. But what would Mr Attwood have gained if people said ounce instead of £3 17s. 10 1/2d., and so many pennyweight instead of shillings? That, for convenience in calculating, the fractional parts are given names—which apart from that, also indicates that the metal is here given a social quality alien to itself—what witness does it bear either for or against Attwood’s doctrine?) ‘Or thevalue? If an ounce = £3 17s. 10 1/2d., why at different periods money £5 4s., and then again 3,17, 9?… the expression pound has reference tovalue, but not a fixed standard value … Labour is the parent of cost, and gives the relative value to gold or iron.’ (And that is in fact why the value of one ounce and of £3 17s. 10 1/2d. changes.) ‘ Whatever denomination or words are used to express the daily or weekly labour of a man, such words express the cost of commodity produced.’ (p. 270.) The word ‘one pound is the ideal unit’. (p. 272.) The last sentence important because it shows how this doctrine of the ‘ideal unit’ dissolves into the demand for a money which is supposed directly to represent labour. Pound then e.g. the expression for 12 days’ work. The demand is this, that the determination of value should not lead to that of money as a distinct quantity, or that labour as the measure of values should not compel the labour objectified in a specific commodity to be made the measure of the other values. The important thing is that this demand is here made from the standpoint of the bourgeois economy (thus also by Gray, who actually works out this matter to perfection, and of whom we will speak in a moment), not from the standpoint of the negation of the bourgeois economy, as e.g. with Bray. The Proudhonists (see e.g. Mr Darimon) have indeed succeeded in raising this demand both as one corresponding to the present relations of production and also as a demand which totally revolutionizes them, and a great innovation, since, as crapauds, [52] they are of course not required to know anything of what has been written or thought on the other side of the Channel. At all events, already the simple fact that this demand was raised more than 50 years ago in England by a fraction of bourgeois economists shows to what extent the socialists who pretend thereby to advance something new and anti-bourgeois are on the wrong track. About the demand itself, see above. (Only a few things from Gray can be added here. As to the rest, the matter can be gone into in detail only in the banking system.)


End of February, March. End of May — Beginning of June 1858 continued

[Money as Means of Circulation and as

Independent Value

[More on the critique of theories about medium of circulation and money. — Transformation of the medium of circulation into money. — Formation of treasures. — Means of payment. — Prices of commodities and quantity of circulating money. — Value of money]

As regards money as constantly self-identical equivalent, i.e. as value as such, and thus as the material of all contracts, it is clear that the changes in the value of the material in which it represents itself (directly, as in gold, silver, or indirectly, as claims, in notes, on specific quantity of gold, silver etc.) must bring about great revolutions between the different classes of a state. This not to be examined here, since these relations presuppose knowledge of the various economic relations. Only something by way of illustration. In the sixteenth and seventeenth centuries, it is well known that the depreciation of gold and silver, due to the discovery of America, depreciated the labouring class and that of the landed proprietors; raised that of the capitalists (specially of the industrial capitalists). In the Roman republic, the appreciation of copper turned the plebeians into the slaves of the patricians. ‘Since one was forced to pay the largest sums in copper, one had to hold this money in masses or in stamped fragments which were tendered and received by weight. Copper in this state was aes grave. Metal money weighed. [53] (Originally copper without stamp among the Romans; then stamping of external coins. Service rex ovium boumque erie primus aes signavit. [54](Pliny, Historia naturalis I. 18, c. 3.)> After the patricians had stockpiled a mass of this dark and ugly metal… they tried to free themselves from it, either by buying from the plebeians all the land which the latter would sell, or by lending at long term. This value had cost them nothing to acquire, and was a hindrance to them, so they were forced to rid themselves of it unsparingly. The competition of all who had the same desire of getting rid of it necessarily brought about, in a short time, a considerable reduction of the price of copper in Rome. At the beginning of the fourth century after the foundation of Rome, as one may see from the Lex Menenia (302 a.u.c.), the relation of copper to silver = 1:960… This metal, so depreciated in Rome, at the same time one of the most sought-after articles of trade (since the Greeks made their works of art out of bronze etc.)… The precious metals came to be exchange in Rome for copper, with enormous profits, and so lucrative a commerce stimulated new imports each day… Little by little the patricians exchanged their treasure for ingots of gold and of silver, aurum infectum, argentum infectum,[55] in place of these piles of old copper, so troublesome to dispose of and so disagreeable to look at. After the defeat of Pyrrhus and particularly after the conquests in Asia… the aes grave had already quite vanished, and the requirements of circulation had necessitated the introduction of the Greek victoria, and the name victoriatus… of a weight of 1 1/2 scruples of silver, like the Attic coin, the drachma; in theseventh century a.u.c. the lex Clodia made Roman coin of it. It was usually exchanged for the pound of copper or the as of 12 ounces. Thus between silver and copper the relation of 192:1, i.e. a 5 times weaker relation than during the time of the greatest depreciation of copper due to export; still, copper cheaper in Rome than in Greece and Asia. This great revolution in the exchange value of the monetary substance, to the measure it proceeded, most cruelly worsened the lot of the unfortunate plebeians, who had obtained the depreciated copper as a loan, and, having spent or used it at the rate it then had, now owed, by the letter of their contracts, a five times greater sum than they had borrowed in reality. They had no means to buy their way out of servitude… Whoever had borrowed 3,000 as during the time when this sum = 300 oxen or 900 scruples of silver, could then obtain these only for 4,500 scales of silver, when the us was represented by 1 1/2 scruples of this metal… If the plebeian gave back 1/5 of the copper he had obtained, then he had in reality paid off his debt, for 1/5 now the same value as 1 at the time the contract was made. Copper had risen 5 times in value compared to silver… The plebeians demanded a revision of the debt, a new appraisal of the sum due, and a change in the title of their original obligation… While the creditors did not demand the restitution of the capital, the payment of interest was itself unbearable, because the interest, originally stipulated as 12%, had, owing to the excessive rise in cost of the specie, become as onerous as if it had been fixed at 60% of the principal. By way of concession, the debtors obtained a law that deducted the accumulated interest from the capital… The senators resisted letting go of the means by which they held the people in the most abject dependence. The masters of nearly all landed property, armed with legal titles which authorized them to throw their debtors into irons and to sentence them to corporal punishment, suppressed the uprisings and persecuted the most mutinous. Every patrician’s home was a prison. Finally wars were got up which gave the debtor some payment, with a suspension of obligations, and which opened to the creditor new sources of wealth and of power. This the internal situation in Rome at the time of the defeat of Pyrrhus, the capture of Taranto and important victories over the Samnians, Lucanians and other South-Italian peoples etc…. 483 or 485 the first Roman silver coin, the libella;… was called libella because of small weight = libra of 12 ounces of copper.’ (Garnier, Germain, Histoire de la Monnaie etc., 2 vols., Paris, 1819. Vol. II. p. 14-24.)

<Assignats. ‘National Property. Assignat of 100 frs.’ legal tender… They are distinguished from all other notes in not even professing to represent any specified thing. The words ‘national property’ meant that their value could be obtained by buying confiscated properties with them at the continuous auctions of the latter. But no reason why this value called 100 fr. It depended on the comparative quality of the property so purchasable and the number of assignats issued.’ (78, 79, Nassau W. Senior, Three Lectures on the Cost of Obtaining Money’ etc., London, 1830.)

‘The livre de compte, introduced by Charlemagne, almost never represented by a real equivalent coin, retained its name, as well as its divisions into sous and deniers, until the end of the eighteenth century, while real coins have varied infinitely in form, size, value, not only with every change of government, but even under the same reign. The value of the livre de compte nevertheless underwent enormous diminutions… but this always an act of force.’ (p. 76, Vol. I. Garnier, loc. cit.) All coins in antiquity originally weights. (loc. cit. p. 125.)

‘Money is in the first place the universally marketable commodity, or that in which every one deals for the purpose of procuring other commodities.’ (Bailey: ‘Money and its Vicissitudes’ etc., London, 1837, p. 1.) ‘It is the great medial commodity.’ (loc. cit. p. 2.) It is thegeneral commodity of contracts, or that in which the majority of bargains about property, to be completed at a future time, are made. (p. 3.) Finally, it is the ‘measure of value… Now, as all articles are exchanged for money, the mutual values of A and B are necessarily shown by their values in money or their prices… as the comparative weight of substances are seen by their weight in relation to water, or their specific gravities.’ (p. 4.) ‘The first essential requisite is that money should be uniform in its physical qualities, so that equal quantities should be so far identical as to present no ground for preferring one to the other… For example, grain and cattle already for this reason not useful, because an equal quantity of grain and equal numbers of cattle are not always alike in the qualities for which they are preferred.’ (p. 5, 6.) ‘The steadiness of value is so desirable in money as medial commodity and a commodity of contract; it is quite unessential to it in its capacity of the measure of value.’ (p. 9.) ‘Money may continually vary in value, and yet be as good a measure of value as if it remained perfectly stationary. Suppose e.g., it is reduced in value and the reduction in value implies a reduction of value in relation to some one or more commodities, suppose it is reduced in value in relation to corn and labour. Before the reduction, a guinea would purchase three bushels of wheat, or six days’ labour; subsequently, it would purchase only two bushels of wheat or four days’ labour. In both cases, the relations of wheat and labour to money being given, their mutual relations can be inferred; in other words, we can ascertain that a bushel of wheat is worth two days’ labour. This, which is all that measuring value implies, is as readily done after the redaction as before. The excellence of any thing as a measure of value is altogether independent of its own variableness in value… One confuses invariableness of value with invariableness in fineness and weight … The command of quantity being that which constitutes value, a definite quantity of a substance of some uniform commodity must be used as a unit to measure value; and it is this definite quantity of a substance of uniform quality which mast be invariable.’ (p. 11.) In all money contracts the issue at stake is the quantity of the gold and silver to be lent, not its value. (p. 103.) ‘If someone were to insist that it be a contract for a specified value, he is bound to show in relation to what commodity: thus, he would be maintaining that a pecuniary contract does not relate to a quantity of money as expressed on the face of it, but to a quantity of some commodity of which no mention is made.’ (p. 104.) ‘It is not necessary to restrict this to contracts where actual money is lent. It holds for all obligations for the future payment of money, whether for articles of any kind sold on credit, or for services, or as rent of land or houses; they are precisely in the same condition as pure loans of the medial commodity. If A sells a ton of iron to B for ten pounds, at twelve months’ credit, it is just the same in effect as lending the ten pounds for a year and the intents of both contracting parties will in the same way be affected by changes in currency.’ (p. 110, 111.)

The confusion of giving names to specified and unchangeable fractional parts of the money substance which is to serve as unit of measure — confusing the denomination of it with fixing the price of money — is also displayed, among others, by the high-flown romanticist of political economy, Mr Adam Müller. He says, among other things: ‘Every one can see how much depends on the true determination of the mint price,above all in a country like England, where the government, with generous liberality’ (i.e. at the country’s expense and the profit of the Bank of England bullion dealers) ‘mints without charge, collects no mintage etc., and thus, if it set the mint price significantly higher than the market price, if, instead of paying an ounce of gold at £3 17s. l0 1/2d., as now, it set £3 19s. as the mint price of one ounce of gold, then all gold would flow towards the mint, all the silver there would be changed into the cheap gold here, and thus be brought to the mint anew, and the currency system would become disordered.’ (p. 280, 281, Vol. II. Die Elemente der Staatskunst, Berlin, 1809.) Herr Müller does not know, then, that pence and shillings here are only names for fractional parts of a gold ounce. Because silver and copper coins — which, notabene, are not minted according to the proportion of silver and copper to gold, but are issued as markers for the equivalent parts of gold, and hence need be accepted in payment only in very small amounts — circulate under the names of shillings and pence, he imagines that an ounce of gold is divided into pieces of gold, of silver, and of copper (thus triple standard of value). A couple of steps later he suddenly remembers again that there is no double standard in England, hence even less a triple one. Herr Müller’s lack of clarity about the ‘common’ economic relations is the real foundation of his ‘higher’ conception.

From the general law that the total price of commodities in circulation determines the mass of the circulating medium at a given stage of the velocity of circulation, it follows that at a given stage of growth of the values thrown into circulation, the more precious metal — the metal of greater specific value, i.e. which contains more labour time in a smaller amount — takes the place of the less precious as the predominant medium of circulation; hence, copper, silver, gold, each one replacing the previous one as the predominant medium of circulation. The same aggregate sum of prices can be circulated e.g. with 14 times as few gold coins as silver coins. Copper or even iron coin as predominant medium of circulation supposes weak circulation. Just as the more powerful but more valuable means of transport and means of circulation takes the place of the less valuable to the degree that the mass of circulating commodities, and circulation generally, grows.

On the other side it is clear that the small retail traffic of everyday life requires exchange on a very diminutive scale — the smaller, the poorer the country and the weaker is circulation as such. It is in this retail traffic, where very small amounts of commodities on the one side, hence also very small values circulate, that money appears in the most proper sense of the word merely as vanishing medium of circulation, and does not congeal as realized price. Consequently, a subsidiary medium of circulation enters for this traffic, which is merely the symbol of the fractional parts of the predominant media of circulation. These are silver and copper markers, which are therefore not minted in the relation of the value of their substance to the value of e.g. gold. Here money appears still only as symbol, even if itself still in a relatively valuable substance. Gold e.g. would have to be divided into excessively small fractions to serve as equivalent of the division of commodities required by this retail traffic.

This is why these subsidiary media of circulation need be accepted in payment, by law, in only very small amounts, so that they can never solidify as realization of price. For example, in England, copper in the amount of 6d., silver in the amount of 20s. The more developed circulation is generally, the greater the mass of prices of the commodities entering into circulation, the more does their wholesale exchange separate off from their retail exchange, and they require different sorts of coin for their circulation. The velocity of the circulation of these markers is inversely related to the magnitude of their value.

‘In the early stage of society, when nations are poor, and their payments trifling, copper has frequently been known to answer all the purposes of currency and it is coined into pieces of very low denominations in order to facilitate the inconsiderable exchanges which then take place. So in the early age of the Roman Republic and of Scotland.’ (p. 3.) (David Buchanan, Observations on the Subjects, treated of in Dr Smith’s Inquiry’ etc., Edinburgh, 1814.) ‘The general wealth of a country is very accurately measured by the nature of its payments and the state of its coin; and the decided prevalence of a coarse metal in its currency, joined to the use of coins of very low denomination, marks a rude state of society.’ (p. 4.) Later ‘the business of currency becomes divided into two distinct departments; the duty of effecting the main payments… for the more precious metals; the inferior metals by contrast retained for some trivial exchanges, and thus purely subservient to the main currency. Between the first introduction of a precious metal into the currency of a country, and its exclusive use in the main payments, a wide interval; and the payments of the retail trade must in the interval have become so considerable, owing to the increase of wealth, that at least in part they could be conveniently managed by the new and more valuable coin; since no coin can be used for the main payments’ (this is false, as the notes show) ‘which is not suited, at the same time, to the transactions of the retail trade, since every trade ultimately obtains from the consumer … the return of its capital… Silver has maintained itself everywhere on the continent in the main payments… In Britain the quantity of silver in circulation does notexceed what is necessary for the smaller payments… in fact few payments to the amount of 20s. made in silver… Before the reign of William III silver was brought in large bags to the treasury in payment of the national revenue. At this period the great change took place… The exclusive introduction of gold in the main payments of England was a clear proof that the returns of the retail trade at this time were made mainly in gold; this possible without a single payment ever exceeding or even equalling any of the gold coins; because, in the general abundance of gold, and scarcity of silver, gold coins naturally offered for small sums and a balance of silver demanded in return; so that gold, by thus assisting in the retail trade and in economizing the use of silver, even for the small payments, would prevent its accumulation by the retail trader… At the same time, as in England gold was substituted for silver’ (1695) ‘for the main payments, silver for copper in Sweden… Clear, that the coin used for the larger payments can only pass current at its intrinsic worth… But intrinsic worth not necessary for a subsidiary currency… In Rome, so long as copper the prevailing coin, current only for its intrinsic value … 5 years before the beginning of the first Punic war, silver introduced, little by little displaced copper in the main payments… 62 years after the silver, gold, but it never seems to have excluded silver from the main payments … In India, copper not a subsidiary currency; passes therefore for its intrinsic worth. The rupee, a silver coin of 2s. 3d., is the money of account; in relation to which the mohour, a gold coin, and the pice, a copper coin, are allowed to find their value in the market; the number of pice currently exchanged for a rupee constantly varies with the weight and value of the coin, while here 24 halfpence always = 1s. without reference to their weight. In India the retail dealer must still take considerable quantities of copper for his goods, and he cannot afford to take it therefore but for its intrinsic value… In the currencies of Europe, copper passes for whatever value is fixed upon it, without examination of its weight and fineness.’ (p. 4-18.) In England ‘an excess of copper spent 1798 by private traders; and although copper only legal payment for 6d., found its way (the surplus) to the retail traders; they sought to put it in circulation again; but ultimately returned to them. When this currency was stopped, copper accumulated with the retail traders in sums of £20, £30, even £50, which they finally had to sell at their intrinsic value.’ (p. 31.)

In the subsidiary currency, the medium of circulation takes on a particular form as such, as a merely vanishing medium, alongside the medium of circulation which is at the same time equivalent, which realizes prices, and accumulates as independent value. Thus, here, pure symbol. Thus it may be issued only in the quantity absolutely required for the small retail trade, so that it can never thereby accumulate. The quantity must be determined by the mass of prices which it circulates, divided by its velocity. Because the mass of the circulating medium, of a certain value, is determined by prices, it follows automatically that if a greater quantity than required by circulation itself were artificially thrown into it and could not run off (which is not the case here, because, as medium of circulation, it is above its intrinsic worth), then it would be depreciated; not because the quantity determines prices, but because prices determine the quantity, and hence only a specific amount can remain in circulation at a specific value. Thus, if there are no openings by which circulation can throw out the superfluous quantity, if the circulating medium cannot change from that form into the form of value for itself, then the value of the medium of circulation must fall. But this can only take place, apart from artificial hindrances, prohibition of melting-down, of export etc., if the circulating medium is merely a symbol, and does not itself possess a real value corresponding to its nominal value, hence cannot make the transition from the form of circulating medium into that of the commodity in general, and shed its stamp; if it is imprisoned in its existence as coin. It follows on the other side that the symbol, the money marker, can circulate at the nominal value of the gold it represents — without possessing any value whatever of its own — in so far as it represents the medium of circulation only in that quantity in which it would itself circulate. But then [it becomes] at the same time a condition either that it is itself then on hand only in such a small quantity that it circulates only in the subsidiary form, hence does not cease for an instant to be a medium of circulation (where it constantly serves partly in the exchange with small amounts of commodities, partly merely to make exchange for the real medium of circulation), hence can never accumulate; or it must possess no value whatever, so that its nominal value can never be compared with its intrinsic value. In the latter case it is posited as mere symbol, which, by means of itself, points to value as something existing outside itself. In the other case it never comes to a comparison between its intrinsic value and its nominal value.

Which is why counterfeits of money show an effect immediately; while total destruction of its value does not damage it. It might otherwise appear paradoxical that money can be replaced by worthless paper; but that the slightest alloying of its metallic content depreciates it.

The double function of money in circulation contradicts itself as such; to serve as mere medium of circulation, where it is a vanishing mediation; and at the same time as realization of prices, in which form it accumulates and turns into its third character as money. As medium of circulation it is worn out; thus does not contain the metal content which makes it into objectified labour in a fixed amount. Its correspondence to its value hence always more or less illusory. One example to be presented. It is important to bring in the determination of quantity already at this point in the chapter on money, but deduced in just the opposite way to the usual doctrine. Money can be replaced because its quantity is determined by the prices it circulates. In so far as it, itself, has value — as in the subsidiary medium of circulation — its quantity must be so determined that it can never accumulate as an equivalent, and in fact always figures as an auxiliary cog of the medium of circulation proper. In so far, however, as it is to replace the latter, it must have no value whatsoever, i.e. its value must exist apart from itself. The variations in circulation determined by the amount and number of transactions. (Economist.) Circulation may rise, prices remaining equal, by increase in the amount of commodities; if the amount remains constant, by increase of their prices; by both together.

With the proposition that prices regulate the quantity of currency and not the quantity of currency prices, or in other words that trade regulates currency (the quantity of the medium of circulation), and currency does not regulate trade, [it] is, of course, as our deduction has shown, supposed that price is only value translated into another language. Value, and value determined by labour time, is the presupposition. It is clear, therefore, that this law is not equally applicable to the fluctuations of prices in all epochs; e.g. in antiquity, e.g. in Rome, where the circulating medium does not itself arise from circulation, from exchange, but from pillage, plunder etc.

‘No country may consequently have more than one standard; more than one standard for the measure of value; for this standard must be uniform and unchanging. No article has a uniform and unchanging value relative to others: it only has such with itself. A piece of gold is constantly of the same value as the other, of exactly the same fineness, the same weight and in the same place; but this cannot be said of gold and any other article, e.g. silver.’ (Econ. Vol. I p. 771.) [56] ‘Pound is nothing but a denomination in account, which has reference to a given and fixed quantity of gold of standard quality.’ (loc. cit.) ‘To speak of making one ounce of gold worth £5 instead of £3 17s. l0 1/2d. is to say only that it ought henceforth to be minted in 5 sovereigns instead of in 3 420/480 sovereigns. We would not thereby alter the value of the gold, but only the weight and hence the value of the pound or sovereign. An ounce of gold would have the same value relative to wheat and all other commodities as before, but since a pound, although bearing the same name as before, would represent a smaller part of an ounce of gold, it would represent a correspondingly smaller quantity of wheat and other commodities. Just as if we had said that a quarter of wheat should no longer be divided into 8, but rather into 12 bushels; we could not thereby change the value of wheat, but merely diminish the quantity contained in a bushel, and hence the latter’s value.’ (p. 772 loc. cit.) ‘Whatever temporary or permanent change might take place, its price is always expressed in the same amount of money; an ounce of gold will remain £3 17s. 10 1/2d. of our money. The change in its value indicated by the greater or lesser quantity of the commodities it can purchase.’ (loc. cit. p. 890.) [57]

The ideal bar to be compared e.g. with the ideal milrea in Buenos Aires (likewise the pound in England during the depreciation of notes etc.). What is fixed here is the name milrea; what fluctuates is the quantity of gold or silver it expresses. In Buenos Aires the currency is inconvertible paper money (paper dollars); these dollars originally = 4s. 6d. each; now approximately 3 3/4d. and has been as low as 1 /12d. An ell of cloth formerly worth 2 dollars, now nominally 28 dollars in consequence of the depreciated paper.

‘In Scotland, the medium of exchange, not to be confused with the standard of value, in the amount of £1 and upwards may be said to be exclusively paper, and gold does not circulate at all; yet gold is as much the standard of value as if nothing else circulated, because the paper is convertible into the same fixed quantity of that metal; and it circulates only on the faith of being so convertible.’ (p. 1275.) [58]

‘Guineas are hoarded in times of distrust.’ (Thornton, p. 48.) [59] The hoarding principle, in which money functions as independent value, is, apart from the striking forms in which it appears, necessary as one moment of exchange resting on money circulation; since everyone, as A. Smith says, needs, beside his own commodity, the medial quantity, a certain proportion of the ‘general commodity’. ‘The man in trade has property in trade.’ (loc. cit. p. 21.)>

Capital, not labour, determines the value of the commodity. Torrens

‘Equal capitals or in other words equal quantities of accumulated labour will often put in motion different quantities of immediate labour, but that does not alter the matter.’ (p. 31. Torrens, ‘An Essay on the Production of Wealth’, London, 1821.) ‘In the early period of society… it is the total quantity of labour, accumulated and immediate, expended on production… which determines the relative value of commodities. But as soon as stock is accumulated and a class of capitalists distinguishes itself from another class, of workers, when the person who undertakes any branch of industry does not perform his own work, but advances subsistence and materials to others, then it is the amount of capital, or the quantity of accumulated labour expended in production, which determines the exchangeable power of commodities.’ (p. 33, 34.) ‘So long as two capitals are equal… their products are of equal value, however we may vary the quantity of immediate labour which they put in motion, or which their products may require. If they are unequal,… their products are of unequal value, though the total quantity of labour expended upon each should be precisely equal.’ (p. 39.) Thus ‘after this separation of capitalists and labourers, it is the amount of capital, the quantity of accumulated labour, and not, as before this separation, the sum of accumulated and immediate labour, expended on production, which determines the exchange value.’ (loc. cit.) Mr Torrens’s confusion correct compared to the abstract way of the Ricardians. In itself, fundamentally wrong. Firstly, the determination of value by pure labour time takes place only on the foundation of the production of capital, hence the separation of the two classes. The positing of prices as equal, in consequence of the same average rate of profit — and even this with a grain of salt — hasnothing to do with the determination of value, rather supposes the latter. This point important so as to show the Ricardians’ confusion.

The minimum of wages

The rate of surplus value as profit is determined (1) by the magnitude of the surplus value itself; (2) by the relation of living labour to accumulated (the ratio of the capital expended as wages to the capital employed as such). Both the causes which determine (1) and (2), to be examined separately. The law of rent, e.g., belongs to (1). For the time being, necessary labour supposed as such; i.e. that the worker always obtains only the minimum of wages. This supposition is necessary, of course, so as to establish the laws of profit in so far as they are not determined by the rise and fall of wages or by the influence of landed property. All of these fixed suppositions themselves become fluid in the further course of development. But only by holding them fast at the beginning is their development possible without confounding everything. Besides it is practically sure that, for instance, however the standard of necessary labour may differ at various epochs and in various countries, or how much, in consequence of the demand and supply of labour, its amount and ratio may change, at any given epoch the standard is to be considered and acted upon as a fixed one by capital. To consider those changes themselves belongs altogether to the chapter treating of wage labour.

‘Exchangeable value is determined not by the absolute, but by the relative cost of production. If the cost of producing gold remained the same, while the cost of producing all other things doubled, then would gold have a less power of purchasing all other things than before; and its exchangeable value would fall one half; and this diminution in its exchange value precisely the same in effect as if the cost of producing all other things remained unaltered, while that of prodding gold had been reduced one half.’ (p. 56, 57. Torrens, loc. cit.) This important for prices. For determination of value, absolutely not; mere tautology. The value of a commodity is determined by the amount of labour it contains; this means that it exchanges for the same quantity of labour in every other form of use value. It is therefore clear that, if the labour time necessary for the production of object A doubles, then now only 1/2 of it = its earlier equivalent, B. Since equivalence is determined by the equality of labour time or of the amount of labour, the difference of value is of course determined by the inequality of labour time, or, labour time is the measure of value.

1826 cotton machinery and workmen. Hodgskin

‘In 1826, the various machinery used in manufacturing cotton employed 1 man to perform the work of 150. Now suppose that only 280,000 men are employed in it at present; then, half a century earlier, 42,000,000 would have had to be in it.’ (p. 72.) (Hodgskin.) ‘The relative value of the precious metals to other commodities determines how much of them must be given for other things; and the number of sales to be made, within a given period, determines, as far as money is the instrument for effecting sales, the quantity of money required.’ (loc. cit. p. 188.)

‘Abundant reason to believe that the practice of coining originated with individuals and carried on by them before it was seized on and monopolized by governments. Such long the case in Russia.’ (See Storch.) (loc. cit. p. 195 note.)

Hodgskin is of a different opinion from the romantic Müller: ‘The mint stamps only what individuals bring, most injudiciously charging them nothing for the labour of coining; and taxing the nation for the benefit of those who deal in money.’ (p. 194. Popular Polit. Econ. etc., London, 1827.)

[Machinery and Profit]

How the machine creates raw material. Linen industry. Tow yarn. Economist

After all these digressions about money — and we will occasionally have to take them up again, before ending this chapter — we return to the point of departure. As example of how, in manufacturing industry also, the improvement of machinery and the consequent increase of the force of production creates (relatively) raw material, instead of demanding an absolute increase of it: ‘The factory system in the linen trade is very recent. Before 1828 the great mass of linen yarn in Ireland and England spun by hand. About this time the flax spinning machine so much improved, especially through the persistence of Mr Peter Fairbairn in Leeds, that it came into very general use. From this time on, spinning mills erected very intensively at Belfast and other parts of Northern Ireland, as in different parts of Yorkshire, Lancashire and Scotland, for spinning fine yarns, and in a few years, spinning by hand given up… Fine tow yarn now manufactured from what, 20 years earlier, was thrown away as waste.’ (Economist, 31 Aug. 1850.)

Machinery and surplus labour

With all application of machinery — let us initially look at the case such as it arises directly, that a capitalist puts a part of his capital into machinery rather than into immediate labour — a part of the capital is taken away from its variable and self-multiplying portion, i.e. that which exchanges for living labour, so as to add it to the constant part, whose value is merely reproduced or maintained in the product. But the purpose of this is to make the remaining portion more productive. First case: the value of the machinery equal to the value of the labour capacity it replaces. In this Case the newly produced value would be diminished, not increased, if the surplus labour time of the remaining part of labour capacity did not grow at the same rate as its amount is diminished. If 50 out of 100 workers are let go and replaced by machinery, then the remaining 50 have to accomplish as much surplus labour time as the 100 did before. If the 100 worked 200 hours’ surplus labour time every day out of 1,200 hours’ work, then the 50 must now create the same quantity of surplus labour time; hence 4 hours per day, if the former only 2. In that case the surplus labour time remains 50 × 4 = 200, the same as before, 100 × 2 = 200, although the absolute labour time has decreased. In this case, the situation for capital is the same; it is concerned only with the production of surplus labour. In this case, the raw material worked up would remain the same; hence the outlay for it; that for instrument of labour would have increased; that for labour decreased. The value of the total product would be the same, because = to the same sum of objectified and surplus labour time. Such a case would be altogether no incentive for capital. What it would gain in surplus labour time on one side, it would arose on the part of capital which would enter production as objectified labour, i.e. as invariable value. It is also to be kept in mind that the machinery takes the place of more imperfect instruments of production, which possessed a specific value; i.e. had been exchanged for a definite sum of money. The part of the capital employed at a developed stage of the productive force is deducted from the cost of the machinery for the capitalist who sets up a new. business, although not for the capitalist who is already in business.

Thus e.g. if, as soon as the machine is introduced for £1,200 (50 labour capacities), an earlier expenditure of, say, 240 pounds for instruments of production ceases to be necessary, then the additional expenditure of capital amounts to only £960; the price of 40 workers a year. In this case then, if the remaining 50 workers together produce exactly as much surplus labour as did the 100 previously, then now 200 hours of surplus labour are produced with a capital of £2,160; before, with a capital of £2,400. The number of workers has decreased by half, absolute surplus labour has remained the same, 200 hours of labour as before; the capital invested in material of labour is also the same; but the relation of surplus labour to the invariable part of the capital has increased absolutely. Altogether £9,240. The relationship is this:

Since the capital laid out in raw material has remained the same, and that laid out in machinery increased, but not in the same relation as that laid out in labour diminished; it follows that the total outlay of capital diminished; surplus labour remained the same, hence grown relative to the capital, not only at the rate at which surplus labour time must grow to remain the same with half as many workers, but by more than that; namely by the rate at which the [outlay] for the old means of production is deducted from the costs of the new.

The introduction of machinery or a general increase in the force of production has objectified labour as its substratum, hence costs something; therefore, if a part of the capital previously laid out for labour is laid out as a component part of the part of the capital which enters into the production process as constant value, then the introduction of machinery can take place only if the rate of surplus labour time does not merely remain the same, i.e. grow relative to the living labour employed, but if it grows at a greater rate than the relation between the value of the machinery and the value of the dismissed workers. This can happen either because the entire expenditure incurred for the previous instrument of production must be deducted. In this case the total sum of the capital laid out diminishes, and, although the relation of the total sum of employed labour relative to the constant part of the capital has diminished, the surplus labour time has remained the same, and has hence grown not only relative to the capital laid out for labour, for necessary labour time, but also relative to the total capital, to the total value of the capital, because the latter has diminished. Or, the value for machinery may be as great as that previously laid out for living labour, which has now become superfluous; but the rate of surplus labour of the remaining capital has increased so that the 50 workers supply not only as much surplus labour as the 100 did before, but a greater amount. Say, e.g. instead of 4 hours each, 4 1/4 hours. But in this case a greater part of the capital is required for raw materials etc., in short, a greater total capital is required. If a capitalist who previously employed 100 workers for £2,400 annually, lets 50 go, and puts a machine costing £1,200 in their place, then this machine — although it costs him as much as 50 workers did before — is the product of fewer workers, because he pays the capitalist from whom he buys the machine not only the necessary labour, but also the surplus labour. Or, if he had his own workers build the machine, he would have used a part of them for necessary labour only. In the case of machinery, thus, increase of surplus labour with absolute decrease of necessary labour time. It may be accompanied both by absolute diminution of the employed capital, and by its growth.

Capital and profit. Value makes the product. — Relation of the worker to the conditions of labour in capitalist production. — All parts of capital bring a profit. — Relation of fixed and circulating capital in the cotton mill. Senior’s surplus labour and profit. Tendency of the machine to prolong labour. — Influence of transport on circulation etc. — Transport increasingly suspends hoarding. — Absolute surplus labour and machinery. Senior

Surplus value, as posited by capital itself and measured by its quantitative relation to the total value of the capital, is profit. Living labour, as appropriated and absorbed by capital, appears as capital’s own vital power; its self-reproducing power, additionally modified by its own movement, by circulation, and by the time belonging to its own movement, circulation time. Only by distinguishing itself as presupposed value from itself as posited value is capital posited as self-perenniating and multiplying value. Since capital enters wholly into production, and since, as capital, its various component parts are only formally distinct from one another, are equally sums of value, it follows that the positing of value appears to be equally inherent in them. Furthermore, since the part of the capital which exchanges for labour acts productively only insofar as the other parts of capital are posited together with it — and since the relation of this productivity is conditioned by the magnitude of the value etc., the various relations of these parts to one another (as fixed capital etc.)– it follows that the positing of surplus value, of profit, appears to be determined by all parts of capital equally. Because on one side the conditions of labour are posited as objective component parts of the capital, on the other side labour itself is posited as activity incorporated in it, the entire labour process appears as capital’s own process and the positing of surplus value as its own product, whose magnitude is therefore also not measured by the surplus labour which it compels the worker to do, but rather as a magnified productivity which it lends to labour. The product proper of capital is profit. To that extent, it is now posited as the source of wealth. But in so far as it creates use values, it produces use values, but use values determined by value: ‘Value makes the product.’ (Say.) [60] Accordingly, it produces for consumption. In so far as it eternalizes itself through the constant renewal of labour, it appears as permanent value, a presupposition for production, which latter depends on its preservation. To the extent that it constantly exchanges itself anew for labour, it appears as labour fund. The worker can naturally not produce without the objective conditions of labour. Now, in capital, the latter are separated from him, confront him as independent. He can relate to them as conditions of labour only in so far as his labour itself has previously been appropriated by capital. From the standpoint of capital, the objective conditions of labour do not appear as necessary for the worker; what rather appears as necessary is that they exist independently opposite him — his separation from them, their ownership by the capitalist — and that the suspension of this separation takes place only when he cedes his producing power to capital, in exchange for which the latter maintains him as abstract labour capacity, i.e. precisely as the mere capacity of reproducing wealth opposite himself as capital, as the power which rules him.

Thus all parts of the capital bear profit simultaneously, both the circulating part paid out in wages and raw material etc.) and the part laid out in fixed capital. The capital can now reproduce itself either in the form of circulating capital or in the form of fixed capital. Since we saw earlier, in the examination of circulation, that its value returns in a different form depending on in which of these two forms it is presupposed, and since, from the standpoint of profit-producing capital, what returns is not simply the value, but rather the value of the capital plus the profit, value as itself and value as self-realizing, it follows that the capital will be posited as profit-bearing in a different form corresponding to each of these two forms. The circulating capital enters wholly into circulation, with its use value as vehicle of its exchange value; and thus exchanges for money. I.e. then, it is sold, entirely, although each time only a part of it enters into circulation. In one turnover, however, it has entirely gone over into consumption (whether this be merely individual, or in turn productive) as product, and has completely reproduced itself as value. This value includes the surplus value, which now appears as profit. It is sold as use value, in order to be realized as exchange value. This, then, is sale at a profit. On the other side, we have seen that the fixed capital returns only in portions over the course of several years, of several cycles of the circulating capital, and, more specifically, enters into circulation as exchange value and returns as such only to the degree that it is used up (at that time, in the immediate act of production). However, the entry as well as the return of the exchange value is now posited as the entry and return not only of the value of the capital, but also at the same time of the profit, so that a fractional part of profit corresponds to the fractional part of capital.

‘The capitalist expects an equal benefit from all parts of the capital he advances.’ (Malthus, Principles of Political Economy, 2nd ed. Lond., 1836, p. 267.)

‘Where Wealth and Value are perhaps the most nearly connected, is in the necessity of the latter to the production of the former.’ (loc. cit. p. 301.)

<‘The fixed capital’ (in the cotton factories) ‘usually = 1:4 to the circulating, so that if a manufacturer has £50,000, he spends £40,000 in erecting his mill and filling it with machinery, and only £10,000 in the purchase of raw material (cotton, coals etc.) and the payment of wages.’ (Nassau W. Senior, Letters on the Factory Act etc., 1837, p. 12.) ‘The fixed capital is subject to incessant deterioration, not only through wear and tear, but also through constant mechanical improvements …’ (loc. cit.) ‘Under present laws, no mill in which persons under 18 years of age are employed can be worked more than 11 1/2 hours by day, i.e. 12 hours for 5 days and 9 on Saturday. Now, the following analysis shows that, in a mill so worked, the whole net profit is derived from the last hour. Let a manufacturer invest £100,000 — 80,000 in his mill and machinery, and 20,000 in raw material and wages. As to the annual return of the mill, supposing the capital to be turned once a year, and gross profits to be 15%, his goods must be worth £115,000, produced by the constant conversion and reconversion of the £20,000 circulating capital, from money into goods and from goods into money’ (in fact the conversion and reconversion of surplus labour first into commodity and then again into necessary labour etc.) ‘in periods of rather more than two months. Of these £115,000, each of the 23 half hours of work produces 5/115th or 1/23rd. Of the 23/23, constituting the whole 115,000, 20/23, i.e. £100,000 out of the 115,000, only replace the capital; 1/23 (or 5,000 out of the 115,000) makes up for deterioration of the mill and machinery. The remaining 2/23, i.e. the last 2 of the 23 half hours of every day, produce the net profit of 10%. If, therefore (prices remaining the same), the factory could be kept at work for 13 hours instead of 11 1/2, by an addition of about £2,600 to the circulating capital, the net profit would be more than doubled.’ (I.e. 2,600 would be worked up, without requiring relatively more fixed capital, and without payment to labour at all. The gross and net profit is = to the material which is worked up for the capitalist free of charge, and then of course one hour is = 100% more, if the surplus labour, as Mr Shit [61] falsely presupposes, is only = 1/12 day or only 2/23, as Senior says. ‘On the other side, if the daily hours of work were reduced by 1 hour per day (prices remaining the same), netprofit would be destroyed; if reduced by l 1/2 hours, gross profit as well. The circulating capital would be replaced, but there would be no fund to compensate the progressive deterioration of the fixed capital.’ (12, 13.) (As false as Mr Senior’s data, so important his illustration for our theory.) ‘The relation of fixed capital to circulating grows constantly for two reasons: (1) the tendency of mechanical improvement to throw on machinery more and more the work of production… (2) the improvement of the means of transport and the consequent diminution of the stock of raw material in the manufacturer’s hands waiting for use. Formerly, when coals and cotton came by water, the incertainty and irregularity of supply forced him to keep on hand 2 or 3 months’ consumption. Now, a railway brings it to him week by week, or rather day by day, from the port or the mine. Under such circumstances, I fully anticipate that, in a very few years, the fixed capital, instead of its present proportion, will be as 6 or 7 or even 10 to 1 to the circulating; and, consequently, that the motives to long hours of work will become greater, as the only means by which a large proportion of fixed capital can be made profitable. ‘When a labourer’, said Mr Ash-worth to me, ‘lays down his spade, he renders useless, for that period, a capital worth 18d. When one of our people leaves the mill, he renders useless a capital that has cost £100.’ (13, 14.)> <This a very nice proof that, under the rule of capital, the application of machinery does not shorten labour; but rather prolongs it. What it abbreviates is necessary labour, not the labour necessary for the capitalist. Since fixed capital becomes devalued to the extent it is not used in production, its growth is linked with the tendency to make labour perpetual. As for the other point raised by Senior, the diminution of the circulating capital relative to the fixed capital would be as great as he assumes if prices remained constant. But if e.g. cotton, on the average, has fallen below its average price, then the manufacturer will purchase as great a supply as his floating capital permits, and vice versa. With coal, however, where production regular and no special circumstances give grounds for anticipating an extraordinary rise in demand, Senior’s remark correct. We have seen that transport (and hence means of communication) do not determine circulation, in so far as they concern bringing the product to market or its transformation into commodity. For in this respect they are themselves included as part of the production phase. But they determine circulation in so far as they determine (1) the return; (2) the retransformation of the capital from the money form into that of the conditions of production. The more rapid and uninterrupted the supply of material and matières instrumentales, the smaller a supply does the capitalist need to buy. He can therefore all the more often turn over or reproduce the same circulating capital in this form, instead of having it lie around as dormant capital. On the other side, as Sismondi already noted, this also has the effect that the retail merchant, the shopkeeper, can all the more rapidly restore his stock, thus also has less need to keep commodities in stock, because he can renew the supply at any instant. All this shows how with the development of production there is a relative decline of accumulation in the sense of hoarding; increases only in the form of fixed capital, while however continuous simultaneous labour (production) increases in regularity, in intensity, and in scope. The speed of the means of transport, together with their all-sidedness, increasingly transforms (with the exception of agriculture) the necessity of antecedent labour, as far as circulating capital is concerned, into that of simultaneous, mutually dependent, differentiated production. This observation important for the section on accumulation.> ‘Our cotton factories, at their commencement, were kept going the whole 24 hours. The difficulty of cleaning and repairing the machinery, and the divided responsibility, arising from the necessity of employing a double staff of overlookers, book-keepers etc. have nearly put an end to this practice, but until Hobhouse’s Act reduced them to 69, our factories generally worked from 70 to 80 hours per week.’ (p. 15, loc cit.)

Cotton factories in England. Workers. Example for machinery and surplus labour. — Example from Symons. [62] Glasgow. Power-loom factory etc. (These examples for the rate of profit.) — Different ways in which machinery diminishes necessary labour. Gaskell. — Labour the immediate market for capital

‘According to Baines a first-rate cotton-spinning factory cannot be built, filled with machinery, and fitted with steam engines and gas works, under £100,000. A steam-engine of 100 horse-power will turn 50,000 spindles, which will produce 62,500 miles of fine cotton thread per day. In such a factory 1,000 persons will spin as much thread as 250,000 persons could without machinery.’ (p. 75. S. Laing, National Distress etc.,London, 1844.)

‘When profits fall, circulating capital is disposed to become to some extent fixed capital. When interest 5%, capital not used in making new roads, canals or railways, until these works yield a corresponding large percentage; but when interest only 4 or 3%, capital would be advanced for such improvements, if it obtained but a proportional lower percentage. Joint-stock companies, to accomplish great improvements, are the natural offspring of a falling rate of profit. It also induces individuals to fix their capital in the form of buildings and machinery.’ (p. 232. Hopkins (Th.), Great Britain for the last 40 Years etc., London, 1834.) ‘McCulloch thus estimates the numbers and incomes of those engaged in the cotton manufacture:

833,000 weavers, spinners, blackers at £24 each a year £20,000,000
111,000 joiners, engineers, machine makers etc. at £30 each  £3,330,000
Profits, superintendence, coal and  materials of machines  £6,670.000
    944.000 £30,000,000

‘Of the 6 2/3 millions, 2 millions are supposed to go for coal, iron and other materials, for machinery and other outgoings, which would give employment at £30 a year each, to 666,666, making a total population employed of 1,010,666; add to these 1/2 the number of children, aged etc., dependent on those who work, or an additional 505,330; so a total, supported on wages, of 1,515,996 persons. Added to these, those who are supported, directly or indirectly, by the 4 2/3 millions of profit etc.’ (Hopkins loc. cit. 336, 337.) According to this calculation, then, 833,000 directly engaged in production; 176,666 in the production of the machinery and the matières instrumentales which are required only because of the employment of machinery. The latter are reckoned, however, at £30 per head; thus, so as to resolve their labour into labour of the same quality as that of the 833,000, this must be calculated at £24 per head; thereby, £5,333,000 would give about 222,208 workers; this would give about 1 occupied in the production of machinery and matières instrumentales per 3 3/4 occupied in the production of the cotton fabric. Less than 1 to 4, but say 1 to 4. Now, if the 4 remaining workers worked only as much as 5 did earlier, thus each of them 1/4 more surplus labour time, then no profit for capital. The remaining 4 have to supply more surplus labour than the 5 did before; or the number of workers employed for machinery must be smaller than the number of workers displaced by the machinery. Machinery profitable for capital only in relation as it increases the surplus labour time of the workers employed in machinery (not in so far as it reduces it; only in so far as it reduces the relation of surplus labour time to necessary, so that the latter has not only relatively declined, while the number of simultaneous working days has remained the same, but has diminished absolutely).

The increase of absolute labour time supposes the same or an increasing number of simultaneous working days; ditto the increase of the force of production by division of labour etc. In both cases the aggregate labour time remains the same or grows. With the employment of machinery, relative surplus labour time grows not only relative to necessary labour time and hence correlative with aggregate labour time; but rather the relation to necessary labour time grows while aggregate labour diminishes, i.e. the number of simultaneous working days diminishes (relative to surplus labour time).

A Glasgow manufacturer gave Symons (J.C.), author of Arts and Artisans at Home and Abroad, Edinb., 1839, the following pieces of information (we cite several of them here in order to have examples for the relation of fixed capital, circulating, the part of the capital laid out in wages, etc.):

Glasgow: Expense of erecting a power-loom factory of 500 looms, calculated to weave a good fabric of calico, or shirting, such as is  generally made in Glasgow, would be about £18,000
Annual produce, say 150,000 pieces of 24 years, at 6s. £45,000
Interest on sunk capital, and for depreciation of value of machinery 1,800
Steam power, oil, tallow, etc., keeping up machinery, utensils, etc. 2,000
Yarns and flax 32,000
Wages to workmen 7,500
Suppose profit 1,700

Thus if we take 5% interest on machinery, then the gross profit 1,700 + 900 = 2,600.  The capital laid out in wages amounts, however, to only 7,500.  Thus profit relates to wages = 26:75 = 5 1/5:15, hence = 34 2/3%.

Probable expenses of erecting a spinning cotton-  mill with hand-mules, calculated to produce No. 40  of [a] fair average quality £23,000 
If patent self-actors, £2,000 additional.  Produce annually to the present prices of cottons  and the rates at which yarns could be sold 25,000
Cost of which is as follows:   Interest of sunk capital, allowance of depreciation  of value of the machinery by 10% 2,300
Cotton 14,000
Steam power, oil, tallow, gas, and general  expense of keeping utensils and machinery in repair 1,800
Wages to workers 5,400
Profit 1,500

(Thus assuming floating capital of £7,000, since 1,500 5% on 30,000.)

The produce of the mill taken at 10,000 lb. weekly (234 loc. cit).  Here, then, profit = 1,150 + 1,500 = 2,650:5,400 (wages) = 1:2 2.53, = 49 8/108%.

Cost of a cotton spinning mill of 10,000 throstles,  calculated to produce a fair quality of No. 24 £20,000
Taking present value of produce, the amount   would annually be costing £23,000
Interest on sunk capital, depreciation of value  of machinery at 10% 2,000
Cotton 13,300
Steam power, tallow, oil, gas, keeping machinery  in repair etc 2,500
Wages to workers 3,800
Profit 1,400

Hence gross profit = 2,400; wages 3,800; 2,400:3,800 = 24:38 = 12:19 = 63 3/19%. In the first case 34 2/3%; in the second 49 8/108% and in the last 63 3/19%. In the first case, wages 1/6 of the total price of the product; in the second more than 1/4; in the last, more than 1/6. But in the first case wages related to the value of the capital as = 1:4 8/15; in the second case = 1:5 15/27; in the third = 1:7 2/19. At the same rate as the total ratio of the part of the capital laid out in wages declines relative to the part laid out in machinery and circulating capital (this, together, 34,000 in the first case; 30,000 in the second; 28,000 in the third), the profit on the part laid out in wages must naturally rise, to allow the percentage of profit to remain the same.

The absolute decrease of aggregate labour, i.e. of the working day multiplied by the number of simultaneous working days, can appear doubly. In the first-cited form, that one part of the hitherto employed workers is dismissed in consequence of the use of fixed capital (machinery). Or, that the introduction of machinery will diminish the increase of the working days employed, even though productivity grows and, indeed, at a greater rate (of course) than it diminishes in consequence of the ‘value’ of the newly introduced machinery. In so far as the fixed capital has value, it does not magnify, but rather diminishes the productivity of labour. ‘The surplus hands would enable the manufacturers to lessen the rate of wages; but the certainty that any considerable reduction would be followed by immediate immense losses from turnouts, extended stoppages, and various other impediments which would be thrown in their way, makes them prefer the slower process of mechanical improvement, by which, though they may triple production, they require no new men.’ (Gaskell, Artisans and Machinery, London, 1836.) (p. 314.) ‘When the improvements not quite displace the workmen, they will render one man capable of producing, or rather superintending, the production of quantity now requiring ten or twenty labourers.’ (315, loc. cit.) ‘Machines have been invented which enable 1 man to produce as much yarn as 250, or 300 even, could have produced 70 years ago: which enable 1 man and 1 boy to print as many goods as a 100 men and a 100 boys could have printed formerly. The 150,000 workmen in the spinning mills produce as much yarn as 40 millions with the one-thread wheel could have produced.’ (316, loc. cit.)

‘The immediate market for capital, or field for capital, may be said to be labour. The amount of capital which can be invested at a given moment, in a given country, or the world, so as to return not less than a given rate of profits, seems principally to depend on the quantity of labour, which it is possible, by laying out that capital, to induce the then existing number of human beings to perform.’ (p. 20. An Inquiry into those Principles respecting the Nature of Demand etc., London, 1821.) (By a Ricardian against Malthus’s Principles etc.)


Alienation of the conditions of labour with the development of capital. (Inversion.) The inversion is the foundation of the capitalist mode of production, not only of its distribution.

The fact that in the development of the productive powers of labour the objective conditions of labour, objectified labour, must grow relative to living labour — this is actually a tautological statement, for what else does growing productive power of labour mean than that less immediate labour is required to create a greater product, and that therefore social wealth expresses itself more and more in the conditions of labour created by labour itself? — this fact appears from the standpoint of capital not in such a way that one of the moments of social activity — objective labour — becomes the ever more powerful body of the other moment, of subjective, living labour, but rather — and this is important for wage labour — that the objective conditions of labour assume an ever more colossal independence, represented by its very extent, opposite living labour, and that social wealth confronts labour in more powerful portions as an alien and dominant power. The emphasis comes to be placed not on the state of being objectified, but on the state of being alienated, dispossessed, sold [Der Ton wird gelegt nicht auf das Vergegenständlichtsein,sondern das Entfremdet-, Entäussert-, Veräussertsein]; on the condition that the monstrous objective power which social labour itself erected opposite itself as one of its moments belongs not to the worker, but to the personified conditions of production, i.e. to capital. To the extent that, from the standpoint of capital and wage labour, the creation of the objective body of activity happens in antithesis to the immediate labour capacity — that this process of objectification in fact appears as a process of dispossession from the standpoint of labour or as appropriation of alien labour from the standpoint of capital — to that extent, this twisting and inversion [Verdrehung und Verkehrung] is a real [phenomenon], not a merely supposed one existing merely in the imagination of the workers and the capitalists. But obviously this process of inversion is a merely historical necessity, a necessity 832 for the development of the forces of production solely from a specific historic point of departure, or basis, but in no way an absolute necessity of production; rather, a vanishing one, and the result and the inherent purpose of this process is to suspend this basis itself, together with this form of the process. The bourgeois economists.are so much cooped up within the notions belonging to a specific historic stage of social development that the necessity of the objectification of the powers of social labour appears to them as inseparable from the necessity of their alienation vis-à-vis living labour. But with the suspension of the immediate character of living labour, as merely individual, or as general merely internally or merely externally, with the positing of the activity of individuals as immediately general orsocial activity, the objective moments of production are stripped of this form of alienation; they are thereby posited as property, as the organic social body within which the individuals reproduce themselves as individuals, but as social individuals. The conditions which allow them to exist in this way in the reproduction of their life, in their productive life’s process, have been posited only by the historic economic process itself; both the objective and the subjective conditions, which are only the two distinct forms of the same conditions.

The worker’s propertylessness, and the ownership of living labour by objectified labour, or the appropriation of alien labour by capital — both merely expressions of the same relation from opposite poles — are fundamental conditions of the bourgeois mode of production, in no way accidents irrelevant to it. These modes of distribution are the relations of production themselves, but sub specie distributionis. It is therefore highly absurd when e.g. J. St. Mill says (Principles of Political Economy, 2nd ed., London, 1849, Vol. I, p. 240): ‘The laws and conditions of the production of wealth partake of the character of physical truths… It is not so with the distribution of wealth. That is a matter of human institutions solely.’ (p. 239, 240.) The ‘laws and conditions’ of the production of wealth and the laws of the ‘distribution of wealth’ are the same laws under different forms, and both change, undergo the same historic process; are as such only moments of a historic process.

It requires no great penetration to grasp that, where e.g. free labour or wage labour arising out of the dissolution of bondage is the point of departure, there machines can only arise in antithesis to living labour, as property alien to it, and as power hostile to it; i.e. that they must confront it as capital. But it is just as easy to perceive that machines will not cease to be agencies of social production when they become e.g. property of the associated workers. In the first case, however, their distribution, i.e. that they do not belong to the worker, is just as much a condition of the mode of production founded on wage labour. In the second case the changed distribution would start from a changed foundation of production, a new foundation first created by the process of history.


Merivale. Natural dependence of the worker in colonies to be replaced by artificial restrictions

Gold, in the figurative language of the Peruvians, ‘the tears wept by the sun’. (Prescott.) ‘Without the use of the tools or the machinery familiar to the European, each individual’ (in Peru) ‘could have done but little; but acting in large masses and under a common direction, they were enabled by indefatigable perseverance to achieve results etc.’ (loc. cit.) [63]

<The money prevalent among the Mexicans (more with barter and oriental landed property), ‘a regulated currency of different values. This consisted of transparent quills of gold dust; of bits of tin, cut in the form of a T; and of bags of cocoa, containing a specified number of grains. ‘0 felicem monetam’, says Peter Martyr (de Orbe novo), ‘quae suavem utilemque praebet humano generi potum, et a tartarea peste avaritiae suos immunes servat possessores, quod sugodi aut diu servari nequeat.’ (Prescott.) [64] ‘Eschwege (1823) estimates the total value of the diamond workings in 80 years at a sum hardly exceeding 18 months’ produce of sugar or coffee in Brazil.’ (Merivale.) [65] ‘The first’ (British) ‘settlers’ (in North America) ‘cultivated the cleared ground about their villages in common… this custom prevails until 1619 in Virginia’ etc. (Merivale, Vol. I. p. 91.) (Notebook, p. 52.) (‘In 1593 the Cortes made the following representation to Philip II: “The Cortes ofValladolid of the year ’48 begged Your Majesty to cease to permit the entry into the kingdom of candles, mirrors, jeweler, knives and similar things from the exterior, these articles, so useless to human life, being exchanged for gold, as if Spaniards were Indians”.’ (Sempéré.)) [66]

‘In densely peopled colonies the labourer, although free, is naturally dependent on the capitalist; in thinly peopled ones the want of this natural dependence must be supplied by artificial restrictions.’ (Merivale, 314, Vol. II. Lectures on Colonization etc., London, 1841, 1842.)>

How the machine etc. saves material. [67]Bread. Dureau de la Malle

Roman money: aes grave pound copper (emere per aes et libram). This the as. [*] 485 A.U.C., deniers d’argent = 10 as (thesedenarii 40 per pound: in 510, 75 deniers per pound; each denarius still = 10 as, but 10 as of 4 ounces each). In 513, the as reduced to 2 ounces; the denarius still = 10 as, but only 1/84 of the pound of silver. The latter figure, 1/84, held firm until the end of the Republic, but in 537 the denier was 16 as to the ounce, and in 665 only 16 as the half ounce… The silver denarius anno 485 of the Republic = 1 franc 63; 510 = 87 centimes; 513 — 707 = 78 centimes. From Galba to the Antonines, 1 franc. (Dureau de la Malle, Vol. 1.) At the time of the first silverdenarius, 1 pound silver to 1 pound copper = 400: l. Beginning of the second Punic war = 112: l. (loc. cit., Vol. I, pp. 82-4.) ‘The Greek colonies in the south of Italy drew the silver from which they had fabricated coins since the sixth and fifth century B.C. from Greece and Asia, directly or by way of Tyre and Carthage. Despite this proximity, for political reasons the Romans prohibited the use of gold and silver. The People and the Senate felt that so easy a medium of circulation would lead to concentration, to decay of the old mores and of agriculture.’ (loc. cit. p. 64, 65.) ‘According to Varro, the slave an instrumentum vocale, the animal instrumentum semi-mutum, the ploughinstrumentum mutum.’ (loc. cit.p. 253, 254.) (A Roman city-dweller’s daily consumption somewhat more than 2 French livres; of a countryman, more than 3 livres. A Parisian eats 0.93 of bread; a countryman in the 20 departments where wheat the chief staple, 1-70. (loc. cit.) In Italy (today) 1 lb. 8 ounces, where wheat the main food. Why did the Romans eat relatively more? Originally they ate wheat raw or just softened in water; afterwards they decided to roast it… Later they discovered the art of milling, and at first the paste made with this flour was eaten raw. To mill the grain, they used a pestle, or two stones beaten and turned against one another… The Roman soldier prepared a several days’ supply of this raw paste, puls. Then they invented the winnowing-basket, to clean the grain, and a means was found to separate the bran from the flour; finally they added yeast, and at first they ate the bread raw, until an accident taught them that, by cooking it, one could prevent it from going sour and one could store it much longer. Only after the war against Perseus, 580, did Rome have bakers. (p. 279 loc. cit.) ‘In pre-Christian times, the Romans were unacquainted with windmills.’ (280 loc. cit.)) ‘Parmentier has demonstrated that the art of milling has made great progress in France since Louis XIV, and that the difference between the old and the new millage amounts to 1/2 the bread supplied by the same grain. At first 4, then 3, then 2, then finally l 1/3 setiers of wheat were allotted for the annual consumption of an inhabitant of Paris… Thus the enormous disproportion between the daily consumption of wheat among the Romans and among us is easily explained by the imperfections of the processes of milling and baking.’ (p. 281 loc. cit.) ‘The agrarian law was a limitation of landed property among active citizens. The limitation of property formed the foundation of the existence and prosperity of the old republics.’ (loc. cit. p. 256, 257.) ‘The state’s revenue consisted of the estates, of contributions in kind, of forced labour, and of some taxes in silver payable at the entry and exit of merchandise, or levied on the sale of certain goods. This mode… still exists almost without change in the Ottoman Empire… At the time of Sulla’s dictatorship and even at the end of the seventh century A.U.C., the Roman Republic took in only 40 million francs annually, anno 697… In 1780, the revenue of the Turkish Sultan, in coined piastres, only 35,000,000 piastres or 70 million francs The Romans and the Turks levied the bulk of their revenue in kind. Among the Romans… 1/10 of the grain, 1/5 of the fruit, among the Turks, varying from 1/2 to 1/10 of the product… Since the Roman Empire was only an immense agglomeration of independent municipalities, the greater part of the costs and expenditures remained communal.’ (pp. 402-7.) (The Rome of Augustus and Nero, without the suburbs, only 266,684 inhabitants. Assumes that in the fourth century of the Christian era the suburbs had 120,000 inhabitants, the Aurelian belt 382,695, altogether 502,695, 30,000 soldiers, 30,000 aliens; altogether 562,000 heads, in round numbers. Madrid, during a period of l 1/2 centuries after Charles V, capital of a part of Europe and of half the new world, many resemblances to Rome. Its population also did not grow in proportion to its political importance. (405, 406, loc. cit.)) ‘The social condition of the Romans at the time resembled much more that of Russia or of the Ottoman Empire than that of France or of England: little commerce or industry; immense fortunes side by side with extreme misery.’ (p. 214, loc. cit.) (Luxury only in the capital and in the residences of the Roman satraps.) ‘From the destruction of Carthage to the foundation of Constantinople, Roman Italy had existed in the same condition, vis-à-vis Greece and the Orient, as was Spain during the eighteenth century vis-à-vis the rest of Europe. Alberoni said: “Spain is to Europe what the mouth is to the body: everything enters, nothing stays”.’ (loc. cit. p. 385 seq.)

Usury originally unrestricted in Rome. The law of the 12 tables (303 A.U.C.) had fixed the interest on money at 1% per year (Niebuhr says 10). [68] These laws promptly violated. Duilius (398 A.U.C.) again reduced the interest on money to 1%, unciario faenore. [69] Reduced to 1/2% in 408; in 413, lending at interest was absolutely forbidden by a plebiscite engineered by the tribune, Genucius. It is not surprising that, in a republic where industry, where commerce either wholesale or retail were prohibited to citizens, there was also a prohibition against commerce in money. (p. 260, 261 Vol. II, loc. cit.) This situation lasted 3 years, until the capture of Carthage. 12%, then: 6% the average annual rate of interest. (261 loc. cit.) Justinian fixed interest at 4%; … usura quincunx [70] under Trajan the legal interest is 5%. Commercial interest in Egypt, 146 years B.C., was 12%. (loc. cit. p. 263.)

The involuntary alienation of feudal landed property develops with usury and with money: ‘The introduction of money which buys all things, and hence the advantage for the creditor, who lends money to the land owner, brings in the necessity of legal alienation for the advance.’ (124. John Dalrymple, An Essay towards a General History of Feudal Property in Great Britain, 4th ed., Lond., 1759.)

In medieval Europe: ‘Payments in gold.customary with only a few articles of commerce, mostly with precious goods. Most prevalent outside the mercantile sphere, with gifts by the great, certain high obligations, heavy fines, purchase of landed estates. Unminted gold was not infrequently measured to suit in pounds or marks (half pounds)… 8 ounces = 1 mark; one [ounce] hence = 2 pennyweight or 3 carats. Of minted gold until the Crusades, familiar only with the Byzantine solidus, the Italian Tari and the Arabian maurabotini (afterwards maravedi).(Hüllmann, Städtewesen des Mittelalters, 1st Part, Bonn, 1826.) (p. 402-4.) ‘In Frankish laws, the solidus also as mere money of account,in which the value of agricultural products to be paid as fines was expressed. E.g. among the Saxons, a solidus a yearling ox in usual autumn condition… In Ripuarian law, a healthy cow represented one solidus… 12 denars = 1 gold solidus.’ (405, 406.) 4 Tari = 1 Byzantine solidus ..; Since the thirteenth century, various gold coins minted in Europe. Augustales (of the emperor Frederick II in Sicily: Brundisium and Messina); florentini or floreni (Florence 1252);… ducats or zecchini (Venice since 1285). (409 — 11, loc. cit.) ‘Larger gold coins minted also in Hungary, Germany and the Netherlands since the fourteenth century; in Germany, were simply called Gulden.’ (loc. cit. 413.) ‘ With payments in silver, the prevailing custom in all larger payments was weighing, usually in marks… Even minted silver weighed for such payments, since the coin still of almost wholly pure silver, hence weight the only question. Hence the name pound (livre, lire) [*] and mark, partly the name of imaginary or accounting coins, partly passed over to real silver coins. Silver coins: denari or kreuzer… In Germany these denari were called Pfennige (Penig, Penning, Phennig)… since as early as the ninth century. Originally Pending, Penthing, Pfentini… from pfündig, in the old form pfünding… the same as full-weighted: hence pfündige denari, abbreviated pfündinge… Another name for the denari, from the beginning of the twelfth century in France, Germany, Netherlands, England, from the star pictured on them in place of the cross: sternlinge, sterlinge,starlinge… Denari sterlings = pfennig sterlings… In the fourteenth century, 320 of the Netherlands sterlings made a pound, 20 to the ounce… In the earlier Middle Ages, silver solidi not real coins, but rather inclusive name for 12 denari… 1 gold solidus = 12 sterling denari, for this was the median relation of gold and silver … Oboli, half pfennigs, having circulated as small change… With the increasing spread of petty trade, more and more of the small commercial cities and petty princes obtained the right to strike their own local coin, thus for the most part small change. Alloyed it with copper, in increasing proportions… Thick pennies, gros deniers, grossi, groschen, groten, first minted in Tours before the middle of the thirteenth century. These groschen originally double pfennigs.’ (415-33.)

‘The ecclesiastical assessments levied by the popes on nearly all Catholic countries contributed in no small measure, firstly, to the development of the entire money system in commercially active Europe, and then, as a consequence, to the rise of a variety of efforts to circumvent the ecclesiastical prohibition (of interest). The pope made use of the Lombards in the collection of official dues and other obligations from the archbishoprics. These, the chief usurers and pawnbrokers, under papal protection. Already generally known since the middle of the twelfth century. Especially from Siena. ‘Public usurarii.’ In England they called themselves ‘Roman Pontifical Money-Dealers’. Some bishops in Basle and elsewhere pawned the episcopal ring, silken robes, all the ecclesiastical vessels at low rates with Jews, and paid interest. But bishops, abbots, priests themselves also practised usury with the church vessels by lending them for a share of the gain to Tuscan money dealers from Florence, Siena and other cities.’ etc. (see loc. cit. Notebook, p. 39.) [71]

Because money is the general equivalent, the general power of purchasing, everything can be bought, everything may be transformed into money. But it can be transformed into money only by being alienated [alieniert], by its owner divesting himself of it. Everything is therefore alienable, or indifferent for the individual, external to him. Thus the so-called inalienable, eternal possessions, and the immovable, solid property relations corresponding to them, break down in the face of money. Furthermore, since money itself exists only in circulation, and exchanges in turn for articles of consumption etc. — for values which may all ultimately be reduced to purely individual pleasures, it follows that everything is valuable only in so far as it exists for the individual. With that, the independent value of things, except in so far as it consists in their mere being for others, in their relativity, exchangeability, the absolute value of all things and relations, is dissolved. Everything sacrificed to egotistic pleasure. For, just as everything is alienable for money, everything is also obtainable by money. Everything is to be had for ‘hard cash’, which, as itself something existing external to the individual, is to be catched [sic] by fraud, violence etc. Thus everything is appropriable by everyone, and it depends on chance what the individual can appropriate and what not, since it depends on the money in his possession. With that, the individual is posited, as such, as lord of all things. There are no absolute values, since, for money, value as such is relative. There is nothing inalienable, since everything alienable for money. There is no higher or holier, since everything appropriable by money. The ‘res sacrae’ and‘religiosae’, which may be ‘in nullius bonis’, ‘nec aestimationem recipere, nec obligari alienarique posse’, which are exempt from the ‘commercio hominum’, [72] do not exist for money — just as all men are equal before God. Beautiful that the Roman church in the Middle Ages itself the chief propagandist of money.

‘Since the ecclesiastical law against usury had long lost all significance, in 1425 Martin formally annulled it.’ (Hüllmann, part II, loc. cit. Bonn, 1827, p. 55.) ‘No country in the Middle Ages a general rate of interest. Firstly, the priests strict. Uncertainty of the juridical arrangements for securing the loan. Accordingly higher rates in individual cases. The small circulation of money, the necessity to make most payments in cash, since the brokerage business still undeveloped. Hence great variety of views about interest and concepts of usury. In Charlemagne’s time it was considered usurious only when 100% was taken. At Lindau on Lake Constance, in 1344, local citizens took 216 2/3%. In Zurich the Council fixed the legal interest at 43 1/3%… In Italy, 40% had to be paid during some periods, although from the twelfth to the fourteenth century the usual rate does not exceed 20%… Frederick II in his decree… 10%, but this only for Jews. He did not wish to speak for the Christians … 10% was already usual in the thirteenth century in the Rhineland of Germany.’ (55-7 loc. cit.)

Productive consumption. Newman. — Transformations of capital. Economic cycle. (Newman)

‘Productive consumption, where the consumption of a commodity is a part of the process of production.’ (Newman etc. Notebook XVII, 10.) [73] ‘It will be noticed, that in these instances there is no consumption of value, the same value existing under a new form.’ (loc. cit.) ‘Further consumption… the appropriation of individual revenue to its different uses.’ (p. 297.) (loc. cit.)

‘To sell for money shall at all times be made so easy as it is now to buy with money, and production would become the uniform and never failing cause of demand.’ (John Gray, The Social System etc., Edinburgh, 1831.) (p. 16.) ‘After land, capital, labour, the fourth necessary condition of production is: instant power of exchanging.’ (loc. cit. 18.) ‘To be able to exchange is’ for the man in society ‘as important as it was to Robinson Crusoe to be able to produce.’ (loc. cit. 21.)

‘According to Say, credit only transfers capital, but does not create any. This true only in the one case of a loan to an industrialist by a capitalist… but not of credit between producers in their mutual advances. What one producer advances to another is not capital; it is products, commodities. These products, these commodities, can and undoubtedly will become active capital in the hands of the borrower, i.e. instruments of labour, but at the time they are nothing but products for sale in the hands of their owner, and everywhere inactive … One must distinguish… between product and commodity… and instrument of labour and productive capital… As long as a product remains in the hands of its producer, it is only a commodity, or, if you like, inactive, inert capital. Far from being of benefit for the industrialist who holds it, it is a burden for him, a ceaseless cause of trouble, of faux frais and of losses: storage costs, maintenance costs, protection costs, interest on capital etc., without counting the waste and spoiling which nearly all commodities suffer when they are inactive for long… Thus, if he sells this, his commodity, on credit, to another industrialist who can use the commodities for the kind of work for which they are fit, then, from having been inert commodities, they have become, for the latter, active capital. In this case, therefore, there will be an increase of productive capital on one side without any diminution on the other. Even more: if one takes note that the seller, while furnishing his commodity on credit, has received in exchange a bill which he has the right to negotiate on the spot, is it not clear that by that very fact he too has obtained the means to renew his raw materials and his instruments of labour so as to begin work again? Thus there is here a double growth of productive capital, in other words, a power acquired on both sides.’ (Charles Coquelin, ‘Du Credit et des Banques dans l’Industrie’, Revue des deux mondes, Vol. 31, 1842, p. 799 seq.) ‘Let the whole mass of commodities for sale pass rapidly from the state of inert product into that of active capital, without delays and obstacles: the country will be filled with so much new activity!… this rapid transformation is precisely the advantage which credit allows to be realized… This is the activity of circulation… Thus credit may increase the industrialists’ business tenfold… In a given period of time, the dealer or producer renews his materials and his products ten times instead of once… Credit brings this about by increasing everyone’s purchasing power. Instead of reserving this power to those who presently have the ability to pay, it gives it to all those people… whose position and whose morality provide the guarantee of a future payment; it gives it to any person who is capable of utilizing these products through labour… Hence the first benefit of credit is to increase, if not the sum of values a country possesses, yet at least the sum of active values. This is the immediate effect. Flowing out of it… is the increase of the productive powers, hence also of the sum of values etc.’ (loc. cit.)

Letting is a conditional sale, or sale of the use of a thing for a limited time. (Corbet, Th., ‘An Inquiry into the Causes and Modes of the Wealth of Individuals’ etc., Lond., 1841, p. 81.)

‘Transformations to which capital is subjected in the work of production. Capital, to become productive, must be consumed.’ (p. 80. S. P. Newman, Elements of Political Economy, Andover and New York, 1835.) ‘Economic cycle… the whole course of production, from the time that outlays are made, till returns are received. In agriculture, seed time is its commencement, and harvesting its ending’. (81). The basis of the difference between fixed and circulating capital is that during every economic cycle, a part is partially, and another part totally consumed. (loc. cit.) Capital as directed to different employments. (loc. cit.) Belongs in the doctrine of competition. ‘A Medium of Exchange: In undeveloped nations, whatever commodity constitutes the larger share of the wealth of the community, or from any cause becomes more frequently than others an object of exchange, is wont to be used as a circulating medium. So cattle a medium of exchange among pastoral tribes, dried fish in Newfoundland, sugar in the West Indies, tobacco in Virginia. Precious metals… advantage … : (a) sameness of quality in all parts of the world… (b) admit of minute division and exact apportionment; (c) rarity and difficulty of attainment, (d) they admit of coinage.’ (100 loc. cit.)

Dr Price. Innate power of capital

The notion of capital as a self-reproducing being — as a value perenniating and increasing by virtue of an innate quality — has led to the marvellous inventions of Dr Price, which leaves the fantasies of the alchemists far behind, and which Pitt earnestly believed and made into the pillars of his financial sagacity in his sinking fund laws (see Lauderdale). [74] The following, a few striking excerpts from the man:

‘Money bearing compound interest increases at first slowly. But, the rate of increase being continually accelerated, it becomes in some time so rapid, as to mock all the powers of the imagination. One penny, put out at our Saviour’s birth to 5% compound interest, would, before this time, have increased to a greater sum than would be obtained in a 150 millions of Earths, all solid gold. But if put out to simple interest, it would, in the same time, have amounted to no more than 7 shillings 4 1/2d. Our government has hitherto chosen to improve money in the last, rather than the first of these ways.’ (18, 19. Price, Richard, An Appeal to the Public on the Subject of the National Debt, London, 1772, 2nd ed.) (His secret: the government should borrow at simple interest, and lend out the borrowed money at compound interest.) In his Observations on Reversionary Payments etc., London, 1772, he flies even higher: ‘A shilling put out to 6% compound interest at our Saviour’s birth would … have increased to a greater sum than the whole solar system could hold, supposing it a sphere equal in diameter to the diameter of Saturn’s orbit.’ (loc. cit. XIII, note.) ‘A state need never, therefore, be under any difficulties; for, with the smallest savings, it may, in as little time as its interest can require, pay off the largest debts.’ (p. xiv.) The good Price was simply dazzled by the enormous quantities resulting from geometrical progression of numbers. Since he regards capital as a self-acting thing, without any regard to the conditions of reproduction of labour, as a mere self-increasing number, he was able to believe that he had found the laws of its growth in that formula (see below). Pitt, 1792, in a speech where he proposed to increase the sum devoted to the sinking fund, takes Dr Price’s mystification quite seriously. (S = C (1 + i)n.)

McCulloch, in his Dictionary of Commerce, 1847, cites, as properties of metallic money: ‘The material must be: (1) divisible into the smallest portions; (2) capable of being stored for an indefinite period without deterioration; (3) easily transportable from place to place owing to great value in small bulk; (4) a piece of money, of a certain denomination, always equal in size and quality to every other piece of the same denomination; (5) its value comparatively steady.’ (581.) [75]

Proudhon. Capital and simple exchange. Surplus. — Necessity of workers’ propertylessness. Townsend. Galiani. — The infinito in process. Galiani

In the whole polemic by Mr Proudhon against Bastiat in Gratuity du credit. Discussion entre M. Fr. Bastiat et M. Proudhon, Paris, 1850, Proudhon’s argument revolves around the fact that lending appears as something quite different to him from selling. To lend at interest ‘is the ability of selling the same object again and again, and always receiving its price anew, without ever giving up ownership of what one sells’. (9, in the first letter [to] Chevé, one of the editors of La Voix du Peuple.[76] The different form in which the reproduction of capital appears here deceives him into thinking that this constant reproduction of the capital — whose price is always obtained back again, and which is always exchanged anew for labour at a profit, a profit which is realized’ again and again in purchase and sale — constitutes its concept. What leads him astray is that the ‘object’ does not change owners, as with purchase and sale; thus basically only the form of capital lent at interest with the form of reproduction peculiar to fixed capital. With house rent, about which Chevy speaks, it is directly the form of fixed capital. If the circulating capital is regarded in its whole process, then it may be seen that, although the same object (this specific pound of sugar, e.g.) is not always sold anew, the same value does always reproduce itself anew, and the sale concerns only the form, not the substance. People who are capable of making such objections are obviously still unclear about the first elementary concepts of political economy. Proudhon grasps neither how profit, nor, therefore, how interest, arises from the laws of the exchange of values. ‘House’, money etc. should therefore not be exchanged as ‘capital’, but rather as ‘commodity… at cost price’. (44.) (The good fellow does not understand that the whole point is that value is exchanged for labour, according to the law of values; that, hence, to abolish interest, he would have to abolish capital itself, the mode of production founded on exchange value, hence wage labour as well. Mr Proudhon’s inability to find even one difference between loan and sale: ‘In effect, the hatter who sells hats… obtains their value in return, neither more nor less. But the lending capitalist … not only gets back the whole of his capital; he receives more than the capital, more than he brings into the exchange; he receives an interest above the capital.’ (69.) Thus Mr Proudhon’s hatters reckon neither profit nor interest as part of their cost price. He does not grasp that, precisely by receiving the value of their hats, they obtain more than these cost them, because a part of this value is appropriated in the exchange, without equivalent, with labour. Here also his great thesis mentioned above: ‘Since in commerce, the interest on capital is added to the worker’s wages to make up the price of the commodity, it is impossible for the worker to buy back what he has himself produced. To live by working is a principle which, under the reign of interest, implies a contradiction.’ (105.) In letter IX (p. 144-52), the good Proudhon confuses money as medium of circulation with capital, and therefore concludes that the ‘capital’ existing in France bears 160% (namely 1,600 millions annual interest in the state debt, mortgage etc. for a capital of a thousand millions,… the sum of currency… circulating in France). How little he understands about capital in general and its continual reproduction [is shown by] the following, which he imputes as specific to money-capital, i.e. to money lent out as capital: ‘Since, with the accumulation of interest, money-capital, exchange after exchange, always comes back to its source, it follows that this re-lending, always done by the same hand, always profits the same person.’ (154.) ‘All labour must leave a surplus.’ (Everything ought to be sold, nothing lent. This the simple secret. Inability to see how the exchange of commodities rests on the exchange between capital and labour, and profit and interest in the latter. Proudhon wants to cling to the simplest, most abstract form of exchange.)

The following pretty demonstration by Mr Proudhon: ‘Since value is nothing more than a proportion, and since all products are necessarily proportional to one another, it follows that from the social viewpoint products are always values and produced values: for society, the difference between capital and product does not exist. This difference is entirely subjective to individuals.’ (250.)

The antithetical nature of capital, and the necessity for it of the propertyless worker, is naively expressed in some earlier English economists, e.g. the Reverend Mr J. Townsend, [77] the father of population theory, by the fraudulent appropriation of which Malthus (a shameless plagiarist generally; thus e.g. his theory of rent is borrowed from the farmer, Anderson) made himself into a great man. Townsend says: ‘It seems to be a law of nature that the poor should be to a certain degree improvident, that there may be always some to fulfill the most servile, the most sordid, and the most ignoble offices in the community. The stock of human happiness is thereby much increased. The more delicate ones are thereby freed from drudgery, and can pursue higher callings etc. undisturbed.’ (A Dissertation on the Poor-laws, edition of 1817, p. 39.) ‘Legal constraint to labour is attended with too much trouble, violence, and noise, creates ill will etc., whereas hunger is not only a peaceable, silent, unremitted pressure, but, as the most natural motive to industry and labour, it calls forth the most powerful exertions.’ (15.) (This the answer to what labour is in fact more productive, the slave’s or the free worker’s. A. Smith could not raise the question, since the mode of production of capital presupposes free labour. On the other side, the developed relation of capital and labour confirms A. Smith in his distinction between productive and unproductive labours. Lord Brougham’s stale jokes against it, and the objections, supposed to be serious, by Say, Storch, MacCulloch and tutti quanti do not make any impact on it. A. Smith misses the mark only by somewhat too crudely conceiving the objectification of labour as labour which fixates itself in a tangible [handgreiflich] object. But this is a secondary thing with him, a clumsiness in expression.)

With Galiani, too, the workmen are supplied by a law of nature. Galiani published the book in 1750. ‘God makes sure that the men who exercise occupations of primary utility are born in abundant numbers.’ (78. Della Moneta, Vol. III, Scrittori Classici Italiani di Economia Politica. Parte Moderna. Milano, 1803.) But he already has the correct concept of value: ‘It is only toil which gives value to things.’ (74.) Of course, labour is distinct qualitatively as well, not only in so far as it [is performed] in different branches of production, but also more or less intensive etc. The way in which the equalization of these differences takes place, and all labour is reduced to unskilled simple labour, cannot of course be examined yet at this point. Suffice it that this reduction is in fact accomplished with the positing of products of all kinds of labour as values. As values, they are equivalents in certain proportions; the higher kinds of labour are themselves appraised in simple labour. This becomes clear at once if one considers that e.g. Californian gold is a product of simple labour. Nevertheless, every sort of labour is paid with it. Hence the qualitative difference is suspended, and the product of a higher sort of labour is in fact reduced to an amount of simple labour. Hence these computations of the different qualities of labour are completely a matter of indifference here, and do not violate the principle. ‘Metals… are used for money because they are valuable,… they are not valuable because they are used for money.'(loc. cit. 95.) ‘It is the velocity of circulation of money, and not the quantity of metal, which makes more or less money appear.’ (99.) ‘ Money is of two kinds, ideal and real; and is adapted to two uses, to evaluate things and to purchase them. Ideal money is as good as, sometimes better than, real money for evaluating things… the other use of money is to buy those things to which its value may be equal… prices and contracts are valued in ideal money and executed in real.’ (p. 112 seq.) ‘The metals have the peculiar and singular quality that in them alone all relations reduce themselves to one only, which is their quantity; nature did not endow them with a varying quality either in their internal constitution or in their external form and shape.’ (126, 127.) This is very important observation. Value supposes a common substance, and all differences, proportions etc. reduced to merely quantitative ones. This the case with precious metals, which thus appear as the natural substance of value. ‘Money… like a law which reduces all things to their necessary proportions is that which articulates all things in a single voice: price.’ (152.) ‘Only this same ideal money is of account, which is to say, all things are stipulated, contracted and evaluated in it; which came about for the same reason that the moneys which are ideal today are the most ancient moneys of a nation, and all of them were once real, and, because they were real, they were used in accounting.’ (152.) (This also the formal clarification of Urquhart’s ideal money etc. For the blacks etc. the iron bar was originally real money, then changed into ideal; but they tried at the same time to hold onto its previous value. Now, since the value of iron, as becomes apparent to them in commerce, fluctuates relative to gold etc., therefore the ideal bar, so as to preserve its original value, expresses varying proportions of real amounts of iron, a laborious calculation which does honour to these gentlemen’s power of abstraction.) (In the debates caused by the Bullion Committee 1810, Castlereagh advanced similar confused notions.) A beautiful statement by Galiani: ‘The infinity which’ (things) ‘lack in progression, they find in circulation.'(156.) About use value, Galiani nicely says: ‘Price is a relation… the price of things is their proportion relative to our need, which has as yet no fixed measure. But this will be found. I myself believe it to be man himself.’ ([159,] 162.) ‘Spain, during the same period when it was the greatest as well as the richest power, counted in reales and in the tiniest maravedis.’ (172, 173.) ‘It is, rather, he’ (man) ‘who is the sole and true wealth.’ (188.) ‘Wealth is a relation between two persons.’ (221.) ‘When the price of a thing, or rather its proportion relative to others, changes proportionately to all of them, it is a clear sign that it is its value alone, and not that of all the others, which has changed.’ (154.) (The costs of preserving the capital, of repairing it, also have to be taken into account.)

‘The positive limitation of quantity in paper money would accomplish the only useful purpose that cost of production does in the other.’ (Opdyke.) [78] The merely quantitative difference in the material of money: ‘Money is returned in kind only’ (with loans); ‘which fact distinguishes this agent from all other machinery… indicates the nature of its service… clearly proves the singleness of its office.’ (267.) ‘With money in possession, we have but one exchange to make in order to secure the object of desire, while with other surplus products we have two, the first of which (securing the money) is infinitely more difficult than the second.’ (287, 288.)

‘Banker… differs from the old usurer… that he lends to the rich and seldom or never to the poor. Hence he lends with less risk, and can afford to do it on cheaper terms; and for both reasons, he avoids the popular odium which attended the usurer.’ (44.) (Newman, F. W., Lectures on Political Economy, London, 1851.)

Advances. Storch. — Theory of savings. Storch. — MacCulloch. Surplus. — Profit. — Periodical destruction of capital. Fullarton. — Arnd. Natural interest

Everyone hides and buries his money quite secretly and deeply, but especially the Gentiles, who are the almost exclusive masters of commerce and of money, and who are infatuated with this belief that the gold and silver they hide during their lifetime will be of use to them after death. (314.) (Francis Bernier, Vol. I, Voyages contenant la description des états du Grand Mogol etc., Paris, 1830.)

Matter in its natural state… is always without value… Only through labour does it obtain exchange value, become element of wealth. (MacCulloch, Discours sur l’origine de l’économie politique etc. transl. by Provost. Geneva and Paris, 1825. p. 57.)

Commodities in exchange are each other’s measure. (Storch. Cours d’Économie Politique avec des notes etc. par J. B. Say, Paris, 1823, Vol. I, p. 81.) ‘In the trade between Russia and China, silver is used to evaluate all commodities; nevertheless, this commerce is carried on by barter.’ (p. 88.) ‘Just as labour is not the source… of wealth, so is it not its measure.’ (p. 123 loc. cit.) ‘Smith… let himself be misled into the opinion that the same cause which made material things exist was also the source and the measure of value.’ (p. 124.) ‘Interest the price one pays for the use of a capital.’ (p. 336.) Currency must have a direct value, but be founded on an artificial need. Its material must not be indispensable for human existence; because the whole amount of it which is used for currency cannot be used individually, and must always circulate. (Vol. II, p. 113, 114.) ‘Money takes the place of anything.’ (p. 133.) T.V. [79] Considerations sur la nature du revenu national,Paris, 1824: ‘Reproductive consumption is not properly an expense, but only an advance, because it is reimbursed to him who makes it.’ (p. 54.) ‘Is there not a manifest contradiction in this proposition that a people grows wealthy by its savings, or its privations, that is to say, by voluntarily condemning itself to poverty?’ (p. 176.) ‘At the time when hides and pelts served as money in Russia, the inconvenience involved in circulating so voluminous and perishable a currency gave rise to the idea of replacing them by small pieces of stamped leather, which thereby became symbols payable in hides and pelts… They kept up this usage until 1700 (namely, later, of representing the fractions of silver kopecks), ‘at least in the city of Kaluga and its environs, until Peter l’ (1700) ‘ordered them to be turned in and exchanged for small copper coins.’ (Vol. IV, p. 79.)

An indication of the marvels of compound interest is already found in the great seventeenth-century champion of the fight against usury: in Jos. Child. Traités sur le commerce etc. trad. de 1’anglois (English publication 1669, Amsterdam and Berlin, 1754.) (pp. 115-17.)

‘In point of fact a commodity will always exchange for more labour than has produced it; and it is this excess that constitutes profits.’(p. 221. McCulloch, The Principles of Political Economy, London, 1830.) Shows how well Mr McCulloch has understood the Ricardian principle. He distinguishes between exchange value and real value; the former (I) quantity of labour expended in its appropriation or production; (2) the second, buying power of certain quantities of labour of the other commodities. (p. 211.) Man is as much the produce of labour as any [of] the machines constructed by his agency; and it appears to us that in all economical investigations he ought to be considered in precisely the same point of view. (115 loc. cit.) Wages… really consist of a part of the produce of the industry of the labourer. (p. 295.) The profits of capital are only another name for the wages of accumulated labour. (p. 291.)

‘A periodical destruction of capital has become a necessary condition of any market rate of interest at all, and, considered in that point of view, these awful visitations, to which we are accustomed to look forward with so much disquiet and apprehension and which.we are so anxious to avert, may be nothing more than the natural and necessary corrective of an overgrown and bloated opulence, the vis medicatrix by which our social system, as at present constituted, is enabled to relieve itself from time to time of an ever-recurring plethora which menaces its existence, and to regain a sound and wholesome state.’ (p. 165. Fullarton (John): On the Regulation of Currency etc. Lond., 1844.)

Money — General Power of Purchasing. (Chalmers.)

‘Capital … services and commodities used in production. Money: the measure of value, the medium of exchange, and the universal equivalent; more practically: the means of obtaining capital; the only means of paying for capital previously obtained for credit; virtually — security for obtaining its equivalent value in capital: Commerce is the exchange of capital for capital through the medium of money, and the contract being for the medium, money alone can satisfy the contract and discharge the debt. In selling, one kind of capital is disposed for money for obtaining its equivalent value in any kind of capital. Interest — the consideration given for the loan of money. If the money is borrowed for the purpose of procuring capital, then the consideration given is a remuneration for the use of capital (raw materials, labour, merchandise etc.), which it obtains. If borrowed for the purpose of discharging a debt, for paying for capital previously obtained and used (contracted to be paid for in money), then the consideration given is for the use of money itself, and in this respect interest and discount are similar. Discount solely the remuneration for money itself, for converting credit money into real money. A good bill gives the same command over capital as bank notes, minus the charge for discount; and bills are discounted for the purpose of obtaining money of a more convenient denomination for wages and small cash payments, or to meet larger engagements falling due; and also for the advantage to be gained when ready money can be had by discounting at a lower rate than 5%, the usual allowance made for cash. The main object, however, in discounting depends fundamentally upon the supply and demand of legal tender money… The rate of interest depends mainly on the demand and supply of capital, and the rate of discount entirely on the supply and demand of money.’ (13 March ’58, Economist, letter to the editor.)

Mr K. Arnd, quite in his proper place where he reasons about the ‘dog tax’, [81] has made the following interesting discovery:

‘In the natural course of the production of goods, there is only one phenomenon, which — in wholly settled and cultivated countries — seems destined to regulate the rate of interest to some extent; — this is the rate at which the amount of timber in the European forests increases with their annual new growth — this growth proceeds, quite independently of its exchange value, at the rate of 3 to 4 per cent.’ (p. 124, 125. Die naturgemässe Volkswirtschaft etc., Hanau, 1845.) This deserves to be called the forest-primeval [waldursprüngliche] rate of interest.


End of February, March. End of May — Beginning of June 1858, continued

Interest and profit. — Carey. Pawning in England

‘The remaining value or overplus will in each trade be in proportion to the value of the capital employed.’ (Ricardo.) [82]

In regard to interest, two things are to be examined: Firstly, the division of profit into interest and profit. (As the unity of both of these the English call it gross profit.) The difference becomes perceptible, tangible as soon as a class of monied capitalists comes to confront a class of industrial capitalists. Secondly: Capital itself becomes a commodity, or the commodity (money) is sold as capital. Thus it is said e.g. that capital, like any other commodity, varies in price according to demand and supply. These then determine the rate of interest. Thus here capital as such enters into circulation.

Monied capitalists and industrial capitalists can form two particular classes only because profit is capable of separating off into two branches of revenue. The two kinds of capitalists only express this fact; but the split has to be there, the separation of profit into two particular forms of revenue, for two particular classes of capitalists to be able to grow up on it.

The form of interest is older than that of profit. The level of interest in India for communal agriculturists in no way indicates the level of profit. But rather that profit as well as part of wages itself is appropriated in the form of interest by the usurer. It requires a sense of history like that of Mr Carey to compare this interest with that prevailing on the English money market, which the English capitalist pays, and to conclude therefrom how much higher the ‘labour share’ (the share of labour in the product) is in England than in India. He ought to have compared the interest which English handloom-weavers, e.g. in Derbyshire, pay, whose material and instrument is advanced (lent) by the capitalist. He would have found that the interest is here so high that, after settlement of all items, the worker ends up being the debtor, after not only having made restitution of the capitalist’s advance, but also having added his own labour to it free of charge. Historically, the form of industrial profit arises only after capital no longer appears alongside the independent worker. Profit thus appears originally determined by interest. But in the bourgeois economy, interest determined by profit, and only one of the latter’s parts. Hence profit must be large enough to allow of a part of it branching off as interest. Historically, the inverse. Interest must have become so depressed that a part of the surplus gain could achieve independence as profit. There is a natural relation between wages and profit — necessary labour and surplus labour; but is there any between profit and interest, same [as] that which is determined by the competition between these two classes arranged under these different forms of revenues? But in order that this competition exist, the [existence of the] two classes, the division of the surplus value into profits and interest, is already presupposed. To examine capital in general is not a mere abstraction. If I regard the total capital of e.g. a nation as distinct from total wage labour (or, as distinct from landed property), or if I regard capital as the general economic basis of a class as distinct from another class, then I regard it in general. Just as if I regard man e.g. as physiologically distinct from the animals. The real difference between profit and interest exists as the difference between a moneyed class of capitalists and an industrial class of capitalists. But in order that two such classes may come to confront one another, their double existence presupposes a divergence within the surplus value posited by capital.

(Political economy has to do with the specific social forms of wealth or rather of the production of wealth. The material of wealth, whether subjective, like labour, or objective, like objects for the satisfaction of natural or historical needs, initially appears as common to all epochs of production. This material therefore appears initially as mere presupposition, lying quite outside the scope of political economy, and falls within its purview only when it is modified by the formal relations, or appears as modifying them. What it is customary to say about this in general terms is restricted to abstractions which had a historic value in the first tentative steps of political economy, when the forms still had to be laboriously peeled out of the material, and were, at the cost of great effort, fixed upon as a proper object of study. Later, they become leathery commonplaces, the more nauseating, the more they parade their scientific pretensions. This holds for everything which the German economists are in the habit of rattling off under the category ‘goods’.)

The important thing is that both interest and profit express relations of capital. As a particular form, interest-bearing capital stands opposite, not labour, but rather opposite profit-bearing capital. The relation in which on one side the worker still appears as independent, i.e. not as wage labourer, but on the other side his objective conditions already possess an independent existence alongside him, forming the property of a particular class of usurers, this relation necessarily develops in all modes of production resting more or less on exchange — with the development of merchant wealth or money wealth in antithesis to the particular and restricted forms of agricultural or handicraft wealth. The development of this mercantile wealth may itself be regarded as the development of exchange value and hence of circulation and of money relations in the former spheres. Of course, this relation shows us, on one side, the growing independence, the unbinding of the conditions of labour — which more and more come out of circulation and depend on it — from the worker’s economic being. On the other side, the latter is not yet subsumed into the process of capital. The mode of production therefore does not yet undergo essential change. Where this relation repeats itself within the bourgeois economy, it does so in the backward branches of industry, or in such branches as still struggle against their extinction and absorption into the modern mode of production The most odious exploitation of labour still takes place in them, without the relation of capital and labour here carrying within itself any basis whatever for the development of new forces of production, and the germ of newer historic forms. In the mode of production itself, capital still here appears materially subsumed under the individual workers or the family of workers — whether in a handicraft business or in small-scale agriculture. What takes place is exploitation by capital without the mode of production of capital. The rate of interest appears very high, because it includes profit and even a part of wages. This form of usury, in which capital does not seize possession of production, hence is capital only formally, presupposes the predominance of pre-bourgeois forms of production; but reproduces itself again in subordinate spheres within the bourgeois economy itself.

Second historic form of interest: Lending of capital to wealth which is engaged in consumption. Appears historically important here as itself a moment in the original rise of capital, in that the income (and often the land, too) of the landed proprietors accumulates and becomes capitalized in the pockets of the usurer. This is one of the processes by which circulating capital or capital in the form of money comes to be concentrated in a class independent of the landed proprietors.

The form of realized capital as well as of its realized surplus value is money. Profit (not only interest) thus expresses itself in money; because in that value is realized and measured.

The necessity of payments in money — not only of money for the purchase of commodities etc. — develops wherever exchange relations and money circulation take place. It is by no means necessary that exchange should be simultaneous. With money, the possibility is present that one party cedes his commodity and the other makes his payment only later. The need for money for this purpose pater developed in loans and discounts) a chief historic source of interest. This source does not concern us at all yet at this point; is to be looked at only along with credit relations.

Difference between buying (M-C) and selling (C-M): ‘when I sell, I have (1) added the profit to the commodity and obtained it; (2) an article universally representative or convertible, money, for which, money being always saleable, I can always command every other commodity; the superior saleableness of money being the exact effect or natural consequence of the less saleableness of commodities… With buying, different. If he buys to sell again or supply customers, whatever may be the probability, there is no absolute certainty of his selling at a remunerative price… But not all buy so as to sell again, but rather for their own use or consumption’ etc. (p. 117 seq. Corbet, Th. An Inquiry into the Causes and Modes of the Wealth of Individuals, London, 1841.)

Economist, 10 April [1858]: ‘A parliamentary return moved for by Mr James Wilson, shows that the mint coined in 1857 gold to the value of £4,859,000, of which £364,000 was in half sovereigns. The silver coinage of the year amounted to £373,000, the cost of the metal used being £363,000… The total amount coined in the ten years ending the 31st of December, 1857, was £55,239,000 in gold, and 2,434,000 in silver… The copper coinage last year amounted in value to £6,720 — the value of the copper being £3,492; of this 3,163 was in pence, 2,464 in half-pence, and 1,120 in farthings… The total value of the copper coinage of the last ten years was £141,477, the copper of which it was composed being purchased for £73,503.’

‘According to Thomas Culpeper (1641), Josiah Child (1670), Paterson (1694), Locke (1700), wealth depends on the self-enforced reduction of the interest rate of gold and silver. Accepted in England during nearly two centuries.’ (Ganilh.) [83] When Hume, in antithesis to Locke, developed the determination of the interest rate by the rate of profit, he already had before his eyes a far greater development of capital; even more so Bentham when, towards the end of the eighteenth century, he wrote his defence of usury. (From Henry VIII to Anne, statutory reduction of interest.)

‘In every country: (1) a producing class and (2) a monied class, which lives from the interest on its capital.’ (p. 110.) (J. St. Mill, Some Unsettled Questions of Political Economy, London, 1844.)

‘It is by frequent fluctuation in a month, and by pawning one article to relieve another, where a small sum is obtained, that the premium for money becomes so excessive. 240 licensed pawn-brokers in London and about 1450 in the country… The capital employed is estimated at about 1 million. Turned over at least three times annually … Each time on the average for 33 1/3% profit; so that the inferior orders of England pay 1 million annually for a temporary loan of one million, exclusive of what they lose by goods being forfeited.’ (p. 114.) (Vol. I. J. D. Tuckett, A History of the Past and Present State of the Labouring Population etc., London, 1846.)

How merchant takes the place of master

‘Some works cannot be operated on other than a large scale, e.g. porcelain making, glass making etc. Hence are never handicrafts. Already in the thirteenth and fourteenth centuries, some works, like weaving, were carried on on a large scale.’ (Poppe, p. 32.)

‘In earlier times all factories belonged to the crafts, and the merchant remained merely the distributor and promoter of the handicrafts. This was still most strictly observed in the manufacture of cloth and textiles. But, by and by, in many localities the merchants began to set themselves up as masters’ (of course without the old masters’ guild prejudices, traditions, relations to the journeymen), ‘and to take journeymen into their employ for day-wages.’ (Poppe. p. 92, Vol. 1. Geschichte der Technologie, Göttingen, 1807 — 11.) This was a chief reason why, in England, industry proper struck root and arose in non-incorporated cities.

Merchant wealth

Mercantile capital, or money as it presents itself as merchant wealth, is the first form of capital, i.e. of value which comes exclusively from circulation (from exchange), maintains, reproduces and increases itself within it, and thus the exclusive aim of this movement and activity is exchange value. There are two movements, to buy so as to sell, and to sell so as to buy; but the form M-C-C-M predominates. Money and its increase appear as the exclusive purpose of the operation. The merchant neither buys the commodity for his own needs, for the sake of its use value, nor does he sell it so as to e.g. pay off contracts written in money, or so as to obtain another commodity for his own needs. His direct aim is increase of value, and namely in its direct form as money. Mercantile wealth is, firstly, money as medium of exchange; money as the mediating movement of circulation; it exchanges commodity for money, money for commodity and vice versa. Money likewise appears here as an end-in-itself, but without therefore existing in its metallic existence. It is here the living transformation of value into the two forms of commodity and money: the indifference of value towards the particular form of use value which it assumes, and at the same time its metamorphosis into all of these forms, which appear, however, merely as disguises. Thus, while the action of commerce concentrates the movements of circulation, hence money as merchant wealth is in one respect the first existence of capital, still appears as such historically, this form appears on the other side as directly contradictory to the concept of value. To buy cheap and sell dear is the law of trade. Hence not the exchange of equivalents, with which trade, rather, would be impossible as a particular way of gaining wealth.

Nevertheless, money as trading wealth — as it appears in the most various forms of society and at the most various stages of the development of the forces of social production — is merely the mediating movement between two extremes, which it does not dominate, and presuppositions which it does not create.

A. Smith, Vol. II (ed. Garnier): ‘The great trade of every civilized society is that which is established between the inhabitants of the town and those of the countryside… it consists in the exchange of the raw product for the manufactured product… either directly, or by the intervention of money.’ (p. 403.) Trade always concentrates; production originally on a small scale. ‘The town is a continual fair or marketplace where the inhabitants of the countryside go to exchange their raw product for manufactured products. It is this trade which supplies the inhabitants of the town both with the material of their labour and with the means of their subsistence. The quantity of manufactured goods which they sell to the inhabitants of the countryside necessarily determines the quantity of materials and subsistence they buy.’ (p. 408 [409].)

So long as ‘means of subsistence and of pleasure’ the chief aim, use value predominates.

It is part of the concept of value that it maintains itself and increases only through exchange. But the existing value, initially, money.

‘This industry, whose aim was something beyond absolute necessity, established itself in the towns long before it could be commonly practised by the cultivators of the countryside.’ (p. 452.)

‘Although the inhabitants of a town ultimately draw their subsistence and all the means and materials of their industry from the countryside, yet those of a town lying near the shores of the sea or of a navigable river may draw them also from the farthest corners of the world, either in exchange for the manufactured product of their own industry, or by performing the service of carriers alternately between distant countries and exchanging the products of these countries among them. Thus a city may become very wealthy, while not only the land in its immediate environs, but also all lands where it trades, are poor. Each of these countries, taken separately, can offer it only a very small part of subsistence and for business; but all of these countries, taken collectively, can supply it with a great quantity of subsistence and a great variety of employment.’ (p. [452,] 453.) (Italian cities were the first in Europe to rise by trade; during the crusades — Venice, Genoa, Pisa — partly by the transport of people and always by that of the supplies which had to be delivered to them. These republics were, in a manner of speaking, the supply commissaries of these armies.) (loc. cit.)

Merchant wealth, as constantly engaged in exchange and exchanging for the sake of exchange value, is in fact living money.

‘The inhabitants of mercantile towns imported refined objects and luxury articles from wealthier countries at a high price, thus furnishing new food for the vanity of the great landed proprietors, who bought them with alacrity, by paying great quantities of the raw produce of their estates for them. Thus the commerce of a great part of Europe at this time consisted in exchange of the raw produce of one country for the manufactured produce of a country more advanced in industry.’ (p. [454,] 455.) ‘When this taste had become sufficiently general to create a considerable demand, the merchants sought, so as to save the costs of transport, to establish similar manufactures in their own country. This the origin of the first manufactures for distant markets.’ Luxury manufactures, arisen out of foreign commerce, established by merchants (p. [456-] 458) (worked up foreign materials). Ad. Smith speaks of a second sort, which ‘arose naturally and by itself through successive refinement of the crude and domestic employments’. Worked up home-grown materials. (p. 459.)

The trading peoples of antiquity like the gods of Epicurus in the spaces between the worlds, or rather like the Jews in the pores of Polish society. Most of the independent trading peoples or cities attained the magnificent development of their independence through the carrying trade, which rested on the barbarity of the producing peoples, between whom they played the role of money (the mediators).

In the preliminary stages of bourgeois society, trade dominates industry; in modern society, the opposite.

Trade will naturally react back to varying degrees upon the communities between which it is carried on. It will subjugate production more and more to exchange value; push direct use value more and more into the background; in that it makes subsistence more dependent on the sale than on the immediate use of the product. Dissolves the old relations. Thereby increases money circulation. First seizes hold of the overflow of production; little by little lays hands on the latter itself. However, the dissolving effect depends very much on the nature of the producing communities between which it operates. For example, hardly shook the old Indian communities and Asiatic relations generally. Fraud in exchange is the basis of trade such as it appears independently.

But capital arises only where trade has seized possession of production itself, and where the merchant becomes producer, or the producer mere merchant. Opposed to this, the medieval guild system, the caste system etc. But the rise of capital in its adequate form presupposes it as commercial capital, so that production is no longer for use, more or less mediated by money, but for wholesale trade.

Commercial wealth as an independent economic form and as the foundation of commercial cities and commercial peoples exists and has existed between peoples on the most diverse stages of economic development, and within the commercial city itself (e.g. the old Asian, the Greek, and the Italian etc. of the Middle Ages) production can continue on in the form of guilds etc.

Steuart. ‘Trade is an operation, by which the wealth, or work, either of individuals, or of societies, may be exchanged by a set of men called merchants, for an equivalent, proper for supplying every want, without any interruption to industry, or any check to consumption. Industry is the application to ingenious labour in a free man, in order to procure, by the means of trade, an equivalent, fit for supplying every want.’ (Vol. I, p. 166.)

‘While wants continue simple and few, a workman finds time enough to distribute all his work; when wants become more multiplied, men must work harder; time becomes precious; hence trade is introduced… The merchant as mediator between workmen and consumers.’ (p. 171.)

The collection (of products) into a few hands is the introduction of trade. (loc. cit.) The consumer does not buy so as to sell again. If the merchant buys and sells solely with a view to a gain (p. 174) (i.e. for value). ‘The simplest of all trades is that which is executed by bartering of the most necessary means of subsistence’ (between the surplus food of the farmers and the free hands). ‘Progress chiefly to be ascribed to the introduction of money.’ (p. 176.) As long as mutual needs are supplied by barter, there is not the least occasion for money. This the simplest combination. When needs have multiplied, bartering becomes more difficult: upon this, money is introduced. This is the common price of all things. A proper equivalent in the hands of those who want. This operation of buying and selling is somewhat more complex than the first. Thus (1) barter; (2) sale; (3) commerce. The merchant must intervene. What was earlier called wants is now represented by the consumer; industry by the manufacturer, money by the merchant. The merchant represents money by substituting credit in its place; and as money invented for the facilitation of barter, so the merchant, with credit, a new refinement upon the use of money. This operation of buying and selling is now trade; it relieves both parts of the whole trouble of transportation and adjusting wants to needs, or wants to money; the merchant represents by turns the consumer, the manufacturer, and money. Towards the consumer he represents the totality of manufacturers, to the latter the totality of consumers, and to both classes his credit supplies the use of money. (p. 177, 178.) Merchants are supposed to buy and sell not out of necessity, but rather with a view to profit. (p. 203.)

‘First the industrialist produces for others’ not for his own use; these goods begin to be of use to him only from the moment he exchanges them away. They thus make trade and the art of exchange necessary. They are only appraised by their exchangeable value.’ (p. 161.) (Sismondi,Études sur l’économie politique, Vol. II, Brussels, 1837.) Trade has robbed things, pieces of wealth, of their primitive character of usefulness:it is the antithesis between their use value and their exchangeable value to which commerce has reduced all things. (p. 162.) At the beginning, utility is the true measure of values;… trade exists then, in the patriarchal state of society; but it has not entirely absorbed the society; it is practised only upon the surplus of each one’s production, and not on what constitutes its existence. (p. 162, 163.) By contrast, the character of our economic progress is that trade has taken on the burden of the distribution of the totality of the annually produced wealth and it has consequently suppressed absolutely its character of use value, letting only that of exchangeable value remain. (163.) Before the introduction of trade… the increase in the quantity of the product was a direct increase of wealth. Less significant at that time was the quantity of labour by means of which this useful thing was obtained… And really, the thing demanded loses none of its usefulness even if no labour at all were needed to obtain it; grain and linen would not be less necessary to their owners… even if they fell to them from heaven. This is without a doubt the true estimate of wealth, enjoyment, and usefulness. But from the moment when men… made their subsistence dependent on the exchanges they could make, or on commerce, they were forced to adhere to a different estimation, to exchange value, to value which results not from usefulness but rather from the relation between the needs of the whole society and the quantity of labour which was sufficient to satisfy this need, or as well the quantity of labour which might satisfy it in the future. (p. 266, loc. cit.) In the estimation of values, which people endeavoured to measure with the introduction of currency, the concept of usefulness is quite displaced. It is labour, the exertion necessary to procure oneself the two things exchanged for one another, which has alone been regarded. (p. 267.)

Gilbart (J. W.): The History and Principles of Banking, London, 1834, has this to say about interest:

‘That a man who borrows money with the intention of making a profit on it, should give a portion of the profit to the lender, is a self-evident principle of natural justice. A man makes a profit usually by means of traffic. But in the Middle Ages the population purely agricultural. And there, like under the feudal government, there can be only little traffic and hence little profit… Hence the usury laws in the Middle Ages justified… Furthermore: in an agricultural country a person seldom wants to borrow money except he be reduced to poverty or distress by misery.’ (p. 163.) Henry VIII limited interest to 10%, James I to 8, Charles II to 6, Anne to 5. (164, 165.) In those days, the leaders were, if not legal, still actual monopolists, and thus it was necessary to place them under restraint like other monopolists. (p. 165.) In our time the rate of profit governs the rate of interest; in those days the rate of interest governed the rate of profit. If the money-lender burdened the merchant with a higher rate of interest, then the merchant had to put a higher rate of profit on his goods, hence a greater sum of money taken out of the pockets of the buyers so as to bring it into the pockets of the money-lenders. This additional price put on the goods made capital less able and less inclined to buy them. (p. 165.) (loc. cit.)

Commerce with equivalents impossible. Opdyke

‘Under the rule of invariable equivalents commerce etc. would be impossible.’ (G. Opdyke, A Treatise on Political Economy, New York, 1851, p. 67.)

‘The positive limitation of quantity on this instrument’ (i.e. paper money) ‘would accomplish the only useful purpose that cost of production does in the other’ (metal money). (loc. cit. 300.)

Principal and interest

Interest. ‘If a fixed sum of precious metal falls, then this no reason that a smaller quantity of money should be taken for its use, for if the principal worth less for the borrower, so the interest in the same measure less difficult for him to pay… In California 3% per month, 36% per annum because of the unsettled state … In Hindustan, where borrowing by Indian princes for unproductive expenses, in order to balance the losses of capital on the average, very high interest, 30%, having no relation to profit which might be gained in industrial operations.’ (Economist, 22 January 1853.) (The lender ‘here charges interest so high as to be sufficient to replace the principal in a short time, or at least as on the average of all his lending transactions, might serve to counterbalance his losses in particular instances, by the apparently exorbitant gains acquired in others.’ (loc. cit.))

The rate of interest depends: (1) on the rate of profit; (2) on the proportion in which the entire profit divided between lender and borrower. (loc. cit.)

Abundance or scarcity of the precious metals, the high or low scale of general prices prevailing, determines only whether a greater or less amount of money will be required in effecting the exchanges between borrowers and lenders, as well as every other species of exchange… Difference only, that a greater sum of money would be needed to represent and transfer capital lent… the relation between the sum paid for the use of capital and the capital expresses the rate of interest as measured in money. (loc. cit.)


Double Standard. Previously, in countries where gold and silver legal standard, silver circulated almost exclusively, because from 1800 to 1850 the tendency was for gold to become dearer than silver … The gold was somewhat risen against silver, bore a premium in France on its relation to silver as fixed in 1802… so in the United States;… in India. (In the latter now silver standard, as in Holland etc.)… The circulation of the United States the first affected. Great import of gold from California, premium on silver in Europe… extensive shipment of silver coins and replacement by gold. The United States government struck silver coins as low as 1 dollar … Substitution of silver for gold in France. (Economist,15 November 1851.) Let the ‘standard of value’ be what it will, ‘and let the current money represent any fixed portion of that standard, that may be determined upon, the two can only have a fixed and permanent value in relation to each other, by being convertible at the will of the holder.’ (Economist.[84]

The only way in which any class of coins can command a premium is that no one is obliged to pay them, while every one is obliged to take them as a legal tender. (Economist.[85]

No country may consequently have more than one standard (more than one standard of the measure of value); for this standard must be uniform and unchanging. No article has a uniform, unchanging value relative to another; it only has such with itself. A gold piece is always of the same value as another, of exactly the same fineness, the same weight, and the same value in the same place; but this cannot be said of gold andany other article, e.g. silver.(Economist, 1844.) [86]

The English £ somewhat less than 1/3 of its original value, the German florin = 1/6, Scotland before the union [reduced] its pound 1/36, to the French livre 1/74, the Spanish maravedi = less than 1/1,000, the Portuguese re still lower. (p. 13, Morrison.) [87]

Before the law of 1819, causes in existence in determinating the bullion price apart from the circulation of bank notes: (1) the more or less perfect condition of the coin. If the circulating metallic coin is debased below its standard weight, then the slightest turn of exchange causing a demand for exportation must raise the price of the uncoined bullion by at least the degradation of the coin. (2) penal laws which forbade the melting and exporting of coin, and permitted the traffic in bullion. With intensive demand for export, this gave latitude for variation of bullion price against coin even at times when paper completely convertible. In 1783, 1792, 1795, 1796… 1816, the bullion price rose above the mint price, because the bank-creditors, in their anxiety to prepare for the resumption of cash payment, accepted gold considerably above the mint price. (Fullarton.)

The standard may be for gold, without one ounce of gold circulating. (Economist.)

Under George III (1774) silver legal tender only for £25. And the bank, by statute, now paid only in gold. (Morrison.) Lord Liverpool (beginning of the nineteenth century) made silver and copper into purely representative coins. (loc. cit.) [89]

Dissolving effect of money. Money a means of cutting up property

Urquhart’s nonsense about the standard of money: ‘The value of gold is to be measured by itself; how can any substance be the measure of its own worth in other things? The worth of gold is to be established by its own weight, under a false denomination of that weight — and an ounce is to be worth so many pounds and fractions of pounds. This is — falsifying a measure, not establishing a standard!’ (Familiar Words.) [90]

Ad. Smith calls labour the real and money the nominal measure of value; presents the former as the original. [91]

Value of money. J. St. Mill. ‘If the quantity of goods sold is given, and the number of sales and resales of these goods, then the value of money depends on its quantity, together with the number of times that each piece of money changes hands in this process.’ ‘The quantity of money in circulation = the money value of all commodities sold, divided by the number which expresses the velocity of circulation.’ ‘If the amount of commodities and transactions be given, then the value of money is the inverse of its quantity multiplied by its velocity of circulation.’ But all these statements to be understood only in the sense ‘that we speak only of the quantity of money which really circulates and is factually exchanged for commodities’. ‘The necessary quantity of money determined partly by its production costs, partly by the velocity of its circulation. If the velocity of circulation is given, then the costs of production are determinant; if the production costs are given, then the quantity of money depends on the velocity of circulation.’ [92]

Money has no equivalent other than itself or commodities. Hence degrades everything. At the beginning of the fifteenth century in France even the sacred vessels of the church (chalices) etc. pawned to the Jews. (Augier.) [93]

Money not a direct object of consumption: the currency never becomes an object of consumption, always remains a commodity, never becomes a good. Has a direct intrinsic value only for society; an exchangeable one for each individual. Its material must therefore have value, but founded on an artificial need, must not be indispensable for human existence; for the whole quantity of it which is used as currency can never be employed individually; it must always circulate. (Storch.) [94]

John Gray: The Social System. A Treatise on the Principle of Exchange, Edinburgh, 1831.

‘To sell for money ought at all times to be made as easy as to buy with money; production would then become the uniform and never failing cause of demand.’ (16.) It is the quantity that can be sold at a profit, not the quantity that can be made, that is the present limit to production. (59.)

Money should be merely a receipt, an evidence that the holder of it has either contributed a certain value to the national stock of wealth, or that he has acquired a right to the said value from some one who has contributed to it… Money, should be nothing more or less than portable, transferable, divisible, and inimitable evidences of the existence of wealth in store. (63, 64.) An estimated value being previously put upon produce, let it be lodged in a bank, and drawn out again whenever it is required; merely stipulating, by common consent, that he who lodges any kind of property in the proposed National Bank may take out of it an equal value of whatever it may contain, instead of being obliged to draw out the selfsame thing that he put in… The proposed national banker should receive and take charge of every description of valuable, and give backany description of valuable again. (loc. cit. 68.)

‘If money,’ says Gray, ‘be of equal value with that which it represents, it ceases to be a representative at all. It is one of the chief desideratums in money, that the holder of it should be compelled at one time or other to present it for payment at the place ‘from whence he received it. But if money be of the same intrinsic value as that which is given for it, no such necessity exists.’ (74.)

‘Depreciation of stock … should form an item of national charge.’ (p. [115,] 116.) ‘The business of every country is to be conducted… on a national capital.’ (171.) ‘All land to be transformed into national property.’ (298.)

Gray (John), Lectures on the nature and use of Money (Edinburgh, 1848): ‘Man collectively should know no limit to his physical means of enjoyment, save those of the exhaustion either of his industry or [of] his productive powers: whilst we, by the adoption of a monetary system, false in principle, and destructive in practice, have consented to restrict the amount of our physical means of enjoyment to that precise quantity which can be profitably exchanged for a commodity, one of the least capable of multiplication by the exercise of human industry of any upon the face of the earth.’ (29.) What will be required for a good system, is (1) a bank system through whose operations the national relationship of supply and demand would be restored; (2) a true standard of value, instead of the existing fiction. (108.) (In this book the idea of the exchange-bank developed in still more detail and with preservation of the present mode of production.) ‘There must be a minimum price of labour payable in standard money.’ (p. 160.) Let us call e.g. the lowest rate of wages per week for 60-72 hours that may by law be given, 20s. or £l standard. (161.) ‘Shall we retain our fictitious standard of value, gold, and thus keep the productive resources of the country in bondage, or shall we resort to the natural standard of value, labour, and thereby set our productive resources free?’ (p. 169.) The amount of this minimum wage being once fixed… it should remain the same for ever. (174.) ‘Merely let gold and silver take their proper place in the market beside butter and eggs and cloth and calico, and then the value of the precious metals will interest us no more than that of the diamond’ etc. (182 [, 183).) No objection to make to gold and silver used as instruments of exchange,… but only as measures of value… In a short time one would see how many ounces of gold or silver were obtainable in London, Edinburgh or Dublin in exchange for a hundred pound standard note. (p. 188.)

Interest. As the class of rentiers increases, so also does that of lenders of capital, for they are one and the same. From this cause alone, interest must have had a tendency to fall in old countries. (201, 202 Ramsay.) ‘It is probable that in all ages the precious metals cost more in their production than their value ever repaid.’ (101, II. Jacob, W. An Historical Enquiry into the Production and Consumption of Precious Metals, London, 1831.)

Value of money. The value of all things, divided by the number of transactions of which they were the object, from product[ion] to the produc[er], = the value of the deus used to buy them, divided by the number of times that these thalers have been transferred in the same space of time. (Sismondi, Nouveaux Principes d’Économie Politique, etc.)

The most formal development of the false theory of prices is by James Mill (quoted from the translation by J. T. Parisot, Paris, 1823.Éléments d’Économie Politique).

The chief passages in Mill are:

‘ Value of money = the proportion in which one exchanges it for other articles, or the quantity of money which one gives in exchange for a specific quantity of other things.’ (p. 128.) This relation is determined by the total quantity of money existing in a country. If one supposes all the commodities of a country brought together on one side, and all the money on the other, then it is evident that in the exchange between both sides, the value of money, i.e. the quantity of the commodities for which it has been exchanged, entirely depends on its own quantity. (loc. cit.) The case is wholly the same in the actual state of things. The total mass of the commodities of a country is not exchanged at once for the total mass of the money, but rather the commodities are exchanged in portions, and often very small portions, at various periods in the course of the year. The same piece of money which has served today for one exchange may serve tomorrow for another. A part of the money is used for a very great number of exchanges, another part for a very small number, a third is stockpiled and serves for no exchange. Among these variations there will be a median rate, based on the number of exchanges for which each piece of money would be used if all had effected an equal number of exchanges. Let this rate be fixed at some convenient number, e.g. 10. If every piece of money in the country 868 has served for 10 purchases, then it is the same as if the total number of pieces of money had increased tenfold, and each had served for only a single exchange. In this case the value of all commodities is equal to 10 times the value of the money etc. (p. 129, 130.) If, instead of each coin serving for 10 purchases a year, the total mass of money had increased tenfold, and the coin served for only one exchange, then it is evident that every increase of this mass would cause a relative diminution in the value of each of these coins taken separately. Since it is supposed that the mass of all commodities for which the money may exchange remains the same, therefore the value of the total mass of the money has become no greater after the increase of its quantity than before. If one supposes an increase of one-tenth, then the value of each of its parts, e.g. an ounce, must have diminished by one-tenth. (p. 130, 131.) ‘Thus, whatever may be the degree of the increase or decrease of the total mass of money, if the quantity of the other things remains the same, then this total mass and each of its parts experiences inversely a relative diminution or increase. It is clear that this thesis is of absolute truth. Whenever the value of money has experienced a rise or fall, and whenever the quantity of the commodities for which it could be exchanged, and the movement of circulation, remained the same, this change must have had as cause a relative increase or diminution of money, and can be ascribed to no other cause. If the mass of commodities decreases while the quantity of money remains the same, then it is as if the totality of money had increased, and vice versa. Similar changes are the result of every alteration in the movement of circulation. Every increase of the number of purchases produces the same effect as a total increase of money; a decrease of this number produces directly theopposite effect.’ (p. 131, 132.) If a portion of the annual product has not been exchanged at all, like that which the producers consume, or is not exchanged for money, then this portion must not be put on the account, because whatever does not exchange for money is in the same situation relative to money as if it did not exist. (p. 131, 132.) Whenever the increase or diminution of money can proceed freely, this quantity is governed by the value of the metal… Gold and silver, however, are commodities, products… The costs of production govern the value of gold and silver, like that of all other products. (p. 136.)

The insipidness of this reasoning is quite evident.

(1) If one supposes that the mass of commodities remains the same, and the velocity of circulation as well, but that nevertheless a great mass of gold or silver exchanges for this same mass of commodities (without the value, i.e. the amount of labour contained in gold and silver, having changed), then one supposes exactly what one wanted to prove, namely that the prices of commodities are determined by the quantity of the circulating medium and not vice versa.

(2) Mill concedes that the commodities not thrown into circulation do not exist for money. It is equally dear that the money not thrown into circulation does not exist for the commodities. Thereby there exists no fixed relation between the value of money generally and the mass of it which enters into circulation. That the mass actually in circulation, divided by the number of its turnovers, is equal to the value of money is merely a tautological circumlocution for saying that the value of the commodity expressed in money is its price; since the money in circulation expresses the value of the commodities it circulates — it follows that the value of these commodities is determined by the mass of the circulating money.

(3) The confusion of Mill’s view is clearly shown in his thesis that the value of money diminishes or increases with ‘every alteration in the movement of circulation’. Whether one pound sterling circulates 1 time or 10 times a day, in each exchange it expresses an equivalent for the commodity, exchanges for the same value in commodities. Its own value remains the same in every exchange, and is hence altered neither by slower nor by rapid circulation. The mass of the circulating money is altered; but neither the value of the commodity, nor the value of the money. ‘If it is said: a piece of cloth is worth £5, then it means: it possesses the value of 616,370 grains of standard gold. The reason assigned above may be paraphrased thus: prices must fall because commodities are estimated as being worth so many ounces of gold; and the amount of gold in this country is diminished.’ (Hubbard, J. G., The Currency and the Country, London, 1843, p. 44.)

(4) Mill at first supposes, in theory, that the whole mass of the money in a country is exchanged at once for the whole mass of the commodities which are to be found in it. Says, then, that this is so in reality, namely for the main reason that in practice just the opposite takes place, and only portions of money are exchanged for portions of commodities, the fewest payments arranged by payment on the spot — time bargains. Follows, therefore, that the total amount of transactions or purchases, made in a day, is entirely independent of the money circulating on this day, and that the mass of money circulating on any given day is not the cause but the effect of a mass of previous transactions, each of them wholly independent of the money supply at the time.

(5) Finally, Mill himself admits that with free circulation of money, and this is our only concern, the value of money is determined by its cost of production, i.e., according to his own admission, by the labour time contained in it.


Monetary affairs. In Ricardo’s pamphlet: Proposals for an Economical and Secure Currency with Observations on the Profits of the Bank of England, London, 1816, there is a passage where he makes a shambles of his whole viewpoint. It says, namely: ‘The amount of notes in circulation depends… on the amount required for the circulation of the country, and this is governed by the value of the standard, the amount of payments, and the economy applied to accomplish them’. (p. 8 loc. cit.)

Under Louis XIV, XV, XVI France still had, for its state taxes, taxes in kind levied on the rural people. (Augier.) [95]

Prices and mass of the circulating medium. Mere rise of prices not sufficient to create demand for additional currency. This only the case if production and consumption rise simultaneously. E.g. the price of grain rises, but its supply declines. Can thus be governed with the same quantity of currency… but if rise of prices due to rising demand, new markets, enlarged scale of production, in a word, rise of prices and of the general sum of transactions, then it is necessary for the intervention of money to be multiplied in number and enlarged in magnitude. (Fullarton.) [96]


Trade governs money, not money trade. The servant of trade must follow the variations (in the prices) of the other commodities. (D’Avenant.)[97] (Under the feudal kings, the few articles bought in mass quantities by the people fell so much that no gold or silver coin small enough to correspond to the daily requirement of the labourer… current money thus like in ancient Rome only the inferior metals, copper, tin, iron.) (Jacob.)[98]

Jacob assumes that in this century, 2/3 of the gold and silver in Europe in other articles, utensils and ornament, not in coin. (In another passage he calculates the precious metal so used in Europe and America at £400 million.) [99]

Prices and mass of the circulating medium. Locke, Spectator (19 Oct. 1711), Hume, Montesquieu — their doctrine rests on three theses:

(1) Prices of commodities proportionate to the mass of money in the country; (2) the coin and current money of a country representative of all its labour and commodities, so that the more or less representation, the more or less quantity of the thing represented goes to the same quantity of it; (3) increase commodities, they become cheaper; increase money, they rise in their value. (Steuart.)

Markers (small copper money or silver money, counters ) in antithesis to money of intrinsic worth. (loc. cit.)

Dissolving effect of money. Money a means of cutting up property (houses, other capital) into countless fragments and consuming it piece by piece through exchange. (Bray.) [100] (Without money, a mass of inexchangeable, inalienable objects.) ‘As immobile and immutable things came into human commerce just as well as movable things made for exchange, money came into use as rule and measure (square), by which these things obtained appraisal and value.’ (Free Trade, London, 1622.) [101]

Coin. The solver and copper markers are representatives of fractional parts of the pound sterling. (This in a recent answer of the Lord of the Treasury). Exchange value. F. Vidal says likewise, Lauderdale) (and in certain respects Ricardo): ‘The true social value is use or consumption value; exchangeable value serves only to characterize the relative wealth of each of the members of a society in comparison to the others.’ (70. De la Repartition des Richesses etc., Paris, 1846.) On the other side, exchange value expresses the social form of value, while use value no economic form of it whatever, rather, merely the being of the product, etc. for mankind generally.

Two nations may exchange according to the law of profit in such a way that both gain, but one is always defrauded

<From the possibility that profit may be less than surplus value, hence that capital [may] exchange profitably without realizing itself in the strict sense, it follows that not only individual capitalists, but also nations may continually exchange with one another, may even continually repeat the exchange on an ever-expanding scale, without for that reason necessarily gaining in equal degrees. One of the nations may continually appropriate for itself a part of the surplus labour of the other, giving back nothing for it in the exchange, except that the measure here [is] not as in the exchange between capitalist and worker.>

Money in the third role, as money. (Value for-itself, equivalent etc.) How important a role money still plays in this role — even in its immediate form — is revealed in time of crises, harvest failures etc., in short, whenever one nation must suddenly liquidate its account with another. Money in its immediate, metallic form then appears as the sole absolute means of payment, i.e. as the sole counter-value, acceptable equivalent. And consequently it pursues a moving course which directly contradicts that of all other commodities. Commodities are transported as means of payment etc. from the country where they are cheapest to the country where they are most expensive. Money, the opposite; in all periods where it brings out its specific inner nature, where, hence, money is called for, in antithesis to all other commodities, as value for-itself, as absolute equivalent, as general form of wealth, in the specific form of gold and silver — and such moments are always more or less moments of crisis, whether a general one, or a grain crisis — then gold and silver are always transmitted from the country where they are most expensive — i.e. where all commodity prices have fallen by the relatively greatest amount — to the country where they are cheapest, i.e. where the prices of commodities are relatively higher. ‘It is a singular anomaly in the economy of the exchanges, and one particularly deserving of remark, that … the course of transit (of gold between two nations equally employing gold as a circulating medium) is always from the country where for the moment the metal is dearest, to the country where it is cheapest, a rise of the market price of the metal to its highest limit in the home market, and a fall of the premium in the foreign market, being the certain results of that tendency to an efflux of gold which follows a depression of the exchanges.’ (J. Fullarton, On the Regulation of Currencies etc. 2nd ed., London, 1845, p. 119.)

Just as exchange as such begins where the communities end, and as money, as the measure, medium of exchange and general equivalent created by exchange itself, arose not in internal traffic but rather in that between different communities, peoples, etc., and there obtains its specific importance, so it was also cat ezochn as medium of international payments — for the liquidation of international debts — that money cast its spell, in the sixteenth century, the period of bourgeois society’s infancy, holding the exclusive interest of states and of incipient political economy. The important role which money (gold and silver) in this third form still plays in international traffic has only become fully clear and been again recognized by the economists since the regular succession of money crises in 1825, 1839, 1847 and 1857. The economists try to extricate themselves by pointing out that money is called for here not as medium of circulation, but as capital. This is correct. Only it should not be forgotten that capital is being called for in the specific form of gold and silver, and not in that of any other commodity. Gold and silver appear in the role of absolute medium of international payments, because they are money as value-for-itself, as independent equivalent. ‘This, in fact, is not a question of currency but of capital.’ (It is rather a question of money, not of currency, nor of capital, because it is not capital which is indifferent to the special form in which it exists, but value in the specific form of money which is requested) ‘… all those various causes which, in the existing condition of monetary affairs, are capable… of directing the stream of bullion from one country to another’ (i.e. giving origin to a drain of bullion), ‘resolve themselves under a single head, namely the state of the balance of foreign payments, and the continually recurring necessity of transferring capital’ (but notabene! capital in the form of money) ‘from one country to another to discharge it. For example failure of crops… Whether that capital is transmitted in merchandise or in specie is a point which in no way affects the nature of the transaction’ (affects it very materially!). Further, war-expenditure. (The case of transmission of capital in order to place it out to greater advantage at interest does not concern us here; nor does that of a surplus quantity of foreign goods imported, which Mr Fullarton cites, although this case certainly belongs here if this surplus importation coincides with crises.) (Fullarton, loc. cit. 130, 131.) ‘Gold is preferred for this transmission of capital’ (but in cases of violent drains of bullion it is absolutely not a question of preference) ‘only in those cases where it is likely to effect the payment more conveniently, promptly, or profitably, than any other description of stock or capital.’ (Mr Fullarton falsely treats the transmission of gold or another form of capital as a matter of preference, whereas the question is precisely those cases when gold must be transmitted in the international trade, just as at the same time bills in the domestic trade must be acquitted in the legal money, and not in any substitute.) ‘Gold and silver… can always be conveyed to the spot where it is wanted with precision and celerity, and may be counted upon to realize on its arrival nearly the exact sum required to be provided, rather than incur the hazard of sending it in tea, coffee, sugar, or indigo. Gold and silver possess an infinite advantage over all other descriptions of merchandise for such occasions, from the circumstance of their being universally in use as money. It is not in tea, coffee, sugar, or indigo that debts, whether foreign or domestic, are usually contracted to be paid, but in coin; and a remittance, therefore, either in the identical coin designated, or in bullion which can be promptly turned into that coin through the Mint or Market of the country to which it is sent, must always afford to the remitter the most certain, immediate, and accurate means of effecting this object, without risk of disappointment from the failure of demand or fluctuation of price.’ (132, 133.) Thus he cites precisely its property of being money, general commodity of contracts, standard of values, and with the possibility of being immediately converted at liberty in medium of circulation. The English have the apt expression currency for money as medium of circulation (Münze, coin, does not correspond to this, because it is itself the medium of circulation in a particular form again) and money for it in its third attribute. But since they have not particularly developed the latter, they declare this money to be capital, although they are then in practice forced to distinguish again between this particular form of capital, and capital generally.

‘Ricardo appears to have entertained very peculiar and extreme opinions as to the limited extent of the offices performed by gold and silver in the adjustment of foreign balances. Mr Ricardo had passed his life amid the controversies which grew out of the Restriction Act,’ [102] and had accustomed himself so long to consider all the great fluctuations of exchange and of the price of gold as the result of the excessive issues of the Bank of England, that at one time he seemed scarcely willing to allow that such a thing could exist as an adverse balance of commercial payments …And so slight an account did he set on the functions performed by gold in such adjustments, as to have even anticipated that drains forexportation would cease altogether so soon as cash payments should be resumed, and the currency restored to the metallic level … (SeeRicardo’s Evidence before the Lords’ Committee of 1819 on the Bank of England, p. 186.)… But since 1800, when paper quite displaced gold in England, our merchants did not really want it; for, owing to the unsettled state of continental Europe, and the increased consumption there of imported manufactures, in consequence of the interruption given to industry and to all domestic improvement by the incessant movement of invading armies, together with the complete monopoly of the colonial trade which England had obtained through her naval superiority, the export of commodities from Great Britain to the Continent continued greatly to exceed her imports from thence, so long as the intercourse remained open; and after that intercourse was interrupted by the Berlin and Milan decrees, the transactions of trade became much too insignificant to affect exchanges in one way or the other. It was the foreign military expenditures and the subsidies, and not the necessities of commerce, that contributed in so extraordinary a manner to derange the exchanges and enhance the price of bullion in the latter years of the war. The distinguished economists of that period, therefore, had few or no real opportunities of practically estimating the range of which foreigncommercial balances are susceptible.’ (Believed that with war and over-issue, the international transmission of bullion would cease.) ‘Had Mr Ricardo lived to witness the drains of 1825 and 1839, he would no doubt have seen reason to alter his views.’ (loc. cit. 133-6.)

Price is the money value of commodities. (Hubbard.) [103] Money has the quality of being always exchangeable for what it measures, and the quantity required for the purposes of exchange must vary, of course, according to the quantity of property to be exchanged. (100. J. W. Bosanquet. Metallic, Paper, and Credit Currency etc., London, 1842.) ‘I am ready to admit that gold is a commodity in such general demand that it may always command a market, that it can always buy [all] other commodities; whereas, other commodities cannot always buy gold. The markets of the world are open to it as merchandise at less sacrifice upon an emergency than would attend an export of any other article, which might in quantity or kind be beyond the usual demand in the country to which it is sent.’ (Th. Tooke. An Enquiry into the Currency Principle etc., 2nd ed., London, 1844, p. 10.) ‘There must be a very considerable amount of the precious metals applicable and applied as the most convenient mode of adjustment of international balances, being a commodity more generally in demand, and less liable to fluctuations in market value than any other.’ (p. 12, 13.)

(Causes, according to Fullarton, of the rise of bullion price above the mint price: ‘Coin debased by wear to the extent of 3 or 4% below its standard weight;… penal laws which prohibited the melting and exportation of the coin, while the traffic in the metal of which that coin was composed remained perfectly free. These causes themselves, however, acted only during periods of unfavourable rate of exchange… [The market price of money] fell, however, from 1816 to 1821 always to the bank price of bullion, when the exchange in favour of England; never rose higher, when the exchange unfavourable, than to such a rate as would indemnify the melters of the coin for its degradation by wear and for the penal consequences of melting it, but rose no higher.’ (Fullarton, see his book, p. 8, 9.) ‘From 18l9 to the present time, amid all the vicissitudes which the money has undergone during that eventful period, the market-price of gold has on no occasion risen above 78s. per oz., nor fallen below 77s. 6d., an extreme range of only 6 in the ounce. Nor would even that extent of fluctuation be now possible; for it was solely owing to the renewed deterioration of the coin that even so trivial a rise occurred as 1 1/2d. in the ounce, or about 1/6% above the Mint-price; and the fall to 77s. 6d. is entirely accounted for by the circumstance of the Bank having at one time thought proper to establish that rate as the limit for its purchases. Those circumstances, however, exist no longer. For many years the Bank has been in the practice of allowing 77s. 9d. for all the gold brought to it for coinage’ (i.e. the bank pockets 1 1/2d. mintage, which the coin gives it free of charge); ‘and as soon as the recoinage of sovereigns now in progress shall be completed, there will be an effectual bar, until the coin shall again become deteriorated, to any future fluctuation of the price of gold bullion in our market beyond the small fractional difference between 77s. 9d. allowed by the Bank, and the Mint-price of 77s. 10 1/2d.’ (loc. cit. p. 9, 10.)

Contradiction between money as measure and equivalent on one side and as medium of circulation. In the latter, abrasion, loss of metallic weight. Garnier already remarks that ‘if a somewhat worn écu were taken as being worth somewhat less than a quite new one, then circulation would be constantly hampered, and every payment would give rise to disputes.’ [104]

(The material designed for accumulation naturally sought for and chosen from the realm of minerals. Garnier.) [105]

‘It being obvious that the coinage, in the very nature of things, must be forever, unit by unit, falling under depreciation by the mere action of ordinary and unavoidable abrasion (to say nothing of the inducement which a very restoration of the coinage holds out to the whole legion of ‘players’ and ‘sweaters’), it is a physical impossibility at any time, even for a single day, utterly to exterminate light coins from circulation.’ (The Currency Theory reviewed etc. By a Banker in England. Edinburgh, 1845, p. 69.) This written December 1844 commenting upon the operation of the then recent proclamations respecting the light gold in circulation in a letter to The Times. (Hence difficulty: If the light money is refused, then all standards insecure. If it is accepted, then door is opened to fraud and the same result.) That is why he says, in regard to the above-cited proclamations: ‘The effect… has virtually been to denounce the whole of the current gold coin as an unsafe and illegal medium for monetary transactions.’ (p. 68, 69, loc. cit.) ‘In English law, when a gold sovereign is more than 0 774 grains deficient in weight, it may no longer pass as current. No such law for silver money.’ (54. Wm H. Morrison, Observations on the System of Metallic Currency Adopted in this Country, London, 1837.)

Assertion by the currency people that the value of a currency depends on its quantity. (Fullarton, p. 13.) If the value of the currency is given, and prices and the mass of transactions likewise (as well as the velocity of circulation), then of course only a specific quantitycan circulate. Given prices and the mass of transactions as well as the velocity of circulation, then this quantity depends exclusively on the valueof the currency. Given this value and the velocity of circulation, it depends exclusively on prices and on the mass of transactions. In this way is the quantity determined. If, however, the money in circulation is representative money — mere value-symbols — then it depends on the standard they represent what quantity of them can circulate. From this it has been wrongly concluded that quantity alone determines its value. For example, paper chits representing pounds cannot circulate in the same quantity as those which represent shillings.

Profit-bearing capital is the real capital, value posited as simultaneously self-reproducing and multiplying, and as constantly self-equivalent presupposition, distinguished from itself as surplus value posited by itself. Interest-bearing capital is in turn the purely abstract form of profit-bearing capital.

Since capital is posited as profit-bearing, in accordance with its value (presupposing a specific stage of the force of production), the commodity — or the commodity posited in its form as money (in its corresponding form as independent value, or, as we may now say, as realized capital) — may enter into circulation as capital; it may become a commodity, as capital. In this case, it is capital lent out at interest. The form of its circulation — or of the exchange it undergoes — then appears as specifically distinct from that examined hitherto. We have seen that capital posits itself both in the role of the commodity and in the role of money; but this happens only in so far as both appear as moments of the circulation of capital, in which it alternately realizes itself. These are only its vanishing and constantly re-created modes of existence, moments of its life’s process. But capital as capital, capital itself as commodity, has not itself become a moment of circulation. The commodity has not been sold as capital; nor money as capital. In a word, neither commodity nor money — and we need actually regard only the latter as the adequate form — have entered into circulation as profit-bearing values.

Maclaren says: ‘Mr Tooke, Mr Fullarton, and Mr Wilson consider money as possessing intrinsic value as a commodity, and exchanging with goods according to that value, and not merely in accordance with the supply of pieces at the time; and they suppose with Dr Smith that exports of bullion are made quite irrespective of the state of the currency, to discharge balances of international debt, and to pay for commodities such as corn, for which there is a sudden demand, and that they are taken from a fund which forms no part of the internal circulation, nor affects prices, but is set apart for these purposes… Difficulty in explaining in what manner the bullion they say is set apart for this purpose, and has no effect on prices, can escape the laws of supply and demand, and though existing in the shape of money lying unemployed and known for the making of purchases, is neither applied for that purpose nor affects prices by the possibility of its being so applied.’ The reply to this is, that the stock of bullion in question represents surplus-capital, not surplus-income, and is not available, therefore, merely to increase the demand for commodities, except on condition of increasing also the supply. Capital in search of employment is not a pure addition to the demanding power of the community. It cannot be lost in the currency. If it tends to raise prices by a demand, it tends to lower them by a corresponding supply. Money, as the security for capital, is not a mere purchasing power — it purchases only in order to sell, and finally goes abroad in exchange for foreign commodities rather than disburse itself in merely adding to the currency at home. Money, as the security for capital, never comes into the market so as to be set off against commodities, because its purpose is to produce commodities; it is only the money which represents consumption that can finally affect prices.’ (Economist, 15 May ’58.) [106]

‘Mr Ricardo maintained that prices depend on the relative amount of the circulating medium and of commodities respectively, and that prices rise only through a depreciation of the currency, that is, from a too great abundance of it in proportion to commodities, that they fall either from a reduction in the amount of the currency, or from a relative increase in the stock of general commodities which it circulates. All the bullion and gold coin in the country is, according to Mr Ricardo, to be reckoned currency, and if this increases without a corresponding increase in commodities, the currency is depreciated, and it becomes profitable to export bullion rather than commodities. On the other hand, if a bad harvest or any other calamity cause a great destruction of commodities, without any corresponding change in the amount of the circulation, the currency, whose amount was proportioned to the estimated rather than to the suddenly reduced market of commodities, again becomes redundant or ‘depreciated’, and must be diminished by exportation before its value can be restored. According to this view of the circulation, which is at the root of Lord Overstone’s theory, the supply of circulating medium or currency is always capable of being indefinitely increased in amount, and diminishes in value according to that increase; and can be restored to its proper value only by exportation of the superabundant portion. Any issue, therefore, of paper money which might supply the gap caused by the exportation of the bullion, and so prevent the ‘natural’ fall of prices otherwise certain to ensue, is held by Mr Ricardo’s school to be an interference with the economical laws of price, and a departure from the principles which would necessarily regulate a purely metallic currency.’ (loc. cit.)

(1) Value

This section to be brought forward.

The first category in which bourgeois wealth presents itself is that of the commodity. The commodity itself appears as unity of two aspects. It is use value, i.e. object of the satisfaction of any system whatever of human needs. This is its material side, which the most disparate epochs of production may have in common, and whose examination therefore lies beyond political economy. Use value falls within the realm of political economy as soon as it becomes modified by the modern relations of production, or as it, in turn, intervenes to modify them. What it is customary to say about it in general terms, for the sake of good form, is confined to commonplaces which had a historic value in the first beginnings of the science, when the social forms of bourgeois production had still laboriously to be peeled out of the material, and, at great effort, to be established as independent objects of study. In fact, however, the use value of the commodity is a given presupposition — the material basis in which a specific economic relation presents itself. It is only this specific relation which stamps the use value as a commodity. Wheat, e.g., possesses the same use value, whether cultivated by slaves, serfs or free labourers. It would not lose its use value if it fell from the sky like snow. Now how does use value become transformed into commodity? Vehicle of exchange value. Although directly united in the commodity, use value and exchange value just as directly split apart. Not only does the exchange value not appear as determined by the use value, but rather, furthermore, the commodity only becomes a commodity, only realizes itself as exchange value, in so far as its owner does not relate to it as use value. He appropriates use values only through their sale [Entäusserung], their exchange for other commodities. Appropriation through sale is the fundamental form of the social system of production, of which exchange value appears as the simplest, most abstract expression. The use value of the commodity is presupposed, not for its owner, but rather for the society generally. (Just as a Manchester family of factory workers, where the children stand in the exchange relation towards their parents and pay them room and board, does not represent the traditional economic organization of the family, so is the system of modern private exchange not the spontaneous economy of societies. Exchange begins not between the individuals within a community, but rather at the point where the communities end — at their boundary, at the point of contact between different communities. Communal property has recently been rediscovered as a special Slavonic curiosity. But, in fact, India offers us a sample chart of the most diverse forms of such economic communities, more or less dissolved, but still completely recognizable; and a more thorough research into history uncovers it as the point of departure of all cultured peoples. The system of production founded on private exchange is, to begin with, the historic dissolution of this naturally arisen communism. However, a whole series of economic systems lies in turn between the modern world, where exchange value dominates production to its whole depth and extent, and the social formations whose foundation is already formed by the dissolution of communal property, without

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Bastiat. Harmonies économiques. 2 Edition Paris, 1851


The history of modern political economy ends with Ricardo and Sismondi: antitheses, one speaking English, the other French — just as it begins at the end of the seventeenth century with Petty and Boisguillebert. Subsequent political-economic literature loses its way, moving either towards eclectic, syncretistic compendia, such as e.g. the work of J. St. Mill, or into deeper elaboration of individual branches, such as e.g. Tooke’sHistory of Prices and, in general, the newer English writings about circulation — the only branch in which real new discoveries have been made, since the works about colonization, landed property (in its various forms), population etc. actually differ from the older ones only in the greater completeness of their material — or the reproduction of old economic disputes for a wider public, and the practical solution of questions of the day, such as the writings on free trade and protection — or, finally, into tendentious exaggerations of the classical tendencies, a relation which e.g. Chalmers occupies toward Malthus and Güllich to Sismondi, as well as in certain respects the older writings of MacCulloch and Senior to Ricardo. It is altogether a literature of epigones; reproduction, greater elaboration of form, wider appropriation of material, exaggeration, popularization, synopsis, elaboration of details; lack of decisive leaps in the phases of development, incorporation of the inventory on one side, new growth at individual points on the other. The only exceptions seem to be the writings of Carey, the Yankee, and Bastiat, the Frenchman, the latter of whom confesses that he leans on the former. [108] Both grasp that the antithesis to political economy — namely socialism and communism — finds its theoretical presupposition in the works of classical political economy itself, especially in Ricardo, who must be regarded as its complete and final expression. Both of them therefore find it necessary to attack, as a misunderstanding, the theoretical expression which the bourgeois economy has achieved historically in modern economics, and to demonstrate the harmony of the relations of production at the points where the classical economists naively described this antagonism. Notwithstanding the altogether different, even contradictory national environment from within which each of them writes, they are driven to identical endeavours. Carey is the only original economist among the North Americans. Belongs to a country where bourgeois society did not develop on the foundation of the feudal system, but developed rather from itself; where this society appears not as the surviving result of a centuries-old movement, but rather as the starting-point of a new movement; where the state, in contrast to all earlier national formations, was from the beginning subordinate to bourgeois society, to its production, and never could make the pretence of being an end-in-itself; where, finally, bourgeois society itself, linking up the productive forces of an old world with the enormous natural terrain of a new one, has developed to hitherto unheard-of dimensions and with unheard-of freedom of movement, has far outstripped all previous work in the conquest of the forces of nature, and where, finally, even the antitheses of bourgeois society itself appear only as vanishing moments. That the relations of production within which this enormous new world has developed so quickly, so surprisingly and so happily should be regarded by Carey as the eternal, normal relations of social production and intercourse, that these should seem to him as hampered and damaged by the inherited barriers of the feudal period, in Europe, especially England, which actually represents Europe to him, and that the English economists should appear to him to give a distorted, falsified reflection, generalization of these relations, that they should seem to him to confuse accidental distortions of the latter with their intrinsic character — what could be more natural? American relations against English ones: to this his critique of the English theory of landed property, wages, population, class anti- theses etc. may be reduced. In England, bourgeois society does not exist in pure form, not corresponding to its concept, not adequate to itself. How then could the English economists’ concepts of bourgeois society be the true, undimmed expression of a reality, since that reality was unknown to them? In the last analysis, the disturbing effect which traditional influences, influences not arising from the womb of bourgeois society itself, exercise upon its natural relations reduces itself for Carey to the influence, to the excesses and interferences of the state in bourgeois society. It is in the nature of wages, e.g., to rise with the productivity of labour. If we find that reality contradicts this law, then, whether in Hindustan or in England, we have only to abstract from the influence of the government, taxes, monopolies etc. If the bourgeois relations are regarded in themselves, i.e. after deduction of state influences, they will indeed always confirm the harmonic laws of the bourgeois economy. The question to what extent these state influences, public debt, taxes etc., grow out of the bourgeois relations themselves — and hence, e.g. in England, in no way appear as results of feudalism, but rather as results of its dissolution and defeat, and in North America itself the power of the central government grows with the centralization of capital — is one which Carey naturally does not raise. While Carey thus brings the higher power to which bourgeois society is developed in North America to bear against the English economists, Bastiat brings to bear the lower power of bourgeois society in France, against the French socialists. You believe yourselves to be rebelling against the laws of bourgeois society, in a land where these laws were never allowed to realize themselves! You only know them in the stunted French form, and regard as their inherent form what is merely its French national distortion. Look across, at England. Here, in our own country, the task is to free bourgeois society from the fetters which the state imposes on it. You want to multiply these fetters. First work out the bourgeois relations in their pure form, and then we may talk again. (Bastiat has a point, in so far as in France, owing to its peculiar social formation, many a thing is considered socialism that counts in England as political economy.)

Carey, however, whose point of departure is the American emancipation of bourgeois society from the state, ends with the call for state intervention, so that the pure development of bourgeois relations is not disturbed by external forces, as in fact happened in America. He is a protectionist, while Bastiat is a freetrader. All over the world, the harmony of economic laws appears as disharmony, and even Carey himself ‘is struck by the beginnings of this disharmony in the United States. What is the source of this strange phenomenon? Carey explains it with the destructive influence of England, with its striving for industrial monopoly, upon the world market. Originally, the English relations were distorted by the false theories of her economists, internally. Now, externally, as the commanding power of the world market, England distorts the harmony of economic relations in all the countries of the world. This disharmony is a real one, not one merely based on the subjective conceptions of the economists. What Russia is, politically, for Urquhart, England is, economically, for Carey. The harmony of economic relations rests, according to Carey, on the harmonious cooperation of town and countryside, industry and agriculture. Having dissolved this fundamental harmony in its own interior, England, by its competition, proceeds to destroy it throughout the world market, and is thus the destructive element of the general harmony. The only defence lies in protective tariffs — the forcible, national barricade against the destructive power of large-scale English industry. Hence, the state, which was at first branded the sole disturber of these ‘harmonies économiques’, is now these harmonies’ last refuge. On the one side, Carey here again articulates the specific national development of the United States, their antithesis to and competition with England. This takes place in the naive form of suggesting to the United States that they destroy the industrialism propagated by England, so as, by protective tariffs, to develop the same more rapidly themselves. This naivete apart, with Carey the harmony of the bourgeois relations of production ends with the most complete disharmony of these relations on the grandest terrain where they appear, the world market, and in their grandest development, as the relations of producing nations. All the relations which appear harmonious to him within specific national boundaries or, in addition, in the abstract form of general relations of bourgeois society — e.g. concentration of capital, division of labour, wage labour etc. — appear as disharmonious to him where they appear in their most developed form — in their world market form — as the internal relations which produce English domination on the world market, and which, as destructive influences, are the consequence of this domination. If patriarchal gives way to industrial production within a country, this is harmonious, and the process of dissolution which accompanies this development is conceived in its positive aspect alone. But it becomes disharmonious when large-scale English industry dissolves the patriarchal or petty-bourgeois or other lower stages of production in a foreign country. The concentration of capital within a country and the dissolving effect of this concentration present nothing but positive sides to him. But the monopoly of concentrated English capital and its dissolving effect on the smaller national capitals of other countries is disharmonious. What Carey has not grasped is that these world-market disharmonies are merely the ultimate adequate expressions of the disharmonies which have become fixed as abstract relations within the economic categories or which have a local existence on the smallest scale. No wonder, then, that he in turn forgets the positive content of these processes of dissolution — the only side he recognizes in the economic categories in their abstract form, or in the real relations within the specific countries from which they are abstracted — when he comes to their full appearance, the world market. Hence, where the economic relations confront him in their truth, i.e. in their universal reality, his principled optimism turns into a denunciatory, irritated pessimism. This contradiction forms the originality of his writings and gives them their significance. He is equally an American in his assertion of the harmony within bourgeois society, as in his assertion of the disharmony of the same relations in their world-market form. In Bastiat, none of this. The harmony of these relations is a world beyond, which begins just at the point where the boundaries of France end; which exists in England and America. This is merely the imaginary, ideal form of the un-French, the Anglo-American relations, not the real form such as he confronts it on his own land and soil. Hence, as with him the harmony in no way arises out of the abundance of living observation, but is rather the flat, stilted product of a thin, drawn, antithetical reflection, hence the only moment of reality with him is the demand that the French state should give up its economic boundaries. Carey sees the contradictions in the economic relations as soon as they appear on the world market as English relations. Bastiat, who merely imagines the harmony, begins to see its realization only at the point where France ceases, and where all nationally separate component parts of bourgeois society compete among one another liberated from the supervision of the state. This ultimate among his harmonies — and the presupposition of all his earlier, imaginary ones — is however itself in turn merely a postulate, which is supposed to be realized through free-trade legislation. Thus, while Carey, quite apart from the scientific value of his researches, has at least the merit of articulating in abstract form the large-scale American relations, and, what is more, of doing so in antithesis to the old world, the only real background in Bastiat would be the small scale of the French relations, which everywhere poke their long ears through his harmonies. Still, this meritorious contribution is superfluous, because the relations of so old a country are sufficiently known and least of all require to become known by so negative a detour. Carey is rich, therefore, in, so to speak, horde research in economic science, such as about credit, rent, etc. Bastiat is preoccupied merely with pacifying paraphrases of researches ending in contrasts; hypocrisy of contentment. Carey’s generality is Yankee universality. France and China are equally close to him. Always the man who lives on the Pacific and the Atlantic. Bastiat’s generality is to ignore all countries. As a genuine Yankee, Carey absorbs from all directions the massive material furnished him by the old world, not so as to recognize the inherent soul of this material, and thus to concede to it the right to its peculiar life, but rather so as to work it up for his purposes, as indifferent raw material, as inanimate documentation for his theses, abstracted from his Yankee standpoint. Hence his strayings and wanderings through all countries, massive and uncritical use of statistics, a catalogue-like erudition. Bastiat, by contrast, presents fantasy history, his abstractions sometimes in the form of arguments, another time in the form of supposed events, which however have never and nowhere happened, just as a theologian treats sin sometimes as the law of human existence, then at other times as the story of the fall from grace. Hence both are equally unhistorical and anti-historical. But the unhistoric moment in Carey is the contemporary historic principle of North America, while the unhistoric element in Bastiat is a mere reminiscence of the French eighteenth-century manner of generalizing. Hence Carey is formless and diffuse, Bastiat affected and formally-logical. The most he achieves is commonplaces, expressed paradoxically, ground and polished into facets. With Carey, a couple of general theses, advanced in schoolmasterly form. Following them, a shapeless material, compendium, as documentation — the substance of his theses in no way digested. With Bastiat, the only material — abstracting from a few local examples, or whimsically refashioned English trivia — consists in the general theses of the economists. Carey’s chief antithesis, Ricardo, in short, the modern English economists; Bastiat’s, the French socialists.

XIV. On Wages

The following are Bastiat’s main theses: All men strive for constancy of income, fixed revenue. <Truly French example: (1) All men want to be civil servants or make their sons civil servants. (p. 371.)) Wages are a fixed form of remuneration (p. 376) and hence a very perfect form of association, in whose original form ‘the aleatory’ predominates, in so far as ‘all the associated’ are subject to ‘all the risks of the enterprise’. (If capital takes the risk on its own account, the remuneration of labour becomes established under the name wages. If labour wants to take the consequences, good and bad, then the remuneration of capital splits off and establishes itself under the name interest (382).> (On this juxtaposition, see further p. 382, 383.) However, while the aleatory originally predominates in the worker’s condition, the stability of wage labour is not yet sufficiently secured. There is an ‘intermediate degree which separates the aleatory from stability’. This last stage is reached by ‘saving, during days of work, the means to provide for the needs of days of old age and illness’. (p. 388.) The final stage develops by means of ‘mutual aid societies’ (loc. cit.) and in the final instance by means of the ‘workers’ retirement fund’. (p. 393.) (As man began with the need to become a civil servant, so he ends with the satisfaction of drawing a pension.)

As to 1. Suppose everything Bastiat says about the fixity of wages to be correct. Then we would still not know the proper character of wages, its characteristic specificity, simply because wages are subsumed under the fixed revenues. One of its relations — which it has in common with other sources of income — would be emphasized. Nothing more. This would already be something, admittedly, for the advocate who wishes to plead the advantages of wage labour. It would still be nothing for the economist who wishes to understand the peculiarity of this relation in its entire scope. A one-sided characterization of a relation, of an economic form, so as to make it the object of panegyrics in contrast to the opposite form; this cheap practice of lawyers and apologists is what distinguishes the logician, Bastiat. Thus, in place of wages, put: fixed income. Is a fixed income not a good thing? Does not everyone love to count on a sure thing? Especially every petty- bourgeois, narrow-minded Frenchman? the ‘ever-needy’ man? Human bondage has been defended in the same way, perhaps on better grounds. The opposite could also be asserted, and has been asserted. Equate wages to non-fixedness, i.e. progression past a certain point. Who does not love to get ahead, instead of standing still? Can a relation be bad which makes possible an infinite bourgeois progress? Naturally, Bastiat himself in another passage asserts wages as non-fixedness. How else, apart from non-fixedness, would it be possible for the worker to stop working, to become a capitalist, as Bastiat wishes? Thus wage labour is good because it is fixedness; it is good because it is non-fixedness; it is good because it is neither one nor the other, but both at the same time. What relation is not good, if it is reduced to a one-sided characterization and the latter is regarded as position, not as negation? All opportunist chattering, all apologetics, all philistine sophistry rests on this sort of abstraction.

After this general preface, we come to Bastiat’s actual construction. Only, be it noted in passing that his rural sharecropper, [109] this type who combines in himself the misfortune of the wage labourer with the bad luck of the small capitalist, might indeed consider himself fortunate if he were put on fixed wages. Proudhon’s ‘descriptive and philosophical history’ hardly holds a candle to that of his opponent Bastiat. The original form of association, wherein all the associates share all the risks of chance, is followed, as a higher stage of association entered into voluntarily by both sides, by a form in which the worker’s remuneration is fixed. We will not call attention here to the genius of a procedure which begins by presupposing a capitalist on one side and a worker on the other, so as then, afterwards, to let the relation of capital and wage labour arise between them by their mutual agreement.

The form of association in which the worker is exposed to all the chance risks of the business — in which all producers are equally exposed to these risks — and which immediately precedes the form of wages, where the remuneration of labour gains fixity, becomes stable, as thesis precedes antithesis — is, as Bastiat tells us, the state in which fishing, hunting and herding form the dominant forms of production and society. First the wandering fisherman, hunter, herdsman — and then the wage labourer. Where and when has this historic transition from the semi-savage state into the modern taken place? If at all, then only in the burlesque. In real history, wage labour arises out of the dissolution of slavery and serfdom –or of the decay of communal property, as with oriental and Slavonic peoples — and, in its adequate, epoch-making form, the form which takes possession of the entire social being of labour, out of the decline and fall of the guild economy, of the system of Estates, of labour and income in kind, of industry carried on as rural subsidiary occupation, of small-scale feudal agriculture etc. In all these real historic transitions, wage labour appears as the dissolution, the annihilation of relations in which labour was fixed on all sides, in its income, its content, its location, its scope etc. Hence as negation of the stability of labour and of its remuneration. The direct transition from the African’s fetish to Voltaire’s supreme being, or from the hunting gear of a North American savage to the capital of the Bank of England, is not so absurdly contrary to history as is the transition from Bastiat’s fisherman to the wage labourer. (Furthermore, in all these developments there is no sign of voluntary changes arising from mutual agreement.) This construction — in which Bastiat dishonestly conjures up his Oat abstraction in the form of a historic event — is quite of the same rank as the synthesis in which the English friendly societies and the savings banks appear as the last word of wage labour and as the suspension of all social antinomies.

Thus the historic character of wage labour is non-fixity: the opposite of Bastiat’s construction. But how did he come at all to construe fixity as the all-compensating aspect of wage labour? What led him to the wish to present wage labour in this form historically in other forms of society and of association, as a higher form of the remuneration of labour?

All economists, when they come to discuss the prevailing relation of capital and wage labour, of profit and wages, and when they demonstrate to the worker that he has no legitimate claim to share in the risks of gain, when they wish to pacify him generally about his subordinate role vis-à-vis the capitalist, lay stress on pointing out to him that, in contrast to the capitalist, he possesses a certain fixity of income more or less independent of the great adventures of capital. Just as Don Quixote consoles Sancho Panza with the thought that, although of course he takes all the beatings, at least he is not required to be brave. Thus an attribute which the economists attach to wage labour in antithesis to profit is transformed by Bastiat into an attribute of wage labour in antithesis to earlier forms of labour, and as progress relative to the remuneration of labour in these earlier relationships. A commonplace which takes up the standpoint of the prevailing relation, which consoles one of its sides towards the other, is taken out of this relation by Mr Bastiat and turned into the historic foundation of this relation’s origin. In the relation of wages to profit, wage labour to capital, say the economists, wages have the advantage of fixity. Mr Bastiat says this fixity, i.e. one of the aspects of the relation of wages to profit, is the historical foundation on which wage labour arose (or, is an attribute of wages in antithesis not to profit, but rather to the earlier forms of the remuneration of labour), hence on which profit, hence the whole relation arose likewise. Thus a truism about one facet of the relation of wages and profit is surreptitiously transformed for him into the historic basis of this whole relation. This happens because he is constantly preoccupied by reflections upon socialism, which latter is then dreamed to be everywhere the first form of association. This an example of the importance assumed in Bastiat’s hands by the apologetic commonplaces which accompany the course of development in the economists’ writings.

To return to the economists. Of what does this fixity of wages consist? Are wages immutably fixed? This would altogether contradict the law of demand and supply, the basis of the determination of wages. No economist denies the fluctuations, the rise and fall of wages. Or are wages independent of crises? Or of machines which make wage labour redundant? Or of divisions of labour, which displace it? To assert any of this would be heterodox, and it is not asserted. What is meant is that in a certain average, wages realize a fair average level, i.e. the minimum wage for the whole class, a concept so hateful to Bastiat, and that a certain average continuity of labour takes place, e.g. that wages may continue on even in cases where profit falls or momentarily disappears entirely. Now, what does this mean other than that, if wage labour is presupposed as the dominant form of labour, as the foundation of production, then the working class exists from wages, and that labour individually possesses, on the average, the fixity of working for wages? In other words, a tautology. Where capital and wage labour is the dominant relation of production, there exists an average continuity of wage labour, and, to that extent, a fixity of wages for the worker. Where wage labour exists, it exists. And this is regarded by Bastiat as its all-compensating attribute. Furthermore, that in the state of society where capital is developed, social production as a whole is more regular, continuous, all-sided — hence, also, the income of the elements employed in it ‘more fixed’ — than where capital, i.e. production, is not yet developed to this stage, is yet another tautology which is given with the concept of capital itself and of production resting on it. In other words: that the general presence of wage labour presupposes a higher development of the productive forces than in the stages preceding wage labour, who denies this? And what would lead the socialists to the idea of raising higher demands if they did not presuppose this higher development of the forces of social production, brought about by wage labour? The latter is rather the presupposition of their demands.

Note. The first form in which wages make their general appearance — military pay [Sold], which arises with the decline and fall of national armies and of citizens’ militias. First, the citizens themselves are paid as soldiers. Soon after that, their place is taken by mercenaries who have ceased to be citizens.

(2) (It is impossible to pursue this nonsense any further. We, therefore, drop Mr Bastiat.)


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