Part One

The Metamorphoses of Capital and Their Circuit

Chapter 1: The Circuit of Money Capital

In volume 1 1 we saw the cyclical movement2 of capital as:
MC ... P ... C M
But M is also new M in the next cycle, i.e. functions not only as the end point of one cycle of capital but also as
the starting point of a new one. Given this, that the movement of capital describes a circle, 3 it is possible, therefore,
to view this movement of capital from three different points of view (as three different cycles 4), taking in each a
different element as the starting point; respectively:
MC ... P ... CM

the cycle of money capital

P ... CMC ... P

the cycle of productive capital

CMC ... P ... C

the cycle of commodity capital

In the first three chapters of volume 2, each cycle will be considered separately. 5 (And in what follows we need to
bear in mind the following assumptions: that commodities are sold at their values; that the circumstances in which
commodities are sold do not change; and that no changes of value occur during the movement of capital.) 6
In this chapter we consider the movement of capital from the point of view of:
MC ... P ... CM

1
2

Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], p. 709.

See note 4 below.

Or, according to C1, p. 727, a spiral.

4 In the German, Marx distinguishes between Kreislauf, and Kreislaufprozess. The terms indicate a distinction of some
methodological importance. Kreislaufprozess indicates the actual movement of capital (and also that this movement is circular,
i.e. cyclical; Marx also uses the term Bewegung des Kapitals, literally, and more uncomplicatedly, movement of capital). Kreislauf
indicates the sequence of formal phases through which capital passes in each cycle of this movement. My preferred
translations of Kreislauf and Kreislauprozess are thus cycle and (cyclical) movement respectively, and that is how, outside of
direct quotations, I shall be presenting the terms here. Although the most recent English translation (Capital, vol. 2
(Harmondsworth, 1978) [hereafter C2]), carried out by David Fernbach, sometimes fails to respect this distinction, its
importance lies in the fact that what Marx will do in this section of the book is to examine the actual movement of capital from
the point of view of three different cycles, taking for each, from the actual movement of capital, a different starting point.
Actual capital has, evidently, only one Kreislaufprozess; that it can be examined from the point of view of more than one
Kreislauf, taking the starting point of each as arbitrary, is thus a result of conceptual abstraction.
3

But let us recall Marxs later [C2, pp. 180-1] remark: In a constantly rotating orbit, every point is simultaneously a startingpoint and a point of return. If we interrupt the rotation, then not every starting-point is a point of return. [] [N]ot only does
every circuit [cycle] (implicitly) presuppose the others, but [] the repetition of the circuit [cycle] in one form implies the
motions which have to take place in the other forms []. [] [T]he entire distinction presents itself as merely one of form, a
merely subjective distinction that exists only for the observer.
5

Marxs motivation for this procedure is methodologically significant: In order to grasp these forms [i.e. the different forms
with which capital clothes itself in its different stages (C2, p. 109)] in their pure state, we must first of all abstract from all
aspects that having nothing to do with the change and constitution of the forms as such. (C2, p. 109) Marxs clear intent here
is to indicate that in the actual Kreislaufprozess of capital as it really exists, commodities are not necessarily exchanged at their
values, that the circumstances in which this occurs may well change, and that there may well be changes of value in the
movement of capital.

1 First Phase: MC
The material content of MC 7

It is not the form of MC the transformation of money into commodities which indicates that it forms a part of
the cycle of capital, but its material content, the specific use character [Gebrauchscharakter] of the commodities that
change place with money. 8 The movement we are considering here is the purchase of means of production and
labour-power, the material and [] personal factors of commodity production. 9 The movement MC we are
considering here is thus MC<

mp

, where L is labour-power and mp means of production.

The qualitative distinction between L and mp

In the movement MC, M breaks into two portions, each of which purchases a set of commodities which belongs
to a completely different market from the other. L and mp are thus commodities of a qualitatively different type
belonging to markets of a different type.
The quantitative relation between L and mp

But this notwithstanding, and at the same time, MC<

mp

also expresses a necessary quantitative relation between L

and mp, for the mp purchased must be just sufficient in quantity to consume in its entirety the L bought. 10 If mp
turns out to be insufficient to do this, then a part of the surplus labour at the disposal of the buyer is not made use
of; but if more mp than can be made use of is bought then some of it will remain unconverted into product. 11
The transformation of money capital into productive capital

The completion of MC<

mp

gives to the purchaser not just the means to produce use-values but the possibility to

produce a product with a greater value than that of their factors of production. The value that he has advanced in
the form of money thus now exists in a natural form in which it can be realised as value which breeds surplus-value
(in the shape of commodities). In other words, it exists in the form of productive capital []. 12 If we designate
productive capital as P, we can see that, although embodying different forms of existence, as values M = P.
Money capital considered as money, and as capital

The movement MC, as we are considering it here, is both, in general, a set of commodity purchases, and the
metamorphosis of capital value from its money form to its productive form. M is thus both money, and capital.
Considered from the point of view of its form 13 it is able to fulfil monetary functions specifically here means of
7

Where I insert my own subheads they appear, as here, in sans serif type.

C2, p. 110.
C2, p. 110.

Marx here introduces a numerical example to which he will repeatedly return. 422 are exchanged for L and mp; if a weekly
wage bill for 50 workers (spinning yarn) is 50, then this means that 372 has been spent on mp, if this is the value of the
weekly labour of 3,000 hours assuming each worker works 10 hours a day, 6 days a week 1,500 of which are surplus
labour.
10

And, although Marx does not here say so, it is evident that a factor in determining the quantitative relation between L and
mp is the rate of surplus-value.
11

12

C2, p. 111. This statement we can take as definitional.

13

Marx says state (Zustand): C2, p. 112.

3

purchase and means of payment. 14 But M does this not in virtue of being capital, but in that of being money. But
these functions are, as we have already established, capital functions, and what makes them so is their specific role
in the movement of capital, hence also the relationship between the stage in which they appear and the other stages
of the capital circuit. 15
Money capital is therefore capital not because it is money, but because it is capital. More: what makes money capital
money, and what makes it capital, are, in terms of their determinations, two very different things. 16 We need to
delve deeper into the meaning of this last observation.
If we can look at MC<

mp

as both Mmp, the purchase of means of production, and ML, the purchase of labour-

power, from the point of view of what makes money capital capital, i.e. with regard to the valorisation of value,
what is fundamental here is the second of these (for without the realisation of labour, i.e. the use of labour-power,
there is no new value 17). Now, although the M in ML is capital, it is not capital because it is money, for, as Marx
argues, in this movement (ML) the function of money capital passes over [] into a function in which its capital
character vanishes though its money character remains. 18 What Marx means is that money capital is not money
capital because it is used to buy labour-power: for the worker, the money that pays for her labour-power is not
capital, it is money; for the worker, ML is LM, the sale of her labour-power for money, money which she then
uses to buy commodities as articles of consumption. For the worker, then, LM is simply the first phase of LM
C, i.e. CMC, simple commodity circulation, in which money figures simply as an evanescent [impermanent]
means of circulation, as merely mediating the conversion of one commodity into another. 19 Seen from this point of
view, money is money, not capital. But we already know that ML is the characteristic moment of the
transformation of money capital into productive capital, 20 because, without L, labour-power, the expenditure of
labour, there can be no value-producing surplus-value (i.e. capital). Marx has led us to a conclusion of decisive
methodological significance, even if he has done so in a roundabout way, and he has only stated it obliquely. What
is decisive about ML as capital is not that money buys labour-power but that money buys labour-power; i.e. not that
money buys labour-power but that labour-power exists, as a commodity, to be bought. In other words, it is the capitalrelation, between capital and labour, that makes money capital or, rather, permits capital to take the form of
money not the other way around.
This form is illusory 21 in nature in that, as we saw in volume 1, on the one hand (so it appears) labour is bought for
money, while on the other, to have a price, i.e. to have value, labour would have to have an independent existence,
but the independent existence of labour is value, thus the price of labour really amounts to the value of value, which
is meaningless. That this is so, that ML is illusory in form, is what is characteristic to capitalist production; or,
more precisely, what makes it illusory that money buys labour-power, that labour-power exists, as a commodity,

14

Purchase in Mmp; payment in ML and Mmp when mp is not readily available on the market, but has to be ordered.

15

C2, p. 112.

As Marx points out a little later (C2, pp. 115-16), the errors of then-existing political economy when it deals with money
capital can be grouped according to whether it attributes the functions of money capital that accrue to it by virtue of it being
capital to the fact that it is money, or whether the specific functions of money capital that accrue from the fact that it is money
are attributed as functions of capital.
16

In other words, ML is characteristic of the capitalisyt mode of production because the purchase of labour-power is a
contract of sale which determines that a greater quantity of labour is provided than is necessary to replace the price of []
labour-power []. (C2, p. 113) From this point of view, Mmp only exists to realise the mass of labour bought by way of M
L: C2, p. 113.
17

18

C2, p. 112.

19

C2, p. 113.

20

C2, p. 113.

Hans Ehrbar, differentiating between irrational and irrationel, here translates Marxs irrationelle as incongruity (see his
Annotations, <http://www.econ.utah.edu/~ehrbar/akmc.pdf>, p. 724). I prefer illusory nature, etc.
21

to be bought is what is characteristic to capitalist production. 22

How does mainstream political economy see the matter? The movement ML is indeed seen as characteristic, but it
is not seen for what it is, for political economy takes the wage form as at is and not only cannot see the wage forms
illusory nature as characteristic of capitalist production but cannot see the wage forms illusory nature at all.
The preconditions of money capital

Thus, if the purchase of labour-power is the fundamental characteristic of the capitalist mode of production, then
labour-power must already exist. What does this mean?
When the capitalist effects MC<

L
mp

she effects a connection between the objective and personal factors of

production. 23 But when the capitalist buys labour-power we presume that she has already bought means of
production, for without these latter labour-power cannot apply itself.
For the worker, the sale of her labour-power means its application in association with means of production. But
this means that the sale of labour-power already presupposes its separation from the means of subsistence and
production.
Therefore, even though through ML the possessor of money and the possessor of labour-power confront each
other as no more than a possessor of money and the possessor of a commodity in a simple money relation the fact
is that ML presupposes the prior existence of a class relation between worker and capitalist. 24
How the separation between labour-power and means of subsistence and production comes about is here irrelevant.
If ML exists, the separation exists: has, in other words, already been wrought. Thus, that money can function as
capital is not due to money being money, but because the separation between labour-power and means of
production can be bridged through the sale of labour-power to the owner of means of production: 25 The capital
relation only arises in the production process because it exists implicitly in the act of circulation, in the basically
different economic conditions in which buyer and seller confront one another, in their class relation. 26 It is this that
transforms the function of money into the function of capital.
Thus, if the sale of labour-power becomes widespread, the means of production must already confront the worker
as capital. And, as capital takes hold of production, the separation between labour-power and means of production
is both reproduced and expanded in scale. If capital is able to take hold of production then this presupposes that
capitalist production already exists. The cycle of money capital, MC ... P ... C M, is the self-evident form of the

The wage form thus extinguishes every trace of the division of the working day into paid labour and unpaid labour. All
labour appears as paid labour. C1, p. 680.
22

23

C2, p. 114.

Although the capitalist and the worker only confront each other on the market as buyer, money, on the one hand, and seller,
commodity, on the other, this relationship is coloured in advance by the peculiar content of their dealings. [] [O]n the
labour- market [] [t]he two people who face each other on the market-place, in the sphere of circulation, are not just a buyer
and a seller but capitalist and worker who confront each other as buyer and seller. Their relationship as capitalist and worker is the
precondition of their relationship as buyer and seller. Unlike the situation in the case of other sellers, the relationship does not
arise directly from the nature of commodities. This derives from the fact that no one directly produces the products he needs
in order to live, so that each man only produces a single product as a commodity which he then sells in order to be able to
acquire the products of others. Here, however, we are not concerned with the merely social division of labour in which each
branch of labour is autonomous, so that, for example, a cobbler becomes a seller of boots but a buyer of leather or bread.
What we are concerned with here is the division of the constituents of process of production itself, constituents that really belong
together. C1, pp. 1014-5.
24

Cf. C1, p. 268: The transformation of money into capital has to be developed on the basis of the immanent laws of the
exchange of commodities [].
25

26

C2, p. 115.
5

circuit of capital only on the basis of already developed capitalist production. 27

2 Second Phase [ P ]: The Function of Money Capital

The result and precondition of the entry of money capital into production

The circuit of money capital begins with the transformation of money into commodities MC; but, because of
C<

mp

, and specifically ML , and the fact that the capitalist can only make use of labour-power to fashion

commodities, the direct result of this transformation has to be an interruption in the circulation of capital in the
form of money. It needs to be emphasised that capitals entry into production is inevitable once C<

mp

is effected.

But from this we are lead to presume that money is given up so that it will return; the person who effects this act
must therefore be a commodity producer.
For the worker, who receives, for the sale of her labour-power, wages, ML is LM, which becomes LMC. This
means that the mass of means of subsistence already exist in the form of commodities: As soon as production by
way of wage labour becomes general, commodity production must be the general form of production. 28 And, in
addition, when this is the case commodity production brings about a greater specialisation of products produced as
commodities by capitalists, including means of production. Mmp develops with ML.
The circumstances which create the basic condition for capitalist production, the creation of a class of wage
labourers also bring about that all commodity production becomes capitalist commodity production. 29 It does this
first by making the sale of products the principle interest of producers (whereas previously only those products
superfluous to subsistence were sold), then by destroying production for subsistence itself. 30
{The historic character of the capitalist production process

{The following section, 31 of general methodological interest, is taken from a different manuscript, and is tangential
to the general argument.
{The factors of production, whatever its social form, are workers and means of production. If these factors are
mutually separated, they remain only potential factors of production, and must be brought together. The form in
which this is done demarcates the various economic epochs of the social structure. 32 The separation of worker and
means of production, which is the starting point of capitalist production, is resolved by the capitalist production
process, this latter becoming a function of capital.
All pursuit of commodity production becomes at the same time pursuit of the exploitation of labour-power; but
only the capitalist commodity production is an epoch-making mode of exploitation, which in the course of its
historical development revolutionises the entire economic structure of society by its organisation of the labour
process and its gigantic extension of technique, and towers incomparably above all earlier epochs. 33

{The factors of the capitalist production process, forms of existence of capital value, are distinguished, other than
by their separation into constant and variable capital, by the fact that means of production remains capital outside
of the production process, in the hands of its owner, while labour-power only becomes capital once it is sold. But
both means of production and labour-power share two common features. Not only do both only become productive
27

C2, p. 117.

28

C2, p. 119.

29

We should note that this proposition suggests the existence of non-capitalist commodity production.

30

Marx cites (C2, p. 120) the effect of capitalist commodity production on the Africans, Chinese and Arabs.

31

C2, pp. 120-1.

32

C2, p. 120; i.e. modes of production.

33

C2, p. 120.
6

capital once labour-power and means of production are incorporated; but neither is capital by nature: They receive
this specific social character only certain particular conditions that have historically developed, just as it is only
under such conditions that precious metals are stamped with the character of money is upon, or money with that of
money capital. 34}

3 Third Phase: CM
The nature of the product of capital

In performing its functions, productive capital consumes its own components, converting them into a product of
a higher value. 35 Labour-power functions as an organ of capital; the surplus labour embodied in the product the
fruit of capital. The product is not just a product, but a product impregnated with surplus value.
The determination of commodity capital

Commodities become commodity capital as the functional form of existence of the already valorised capital value that
has arisen from the production process itself. 36 The value expression of commodity capital is C, i.e. C + C. What
determines that C, a value expression of a quantity of a commodity, is C, a value expression of commodity capital,
is not its absolute value magnitude, for this is simply determined by the labour objectified in it, but its value
magnitude relative to the value of the capital P consumed in its production.
The function of commodity capital is to be sold, to realise CM. The essential determinant is the quantity sold: to
realise the total surplus-value, C must be sold in its entirety. But there are other determinants too: the speed with
which CM is realised determines the degree to which C serves as capital, in the formation of products and value,
for as long as commodity capital persists in this form it remains tied up on the market and does nothing to fashion
products and value.
The expanded form of the cycle

MC<

mp

... P ... (C + c)(M + m)

A number of observations:
1 In the first phase the capitalist withdraws commodities from both the commodity market and the labour
market; in the third commodities are returned to the commodity market alone.
2 More value is withdrawn from the market through the sale of C than was originally put in, but this because
more commodity value is put back than was originally withdrawn.
3 A greater value of commodities is returned to the market because surplus-value was produced (in the form
of surplus product). It is only as the product of this process that the mass of commodities is commonly
capital. 37
4 In CM the capital value and the surplus-value are realised at a stroke.
34

C2, p. 121.

Marx continues the numerical example cited in note 10 above. In the production of 10,000 lbs of yarn, 372 of mp and 50
of LP have been consumed. In production, the value of mp is passed on, plus a new value, in proportion to the labour-power
expended, of 128 (78 of which being surplus-value). The yarn thus represents a value of 500.
35

36

C2, p. 122.

37

C2, p. 125.
7

5 But, insofar as it expresses as different phase in the series of metamorphoses through which they have to
pass, CM differs for the original capital value, and the surplus-value.
This last point is clearly important, for Marx goes into it in some detail (and later 38 repeats it). The surplus-value
appears first in commodity form; CM is its first act of circulation (metamorphosis), which still needs to be
supplemented by its converse, MC. For the capital value C, however, C M (i.e. CM) is the second, completing,
metamorphosis, which completes MCM, as this value returns to the money form in which its started the cycle.
The result of MC<

mp

is the conversion of the capital value into commodities that, in virtue of the fact that they

are not articles for sale, no longer function as commodities but as factors of production. On the other side of this
production process, the commodities originally withdrawn through MC are replaced by commodities different
both materially and in value.
Viewed from the point of view of circulation, production therefore appears as an interruption; viewed from the point
of view of the cyclical movement of capital, and disregarding the surplus-value, all that has happened to the original
capital value is a change in its useful form. Ultimately, of course, the capital value even returns to the (original) form
of money. 39
The inscrutable nature of money capital

Thus, if we consider the original capital value, it traces a cycle of MCM. The act CM is, at the same time, the
concluding metamorphosis of this value, and the opening one of the surplus-value that is borne with it. Two
observations need to be made here:
1 CM, the final transformation of capital value back into its money form, is a function of commodity capital.
2 This function includes cm, the first formal transformation of the surplus-value from its original commodity
form into money.
Money thus plays a double role here: it is both the returning form of a value originally advanced as money, and it is
the first transformed form of a value which originally enters circulation in commodity form. If the commodities of
which the commodity capital is composed are sold at their value, then C+c is transformed into M+m at the same
value.
The cycle, viewed overall, is M ... M: the capital value finishes it in the same form as it started it. All that has
changed is the magnitude of the value, not its form.
With respect to C, the finished product, C and c are inextricably combined, the surplus product, c, and aliquot part
of the product C. With respect to M, on the other hand, given that M+m is no more than a determinate sum of
money, M and m are no more than juxtaposed. This juxtaposition, i.e. separation, is a function of commodity capital.
Later on, we shall see that it has a consequence for the reproduction of capital (in function of what happens to m);
for the moment we shall consider this separation according it its formal content.

38

C2, p. 126.

Which is my interpretation of this paragraph: [] the production process appears simply as an interruption in the
circulation of capital value, which up till then had only passed through the first phase MC. It passes through the second and
final phase, CM, with C altered both materially and in value. But as far as the capital value taken by itself is concerned, all it
has undergone in the production process is a change in its use form. [] Thus if we simply consider the two phases of the
circulation process of the capital value, separately from its surplus-value, it passes through (1) MC and (2) CM, where the
second C has a changed form, but the same value of the first C; we thus have MCM, a form of circulation which, by way of
a two-fold displacement in opposite directions, the transformation of money into commodities and commodities into money
[]. (C2, p. 126)
39

Between M and M there is a quantitative difference. But the result of M ... M is M: the process of formation has
been obliterated in the product. 40 But as M+m, M also displays a qualitative relation, even if this qualitative relation
exists in the form of a quantitative one (i.e. between M and m). M, the original capital advanced, now exists in M, in
the same form and of the same magnitude, as realised capital. But it only exists as realised capital because M exists.
M therefore exists as a capital relation, composed of M, money capital, value which has realised itself, and m, surplusvalue. And M is capital because of this relation to m.
But this fact is only the result of a process, and is not mediated by the process whose result it is. As values, portions
of value are only distinguishable the one from the other quantitatively, in terms of their magnitude. In the money
form, qualitative differences between commodities are obliterated, because money is the common equivalent form.
Because of this form, the mediating effect of the history of a sum of money is obliterated. This is what I mean
when I refer to money capitals inscrutable 41 nature.
Although this is also true with regard to C (=C+c), in that C and c are proportional quantities of a homogenous
mass of commodities, that C is a mass of finished product indicates a direct relation to P, whose direct product it
is. M, on the other hand, is a form arising directly from the sphere of circulation, and the direct connection with P
vanishes.
Even the fact that M > M vanishes when M is used to begin a new cycle, for the money the capital cycle begins
with is always M, whatever its quantitative magnitude, never M.
M presents itself, then, not as a function of money capital, but as a function of C (in simple commodity
production, (1) C1M, (2) MC2, M is actively functional only in act (2), as the result of act (1)). But when M divides
into two circulations, that of the capital value and of the value increment to this, in repeated cycles the capital
relation present in M receives functional separation. M and m now function differently both qualitatively and
quantitatively.
Despite its occluded, inscrutable, character, M=M+m is also money capital in its first realised form, money that has
bred money. The function of money capital in the first phase MC<

mp

is different: here, money is just money, and

receives its capital function in virtue of the specific useful form of L and mp. M=M+c, however, expresses
valorised capital value, the purpose and the result, the function of the total process of the circuit of capital. 42 That it
expresses this result in money form is not due to the fact that it is the money form of capital, but that it is capital in
money form: money capital, not money capital.
Between C and M there is a distinction of form: both are valorised capital value, both are realised capital, both
express the result of the function of productive capital. They are not distinguishable as commodity capital and
money capital, but as commodities and money; both are modes of existence of capital. But insofar as C recalls its

40

C2, p. 128.

The word Marx uses is begriffslos, a Hegelian concept and difficult to translate. Begriff, conventionally concept or idea, was
used by Hegel to refer to the sublation (aufhebung) of essence and being, and we can (crudely) think of it as what it is about
something that makes it as it is (Begriff is also closely related to the verb begreifen, to grasp in the sense of comprehend). From
the Preface to the Science of Logic: the nature, the peculiar essence, that which is genuinely permanent and substantial in the
complexity and contingency of appearance and fleeting manifestation, is the notion [Begriff] of the thing [...].
<http://www.marxists.org/reference/archive/hegel/works/hl/hlprefac.htm>. The term begriffslos (-los simply means -less)
is, in this section, variously translated as non-conceptual, superficial, nave, conceptually undifferentiated and lacking in
conceptual differentiation. The translation of Begriff as concept in this context is too literal to render the subtlety of the
term, and the use of superficial and nave for begriffslos inadequate in their own ways. Insofar as money here is conceived of
as the result of a process the nature of which is rendered invisible by its very mediation by money itself I prefer the term
inscrutable.
41

42

C2, p. 130.
9

origins in P it is the less inscrutable form. In M, every trace of the capitalist production process is effaced. 43

4 The Circuit as a Whole

Industrial capital and its forms

The cycles process of circulation presents itself as (1) MC1, (2) C2 M. This process of circulation is interrupted by
P. This is different form the first form of capital we saw, 44 which was MCM (i.e., MC1, (2) C1M).
Nevertheless, given that in both forms of appearance money is transformed in the first act and reconverted into
more money in the second we can consider MC ... CM as contained within MCM.
In both circulation metamorphoses, MC and CM, values of equal magnitude confront each other. The change
in value belong solely to the metamorphosis P, the production process, which thus appears as the real
metamorphosis of capital, as opposed to the formal metamorphoses of the circulation sphere. 45
The total movement, in expanded form, is
MC<

mp

... P ... C(C+c)M(M+m)

The movement consists of capital manifesting itself as a value that passes through a sequence of connected and
mutually determined transformations [metamorphoses]. 46 Two of the phases of this movement belong to the
sphere of circulation, and one to that of production; [i]n each of these phases the capital value is to be found in a
different form, corresponding to a different and special function. 47 The forms the capital assumes in the two
circulation phases are money capital and commodity capital, and that of the production process productive capital.
But they are forms:
The capital that assumes these forms in the course of its total circuit, discards them again and fulfils in each of
them its appropriate function, is industrial capital industrial in the sense that it encompasses every branch of
production that is pursued on a capitalist basis. 48

What does this mean?

Money capital, commodity capital and productive capital thus do not denote independent varieties of capital,
whose functions constitute the content of branches of business that re independent and separate from one
another. They are simply functional forms of industrial capital, which takes on all three forms in turn. 49

The circular movement proceeds normally insofar as the capital proceeds through these phases without delay. But:
It lies in the nature of the case [] that the circuit itself determines that capital is tied up for certain intervals in the
particular sections of the cycle. [] Only after it has fulfilled the function corresponding to the particular form it
is in does it receive the form in which it can enter a new phase of transformation. 50

If capital stops in the first phase MC, a hoard forms; if it stops in P, mp does not function and L is unoccupied; if

43

Thus, the only non inscrutable form of M is when it itself functions as commodity capital, in the production of the
L

commodity capital itself (we are assuming that this is gold), for which the cycle would be MC<mp ... P ... M(M+m).
44

In C1, chapter 4.

45

C2, p. 132.
C2, p. 132.

46
47

C2, p. 132.

48

C2, p. 133.

C2, p. 133. Marxs use of the words Geldkapital and Warenkapital to refer to money capital and commodity capital, rather
than Kaufmannskapital and Wucherkapital (which were used to refer to usurers capital and merchants capital in volume 1 (cf. C1,
pp. 247 and 266)), clearly indicate forms of industrial capital as opposed to different and distinct types of capital.

49

50

C2, p. 133. My emphasis.

10

its tops in CM, unsaleable stock obstructs the flow of circulation. 51

The transport and communication industry

We have so far considered the product of P as a material thing different from the elements of the productive
capital. 52 In this important digression, Marx now considers a case in which the product of production is not an
objective product, namely the communication industry, both that branch transport which displaces things and
people, and that concerned with the transmission of information: letters, telegrams, etc. Here, the useful effect of
production is identical to the production process itself, i.e. the change of place effected. Nevertheless, the
exchange-value of this useful effect, as with any other commodity, is determined by the value of elements used up
in its production plus the surplus-value which arises from surplus-labour. With regards to its consumption, too, if
the useful effect is consumed individually, the value disappears in the act of consumption; if productively, its value
is passed on. The formula for the cycle of capital for the transport industry is
MC<

mp

... P ... M 53

The subordination of other types of capital to industrial capital

Marx now contrasts industrial capital with money capital and commodity capital. Industrial capital is the only mode
of existence of capital in which not only the appropriation of surplus-value or surplus product, but also its creation,
is a function of capital. 54 Industrial capital presupposes capitalist production; it presupposes the class antagonism
between capitalist and wage-labourer. Further: to the extent that it takes hold of production, it revolutionises the
technique and social organisation of the labour process. It also revolutionises the economic-historical type of
society. 55 In this process it subordinates other, earlier forms of capital money capital and commodity capital 56
to itself, reducing them to mere modes of existence of the various functional forms that individual capital
constantly assumes []. 57
The dual nature of the cycle of money capital

M ... M arises from and flows back into the general circulation of commodities; as such, each individual capital, in
the two circulating phases MC and CM, is an agent of the general circulation of commodities.
At the same time, for the individual capitalist, M ... M represents and individual movement peculiar to her capital
value. It is this for three reasons:
1 because of the functionally specific impressed on the cycle by the phases through which it passes in
circulation: by the material content (mp and L) of C in MC and by the fact that in CM the capital value is
realised along with the surplus-value.

In addition, here we are making the assumption that the capital value of the mass of commodities produced in the
production stage is equal to the whole capital originally advanced. But in C1, chapter 8, we saw that instruments of labour are
not used up in one cycle of production but give up their value gradually. Although this real divergence from our assumptions
here changes nothing of substance, it is a circumstance that we shall see does modify the cycle of capital.
51

52

C2, p. 134

53

Note the similarity with the formula for the production of precious metals (which function as money) cited above.

54

C2, pp. 135-6.

55

C2, p. 136.

56

Marx is still using the terms Geldkapital and Warenkapital.

57

C2, p. 136.
11

2 because P includes productive consumption. 58

3 because the return of money to its starting point indicates a cycle in itself.

The specificities of the cycle of money capital

1 The formula of the cycle of money capital expresses, first, that the sum of money with which it begins is not
expended as money but as money capital, i.e. it is not spent, it is advanced; and, second, and consequently, that
the determining aim of the movement is exchange-value, not use-value.
From this, the circuit of money capital must graphically express the motive of the CMP money-making.
2 Production, which links the two circulating phases MC and CM, presents itself explicitly as what it is for
the capitalist mode of production a means of valorising the value advanced.
3 M ... M expresses surplus-value in the form of money as its object and purpose. This differentiates the cycle
from those of commodity capital and productive capital in two ways: with respect to the surplus taking the
form of money; and that the surplus is necessarily expressed (C ... C expresses no surplus, and P ... P is only
P ... P in the case of expanded reproduction).
4 Considered by itself in isolation, from the formal standpoint, the circuit of money capital [] expresses only
the process of valorisation and accumulation: 59
(a)

M ... M does not imply (though this can occur) that the circulation of m separates itself off from M.

(b)

That ML is for the worker LM, the first phase of L(C)MC is suggested by the cycle, but the
individual consumption by the worker falls outside the cycle viewed in isolation. The only
consumption that it encompasses is the productive consumption of MC<

mp

(c)

Neither is the individual consumption on the part of the capitalist formally expressed.

The deceptive nature of the form of the cycle of money capital

Marx concludes the chapter contrasting the fact that the cycle of money capital appears the most characteristic form
of the cycle of industrial capital with the deceptive nature of the cycle that arises from this.
The cycle of money capital appears so strikingly characteristic of the capitalist mode of production for these
reasons:
1 because it so clearly expresses the motive of the capitalist mode of production buying in order to sell
dearer.
2 because it alone always includes the valorisation of value advanced.

Hans Ehrbar: Point two says that the continuity of production helps the circuit of capital to maintain its independent
existence [].
58

59

C2, p. 138.
12

3 because money is the general equivalent form, M ... M is the first cycle of a new capital advanced, and
the last one of a capital value withdrawn from a sector of production or withdrawn from production
altogether.
4 because payment in money is the normal form of advance of wages, the worker habitually confronts the
capitalist as a money capitalist, and with her capital as money capital.
All of which leads to deceive.
The appearance of advanced and valorised value in the form of money emphasises not the valorisation of value but
the money form of this process. It is for this reason that MCM formed the ideological expression of the
bullionism school (while MC ... P ... CM formed that of mercantilism).
The illusory nature arises in conjunction with seeing the cycle of money capital in isolation not only from other
formally distinct cycles but also from its own repetition (which effectively amounts to the same thing. Nevertheless,
even considered in isolation, M ... M suggests other forms.
First, because MC = MC<

mp

, insofar as ML implies that the wage-labourer is a part of productive capital that

the production process is a function of capital is also implied.

Second, with the repetition of M ... M, M appears just as evanescent as M. MC vanishes to make way for P.
Third:
MC ... P ... CM . MC ... P ... CM . MC ... P ... etc. 60

Within the second repetition of the cycle M ... M , we already have expressed the cycle of productive capital (P ...
CM . MC ... P) and that of commodity capital (CM . MC ... P ... C). The cycle of money capital includes the
two other formal cycles, and the money form vanishes, in that it is not just an expression of value but an expression
of value in the equivalent form.
Finally, and bearing mind the dual nature of the cycle of money capital referred to above, in which M ... M both
arises from and flows back into the general circulation of commodities and represents an individual movement
peculiar to one capital value, if, for a newly-appearing capital value MC represents a phase preparatory to the
production process, given the general nature of the cycle, the CMP is already presupposed, such that the existence
of P ... P as a repeated cycle is also presupposed; and, given that MC is, necessarily, MC <
L, the existence of commodity capital too is presupposed.

60

mp

, i.e. Mmp and M

See the diagrammatic representation on the following page here.

13

The Circuit of Capital (with Legend) 61

The circuit of industrial capital is best

represented by a circular flow diagram. This
circuit is important for laying out the basic
structure of the capitalist economy, and
how the spheres of production and
exchange are integrated with one another
through the movement of capital as
(surplus) value is produced, distributed and
exchanged. As the circuit repeats itself,
surplus-value (s) is thrown off. This shows
that capital as self-expanding value
embraces not only definite social relations
of production, but is also a circular
movement going through its various stages.
If s is accumulated for use as capital, we can
think of expanded reproduction as being
represented by an outward spiral
movement.

61

From Ben Fine and Alfredo Saad-Filho, Marxs Capital, 4th edition (London and Stirling, Virginia, 2003), pp. 54 and 55.
14

Chapter 2: The Circuit of Productive Capital

The cycle under consideration is
P ... CMC ... P
This formula represents the periodically repeated function of the productive capital,1 in other words, not just
production, but reproduction. It signifies that the function of the industrial capital that exists in its productive form
does not take place once and for all, but is periodically repeated, so that the new beginning is given by the point of
departure itself.2
Two things are immediately apparent (comparing this cycle with that of money capital):
1 Rather than production mediating circulation, circulation mediates production: circulation serves only as the
mediator of the reproduction that is periodically repeated and made continuous through this reproduction.3
2 Circulation presents itself in the opposite form to that of the cycle of money capital: abstracting from the
determination of value, rather than MCM (MC.CM), we now see CMC (CM.MC), the form of
simple commodity circulation.

1 Simple Reproduction
First we consider CMC, which occurs within the sphere of circulation bounded by the two extremes of P ... P.
I First phase: CM4

We begin with the phase CM (and, as we shall see, the cmc that emerges subsequently). Since we looked at this
in chapter 1, let us first recall what we already know. C (i.e. C + C, or C + c) is the value expression of commodity
capital, and what determines that C, a value expression of a quantity of a commodity, is C, a value expression of
commodity capital, is its value magnitude relative to the value of the capital P consumed in its production:
[c]ommodities become commodity capital as the functional form of existence of the already valorised capital value that
has arisen from the production process itself.5 The function of commodity capital is to be sold, to realise CM,
and the essential determinant here is the quantity sold: to realise the total surplus value, C must be sold in its entirety.
Here, CM forms the second stage of the cycle, but the first stage of circulation. When we looked at the cycle of
money capital we were disinterested in whether the M and m that made up M continued their course together, or
followed different paths. Now, since CM is necessarily complemented by MC, we have to take this into account,
for, if the surplus value follows a path cmc separate from CMC, then surplus value is not accumulated
(recapitalised), but consumed, and we are dealing with simple, and not extended, reproduction. In this case, the
money representing the capital value continues to circulate in the cycle of industrial capital, while the surplus value
converted into money enters into the general circulation of commodities.

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 144.

C2, p. 144. Marx notes that the mediating stage CMC may be in part circumvented insofar as a portion of C re-enters
production directly, or is consumed in kind by the capitalist, thus not entering into circulation. This, however, is insignificant
in general capitalist production, and need only be accounted for in agriculture.
1
2

C2, p. 144.

Where I insert my own subheads they appear, as here, in sans serif type.

C2, p. 122.
1

In the numerical example we pursued in chapter 1, we saw a capital value (C) of 10,000 lbs of yarn with a value6 of
500. 422 of this represents the value of productive capital and continues as the money form of 8,440 lbs of yarn;
while the surplus value of 78, the money-form of 1,560 lbs of yarn, leaves the circulation and enters the general
world of commodities.
Diagrammatically, we can represent this like this:

() ()

C
+
c

M
+
m

C<mp
c

The mc above represents those purchases made by capitalist over time for her own consumption; before it is used,
the money exists temporarily as a hoard,7 destined for further consumption. Given that this money in its function
of medium of circulation (including its hoard form) does not enter the cyclical movement of capital, it is money
not advanced, but spent.8
In the case of our numerical example, the surplus value component of the product produced by P exists in the form
of 1,560 lbs of yarn; but were the product, say, a single machine with the value of 500, the surplus value
component, 78, would exist only in the machine as a whole, and the two commodity value components, C and c,
have only an ideal (ideel), or notional (imagined but not imaginary),9 existence as discrete entities: the machine must
be sold in its entirety before m can enter on an independent circulation (if this is what it does). Nevertheless, and
independently of all this, through the fact of CM, both the capital value and the surplus value acquire a separable
existence, the existence of different sums of money [...].10
Our cmc is simple commodity circulation; its first stage occurs within CM, i.e. within the circular movement of
capital; the second, complementary, stage, mc, occurs within the general circulation of commodities, outside of the
circular movement of capital. Three things emerge from this.
1 While the commodity capital is realised by CM (i.e., by C(M+m)),the movement of capital value and
surplus value become, by acquiring independent form as sums of money, divisible.
2 If the separation between M and m does indeed take place, CM, in conjunction with corresponding CM
and cm, may be represented as two different circulations: CMC and cmc, both, in general form,
examples of ordinary commodity circulation.11
Marx here (C2, p. 146) reminds us, as he did in chapter 1 (C2, p. 109) that we are operating nder the following assumptions:
that commodities are sold at their values; that the circumstances in which commodities are sold do not change; and that no
changes of value occur during the movement of capital.

Cf. Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], pp. 227-32.

C2, p. 146.

Cf. C1, pp. 189-90, where Marx talks about how the prices of commodities are fixed in terms of gold, without the presence
of actual gold. Marx here uses the same term ideell to talk about the price form. In his splendid annotations
(Annotations to Karl Marxs Capital, <http://www.econ.utah.edu/~ehrbar/akmc.htm>), Hans Ehrbar comments: Marx
says here something about the price form which is true for all value forms of a commodity: it is notional. The German word
translated here by notional is ideell. It is incorrect to translate ideell with ideal. Marx makes a strict distinction between
the German terms ideal and ideell. Something which is ideal is by definition not real, it is an idealization of something real.
The price of a commodity is not ideal in this sense. Marx held the view that social relations are real forces [...]. One should not
be confused by this formulation and think Marx wanted to deny their reality. (p. 724)
9

10

C2, p. 147, italicisation added.

Marx here (C2, p. 148) comments on the practice in the London construction trade, normally conducted on credit, of
advancing money to the building contractor according to the stage of development of the building. While a stage of
11

3 If part of the surplus value is not spent of revenue, i.e. if the separation of C (M) and c (m) is only partial,
then (a) the capital value passes through the later stages of its movement increased in value, and (b) there
may occur a change in its value (and therefore organic) composition.
CM (the final stage in the cycle of money capital) is here the second stage of the cycle of industrial capital and the
first in the stage of the circulation of commodities: the self-expansion of capital (the function of P) is behind it, and
the result of this, C, is already realised. Given the premise of simple reproduction, in that cmc separates itself off
from CMC and in that both CMC and cmc are in general form commodity circulation (and, within our
assumptions, display no changes in value) lies the error of vulgar political economy in seeing capitalist production as
nothing but the production and exchange of use-values, as the production of use-values for the purpose of
exchanging them for others.
C serves as commodity capital, and the purpose of the whole process, valorisation, does not rule out an increase in
the capitalists consumption as her surplus value (and hence capital) increases: [i]n fact, it absolutely includes it.12 In
the circulation of the capitalists revenue, c serves to transform it into money, and thence into commodities serving
private consumption. But c is an incarnation of surplus labour, and, as such, is bound to the cycle of capital value in
movement: stagnation in or disturbances of the cycles movement not only restricts c but also the market for those
commodities to replace c. (The same is true should CM fail, wholly or in part: should the commodity product fail
in whole or in part to be sold.)
cmc (the revenue of the capitalist) enters into the circulation of capital in function of c forming a value component
of commodity capital (C). But once it acquires independence from mc, through cmc, although it stems from the
movement of the capital advanced by the capitalist, it does not enter into this movement. The circulation of the
revenue of the capitalist is related to the movement of the capital advanced by the capitalist insofar as the existence
of capital presupposes the existence of the capitalist, and this latter is conditional on his consumption of surplus
value.13
Within the general circulation, C functions [...] simply as a commodity; but as a moment of the circulation of
capital it functions as commodity capital, a form that the capital value alternately assumes and discards.14 Once sold,
through CM, the commodity leaves the circular movement of capital, but remains within the general circulation
of commodities: the metamorphosis through which the commodity passes into consumption is displaced in space
and time from that the same in form through which it passes out of the movement of capital. This holds true
even if the commodity enters the cycle of another industrial capital.
The general circulation comprises as much the intertwining of the circuits of the various independent fractions
of social capital, i.e., the totality of the individual capitals, as the circulation of those values which are not thrown
on the market as capital but enter into individual consumption.15

This relation that between the circuit [cycle] of capital as it forms part of general circulation, and as it provides
the links in an independent circuit [cycle]16 is also manifested in the circulation of M (M+m). M continues the
cycle of capital; m, spent as revenue (mc), leaves the cycle and enters general circulation (although that part which

development of a building is not itself a building, this is an example of how in reality, even in the case of indivisible
commodity products, the separation between capital value and surplus value is achieved before the product is actually sold.
12

C2, p. 149.

13

C2, p. 149.

14

C2, p. 149.

15

C2, p. 150.

16

C2, p. 150
3

functions as additional capital enters into the cycle of capital). In cmc, money functions simply as coin17: the aim
of the circulation is the consumption of the capitalist.18
II Second phase: MC

Assuming simple reproduction, M = P. Following CM, we have MC<

C<

mp

mp

. Hence the overall circulation is CM

. The function of money capital is therefore the same as that exhibited in the cycle of money capital.

Three observations now need to be made.

(1) M as the monetary expression of past (and future) labour

In the cycle of money capital (M ... M), M appeared19 as the form in which the original capital was advanced; now,
in the cycle under consideration, it appears as a part of the quantity of money into which the commodity capital has
been transformed through CM, thus, through the mediation of the sale of the commodity product, as a
transformation of the productive capital P. Now M, rather than being the original and concluding form of the
capital cycle, is now that form that is stripped off so that the MC that concludes CM can be completed.
Conclusion: that part of MC which is also ML now no longer appears as an advance of money for labour-power,
but as an advance in which a given quantity of commodity product in money form is advanced for labour-power, and which
in turn forms a part of the commodity value produced by the worker.20
Now, M appears (in the sense just noted) as a converted form of C, and C is the product of the past function of
P. M, therefore, as a whole appears as the monetary expression of past labour.
In our numerical example, we saw that:
the product of the spinning process: 10,000 lb of yarn = 500
constant capital advanced: 7,440 lb of yarn = 372
variable capital advanced: 1,000 lb of yarn = 50
surplus-value: 1,560 lb of yarn = 78
If, out of M, only that original capital advanced (i.e., 372 + 50 = 422) is advanced afresh, then the worker
receives, as ML, as the next weeks advance, a portion, in money form, of the 10,000 lb of yarn produced this

17

C2, p. 150; i.e. as the symbol of value: cf. C1, p. 221.

And it is typical of the cretinism of the vulgar economists that they see in this this circulation, which does not enter into
the circuit of capital the circulation of the portion of the value product that is consumed as revenue [...] the characteristic
circuit of capital. C2, p. 150.
18

Marx uses the verb erscheinen to appear here. Hans Ehrbar comments: One can almost call it a stylistic peculiarity that
Marx often uses the word appears (erscheint) where a naive reader would expect the word is. Marx uses appear whenever
he speaks about the manifestation of some hidden background [...] on a more accessible stage. Marx is meticulous about
this, because he finds it important to identify the character of the mechanisms that generate actual events and concrete things.
The terminology of the words appear, represent, express is part of this emphasis. These words distinguish generative
mechanisms that stand on their own from those which are proxies for underlying hidden mechanisms. Glossary to Marxs
Capital and Other Writings, <http://www.econ.utah.edu/~ehrbar/glossary.pdf>, p. 224) It is clear, then, that Marx here
means appears in the sense of this is how the thing really manifests itself, rather than in that of this is how it looks but it is
really something else.
19

And, Marx adds, somewhat cryptically to my way of thinking, And for this reason alone, the act MC, insofar as it is ML,
is in no way simply the substitution of commodities in use form for commodities in money form, but includes other elements
that are independent of the general circulation of commodities as such. C2, p. 151.
20

week. As the result of CM, the money is throughout the expression of past labour.21 The supplementary act of
MC, converting M into commodities existing in the market, is again another conversion of past labour from one
form into another; but it is a conversion separated, more or less considerably, from its antecedent in time.
Even though M, in CM, represents past labour, M can also, in MC, represent the transformed form of
commodities either not yet present in the market or simultaneously in production: purchase of coal not yet mined as
means of production, for example, or payment for a coat not yet made; or purchase of commodities subject to
rapid spoilage. In this way, in the case of ML, M represents not just the workers past labour but also a draft on
labour not yet accomplished. With one part of his past labour the capitalist gives him [the worker] a draft on his
own future labour.22
(2) The transient nature of money capital

In CMC<

mp

money is only an evanescent [fleeting, vanishing] moment in [the] [...] movement [of capital],23

whose function is only to facilitate the transformation of commodity capital from commodity form to commodity
form again. When the capital movement is fluid, money acts as means of circulation only when it serves as means
of purchase; it serves as means of payment only when capitalists buy from each other, i.e., when there is a balance
of payments to be settled.
(3) The mediating role of money capital

Independently of whether it serves as means of circulation or as means of payment, the function of money capital is
simply to mediate the replacement of C with L and mp; i.e. to transform commodity capital back into the form of
the elements of its production. [M]oney capital mediates, in the last instance, only the transformation of
commodity capital back into productive capital.24
(Marx remarks here tangentially that for the cycle of capital to run its course smoothly C must not only be sold in
its entirety but must also be sold at its value. In addition, the C ... C mediated by M does not simply imply replacing
commodities with commodities but doing so while maintaining the same value relation.25 More: the whole content
of P ... P, mediated by CMC, is a moment of the reproduction process considered as a whole;26 the mediator, in
form simple commodity circulation, is also a form of circulation of capital, and, as such, includes a functionally
specific interchange of materials27 and the necessity that C be quantitatively equal to the elements of the production
of C while maintaining the value relations between them. That this is something that does not hold in the real
world is why we are here working under the assumptions that commodities are sold at their values; that the
circumstances in which commodities are sold do not change; and that no changes of value occur during the
movement of capital that we are; but it is also a matter which needs to be accounted for and Marx promises to
return to it further on.28)
In the cycle of money capital, M ... M, M, the original form of capital value, is cast aside only to be later reassumed.
Now, in P ... P, M is a form both assumed and cast aside within the movement: the capital as C is anxious to
21

C2, p. 151.

C2, p. 152.
23 C2, p. 152.
22

C2, p. 153.
And, importantly, Marx here notes that [i]n fact, however, the value of the means of production varies; capitalist
production is precisely marked by a continuous change in value relations, if only because of the constant change in the
productivity of labour that characterises it. C2, p. 153.
24
25

26

C2, p. 153.

27

Cf. C2, pp. 110-11.

28

As indeed he does on C2, pp. 360ff.

5

assume the money form but the capital as M is equally anxious to get rid of it. [...] As long as it persists in the form
of money, it does not function as capital, and thus is not valorised; the capital remains idle.29 The independent role of
the money form apparent in M ... M now disappears, and M ... M stands apparent as a mere particular form.30
Should MC be obstructed, then the circular flow of the reproduction process31 is too.32
III The formal and real reproduction of C

If the formal reproduction of C in CMC is formed of acts of circulation, its real reproduction is dependent on
reproduction processes that lie outside of the reproduction process of C.
In the cycle M ... M, MC<

prepared the transformation of money into productive capital; in P ... P, MC<

mp

mp

prepares the transformation of commodity capital back into productive capital, i.e. it prepares the transformation of
commodity capital back into the same elements of production from which it emerged. Therefore, as in M ... M, M
C<

mp

presents itself as preparatory to the production process, but now also as a return to this process, as a repetition

of it, therefore as the precursor to the reproduction process and the repetition of the valorisation process.
ML is not simple commodity exchange, but the purchase of a commodity whose function is the production of surplus
value; Mmp is a procedure (only, says Marx) materially necessary for this end.
IV The cycle as a whole

With the completion of MC<

anew. The full cycle is thus:

mp

M has been transformed back into productive capital and the cycle can begin

( )( )

P ... C

C
+
c

M C<mp ... P
+
m c

V The possibility of crises of overproduction

The transformation of money capital into productive capital is the purchase of commodities for the purpose of
commodity production.33
Marx now implies another critique of existing political economy (in this case of Ricardo, who denies the possibility
of overproduction). The purpose of production is not the existence of the producer: consumption occurs within
the cycle of capital insofar as it is productive consumption, and its premise is the production of surplus-value though
the consumption of commodities so consumed. Rather than an exchange of commodities mediated by money, what

29

C2, p. 153, italicisation added.

C2, p. 154.
31 C2, p. 154.
30

However, unlike the commodity form, the money form can sustain itself longer should the movement of capital be blocked:
money does not cease being money by being capital, while a commodity ceases to be a use-value in general (and hence a
commodity) if it is over detained in the form of commodity capital. In addition, capital in the money form can assume a form
other than its original of productive capital; commodity capital can move no further.
32

33

C2, p. 155.
6

we have here is the replacement of commodity by commodity conditioned by [the production of] surplus-value
[...].34
Alongside the productive consumption of M, transformed into L and mp, we have the first link of ML, which, for
the worker, is LM, i.e. CM. The workers LMC, includes her consumption; but only the first act, the result of
ML, falls within the cycle of capital. MC arises from the cycle of capital, but is separate from it, even though the
existence of the working class is necessary for capital, as is, therefore, their consumption, mediated by MC.
In CM, C is transformed into money, so that the capital cycle may continue. The further circulation of C initially
is of no consequence for the individual cycle of capital; it is transformed into money and hence back in the factors
of the production process: who buys C is immediately immaterial. The volume of commodities produced is not
determined by supply and demand but by capitals need for constant and constantly expanding production. Given that mass
production can only have wholesale merchants (and other capitalists) as its immediate purchasers, commodities
produced do not immediately need to enter into either individual or productive consumption. The consumption of
commodities is not included in the circuit of the capital from which they emerge;35 it is only necessary that
commodities be sold, not consumed. But chickens come home to roost: if commodities that have only apparently
been consumed are actually lying unsold, and new commodities enter the market, then commodity capitals have to
fight each other for space in the market. Prices are cut, by capitals as well as by retailers, even to sell at all; but this
reflects not the real state of demand but with the demand for payment. But the ensuing crisis is not witness by a fall
in consumer demand but a decline in exchanges of capital for capital, in the reproduction process of capital.
M is converted into L and mp as money capital fulfils its function as a capital value, transforming itself into
productive capital. But, unless these commodities are purchased or paid for immediately and simultaneously, a part
of M must persist capital in the money state, as a fund for payment and purchase, withdrawn from circulation, i.e.
as a hoard. The function of money as a hoard thus becomes a function of money capital (just as in MC the money
functions of means of purchase and payment become functions of money capital). But the money here is a state
within and prescribed by the cycle of industrial capital; once again, we see that money capital within the cycle of
industrial capital performs only the functions of money, and these functions are only capital functions though their
connections with the other stages of the cycle.36
The key point here is that the formation of a hoard, i.e. the persistence of money capital in its money state, be it
through expediency or no, represents an interruption in the movement of capital.

2 Accumulation and Reproduction on an Expanded Scale

The proportions in which production may be expanded are proscribed by technical factors; it then may be that
realised surplus-value destined for capitalisation can only reach the proportion necessary through the repetition of
the capital cycle. During such time it must be stored up, and, as a hoard, represents latent (potential, virtual)
capital. The production process is not expanded by the formation of latent money capital; rather, latent money
capital is formed because the production process cannot be directly expanded.
The character of capitalist production is give by the necessity of the valorisation of advanced capital, i.e. by the
production of the greatest possible mass of surplus-value and the transformation of this value into capital. The

34

C2, p. 155.

35

C2, p. 156.

The expression of M as a relation between m and M, as a capital relation, is not a direct function of the money capital, but
rather of the commodity capital C, which in turn expresses, as a relation between c and C, only the result of the production
process, of the self-valorisation of the capital value that takes place within it. C2, p. 157.
36

constant enlargement of [...] capital becomes a condition for its preservation.37 The formula P ... CMC<
expresses the condition in which the surplus-value is accumulated in its entirety.

38

mp

... P

This formula represents productive capital which begins its second cycle as augmented productive capital. Just as in
the cycle of money capital, the result of the cycle (the augmentation) is obliterated once the capital, P in this case,
serves as the point of departure for the new cycle.
If we compare the cycles of money capital (M ... M) and productive capital (P ... P) we observe the following
difference. MM represents the production of surplus-value: money capital (or industrial capital in money form) is
money which breeds money. In the case of P ... P, P consists of the original capital value plus the capital
accumulated through its movement:39 P ... P expresses the fact that produced surplus-value is capitalised.
M as the conclusion of M ... M, and C as it presents itself in all the cycles, represent not the process but the result
in different forms of circulation of the valorisation of the capital value. But this result is not the function of
money or capital value. As forms of existence of industrial capital the functions of money and commodity capital
are functions which accrue to money and commodities. It is only insofar as money and commodity capital appear as
forms of circulation of industrial capital that the money function and the commodity function are also the functions
of money capital and commodity capital, and this is determined by the fact that the elements of production express
themselves as the productive unction of industrial capital through being, on the one hand, the labour-power of
others bought from its owners, and, on the other, means of production bought from the owners of other
commodities. Failure to see this leads, one, to the error of ascribe the specific functions and properties that
characterise money as money and commodities as commodities to their character of capital, and, two, to derive the
properties of productive capital from its mode of existence in the means of production. C is always the product of
the function of P, and M the form into which C is converted. As soon as realised money capital M resumes it
function as money capital, it does so as M.

3 The Accumulation of Money

Whether m can be integrated into production depends on factors whether or not it is of the necessary minimum
magnitude, the relationship between the material factors of P, as well as their value relationship40 beyond the mere
fact of its existence. Until it attains the magnitude at which it can enter into the function of money capital it exists
as a hoard in the process of formation and growth. A hoard is the form of money not in circulation; money
interrupted in its circulation. In the form under consideration here, it represents not capital interrupted in its
movement, but capital not yet capable of functioning.41

4 The Reserve Fund

Hoards may fulfil ancillary tasks, i.e. may enter into the circular movement of capital (without this taking the form P
... P) functioning as a reserve fund to cope with disturbances in its progress.

C2, p. 159. Cf. C1, pp. 725-45.

Although, as Marx notes, a part of the surplus-value must always be spent as revenue in normal circumstances, and another
part capitalised, [...] [such] that at certain periods the surplus-value is completely consumed, and at others completely
capitalised. If the movement takes its average course, there is a bit of both. C2, p. 159.
37
38

39

C2, p. 160.

And the fact of the interplay between the material and the social, between qualitative relations and quantitative ratios, is
significant.
40

Rather than existing in pure form as actual money, the hoard may also exist in the form of favourable balances; and also as
interest-bearing deposits, bills of exchange, securities, etc., i.e. in the shape of money which breeds money.
41

*****
The general formula for the cycle of productive capital which comprises both simple reproduction and
reproduction on an expanded scale:42
1

P ... CM.MC<

L
mp

... P(P)

If P = P, then M in (2) = M minus m; if P = P, then M in (2) > M minus m, i.e. m has been wholly or partly
transformed into money capital.

The circuit [cycle] of productive capital is the form in which the classical economists have considered the circuit [circular
movement] of industrial capital. C2, p. 166
42

Chapter 3: The Circuit of Commodity Capital

The cycle under consideration is
CMC ... P ... C
The premise of the cycle is C; if there is reproduction on an expanded scale, the concluding C is greater than the
starting C, hence C:
CMC ... P ... C

I The circulation of commodities as the premise of the cycle 1

The first thing that we see as specific to this cycle is that it begins with the entire circulation movement, in its two
opposing phases. In the cycle of money capital (MC ... P ... CM) the circulation was interrupted by production; in
the cycle of productive capital (P ... CMC ... P) the circulation mediated the reproduction process.
II Already expanded capital value as the premise of the cycle

In the money and productive capital cycles the manner of the production of the points of departure (M and P(P)
respectively) vanish as the cycle repeats. Both M and P begin the new cycle as M and P. In the cycle under
consideration here, the starting point can only be C, never C. Unlike the other two cycles, the cycle of commodity
capital always opens with not just capital value, but with expanded capital value in commodity form, i.e. it includes
from the start not only the circuit of the capital value present in the commodity form, but also that of the surplusvalue.
III The distinction between the commodity form of capital value and commodity capital as the point of
departure of the cycle

It is important to grasp here that the commodity capital form is that assumed by the capital value as the commodtiy
product C, and not the commodities purchased by the capitalist as factors of production (means of production and
labour-power); i.e. as C, and not C. 2 Marxs argument is that the act MC is MC<

mp

, and both L and mp confront

the capitalist as buyer merely as commodities, and not capital. mp may certainly be C, i.e. commodity capital for its
seller (in the act CM); L, on the other hand, is always just a commodity for the worker, and only becomes capital in
the hands of its buyer, as a component part of P: C<

mp

can never function in the the cycle of capital as commodity

capital; it can only function within the cycle as capital in commodity form, and, as such, only more or less fleetingly. 3

Where I insert my own subheads they appear, as here, in sans serif type.

In other words, there is no cycle C ... P ... CMC. Apparently, Marx did, in at least one point in his manuscripts, consider
such a cycle, but did not pursue the idea (see Christopher J Arthur, The Fluidity of Capital, in Christopher J Arthur and Geert
Reuten (eds.), The Circulation of Capital: Essays on Volume Two of Marx's Capital (London and New York, 1988), pp. 119-124).
2

In effect, in the movement MC ... P, C, as elements of production, is subsumed into the process of production as productive
capital rather than assuming a fixed capital form in itself. As Marx will later (Capital, vol. 2 (Harmondsworth, 1978) [hereafter
C2], p. 234, my italicisation) remark, discussing again the cycle of productive capital, the capital value P advanced in the form of the
elements of production forms the point of departure. Nevertheless, when Simon Mohun, in his entry on Capital in Tom
Bottomore (ed.) A Dictionary of Marxist Thought (Oxford and Malden, MA, 1991), p. 69, identifies C explicitly as productive
3

capital, he goes too far in my opinion in conflating productive capital, as it were, at rest, in the form C<mp , and productive
capital, in process, in the form P.

The commodity product C, the commodity product, is however commodity capital properly so called; and as such it
has a dual aspect. As use-value, as the product of the function of P, fashioned from its elements mp and L; as value, it
is the capital value P plus the surplus-value m produced in the function of P.
IV The separation between the component parts of the capital value within the cycle

As a consequence, the separation capital value and surplus-value, between the capital advanced, that C which is equal
to P, and the surplus-value, necessarily takes place within the cycle (whether they are actually separable as is the case
with the yarn in the example we have been following in these chapters or not as is the case with our machine
for they become so in any case as soon as C is converted into M).
We shall use as an example for that our commodity product the yarn we have seen in the numerical example we have
been following, so that we have a product that is divisible into independent and homogeneous parts.
the act CM can occur as a sum of successively performed sales the capital value C can separate itself off from
C before the surplus-value is realised (i.e. before C is realised in its entirety). For example, of the 10,000 lb of yarn
with a value of 500, 8,440 lb (422) = the capital value (C), while 1,560 lb (78) = surplus-value. By selling the

(1) If

former before the latter, the capitalist would realise C MC<

mp

before the circulation cmc.

Alternatively, if 7,440 lb (372) is sold, then 1,000 lb (50), and then 1,560 lb (78), the capitalist would
successively replace the constant capital, then the variable capital, before realising the surplus-value.
(2)

This division into c+v+s 4 can also be carried out for aliquot parts of the commodity product. 1 lb of yarn, with a
value of 1/- (i.e. 12 d) can be broken down as:
(3)

c = 0.744 lb = 8.928 d;

v = 0.100 lb = 1.200 d;

s = 0.156 lb = 1.872 d

etc. 5
V The specificities of the three cycles
(a) the object of the money capital cycle: valorisation

In the cycle of money capital, production is bounded by two complementary and mutually opposed stages of the
circulation of capital. Money is advanced as capital, converted into the elements of production, then transformed
into the commodity product and finally again into money. This is a finished and complete cycle of business, the result
being money which can be used by anyone for anything. 6 The cycles repetition is no more than a possibility.
Nevertheless, it is evident that valorisation is the object of the process.
(b) the object of the productive capital cycle: reproduction

In the cycle of productive capital, circulation follows the first P and precedes the second; but the first P is productive
To whit, constant capital, variable capital and surplus-value.
5 The buyer is of course disinterested in all this. She is interested in, first, the price (1/- per lb), and, second, the quantity she
needs, and this depends on the composition (both technical and in value terms) of her own capital, not on that of the seller.
Marx here (C2, p. 171) reminds us that we are assuming identity between value and price, and that this is an assumption: It is
[...] decisive for C, as a functional form in the circuit of this individual capital, whether and to what extent price and value
diverge from one another in the sale, but here, where we are merely considering distinctions of form, this is of no concern.
4

C2, p. 172, italicisation added.

2

capital in its function of production, while the second is only the renewed existence of industrial capital in its
productive capital form. Nevertheless, the prior conversation of the capital value into L and mp means that the
concluding P be it P or P must function as productive capital, i.e. must accomplish the production process. This
is why the general form of the cycle P ... P is the form of reproduction (and, as such, that valorisation is the purpose of
the process is not indicated 7).
(c) the object of the commodity capital cycle: the consumption of the entire commodity product

The cycle of commodity capital under consideration here opens with the two stages of the circulation process. Both
this cycle and that of productive capital are incomplete in that they do not end with M, with the valorised capital
value converted back into money; as such, both need to be continued further, and hence presuppose reproduction.
What is specific about the cycle of commodity capital is that it is the only one in which an already valorised capital
value necessarily appears as the starting point of its own valorisation. As a consequence of this, the cycle includes
from the beginning both the cycle of the capital and that of the surplus-value, and, on average, surplus-value must be
partly spent as revenue, passing through cmc and function as an element of capital accumulation.
The cycle of commodity capital in its normal functioning presupposes the consumption of the entire commodity
product: as accumulation of surplus product (productive consumption), as the individual consumption on the part of
the worker (also productive consumption, since labour-power is the permanent product, within certain limits, of the
workers individual consumption 8), as individual consumption [...] necessary for the existence of the capitalist 9, and
that individual consumption other than is necessary for the existence of the individual capitalist [which] is
presupposed only as a social act. 10 The division of valorised capital, the cycles starting point, into money marks the
division of its movement into the movement of capital and the movement of revenue. In this way, [t]he division of
the total social product, as well as the particular division of the product of every individual commodity capital, into
an individual consumption fund on the one hand and a reproduction fund on the other [...]. 11
{Marxs next two remarks at this point appear to me tangential, if not uninteresting.
{First, he notes that M ... M allows for expanded reproduction, depending on how much m enters the new cycle. In
the case of P ... P and C ... C the end point of the prior cycle may start the next one on an expanded scale with the
same value or even less value as the starting point of the first if, for example, commodity elements are cheapened by
a rise in the productivity of labour. The converse also holds. 12
{Second, Marx notes that in C ... C the commodity form is not only the premise of the whole cycle, it reappears as a
premise as the second C in that if this C is not yet produced or reproduced (as the C of another capital) the cycle is
Which is why, observes Marx, classical economics, ignoring the specifically capitalist form of the capitalist production process,
painting it instead as driven by the intention to produce to exchange (MC) and consume (mc). In this way the peculiarities of
money and money capital could be ignored, the production process appearing as something natural.
7

C2, p. 173.

C2, p. 173.

10

C2, p. 173.

11

C2, p. 174. One could also say that non-productive individual consumption assumes a social character as a consequence of

L
CMC<mp , i.e. the conversion of the commodity product into money which is then transformed into the elements of
production (although Marx does not explicitly say this).

But are we not here confusing material expansion with expansion in value terms? In the case of M M, even if M > M
under operating assumptions (identity of value and price) a sufficient fall in the productivity of labour would also result in a
materially contracted reproduction. What does seem clear is that M < M would be impossible under operating assumptions, but,
given these (and let us remind ourselves of what they are (C2, p. 109): that commodities are sold at their values; that the
circumstances in which commodities are sold do not change; and that no changes of value occur during the movement of
capital), it must also be the case that, despite Marxs remarks, none of the other cycles if the movement takes its average
course, and this is all the general formula can express (C2, p. 159) could end with less value than it started with.
12

inhibited: the commodity form is a permanent condition for the reproduction process. 13}
VI The commodity capital cycle as the general form of industrial capital

All 3 circuits share that they finish with the same capital as that with which they start, and that this form is the
transformed form of a preceding functional form that it is not the starting form.
Thus: form I (M ... M) finishes with M, a transformed form of C, and form II (P ... P) P, a transformed form of M.
The transformation in both cases is effected by commodity circulation, by a change of position between commodity
and money. But in form III (C ... C) C is the transformed form of P, the productive function: here, the
transformation, first, does not just affect the functional form of the capital but also the magnitude of its value; and,
second, the transformation is not the result of a formal change of position in circulation but a real transformation of use
form and value in production.
Evidently, the concluding form of each cycle is both produced and determined by the transformations that precede
it. In form I, M, the transformed form of C presupposes the existence of M in the hands of the buyer outside of the
cycle and brought into it by the sale of C; while in form II, P, the transformed form of C (L and mp), presupposes
the existence of L and mp outside the cycle and brought into it by the closing stage MC. But beyond this
the circuit of the individual money capital does not presuppose the existence of money capital as such, and the
circuit of the individual productive capital does not presuppose the existence of productive capital [...]. In form I,
M may be the only money capital, and in form II P may be the only productive capital, that appears on the
historical scene. 14

But in form III, i.e.,

{{
C
M
c

M C<mp ... P ... C

m c

C is presupposed outside the cycle twice: as the C in CMC <

mp

which, insofar as it consists of means of

production, is a commodity in the hands of its seller, is, insofar as it is the product of a capitalist production process,
itself commodity capital (and if it is not appears as such in the hands of a merchant); as the second c of cmc, which
must already be present as a commodity in order to be bought. In both cases, L and mp, and the second c of cmc
commodities are the elements of the formation of C, and must be replaced by equivalent commodities in the course
of circulation.
In addition to this, insofar as the capitalist mode of production [...] [is] the prevailing mode, all commodities must be
commodity capital in the hands of their sellers. 15
In addition, L and mp possess, as the form of the existence of P, in which they are united and now able to function as
productive capital, a different form to that they held on the market.
It is in this form, that of commodity capital, that C appears as a premise of C, i.e. that the existence of commodities
is premised on the existence of commodities. And this is because the cycle opens with capital in commodity form; the

13

C2, p. 174. In fact, this remark could be read as an anticipatory summary of the more developed point Marx is about to make.

14

C2, p. 175.

C2, p. 176. Marx continues: They continue to be so in the hands of the merchants, or they become so if they were not so
previously. Alternatively, they can be commodities such as imported articles, which replace original commodity capital, hence
simply give it another form of existence This point is of general importance.
15

circulation stage CMC <

mp

comprises both the entire circulation process and its result, and the result of the

circulation is P, whose function is production, and it is as a result of this not as the result of circulation that C
appears at the close of the cycle in the same form as its opening. In the other forms, the closing forms (M and P) are
the result of circulation, with the consequence that it is only at the end of the cycle that M and P are supposed to
have passed into the possession of others: neither opening form, neither M nor P, necessarily presuppose someone
elses money and someone elses production process. But C ... C directly presupposes CMC <

mp

, i.e. C = L +

mp, commodities in the hands of others, as its premise. C ... C thus presupposes the existence of commodities (C =
L + mp) as someone elses capital.
For these reasons, the commodity capital cycle demands to be considered not only as the general form of the
circuit, i.e. as a social form in which every individual industrial capital can be considered (except in the case of its
first investment), hence not only a form of motion common to all individual industrial capitals but at the same
time as the form of motion of the sum of individual capitals, i.e. of the total social capital of the capitalist class, a
movement in which the movement of any individual industrial capital simply appears as a partial one, intertwined
with the others and conditioned by them. 16

C ... C describes the movement of industrial capital in its totality: not only of the capital that replaces productive
capital but the surplus-value produced (which is in part spend in revenue, and in part accumulated, and, insofar as
the former, individual consumption is also encompassed by the cycle). 17
To summarise: M ... M indicates only the value aspect, i.e. valorisation of capital advanced; P ... P indicates the
capitalist production process as a reproduction process. C ... C, which already announces itself through its extremes
as capitalist commodity production, also comprises both individual and productive consumption from the start.
Marx concludes the chapter with three miscellaneous remarks.
First, he notes that, given that the cycle of commodity capital describes the movement of the total capitalistically
produced general product, 18 to grasp its movement in all its particularities, that the metamorphoses CM and MC
are functionally defined metamorphoses of a capital which are linked to those of other capitals must be augmented
by grasping how these metamorphoses are linked between capitals and with the total social product. This is why the
study of individual industrial capitals is based on the first two forms:
if attention is fixed exclusively on [...] [the commodity capital cycle] all the elements of the production process
seem to proceed from commodity circulation and to exist only as commodities. This one-sided conception
overlooks the elements of the production process that are independent of the commodity elements. 19

Second, if C ... C describes the movement of the total social product, expanded reproduction, with no change in the
level of productivity, can only occur if the material elements for additional productive capital are to be found within
that part of surplus-value that is to be capitalised. This means that, insofar as the production of one period serves as
the basis for the next, surplus product is immediately produced in the form that permits it to function as additional
capital. A rise in labour productivity will increase the material substance of capital, but not its value; it will, however,
create additional material for valuation.
Third. Marx notes that it is Quesnays credit that in his Tableu conomique that he selected C ... C in opposition to M
... M, and not P ... P.

16

C2, p. 177.

[E]very capitalistically produced article is commodity capital, irrespective of whether its use form destines it for productive or
individual consumption, or both. C2, pp. 177-8.
17

18

C2, p. 178.

19

C2, p. 179.
5

Chapter 4: The Three Figures1 of the Circuit

I The circular movement of industrial capital and its cycles2

Let us summarise.
We have seen the three cycles of industrial capital:
I

MC ... P ... CM

the cycle of money capital

II

P ... CMC ... P

the cycle of productive capital

II

CMC ... P ... C

the cycle of commodity capital

The overall movement can be described like this:

MC ... P ... CM . MC ... P ... CM . MC ... P ... etc.3

The three cycles can also be represented like this, with Tc standing for total circulation process,
I

MC ... P ... CM

II

P ... Tc ... P

III

Tc ... P (C)

Taking the three forms together:

each premise of the process presents itself as its result, i.e. as premises produced by the process itself
each moment presents itself as a point of departure, of transit and return
the process as a whole presents itself as unity of process of production and process of circulation
the circulation process mediates the production process, and vice versa

Self expansion of value valorisation of value is the determining purpose4 behind the cycles (the objective
content of the circulation of capital5): in cycle I this is even expressed in the form. Cycle II begins with the
valorisation process. Cycle III begins with valorised value, and finishes with newly valorised value.
Insofar as the movements CM and MC are acts of sale and purchase they amount to no more than acts within
the general circulation of commodities; in order to grasp them as movements of capital one has to move beyond this
formal aspect and consider the real connection between the metamorphoses of the various individual capitals, [...]
the connection between the circuits of individual capitals as partial movements of the reproduction process of the
Marxs Figuren is perhaps better rendered, as Hans Ehrbar does, as Formulae: Annotations to Karl Marxs Capital,
Volume 2, <http://www.econ.utah.edu/~ehrbar/glossary.pdf>, p. 317.
1

Where I insert my own subheads they appear, as here, in sans serif type.

It can also be represented as a circle (or spiral): see page 10 below.

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 180.

Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], p. 254.

1

total social capital [...].6

In order to do this we have been looking at the movement of capital through the optic of its various cycles. But,
[i]n a constantly rotating orbit, every point is simultaneously a starting-point and a point of return. If we interrupt
the rotation, then not every starting-point is a point of return. [] [N]ot only does every circuit [cycle]
(implicitly) presuppose the others, but [] the repetition of the circuit [cycle] in one form implies the motions
which have to take place in the other forms []. [] [T]he entire distinction presents itself as merely one of
form, a merely subjective distinction that exists only for the observer.7

This if each capital is involved in each of the three cycles at the same time, in addition all three cycles operate
simultaneously alongside each other. The reproduction of the capital in each of its forms and at each of its stages is
just as continuous as is the metamorphosis of these forms and their successive passage through the three stages.8
If a capital value exists in the form of either M, or P, or C, then at each stage in its movement it assumes one form
as opposed to the others. The cycle P ... P (for example)
would present itself not only as a periodic renewal of the productive capital, but equally as an interruption in its
function, the production process, until the circulation process had been completed; instead of taking place
continuously, production would be pursued only in spasms and be repeated only after periods of time [...].9

This is true for each individual portion of capital; and all portions of capital go through this movement.
Nevertheless: continuity is the characteristic feature of capitalist production, and is required by its technical basis
[...].10 Thus the real circuit of industrial capital in its continuity is [...] not only a unified process of circulation, but
also a unity of all its three circuits.11 But this unity is dependent on whether each fraction of capital can pass
through its phases of its cycle uninterruptedly. In a developed process of production various fractions of capital
find themselves at various stages of movement at the same time. Should one fraction be held up in one part of its
cycle for any reason, the whole movement is disturbed. Thus insofar as the real circuit of industrial capital in its
continuity is both a unified process of circulation and a unity of all its three circuits is true it is because the latter
determines the former:12 [e]very delay in the succession brings the coexistence into disarray, every delay in one
stage cause a greater or lesser delay in the whole circuit, not only that of the portion of capital that is delayed, but
also that of the entire individual capital.13
II The dialectical unity of the movement of individual capitals and that of total social capital

Thus what we have here is a unity of two distinct elements: the movement of individual capitals, halting and
spasmodic, and that of overall capital: continuous and uninterrupted. And it is the former that determines the latter.
That this contradictory unity is the locus of crisis, i.e. that this unity both can and does break down, and when it
does crisis occurs, should be clear.
Marx now summarises, step by step, the internal structure of the unity:
6

C2, p. 180, italicisation added.

C2, pp. 180-1.

C2, p. 181.

C2, pp. 181-2 (note Marxs use of the conditional).

C2, p. 182.

10

C2, p. 183.
12 [T]he total process is [] the unity of the three circuits, which are the different forms in which the continuity of the
process is expressed. C2, pp. 183-4
11

C2, p. 183. This state of affairs is complicated by these factors too: the size of each individual industrial capital not only
determines the scale of the overall process, but is in turn dependent on not only the means of the capitalist and the minimum
necessary size for the particular branch of industry, but also must exist in definite numerical ratios in its constituent parts, both
technically and in value terms..
13

The immediate14 form in which the process presents itself is as a succession of phases

The movement of capital into a new phase means its abandonment of the previous one

Each particular cycle has one of the functional capital forms as its starting point and point of return

The total process15 is the unity of the three cycles

The continuity of the process is expressed as this unity

For each functional form the total cycle presents itself as its own particular circuit

Each of these cycles conditions the unity of the total process

Such that the circular movement of each form determines that of the others

It is a prerequisite for the total production process that it is at the same time a process of reproduction

Thus it is a cycle of each of its elements

Different fractions of capital pass successively through the different stages and functional forms

Each form passes through the cycle simultaneously with the others.

But it is always a different fraction of capital which presents itself

A part of capital always exists in one particular form in the process of being transformed into the next

But this part is ever-changing, as well as being constantly reproduced

The constant process of all three forms is mediated by the circuit [cycle] of the total capital through precisely these
three phases [of commodity, money and productive capital].16

Capital as a whole exists, simultaneously present and spatially coexistent, in its different functional forms

14

Marx says nchste nearest: C2, p. 183.

Marx says Gesamtproze, and Hans Ehrbar translates the prefix Gesamt- in this section as aggregate: Annotations to Karl
Marxs Capital, Volume 2, <http://www.econ.utah.edu/~ehrbar/glossary.pdf>, pp. 337ff. This should be born in mind
with regard to my use of the word total in the lines which follow.
15

16

C2, p. 184.
3

But it is constantly passing from one form into another

It functions in each form in turn

The forms are fluid17

Their simultaneity is mediated by their succession

Given that each form both follows and precedes the others, the return of one fraction of capital to a form is
determined by the return of another to its form

Each fraction follows its own course, such that it is always another fraction that finds itself successively in each
form

These cyclical movements are moments which simultaneously and successively constitute the total process

It is only in the unity of the three circuits [cycles] that the continuity of the overall process [Gesamtprozess] is
realised, in place of the interruption we have just delineated. The total social capital [gesellschaftliche Gesamtkapial]
always possesses this continuity, and its process always contains the unity of the three circuits [cycles].18
III Factors influencing the interruption of the reproduction of individual capitals

What might interrupt the continuity of reproduction of individual capitals?

First: unequal distribution of value in terms of both quantity and temporally across the different stages and
functions
Second: these quantities of value may be distributed differently according to the nature of the commodity to be
produced, hence according to the sphere of production in which the capital is to be invested
Third: the effect of natural conditions (in agriculture, for example).
IV The independent nature of value as capital

Capital is, in addition to being a class relation i.e. having a specific social character based on the existence of
wage-labour a movement; it can therefore only be understood in its movement, and not as something static. In its
movement, capital asserts its nature as value which is independent.19 The movements of capital appear20 as the
actions of the individual capitalist, who mediates the circular movement of capital by her own activity.21
17

C2, p. 184.

C2, p. 184.
19 Verselbstndigung des Werts. Value which has an independent, autonomous or isolated existence, or which has achieved this
existence. Marx is arguing for the independence that value acquires as capital.
18

20

Erscheinen.

As we have already had cause to see, Marx uses the verb erscheint (to appear) when he wants to identify a surface
expression generated by deeper mechanisms in order to identify the mechanisms that generate actual events and processes and
their character. See Hans Ehrbars Glossary to Marxs Capital and Other Writings,
21

Revolutions in value22 show the movement of value to be what it really is: something which acts with the force of
an elemental natural process, [which] prevails over the foresight and calculation of the individual capitalist.23
The sequence of metamorphoses of capital implies a comparison of the change in the magnitude of value brought
about in the cycle with the original value of the capital. The autonomy of value from labour-power is introduced by
ML (the purchase of labour-power), and is effected by the production process as the exploitation of labourpower; this independence does not reappear in the circuit in which money, commodities and elements of
production are no more than alternating forms of the capital value in process, in which the past magnitude of value
is compared with its present, changed value.24
Marx now quotes Samuel Bailey to the effect that value is a relation between contemporary commodities;25 Baileys
mistake, Marx argues, is to confuse value with exchange-value, i.e. value with its form of appearance, thus denying the
possibility of comparison of magnitude of value over time (i.e. of comparing value with itself).
V The effect of changes in the value of the elements of production on the forms of the movement of capital

To consider the movement of capital in its pure state26 cycle in its pure state we need to make the following
assumptions:
1 commodities are sold at values;
2 there are no technical changes in the production process (changes which might devalue productive capital);
3 consequences of a change in the value of elements of productive capital on the value of already existing
commodity capital will be disregarded.
Let C = 10,000 lb of yarn
8,440 lb (422 replaces the capital value), but if the value of cotton, coal, etc. (i.e. mp) rises then this 422 may not
be enough to replace the elements of the productive process; additional money capital is necessary.
The converse is also true, and capital is set free.
The process runs normally if disturbances in the repetition of the cycle balance each other out; the greater the
disturbances the more money must be set aside to ride them out.27 The consequence of this is to turn the function
of the industrial capitalist into a monopoly of large-scale money capitalists [...]28
It needs to be noted here that a change in the value of the elements of production affects the cycle of money capital
in a different way to those of productive and commodity capital.
M ... M is the formula for newly invested money capital: a fall in the value of the elements of production means
that a smaller outlay than would be necessary is required: given no change in the level of the productive forces, the
scale of production depends only the volume and scale of means of production that a given quantity of labourpower can work with, not on its value (nor on the value of labour-power, which only affects the magnitude of

<http://www.econ.utah.edu/~ehrbar/glossary.pdf>, p. 224ff. Marx is suggesting here that, despite appearances, the tail is in
fact wagging the dog.
22

Uncontrollable and unexpected changes in the magnitude of value.

23

C2, p. 185.
In other words, the independent nature of value is capital manifests itself as those changes in value wrought in production.

24
25

C2, p. 186, italicisation added.

26

C2, p. 186.

A condition exacerbated by the growth in the minimum necessary size of capital to be advanced which accompanies the
development of capitalist production.
27

28

C2, p. 187.
5

valorisation). The converse is also true. In both cases what is affected is the amount of money capital necessary to
found a business of a given size: either more money capital is tied up, or more is set free.
P ... P and C ... C are affected in this way only insofar as m is accumulated. Otherwise, ignoring the effect of a
change in value of the elements of production on already existing commodities, i.e. commodities already involved in
the process of production, it is not the original outlay that is affected, but a capital value in its process of
reproduction, i.e. C ... C<

mp

, the conversion of commodity capital back into the elements of production. A fall in

their value opens three possibilities:

a continuation of the reproduction process on the same scale (with a portion of money capital set free)
an expansion of the reproduction process (necessary technical proportions permitting)
the building up of a larger reserve of raw materials, etc.

A rise in the value of the replacement elements of commodity capital provokes a converse set of possibilities and
consequences.
There may of course be countervailing tendencies where P ... P and C ... C are concerned. If the cotton spinner has
a large reserve of raw cotton (productive capital, P), a fall in the value (price) of cotton will devalue a part of his P.
The converse is also true. If, however, he has reserves in commodity capital, e.g. in yarn, then a fall in the value of
cotton will devalue a part of his overall capital in cycle.
With regard to CMC<

mp

, a changes in the value of C have different effects depending on when they occur with

regard to the completion of the phases of the cycle, i.e. whether they occur before or after CM or not. In short,
[t]he effect on the various individual capitals invested in the same branch of production can be very different
according to the different circumstances in which they are found.29
VI The social origin of the commodities which enter the movement of capital

Under conditions of the developed, i.e. dominant, capitalist mode of production, in the case of MC<

mp

mp is

normally the functioning commodity capital of others: for the seller, what occurs is CM. But it may well be the
case that the circulation process cuts into the circulation of commodities of diverse (pre-capitalist) modes of social
production. But the origin of these commodities is immaterial for industrial capital: if they function on the market
as commodities they enter the movement of industrial and the circulation of surplus-value it bears. Thus the
circulation process of industrial capital is characterised by the many-sided character of its origins, and the existence
of the market as a world market.30
But, even though Mmp obliterates the provenance of commodities that enter the movement of capital, the latter
demands their replacement through reproduction: the capitalist mode of production tends to transform all possible
production into commodity production, and it does this precisely by drawing this production into its circulation
process. The intervention of industrial capital everywhere promotes [...] [the] transformation [into commodity
production], and with it too the transformation of all immediate producers into wage-labourers.31

C2, p. 189. Marx here mentions in passing the effect on money capital of changes in the duration of the circulation process,
but postpones further discussion to discussion on turnover (dealt with in the second part of this volume)
29

C2, p. 190. The same holds for money: commodity capital functions to money as commodity, hence foreign money
functions to commodity capital as money, and the money here functions as world money.
30

31

C2, p. 190.
6

Equally, whatever the provenance of the commodities that confront industrial capital, they confront it in its form of
commodity capital, they themselves assuming the form of the commodity-dealers or merchants capital. [t]his
by its very nature embraces commodities from all modes of production.32
VII The circulation of capital as the circulation of commodities, and as the circulation of capital

The mass production of commodities presupposes the mass sale of commodities, which supposes sale to a
merchant rather than to an individual consumer. There can be direct sale between capitalists insofar as an industrial
capital in one branch of production supplies means of production to another. Each industrial capitalist is a direct
seller insofar as he is his own merchant.
Commodity trade is presupposed, as a function of merchants capital, and this develops even further with the
development of capitalist production.33 Nevertheless, in what follows here, we shall assume direct sale.
We shall also make another assumption: here we shall assume money to be metallic money, and shall ignore
symbolic money and credit money.
The laws governing the circulation process of industrial capital were developed in volume 1, chapter 3:34 a given
quantity of money will put more industrial capitals into circulation in function of the velocity of money; capital of a
given value requires less money for its circulation in function of how much money functions as means of payment,
and the shorter this means of payment is; all else being equal, the amount of money necessary to circulate as money
capital is given by the sum of the process of the commodities, or, given the quantity and values of the commodities,
by the value of money itself.
Nevertheless, these laws only apply insofar as the circulation process is a set of acts of circulation, not insofar as
these acts form part of the functionally specific cycles of industrial capitals.
CM for the possessor of a commodity is MC for the buyer: the first metamorphosis CM is the second MC for
the commodity which steps up as M Thus, insofar as the capitalist is a buyer and seller of commodities, and his
capital functions as money towards others commodities, this is simple commodity circulation.
But MC(mp) can represent the intertwining of the metamorphoses of different industrial capitals: the commodity
capital (yarn, for example) is replaced by means of production (coal, for example): a part of the cotton spinners
capital exists in money form and is converted into commodity form; a part of the mine-owners capital exists in
commodity form and is converted into money form. The same act of circulation now represent the intertwining of
the cycles of two industrial capitals (moreover from different branches of industry).
But this is not always, nor necessarily, the case. The mp into which M is converted need not be a functional form of
industrial capital, produced by a capitalist; ML is never the intertwining of industrial capitals, for L only becomes
capital when it is sold to the capitalist.35
In addition, it is not necessarily given that the functionally determined role fulfilled by every metamorphosis of an
industrial capital represents the opposite metamorphosis of another.36 Two examples:
1 In P ... P, the M that turns C into money may be for the buyer no more than the monetary expression of
surplus-value (if the commodity is an article of consumption).
32

C2, p. 190.

C2, p. 191. Alternative translation: Trading in commodities as the function of merchants capital is a premise of capitalist
production and develops more and more in the course of development of such production. Hans Ehrbar, Annotations to
Karl Marxs Capital, Volume 2, <http://www.econ.utah.edu/~ehrbar/akmc2.htm>), p. 369.
33

34

C1, pp. 198-219.

35

C2, pp. 168-9.

[P]articularly if we assume that the whole of production for the world market is pursued on a capitalist basis, adds Marx,
without developing the idea further. C2, p. 194.
36

2 In MC<

mp

(i.e. involving accumulated capital) the M that turns C into money may be for the buyer of mp a

replacement of advanced capital or may simply not re-enter the circulation of capital at all (particularly if it enters as
expenditure of revenue).
Conclusion: how the various components of total social capital replace one another is not amenable to the tools of
analysis we developed for the simple circulation of commodities, but requires a different mode of investigation.37
{VIII Mode of production and mode of commerce

{Tangentially, Marx here addresses the concepts of natural economy, money economy and credit economy,
developed by bourgeois political economy. These concepts differentiate societies on the grounds of differences in
modes of commerce or exchange, whereas what really differentiates is the social character of production. In this
sense, what is specific to capitalism is this:
[C]apitalist production is commodity production as the general form of production, but it is only so, and
becomes ever more so in its development, because labour appears [...] as a commodity, because the worker sells
labour, i.e. the function of his labour-power [...]. The producer becomes an industrial capitalist to the same extent
as labour becomes wage-labour. In the relation between capitalist and wage-labourer, the money relation [...]
becomes a relation inherent in production itself. But this relation rests fundamentally on the social character of
production, not on the mode of commerce [...]. It is typical of the bourgeois horizon [...] to see the foundation of
the mode of production in the mode of commerce corresponding to it, rather than the other way round.38}
IX The relation between the capitalists value supply and demand39
(1) Disjunction between supply and demand the prerequisite of valorisation

Because the capitalist puts in more value in the form of commodities into circulation than she withdraws, she
withdraws more value in the form of money from circulation than she puts in; her supply of commodity capital is
always greater than her demand for it. If supply equalled demand there would be no valorisation of capital. And
what is true for the individual capitalist is here true for the capitalist class.
Insofar as the capitalist personifies industrial capital, her own demand consists in demand for mp and L.
In value terms demand for mp < capital advanced. Demand for L is determined by v:C, the ratio between variable
capital and total capital. This demand grows more slowly than demand for mp: the capitalist buys more mp than L,
and increasingly so.
Insofar as the worker converts her wages into means of subsistence, the capitalists demand for L is indirectly a
demand for the workers means of consumption. This demand = v. The limit of the capitalists demand is C = c + v,
but her supply is c + v + s. If the composition of her commodity capital is 80c + 20v + 20s, her demand is 80c + 20v,
20% smaller than her supply: the greater the rate of profit, the greater the percentage of s produced, the smaller her
demand in relation to supply.
As production develops, the capitalists demand for L, indirectly her demand for means of subsistence, grows
increasingly smaller than her demand for mp; at the same time, her demand for mp is always smaller than her capital,
therefore always smaller than the commodity product of the capitalist who works with the same capital under
similar conditions who supplier her with these mp.
If C = 1,000, and c = 800, demand for mp (= c) = 800.

37

Max will return to this later in the volume when he deals with the reproduction of capital.

38

C2, p. 196.

39

This last section of the chapter is taken from a different MS.

8

Another capitalist (or capitalists, independently of how many, and independently of in which proportions) supplies,
for each 1,000, assuming the same rate of profit mp = 1,200; in value terms her demand = 2/3 of the others
supply, while her demand is only 80% of her supply.
(2) Turnover

If total capital = 5,000, of which 4,000 is fixed and 1,000 circulating; of this latter 1,000 = 800c + 200v.
Circulating capital must turn over 5 times for total capital to turn over once. Commodity product = 6,000, 1,000
greater than capital advanced, which gives the same ratio of surplus-value: 5,000C : 1,000s = 100(c+v) : 20s. Conclusion:
turnover does not affect the ratio of total demand to total supply.
If fixed capital has to be renewed in 10 years, each year 1/10 (= 400) is amortised. After 1 year we have fixed
capital = 3,600 and money = 400. Although (assuming total capital turnover time = 1 year) annual demand =
5,000 (= original capital value advanced), this increases with respect to circulating capital and decreases with
respect to fixed.
(3) Reproduction

If the capitalist consumes m in its entirety and reconverts only the original capital sum into productive capital,
demand = supply. But this is not so in respect of the movement of capital: as capitalist her demand amounts to 80%
of her supply; the other 20% she consumes as a non-capitalist, for her private requirements.

demand

supply

as capitalist

100

120

as non-capitalist

20

---

Totals

120

120

The above assumption amounts to assuming the non-existence of capitalism, since it assumes its driving force as
enjoyment and not enrichment, personal consumption not valorisation. More importantly, it is also technically
impossible: the capitalist must form a reserve fund to guard against price fluctuations; she must accumulate capital,
to extend production and incorporate technical advances. But to accumulate capital, surplus-value must be
withdrawn from circulation, and reserved as a hoard until it reaches the dimension necessary to extend production.
During the hoarding period, the capitalists demand does not increase: the money is immobilised and does not
withdraw commodities from circulation.40

40

Marx here (C2, p. 197) admits that ignoring credit here ignores the possibility of accumulation through interest.
9

The Circuit of Capital (with Legend)41

The circuit of industrial capital is best

represented by a circular flow diagram. This
circuit is important for laying out the basic
structure of the capitalist economy, and
how the spheres of production and
exchange are integrated with one another
through the movement of capital as
(surplus) value is produced, distributed and
exchanged. As the circuit repeats itself,
surplus-value (s) is thrown off. This shows
that capital as self-expanding value
embraces not only definite social relations
of production, but is also a circular
movement going through its various stages.
If s is accumulated for use as capital, we can
think of expanded reproduction as being
represented by an outward spiral
movement.

41

From Ben Fine and Alfredo Saad-Filho, Marxs Capital, 4th edition (London and Stirling, Virginia, 2003), pp. 54 and 55.
10

Chapter 5: Circulation Time1

The passage of capital through production and the two stages of circulation occur successively in time. Let us call
the time that capital spends in the sphere of production its production time, and that it spends in that of circulation
time its circulation time. The total time it takes to describe its cycle is therefore production time + circulation time.
I Production time2

In what does production time consist? Evidently, it consists in the labour process, but we also need to take into
account:
3
that a part of constant capital exists in instruments of labour which serve over the course of numerous

labour processes until they wear out.

periodic interruptions (at night, for example) of the labour process interrupt the functioning of the objects

of labour while not affecting their stay in the place of production.

that the capitalist needs to hold a stock of raw and ancillary (etc.) materials to be able to manage accidents

of daily supply: this stock is only consumed gradually.

Thus a capitals production time is not the same as its functioning time. The production time of means of
production consists in:
1 the time they function as means of production in the production process
2 interruptions which impede the above
3 the time they are held in reserve in function of being productive capital.
Thus we can see here a distinction between the process of production and the sphere of production. But neither is it
the case that the production process and the labour process are identical in terms of time, for the latter may be
exposed to intervals in which the object of labour is exposed to processes without the addition of human labour.4
Here we see a distinction between production time and working time (during which former time productive capital is
latent).
That capital might be idle does not make it unproductive, if its idleness is a condition for the uninterrupted flow of
the production process in the case, for example, of the buildings, etc. that are necessary to store the productive
reserve (latent capital) for it creates surplus-value: it makes the product dearer, but a part of this labour is not paid
for. Labour always carries over the value of the means of production, to the extent that it actually consumes these
deliberately as means of production.5
Thus interruptions, even normal interruptions, in the productive process create neither value not surplus-value
(hence the drive towards night work). An excess of production time over labour time whatever the reason
results in means of production failing to absorb labour. Hence the tendency of capitalist production to approximate
production time to working time. Nevertheless, production time always includes working time, and the excess is a
condition of the productive process: production time is always the time that capital takes to produce use-values and
valorise itself, hence to function as productive capital, although it includes time in which it is either latent or
To a certain degree the content of this chapter overlaps with that of chapter 14 (Karl Marx, Capital, vol. 2 (Harmondsworth,
1978) [hereafter C2], pp. 326-33), which was extracted from a different manuscript.

Where I insert my own subheads they appear, as here, in sans serif type.

Arbeitsmittel.

In the case of tanning, corn which has been sown, wine which has to ferment, and so on .

C2, p. 202.
1

produces without being valorised.6

II Circulation time

In circulation capital exists as commodity capital and money capital. The two circulation processes consist in capital
transforming itself from commodity form to money form and from money form to commodity form. These
transformations are processes of simple commodity metamorphosis.
Circulation time and production time are mutually exclusive7 (circulation is an interruption in production); during
circulation capital does not function as productive capital and produces neither commodities not surplus-value.
The expansion and contraction of the circulation time [...] acts as a negative limit on the contraction or expansion
of the production time, or of the scale on which a capital of a given magnitude can function.8 The more the
circulation metamorphoses are notional,9 i.e. the more circulation time tends to zero.10
Circulation time restricts production time and it does so in function of its duration. How does classical political
economy (even that current within it that Marx denotes as scientific economics11) see the matter? Deceived by
appearances, the effect of the circulation process on the valorisation process of capital in general,12 it conceives the
restriction as positive because its effects are positive. In this way, it holds to the illusion of that capital possesses a
mysterious power to self-valorisation independent of production and the exploitation of labour. This illusion is reinforced by:
1 the capitalist manner of calculating profit, in which in relation to capitals in different spheres of
investment, in which only circulation times differ, longer circulation time, being the basis for higher price,
contributes to the equalisation of profit;
2 that circulation time forms only one moment of turnover time; but this latter includes production (or
reproduction) time;
3 that the conversion of commodities into variable capital is conditioned by their previous transformation
into money, i.e. in the circulation process; such that accumulation arising therefrom appears due to
circulation time itself.
Circulation is composed of two acts, CM and MC, of which, as we have seen,13 the most problematic is the
former. Even so, MC, the conversion of money into the elements of production, may be affected by a range of
unpredictable circumstances not immediately visible in the simple form MC,14 and which can affect the circulation
6

C2, p. 203.

C2, p. 203.

C2, p. 203.

Marx says ideell. Cf. Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], pp. 189-90, where Marx talks about
how the prices of commodities are fixed in terms of gold, without the presence of actual gold. Marx here uses the same term
ideell to talk about the price form. In his annotations (Annotations to Karl Marxs Capital,
<http://www.econ.utah.edu/~ehrbar/akmc.htm>), Hans Ehrbar comments: Marx says here something about the price
form which is true for all value forms of a commodity: it is notional. The German word translated here by notional is
ideell. It is incorrect to translate ideell with ideal. Marx makes a strict distinction between the German terms ideal and
ideell. Something which is ideal is by definition not real, it is an idealization of something real. The price of a commodity is
not ideal in this sense. Marx held the view that social relations are real forces [...]. One should not be confused by this
formulation and think Marx wanted to deny their reality. (p. 724)
9

For example, in the case of a capitalist who works to order, receives payment on the delivery of her product, is paid in her
means of production.
10

11

C2, p. 204.

12

C2, p. 204.

13

C1, pp. 198-209.

For example, the necessary means of production may not be available on the market, or may have to be procured from
distant markets; there may be dislocations in supply; there may be variations in price; etc.
14

time. In addition, CM and MC are frequently separated not only in time but also in space.
Circulation is as necessary for production and reproduction as production itself; but for this there is no reason to
confuse the circulation agents with the production agents just as there is none to confuse the function of
productive capital with those of money and commodity capital.
There is another distinction between CM and MC which arises from the nature of capitalist production: CM is
also CM, the realisation of the surplus-value in C. Sale is thus more important than purchase. MC is [...] a
necessary act for the valorisation of the value expressed in M, but it is not a realisation of surplus-value; it is a
prelude to its production, not an appendix to it.15
The circulation of commodity capital CM is delimited by the fact that it must be realised, under pain of spoilage,
within a given interval of time. The absolute limits to this time is imposed by the perishablity of the product.
Use-values remain the bearers of perennial and self-valorising capital value only insofar as they are constantly
renewed [...]. Their sale in their finished commodity form, i.e. their entry, mediated through sale, into productive
and individual consumption, is however the constantly repeated condition for their reproduction. They must
change their old use form within a certain time, and continue their existence in a new one. It is only through this
constant renewal of the body that the exchange-value maintains itself.16

15

C2, p. 205.

16

C2, p. 206.
3

Chapter 6: The Costs of Circulation

In this chapter we shall be examining the costs supposed by the circulation of commodities. We shall see three
classes of costs:
1 those that are incurred in realising the transformations CM and MC
2 those that arise in the formation of stock
3 those supposed by the transport of commodities
Alone of the three, the first category, although it supposes the expenditure of labour, does not impart value to the
commodities affected by it. The second, insofar as it operates on the product as use-value, imparts value (and
therefore surplus-value) to the commodities concerned, even though at the total level it represents a deduction
from social capital. The last of these, transportation, although it occurs within the sphere of circulation, is actually a
continuation of production within this sphere.

1 Pure circulation costs

(a) Buying and selling time
We are assuming that commodities are sold at value: what is involved in the sale and purchase of commodities is
their conversion from one value form to another. 1 Nevertheless, the realisation of CM and MC costs both time
and labour-power. 2
Here we have a function both necessary for reproduction and unproductive, 3 carried out by those we shall consider
as merchants. For our purposes, a merchant is a capitalist who buys and sells commodities (i.e. we shall be
disregarding merchants capital): she expends her labour-power and labour time in CM and MC, thus performing
a necessary function even though the content of her labour creates neither value not products. 4
Assuming the merchant is a wage-labourer, she works, as such, part of the day for nothing: let us say she receives
the value product of 8 hours labour but in fact works 10. Neither her necessary labour nor her surplus labour
create value, although it is by means of the former that she receives part of the social product. 10 hours labour are
in this way used up in circulation, and is not available for productive labour; the 2 hours surplus labour are thus not
appropriated as value, although the amount to a cheapening of the costs of circulation. To the extent that the
capitalist employs wage-labourers as buyers and sellers there is an additional outlay of capital: a part of the variable
capital is advanced in acquiring labour-power that only functions in circulation; the scale on which the capital
advanced functions productively is correspondingly reduced.
(b) Book-keeping
Book-keeping (which includes price calculation) requires that labour-time is spent both as labour-time and, to the
extent that book-keeping requires space and equipment, as means of labour. 5 Again, we have a necessary
unproductive function, for which a part of capital is withdrawn from production and belongs to costs of
circulation.

And even if they are not sold at their values, the sum of converted values is the same.

But not to create value.

And typically, comments Marx, is converted from the secondary activity of many into the principal activity of a few.

He is a part of the faux frais of production.

Arbeitsmittel.
1

[A]s value in process, whether within the production sphere or [...] circulation [...], it is only ideally 6 [notionally] that
capital exists in the shape of money of account [...]. 7 Through book-keeping, registering and controlling the
movement of capital, valorisation receives symbolic reflection in the imagination. 8
Nevertheless, we need to make a distinction between the costs arising from book-keeping and those from buying
and selling. The latter arise from the social form of production itself, out of the fact it is a process of production of
commodities; the former from the fact that capitalist production takes place on an increasingly social scale and loses
its individual character.
(c) Money
The fact that certain commodities function as money arises from the nature of commodity production itself, since
the mass of commodities must assume the money form: the quantity of money commodity and its needs of
maintenance grow in function of the growth of the mass of commodities. The commodities which serve as
money commodity are destined for neither individual nor productive consumption; rather they represent social
labour fixed in a form in which it serves merely as a means of circulation [...] [in other words] costs of circulation
that arise simply from the social form of production. They are faux frais of commodity production in general 9

2 Costs of storage
Circulation costs that arise from changes in form of value do not enter into the value of commodities; capital spent
on them represent deductions from productive capital.
But there are also production processes that are continued in the sphere of circulation whose productive character
is hidden by the circulation form that do have a value-forming effect for the individual capitalist (even if they may
be unproductive from a social point of view), and form an addition to the selling price. 10 Since all labour that adds
value adds surplus-value, costs that increase the value of commodities without increasing use-value are social faux
frais at the same time as enriching the individual capitalist. Nevertheless, insofar as what they add to the value of
commodities just distributes these circulation costs equally they do not cease to be unproductive in character: this
addition to the price of the commodity merely distributes these costs of circulation.
(a) Stock formation in general
The commodity product forms a commodity stock as long as it is in the interval between the sphere of production
and that of consumption. As such, as stock, commodity capital appears twice in each cycle of capital: once as the
Marx uses the word ideell; in Karl Marx, Capital vol. 1 (Harmondsworth, 1990) [hereafter C1.], pp. 189-90, where he talks
about how the prices of commodities are fixed in terms of gold, without the presence of actual gold. Marx here uses the same
term ideell to talk about the price form. In his annotations (Annotations to Karl Marxs Capital,
<http://www.econ.utah.edu/~ehrbar/akmc.htm>), Hans Ehrbar comments: Marx says here something about the price
form which is true for all value forms of a commodity: it is notional. The German word translated here by notional is
ideell. It is incorrect to translate ideell with ideal. Marx makes a strict distinction between the German terms ideal and
ideell. Something which is ideal is by definition not real, it is an idealization of something real. The price of a commodity is
not ideal in this sense. Marx held the view that social relations are real forces [...]. One should not be confused by this
formulation and think Marx wanted to deny their reality. (p. 724)
6

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 211.

C2, p. 211.

C2, pp. 213-14.

And since these costs differ among capitals, adding them to the price and remember that here we are still assuming that
price = value of the commodity means they are distributed in the proportion that in proportion to the amount to be borne
by each individual capitalist.
10

product of a given cycle, once, present in the market to be sold and transformed into productive capital, as the
product of another indeed, for the (re)production process to flow smoothly a mass of commodities (mp) must
form a stock (i.e. be present on the market). 11 (In addition, productive capital also includes labour-power; the
money form here is value form of the means of subsistence the worker must find on the market.)
The general point is this: the shorter commodity capital exists as stock (an inexpedient and involuntary stay on the
market 12), i.e. the more quickly it is sold, the more fluid the reproduction process. But, at the same time, the very
presence of commodity stock is a condition for the flow of the reproduction process.
The existence of stock requires objects of labour and labour-power for its maintenance, supposing costs that count
as costs of circulation. But these costs are costs (unlike the pure circulation costs we saw at the beginning of the
chapter) that do add value, i.e. increase the price, (and hence add surplus-value) to the product. The capital and
labour-power used for maintenance and storage are withdrawn from the direct production process, must be
replaced out of the social product, and thus have the effect, in that more capital and labour is necessary to produce
the same effect, of reducing the productivity of labour. 13
What is the distinction between the costs of circulation here being considered the costs of maintenance and
storage of commodity stock and the pure costs considered above? The latter do not operate on the use-value in
which the commodity value exists: they arise only from the specific social form of the production process (only
from the fact that the product is produced as a commodity and must therefore also pass through a transformation
into money). 14 In the former case, on the other hand, the value of the commodities is conserved, or increased, [...]
because the use-value, the product itself, is [...] subjected to operations in which additional labour works on the usevalues. 15 Hence
their actual object is not the formal transformation of value, but the conservation of the value which exists in the
commodity as [...] a use-value, and hence can be conserved only by conserving the product, the use-value itself.
The use-value is not increased or raised; on the contrary, it declines. But its decline is restricted, and it itself is
conserved. 16

Marx now criticises Adam Smiths notion that the formation of stock is something specific to capitalist
production. 17 Stock, Marx points out, exists in three forms:
in that of productive capital
in that of the individual consumption fund
in that of commodity capital

Although the absolute size of stock may increase in all three forms, it declines relatively in one form if it increases in
one or the other (or both). These relative sizes depend on the purpose of production:
Where production is orientated towards the satisfaction of the producers own requirements (Marx cites the

ancient peasant economies), i.e. where only a small proportion of goods are produced for exchange, the
great mass of the social product does not assume the commodity form and stock in the form of
commodities is small or non-existent. Stock in the form of consumption fund means of subsistence is

If this latter is produced to order there will be an interruption until it is produced.

12 C2, p. 215.
11

13

Marx thus denotes them (C2, p. 216) as expenses.

14

C2, p. 216, italicisation added.

15

C2, p. 216.

16

C2, p. 217.

17

And the contrary position, that stock formation declines with the development of capitalist production.
3

relatively big. 18
Stock in the form of productive capital exists as means of production directly engaged in production of

latently so. The development of the capitalist mode of production increases the social productivity of labour
in an unprecedented fashion, and the mass of means of production as means (instruments) of labour grows
constantly as both premise and effect of this growth in the productivity of labour. 19 As consequence the
total mass of means of production including too raw materials, ancillary products and other means and
objects of labour which must, to avoid interruptions in the process of reproduction, be at hand either on
the market or in the sphere of production grows constantly. Hence a growth in stock in the form of
productive capital and commodity capital.

But the degree to which capital forms a commodity stock i.e., exists on the market or exists as a stock of

latent productive capital (i.e. in the sphere of production without being directly productively engaged)
depends on the speed, regularity and certainty of supply: the less these are fulfilled, the more capital must
take the form of latent capital (and, by the same token, the very development of capitalist production itself
facilitates the efficacy of supply and reduces the relative size of stock in the form of latent productive
capital). But the existence of stock either in the form of latent productive capital or commodity capital on
the market is not the existence of stock or not but a question of the form of the stock.

(b) The commodity stock proper

Three factors, which arise from the social form of capitalist production, are pertinent here:
With the development of capitalist production the more the product takes the commodity form (even,

compared with other modes of production, at the same scale of production); but, to the extent that
commodity product does not pass directly into individual or productive consumption, it exists in the form
of commodity stock. Independently of the scale of production, therefore, the scale of commodity stock
grows in function of the development of capitalist production. But this only represents a change of the
social form of stock: to commodity form rather than those of elements of production and consumption. A
rise in the absolute size of commodity stock in these conditions is a consequence of the greater scale of
production concomitant to capitalism.

With the development of capitalist production, the scale of production is determined less by immediate

demand for its product and more by the capitalists drive to valorisation (and hence expansion of scale of
production). The mass of capital tied up in the form of commodity stock on the market grows.

As the mass of the population are transformed into wage-labourers people who live from hand to mouth,

who receive their wages by the week and spend them by the day 20 means of subsistence must exist on the
market in the form of stock.

Whatever the social form of the stock, its existence implies costs, 21 costs which represent an outlay of social capital,
and which do not enter into the formation of the product, and are thus deductions from it (however necessary an
expenditure of social wealth they may be).
To what degree do these costs enter into the value of commodities? It cannot be that costs arising from the
conservation of the commodity product increase its value, for in that case it would be advantageous in itself to delay
18

Smith held that no stock existed in such societies, confusing the form of stock with stock itself.

19

Cf. C1, pp. 772-81.

20

C2, p. 221.

21

Costs which are reduced, Marx notes (C2, p. 222), the more the stock is socially concentrated.
4

the sale of the commodity product. 22 The expenses it cost [...] [the capitalist] to maintain [...] [the product] in its
commodity form pertain to his own individual expenses and do not interest the buyer [...]. The latter does not pay
him for the circulation time of his commodity. 23
On the other hand, there can be no stock without circulation; hence no circulation without stock. In addition,
The volume of the commodity stock must be sufficient to satisfy the volume of demand over a given period; this
volume must be larger than the average sale, for otherwise excesses over this average could not be satisfied.
Nevertheless, as it is disappearing constantly, the stock must be renewed constantly: this renewal must come from
production, and thus depends on the time necessary for the reproduction of the commodities. The formation of
stock in this way is a premise of the continuity of circulation, and therefore of the reproduction process (which
includes the circulation process).
Given that the commodity stock is, given the scale of production, only the commodity form of the stock that would
still exist as either productive stock (latent production fund) or as consumption fund (reserve of means of
consumption) if it did not exist as commodity stock, the maintenance costs it supposes objectified or living labour are
the transposed expenses of maintaining the social production fund and the social consumption fund. The increase
in value to which they give rise simply distribute these expenses proportionally between the various commodities
[...]. 24
A normal stock is that which has arisen as a necessary condition of commodity circulation; but as soon as
commodities existing as stock fail to make room for incoming production it or a part of it arises from the
stagnation of circulation, not as a premise for the uninterrupted sale of commodities but as a consequence of their
unsaleability. Its costs now arise from the form of the stock, from the difficulty of achieving the metamorphoses of
sale, and rather than adding value to the commodities form a deduction, a loss of value in the realisation of value 25 It
is important to note that in both cases normal and abnormal commodity stock formation the form of the stock
remains the same.
The costs of stock formation lie in:
a quantitative reduction in the mass of the product (through spoilage, for example)
a deterioration of quality
the objectified and living labour necessary for the stocks storage and conservation

3 Transport costs
The general law is that we have observed is that all circulation costs that arise from a change in form of the commodity cannot
add any value to it. 26 They are costs incurred in realising the value or transforming it from one form to another. The
replacement of these costs come from the surplus product and thus forms a deduction from it.

Just as, were it the case that the value of commodity were dependent on the actual labour expended in its production, rather
than that socially necessary, it would be a advantageous to work slowly and inefficiently. Cf. C1, p. 129.
22

C2, p. 222. Deliberately holding back a commodity in anticipation of a revolution in value, this latter is not a consequence of
the costs incurred in maintaining the product as stock.
23

24

C2, p. 224.

25

C2, p. 225.

26

C2, pp. 225-6, italicisation in original.

5

Social production may require the movement of products in space. 27 Use-value is realised in consumption, and only
in consumption, such that, if its consumption requires a change in location, then this latter represents and additional
production process. The productive capital invested in the transport industry thus imparts value to the products
transported, in part through transferring value from the means of transportation, in part by adding value through
the labour performed in transport (and this latter addition of value can be separated into replacement of wages
(variable capital)and surplus-value).
The transportation of commodities involves not only the movement of finished products for individual
consumption but also the change of location of means of labour and object of labour from one place of production
to another.
The general law that the productivity of labour and the value it creates stand in inverse proportion to each other
holds true for the transport industry as well: thus the absolute magnitude of value added by the transport of
commodities stands in inverse proportion to the productive power of the transport industry and direct proportion
to the distance to be traversed.
Thus that part of value relative to that of the product that transport adds, all else being equal, is proportional to the
products size and weight. Modifying factors arise from the fact that different products require more or less
precaution in their transport.
The capitalist mode of production reduces the cost of transportation for the individual commodity by developing
the means of transport and communication, and by increasing their scale. It increases the proportion of living and
objectified social labour expended in transport, by, one, converting the mass products into commodities, and, two,
by substituting distant markets for local ones.
This circulation of commodities, i.e., their actual movement in space, is carried out by the transport industry,
which forms on the one hand an independent branch of production and thus a separate sphere of investment of
productive capital. This industry thus appears as the continuation of a production process within the circulation
process and for the circulation process. 28

Even if without actual movement, as in the case of As sale of a house to B: the house circulates in this physical sense even
though it does not actually move; normally moveable commodity values may remain in the same physical place while they are
repeatedly bought and sold by speculators. What counts here is the movement of the property title.
27

28

C2, p. 229.
6

Part Two
The Turnover of Capital

Chapter 7: Turnover Time and Number of Turnovers

As we have seen, 1 the total time capital takes to describe its cycle is the sum of its production time and circulation
time.
Here, we are concerned with the reproduction of capital:
If production has a capitalist form, so too will reproduction. Just as in the capitalist mode of production the
labour process appears only as a means towards the process of valorisation, so in the case of reproduction it
appears only as a means of reproducing the value advanced as capital, i.e. as self-valorising value. 2

From this point of view, we can distinguish the three cycles of capital (I) M ... M, (II) P ... P and (III) C ... C
in the following ways:
1 In form II (P ... P) the process of reproduction (i.e. the repetition of the cycle) is expressed as a reality; in form
I (M ... M)as a possibility.
2 However, forms I and II are to be distinguished from form III (C ... C) in that the capital value advanced
forms both the starting point and the point of return. In form III, the capital value which begins the cycle does
not do so as capital advanced but as capital already valorised. Form III, therefore, is of importance when it is
necessary to take account of the movement of total social capital (which we shall address in volume 3); it cannot
be used to account for the turnover of capital, for this presupposes the advance of the capital value, either in the
form money or commodities, and requires the return of this value to the form in which it was advanced. Form
I is the form with respect to which we shall analyse the influence of the turnover of capital on the formation of
surplus-value; form II that for the influence of turnover on the formation of the product.
But what are we referring to when we talk about the turnover of capital? Precisely: [t]he circuit of capital, when
this is taken not as an isolated act but a periodic process [...]. 3 The duration of turnover, which is the sum of capitals
production and circulation times, measures the interval of one cyclical period of the total capital value and the next:
the periodicity in the capitals life process [...] the time required for the renewal and repetition of the valorisation
and production process of the same capital value. 4
If we take the year as the unit of measurement of capital turnover, and designate the as U, the turnover time of an
individual capital as u, and the number of turnovers as n, then n =

Before addressing the influence of turnover on the processes of production and valorisation, we need to take
account of the forms which capital assumes as a result of its circulation and which affect the form of its turnover;
this will be the subject of the next chapter.

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], pp. 200ff.
2 Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], p. 711.
1

C2, p. 235 (italicisation added).

C2, p. 236. Marx here comments that [a]s the working day forms the natural measuring unit for the function of labourpower, so the year forms the natural measuring unit for the turnover of capitals in process. This is because its natural basis
[] is that the most important food crops [] are annual products. If it was true that the year formed a natural unit for
measuring the turnover of capital in Marxs time, and this is questionable, it certainly is not now. Saying this does not of
course invalidate the measure itself.

Chapter 8: Fixed Capital and Circulating Capital

Before proceeding, we would do well to remind ourselves of certain conceptual distinctions Marx made in volume
1.
Observing that capital, as it loses its monetary form, is split up and directed into different forms of existence and
transformed into different elements of the production process, Marx distinguishes between two different parts of
capital:
variable capital: that part of capital which is transformed into labour-power, and which consequently
undergoes a quantitative increase in its value in production.
constant capital: that part of which is turned into means of production, and which undergoes no quantitative
alteration of value in production.
Means of production can be further subdivided into:
objects of labour: what is worked on in production. 1
instruments (or means) of labour: those forces of production which, by interposing themselves between the
producer and the objects of production, mediate the action of the former. They consist in tools, etc., and
those other elements on which production depends, such as workshops, roads, canals, etc.
In the case of both instruments and objects of labour their original use-value form is lost in production only to be
re-assumed in a new form in the use-value of the product. But they do not function in this respect in the same way.
In the case of objects of labour, use-value vanishes from the substance of the original material only to reappear in the
properties of the new product; they thus lose the independent form they had when they enter the production
process. The instruments of labour, on the other hand, do not lose their form (indeed, their utility precisely depends
on them not doing so): their use-value is consumed, rather, over the course of their working life, so that a machine
which has a life of, say, x years, will lose 1 xth part of its use-value, and pass on 1 xth part of its value, every year.
Objects of labour are thus transformed in form by productive labour, and, in so being, their value departs the old
material body and occupies the new one, that of the product. This is a process that occurs simultaneously to, and as
a consequence of, the value-creating process performed by labour-power, as a natural property of it in action: the
reproduction of old value at the same time as it creates new.
It is different with regard to instruments of production. What is consumed is not their value but their use-value. Their
value is more accurately preserved than reproduced, and it is preserved not because of any operation they undergo in
the labour process but by virtue of the fact that their exchange-value disappears and re-appears in the value of the
finished product. What is produced is a new use-value in which old exchange-value appears. 2 Thus instruments of
labour enter constantly and directly into the valorisation process but only in parts into the labour process.
With these points in mind, we may now return to Marxs argument in volume 2
***

1 The Formal Distinctions

I Fixed Capital 3

Instruments of labour, unlike objects of labour, which are ejected from the production process and into circulation
Objects of labour are further considered as those which experience no necessary alteration through labour previous to
entering the production process, and those that do. These latter Marx denotes in volume 1 as raw materials.
1

Karl Marx, Capital vol. 1 (Harmondsworth, 1990) [hereafter C1.], p. 316.

Where I insert my own subheads they appear, as here, in sans serif type.
1

in commodity form, never leave the sphere of production once they have entered into it. Instruments of labour give
up their value to the product in proportion to their loss of use-value: the extent to which they pass on their value to
the product is an average calculation in function of the time from which they enter production to that when they
are used up or worn out and need to be replaced. As the instruments are used up, one steadily declining part of
their value remains fixed in the production process.
All capital value circulates, but the capital fixed in production in form of instruments of labour circulates in a
particular way:
1 This part of capital circulates not in its use form, but rather as value.
2 In addition, it circulates only gradually, to the degree in which its value is transferred to the product, which
circulates as a commodity.
3 As long as they continue to function, part of the value of instruments of production remain fixed in
production, distinct from the products it helps produce.
There is another component of capital which, like instruments of labour, do not enter materially into the product,
and whose value circulates as a part of the value of the product, a component we can group under the heading of
ancillaries: power for machines, energy for lighting and heating, etc. But this component differs from instruments
of labour in that it is completely consumed in every labour process they enter into, and, as such, do not preserve
their independent use-form. They therefore do not form a part of fixed capital.
Now established the concept of fixed capital, Marx now examines a number of marginal cases.
1 Unlike objects of labour, which materially enter the product, instruments of labour can only be consumed
productively: they do not enter into individual consumption. An exception to this is found in the case of means of
transport, whose use-effect change of location may also enter simultaneously into private consumption.
2 The distinction between object of labour and ancillary may become blurred in the case of the chemical industry,
for example. 4
3 In agriculture, soil-improving materials may materially enter the product as well producing their effect over a
period of time greater than that of a single production process.
Thus:
The quality that gives a part of the capital value spent on means of production the character of fixed capital lies
exclusively in the specific manner in which this value circulates. This particular manner of circulation arises from
the particular in which the means [instruments] of labour gives up its value to the product, or acts to form value
during the production process. This in turn arises from the special way in which the means of labour function in
the labour process. 5

Thus it is the function of a commodity in the production process as instrument of labour viewed from the
perspective of the circulation of capital and its turnover and not its nature in itself, that makes it fixed capital.
Since it is the durability 6 of labour that determines the size of the difference between the capital value fixed as
instruments of labour and that given up in repeated production processes, the degree of fixedness of fixed capital is
proportional to this durability of labour.
Means of production which are not instruments of labour but behave in the same way with respect to how value is
given up in production (ancillaries, raw materials, semi-finished goods) are also, because of this, fixed capital.
4

Cf. C1, p. 288.

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], pp. 239-40.

Dauerbarkeit.
2

Classical political economys essential error is the confusion of the categories of fixed and circulating capital with
constant and variable capital; this error is compounded by the following:
1 The transformation of certain properties normal to the material existence of instruments of labour
immobility, for example into intrinsic properties of fixed capital.
2 The confusion of formal economic characteristics arising from the nature of the circulation of value with the
intrinsic properties of things.
What does not determine whether means of production is fixed capital or not is the length of time it remains in
production: all capital that functions as productive capital is fixed in this sense to a certain extent in the production
process.
The value of fixed capital acquires a dual existence: while one part remains tied to its use-form, another separates
off eventually as money. Once the fixed capital is used up or worn out, this money is then reconverted into fixed
capital. But the two processes transmutation of value into money and transmutation of money into commodity
are separate. Before a machine is worn out, it does not need to be replaced, but its value circulates piece by piece as
portions of the value of the commodities it produces. At the end of its life, it has been completely transformed into
money, money which is accumulated, until the time comes to replace the machine, as a reserve fund.
II Circulating Capital

All remaining elements of productive capital ancillaries, objects of labour, labour-power (i.e. variable capital)
constitute, viewing production from the perspective of the circulation of capital and its turnover, circulating capital
(sometimes fluid capital 7). What is specific to circulating capital is that
as far as circulation and hence the mode of turnover is concerned [...] [these elements] are completely consumed
in the formation of their product, they transfer their entire value to the product [and] [t]his value is thus
completely circulated via the product, transformed into money and from money back into the elements of
production of the commodity. Its turnover is not interrupted [...] but passes continuously through the entire
circuit [cycle] of its forms, so that these elements of the productive capital are constantly renewed in kind. [...] It
is not only their value that continuously describes the whole circuit of metamorphoses, but also their material
form; they are constantly transformed back from commodities into the elements of production of those
commodities. 8

III Conclusions

The following conclusions can now be drawn.

1 The formal distinction between fixed and circulating capital arises from how the different elements of
productive capital transfer their value to the product, which in turn arises from the different forms in which
productive capital exists, in which one part is consumed entirely in the production of a given product, and
another only gradually. Thus the opposition between fixed and circulating capital only exists for industrial
capital in its productive form, and not in its forms of money and commodity capital. These latter forms are
certainly capital in circulation contrasted with productive capital, but not contrasted with fixed capital.
2 The turnover period of fixed capital encompasses several turnovers of circulating capital. At the same time as
a part of the value of fixed capital remains tied up in its use form, the product circulates the total value of the
circulating component.
7

Marx uses the terms Zirkulierendes Kapital and flssiges (more properly liquid) Kapital interchangeably.

C2, pp. 244-6. As we are here concerned with the turnover of capital, we are for the moment ignoring the creation of surplusvalue.
8

3 The value of the fixed component of productive capital is cast into circulation all at once, but is withdrawn
from circulation only incrementally through the realisation of the value portions that the fixed capital
gradually adds to the commodity product. The transformation of money back into its original form of fixed
capital only takes place at the end of its functional life; until this occurs no new outlay on the part of the
capitalist is necessary.
4 If the production process be continuous, circulating capital is as fixed in it as fixed capital is: the distinction
lies in the fact that fixed capital is neither renewed as long as it lasts nor is repeatedly purchased.
5 The conceptual distinction between, on the one hand, constant and variable capital, and, on the other, fixed
and circulating capital, may be appreciated diagrammatically like this:

2 Components, Replacement, Repairs and Accumulation of the Fixed Capital

I The lifespan of the instruments of labour

Various elements of fixed capital in a given investment will, naturally, have different lifespans, and hence different
turnover times. Different factors influence the lifespan the effects of wear and tear of given elements, for
example:
1 Simple use.
2 Spoilage occasioned by the effect of natural forces. 9
3 Moral deterioration. Marx notes that the progress of industry itself revolutionises the instruments of labour; as
a consequence, instruments of labour are replaced, rather than in original form, in revolutionised form. From
this arises the following contradictory interplay of forces: while, on the one hand, the very lifetime of the
instruments of labour themselves impedes the introduction of improved instruments, the effect of competition
forces the replacement of existing instruments before their natural time.

Marx cites the effects of weather on railway sleepers; indeed, this whole section is informed by citations from official reports
on the railway industry.
9

II Depreciation

Depreciation (excepting moral depreciation) refers to the portion of value that fixed capital gives up to the product
according to the average degree of the loss of its use-value. Certain elements of fixed capital require wholesale
replacement; 10 others permit partial and piecemeal replacement. This fact helps to blur the distinction between the
replacement of fixed capital and the expansion of production: if the transformation of fixed capital into money is
gradual, then the money thus accumulated, but not invested, is not accumulation properly understood the
transformation of surplus-value into capital independently of whether or not it may be used to extend production.
III Maintenance Costs

In part, maintenance of fixed capital is effected through use; in part, it requires specific outlays of additional labour.
Capital expended to this effect is, despite being so outside of the normal production process, insofar as it pertains
to the day-to-day running of production, circulating, rather than fixed, capital; moreover, such capital outlays are
additional to the cost of replacement of the fixed capital in question. In addition, such outlays, although passed on
in the price of the commodity in average form, are realised as and when necessary, and suppose additional costs (in
the form of specialist employees and resources, etc.).
Additional to these costs is insurance, which, insofar as it is concerned with destruction caused by extraordinary
natural events s made good from surplus-value. Clearly, for society to have the means of production necessary to
make good destruction caused by accidents and natural forces production beyond that necessary for the
reproduction and replacement of existing wealth is necessary. In fact, the greater part of the capital necessary for
repair and replacement comes from the extension of production itself, rather than from the money reserve fund.
While repair and replacement costs are determined on a social scale, and the additions to price arising from them as
an average, at the individual level considerable unevenness exists; this further occludes the true nature of surplusvalue and its accumulation.
IV Replacement Costs, Money and Credit

While a considerable degree of replacement actually occurs incrementally, in the form of repair, it is still the case
that each individual capitalist needs an amortization fund for that part of fixed capital that reaches its point of
reproduction after a fixed and extended period; an accumulation of money, and money in a given quantity, is
necessary before fixed capital is replaced. In volume 1, 11 we saw, one, how, once the metamorphoses of sale and
purchase are interrupted, money is precipitated out of circulation in the form of a hoard; and, two, that as
commodity production develops, hoards develop at all points as a reserve for the commodity-producer while she
makes her living, or for emergencies, such that all capitalists to some degree have to sell without buying.
Here we can see that the proportion of money existing in the form of hoards and that in circulation are subject to
constant changes: large quantities of hoarded money will be thrown into circulation by the capitalist at one go to
purchase fixed capital to be then divided up into means of circulation and hoard again. The significance of the
credit system is to facilitate that this hoarded money functions not as a hoard, but as capital; but this lies outside our
concerns at the moment.

10

A horse cannot be replaced bit by bit, but only by another horse. C2, p. 250.

11

C1, p. 227. We are here disregarding the credit system.

5

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

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

1 The overall turnover of capital advanced is its average turnover. 1 Although apparently simple to calculate, there
arise certain complications which must be resolved.

2 Insofar as some elements of fixed capital can be replaced piecemeal, and others only once, at the end of their
lives, it is necessary to reduce turnovers of different types to a similar form, such that the differences are only
quantitative.
But this qualitative equality cannot exist in the cycle of productive capital, P ... P, precisely because some
elements of P have to be constantly replaced in kind, while others not.
In the case of a machine which costs 10,000 and whose lifespan is 10 years, each year 1,000 is transformed
into money capital and back into commodity and productive capital, and thence into money capital again; it is
immaterial whether this 1,000 is transformed back into the material form of a machine or not. Hence, in
considering total turnover of productive capital we consider the money form, the return to money completing
the turnover.

3 Therefore, even if the greater part of productive capital consists in fixed capital whose reproduction time
consists in a cycle of many years, the capital value turned over each year through repeated turnovers of
circulating capital may be greater than the total capital advanced.
If fixed capital of a reproduction period of 10 years amounts to 80,000, and circulating capital, which is
turned over 5 times a year amounts to 20,000, the total capital is 100,0000, while the capital turned over
annually is 8,000 (fixed capital) plus 5 times 20,000 = 100,000, or 108,000, 8,000 more than the total
capital advanced.

4 Therefore, the value turnover is separate from its actual reproduction time, the real turnover time of its
components. A capital of 4,000 is turned over 5 times annually; each year (disregarding surplus-value)
20,000 is turned over. But at the end of each turnover the value to be advanced again is 4,000. The size of
the advanced capital, and the number of turnover periods in which it functions anew as capital, are
independent of each other.
In the case of 3 above, each year there returns to the capitalist a value sum of 20,000, which is laid out on
circulating capital, and a sum of 8,000, separated off from fixed capital through wear and tear. Although the
fixed capital continues to function in the production process, each year its value is depreciated by 8,000. In
order for the fixed capital to come to the end of its life, and be replaced, the total capital advanced must run
through a cycle of 10 annual turnovers. Thus the cycle is determined by the lifespan the reproduction or
turnover time of the fixed capital.
But here we see the operation not only of physical depreciation but moral depreciation: as the development of
production revolutionises the means of production which forces the replacement of fixed capital before its

The numbering system adopted here is Marxs own.

1

natural lifespan. 2

5 (Quoting from the American economist Scrope) Marx outlines how the turnover is calculated.
Imagine a total capital of $50,000. Half is turned over in 10 years, a quarter in 2 years, another quarter twice a
year. The capital turned over in 1 year is
$25,000 10 = $2,500
$12,500 2 = $6,250
$12,500 2 = $25,000
$33,750
The average term (in years) in which his total capital is turned over is
50,000
33,750

= approximately 18 months

Marx here (Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 264), referring to the business cycle, posits
that the cycle of related turnovers, extending over a number of years, within which capital is confined by its fixed component, is one of
the material foundations for the periodic cycle [Marx says crises] [] which business passes through [].
2

Chapter 10: Theories of Fixed and Circulating Capital. The Physiocrats and Adam
Smith
Quesnay conceived of the distinction between fixed and circulating capital as that between avances primitives (original
advances) and avances annuelles (annual advances). Correctly, he presented the distinction as one within productive
capital, i.e. capital already incorporated into the production process. Quesnay also (correctly) conceived of the
distinction as a distinction between the different ways these two elements of productive capital entered the value of
the finished product, the value of one being completely replaced in a year, that of the other piecemeal over a longer
period.
Smith applied the distinction to productive capital in general; hence, rather than the distinction being one between
annual and more than annual turnovers, it reappears as one between more or less shorter and more or less longer
turnovers. But, in doing this, Smith loses sight of the significance of the distinction as one within productive capital in
its impact on turnover and reproduction. Smith designates as circulating capital capital as it passes through the
metamorphoses of the cycle of capital (in reality commodity capital), and thus confuses the movement of industrial
capital as a whole with the distinct elements that exist within productive capital, in other words conflating the
distinction between production capital and capital in the circulation sphere and that between fixed and circulating
capital within productive capital. For Smith, on the other hand, fixed capital is simply that capital which yield[s] a
[...] profit without changing masters. Smith derived his concepts not from the actual function of productive capital,
but [...] rather [...] [from what] obtains subjectively for the individual capitalist, to whom one part of capital is useful
in this way, another in that. 1 In addition, by stating that fixed capital realises a profit by remaining in the production
process, while circulating capital does the same through circulation, permits the similarity of form that variable
capital and the fluid component of constant capital have in the turnover to conceal the basic difference that they have
in the valorisation process and the formation of surplus-value [...]. 2
In addition to all this, when Smith lists elements of production as either circulating or fixed capital (in so doing
reducing the function of the elements of production to their material properties), he excludes labour-power from
his categories. Since Smiths circulating capital is in reality commodity capital, labour-power, which, before being
incorporated into production, i.e. before it is sold, is not capital at all. Thus for Smith variable capital cannot belong
to the category of circulating capital; instead, it appears in his scheme in which the whole of social wealth is
divided into immediate consumption fund, fixed capital, and circulating capital as means of subsistence. But what
is incorporated into the production process is the worker, not her means of subsistence.
For the physiocrats, who correctly subsumed the capital advanced in wages within the category of avances annuelles,
what actually appeared was not labour power itself but the means of subsistence received by the workers. In this
way, the portion of value added to the product by labour-power was the equal of the value of the means of
subsistence (entirely consistent with the Physiocratic doctrine that the source of profit was the result of the
collaboration between nature and production); for Smith, following the Physiocratic logic and substituting the
workers means of subsistence for the actual labour-power into which the variable part of capital is transformed,
these means of subsistence play a part no different to that played by the other elements of productive capital, i.e.
they simply reappear in the value of the product. Smiths conception of the role of variable capital in production is,
in Marxs words, a Physiocratic definition without the premises of the Physiocrats [...]. 3

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 277.

C2, p. 278.

C2, p. 292.
1

Chapter 11: Theories of Fixed and Circulating Capital. Ricardo

Ricardo identifies two sorts of capital: capital that is to support labour (fixed capital), and capital invested in tools,
machinery, and buildings (circulating capital); respectively, instruments of labour and variable capital. The
distinction is made on the basis not of the valorisation process but as in the case of Smith on that of circulation.
Two misconceptions arise:
1 The differences in the degree durability of the fixed capital, and the variations in the composition of capital in
terms of constant and variable, are taken as equivalent. 1 The former, however, as far as valorisation is
concerned, only relates to how a given quantity of value is transferred to the product; the latter determines
variations in the production of surplus-value. In terms of the circulation process, the former is concerned
solely with the period of the renewal of capital.
This standpoint is that of phenomena in their finished form, as opposed to that of the inner mechanism of
capitalist production. 2 As Marx notes, in the distribution of the social surplus-value between capitals, the
effect on the equalisation of the general rate of profit and the transformation of values into process or
production 3 of differences in the time for which capital is advanced (i.e. variations in the lifespans of fixed
capitals) and in organic compositions of capital are similar.
2 In Ricardos categories, with instruments of labour on the one side and variable capital on the other, objects of
labour disappear from the picture. They cannot appear as fixed capital, since their manner of circulation
coincides with the capital laid out on labour-power; but neither can they appear as circulation capital, because
of the Smiths legacy in conflating fixed/circulating capital and constant/variable capital.
From the standpoint of the organic composition of capital, the composition of constant capital between
instruments of labour and objects of labour is immaterial; from the standpoint of circulation, i.e. the distinction
between fixed and circulating capital, the composition of circulating capital between objects of labour and wages is
equally immaterial.
The characteristic feature of variable capital is that a given (constant) part of capital (i.e., a given sum of value) is
exchanged for a power 4 that valorises itself and creates value, i.e., which creates surplus-value. But this
distinguishing feature of the part of capital expended on wages disappears once it is considered from the point of
view of the circulation process, from which it appears only as circulating capital (opposed to the fixed capital
expended on instruments of production), i.e., when it is placed together within a common category with a component
of constant capital. Through this optic, surplus-value is ignored; what counts is just that the value imparted by labourpower (and object of labour) is imparted completely and is hence completely replaced by the commoditys sale.
Instruments of labour comprise one part of fixed capital by virtue of their function in production, and their
function is in part determined by their use-value form, i.e. is a material factor. If the part of capital laid out on
labour-power is considered from the standpoint of circulating capital as opposed to fixed capital, given the material
basis of the function of instruments of labour as fixed capita it is natural to view the opposed character of the
capital laid out on labour-power as circulating capital through the optic of its material nature, and define circulating
capital in terms of its material nature. But the material laid out on wages is labour itself: value-creating labourpower, which the capitalist has exchanged for dead, objectified labour, and incorporated into her capital. Within the
production process, instruments of labour, objects of labour, and labour-power stand together as productive
capital. Within the labour process, labour-power confronts instruments of labour and objects of labour as the
personal factor against objective factors. Within the valorisation process, instruments of labour and objects of
1

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 293.

C2, p. 294.

Of which more in volume 3.

The English text says force; power (Kraft) suggests labour-power (Arbeitskraft).
1

labour stand distinct from labour-power as constant capital to variable capital. Within the circulation of capital,
what is material is that value is objectified labour, and self-acting labour-power is self-objectifying labour, and the
latter creates value and surplus-value as it functions. But what it manifests in its function as the dynamic creation of
value is manifested on the side of the product as static already created value. The value incorporated thus in the
product must be released through its sale so that labour-power be bought afresh and incorporate into productive
capital. It is this which gives labour-power its character of circulating capital.
Again, for Ricardo, as for Smith, the Physiocratic distinction between avances annuuelles and avances primitives is
reproduced as greater or lesser perishibility (which Ricardo correctly recognises as subjective), within which that
part of capital laid out as wages is conceived as means of subsistence and, as such, is classified exclusively in terms
of its reproduction period. Ricardo thus confuses that which makes the capital laid out as wages variable as opposed
to constant and that which makes it circulating as opposed to fixed.
What is happening here is
the fetishism peculiar to bourgeois economics, which transforms the social, economic character that things are
stamped with in the process of social production into a natural character arising from the material nature of
things. [...] [M]eans [instruments] of labour are fixed capital only where the production process is [...] a capitalist production
process and the means of production [...] possess [...] the social character of capital, secondly, they are fixed capital
only if they transfer their value to the product in a particular way. If this is not the case, they remain means of
labour without being fixed capital. [...] What is at issue here is not a set of definitions under which things are to be
subsumed. It is rather definite functions that are expressed in specific categories. 5

The confusion sowed in the Smithian conception has had the following consequences.
1 The distinction between fixed and circulating capital is confused with that between productive capital and
commodity capital.
2 All circulating capital is equated with capital laid out on wages.
3 The distinction between variable capital is completely reduced to the distinction between circulating and fixed
capital, thus losing all sight of the real distinction.

C2, p. 303 (italicisation added). Max adds, importantly: If means of subsistence are inherently circulating capital after this
has been transformed into wages then it further results that the size of the wage depends on the ratio between the number
of workers and the given mass of circulating capital [] whereas in point of fact the quantity of means of subsistence that the
worker withdraws from the market [] depend[s] rather on the ratio between surplus-value and the price of labour. (C2, p.
304)
5

Chapter 12: The Working Period

Imagine two lines of business, thus:

cotton spinning

manufacture of locomotives

a definite quantity of product is turned out

every day

labour process lasts, say, three months to produce a

finished product

discrete product; work begins afresh each

morning

continuous labour process, stretching over a large

number of daily processes

Let us assume:

same working day

application of equal capitals

same division between constant and variable capital

same division between fixed and circulating capital

same division between social and necessary labour

both products produced to order and paid for on delivery

Then: at the end of the week, when the yarn is delivered, the spinner receives her outlay of circulating capital and
the wear and tear of the fixed capital contained in the value of the yarn;1 the turnover is complete, and the cycle can
begin again anew. The locomotive manufacturer, on the other hand, must lay out fresh capital every day for three
months. All else being equal, the latter needs 12 times as much circulating capital available than the former. That
the capital advanced each week is equal is irrelevant to this circumstance.
If the locomotive takes 100 days to build, for the workers each day forms a part of a discontinuous quantity; but for
the product, the 100 days form a continuous quantity, a working day of 1,000 working hours, a single act of
production. This act is the working period: the number of inter-related working days required to complete a finished
product.
Why does this matter? In the case of products requiring a more continuous production process, more additional
outlay on circulating capital is required, since the period during which this capital is unable to exist in a form
capable of circulation in a finished commodity is longer. This is not the case with regard to fixed capital, since
the part of its value which remains fixed in production is independent of the length of the working period
(excepting cases in which this latter is longer than the fixed capitals use-value lifetime).2
Hence, first, even if, in our examples, equal capitals, divided equally into fixed and circulating capital, are invested,
the reflux of these capitals is different. Second, although the same amount of productive capital is applied in the two
processes over the longer working period, the amount of capital invested, because of the first observation, is greater
in the case of the longer working period than in that of the shorter. Conclusion:
1

We are ignoring here surplus-value.

In addition, Marx notes that interruptions in the social production process, caused by crises, for example, affect those
production processes engaged with discrete products (yarn, in our example) differently than those with products that require a
longer period: in the latter case, not only is work interrupted but also a network of interconnected acts of production; in the
case of more extended stoppages, deterioration of both fixed and circulating capital will occur.
2

[T]he length of time in which specific portions of the capital are advanced [...] the time during which capital is
advanced differs according to the length of the labour process, and so too does the amount of capital that has
to be advanced, even though the capital applied daily or weekly is the same.3

Large-scale production thus requires more developed capitalist production: more advanced concentration of
capital,4 and greater development of the credit system.5
Means which shorten the working period more developed cooperation and division of labour, increased use of
machinery generally require an increased outlay of fixed capital. By the same token, of course, this increased
capital is advanced for a shorter time. Increased outlay of capital, apart from depending on the total social capital
available, also depends on the degree to which the means of production and subsistence, and their means of
disposal, are not fragmented between individual capitalists. Hence, to the degree that credit facilitates the
concentration of capital, the working period, and therefore circulation time, is shortened.6

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978), p. 310 (italicisation added).

Karl Marx, Capital vol. 1 (Harmondsworth, 1990), pp. 776-7.

Indeed, as Marx notes, in earlier phases of capitalist production certain large-scale enterprises road and canal building, for
example were not carried out capitalistically at all, but by the municipality or state.
5

In branches of production where the working period is established by natural limits for example, agriculture shortening
the working period cannot be achieved by the above means.

Chapter 13: Production Time

The time that capital is confined to the sphere of production and the time that capital actually exists in the
production process are not equivalent terms: the former may be, and often actually is, longer than the latter. Here,
rather than interruptions in the labour process itself, we are dealing with interruptions arising from the nature of the
product and its production in which the product requires chemical, physical, etc. changes during which the labour
process is suspended. One example (Marx gives more) would be the fermentation and maturation period necessary
in the production of wine. The greater the difference between working time and production time, the greater the
turnover period is extended. This phenomenon is particularly pronounced in the agricultural sector.1
This difference between working and production times affects circulating and fixed capital in the following ways. In
the former case, in that the timing of the reflux of circulating capital occurs according to natural conditions, its
outlay is unevenly distributed over the production period. In the latter case, interruptions in the time that fixed
capital is productively engaged results in a dearer product, since value is transferred to the product not in function
of the time during which the fixed capital operates, but in that of the time in which it loses value. Depreciation of
dead means of labour will also occur.
In agriculture, means to shorten the difference between working and production time (diversification, crop rotation
require and increased outlay on circulating capital.

With the consequence of the development of cottage industries out of the underemployment of the rural workforce outside
of the agricultural working period. Marx cites Russia as an extreme case.

Chapter 14: Circulation Time 1

The turnover time of capital is the sum of its production time and its circulation time. All the factors which
differentiate the circulation periods of different capitals invested in different branches of industry so far considered
(the distinction between fixed and circulating capital, variations in the working period, discrepancy between
production time and working time) pertain to the former. We also need to take account of the effects on turnover
time of capital of differences in the latter sphere.
I Selling Time 2

The most decisive part of circulation time is the time that capital exists in the form of the finished commodity
product, i.e. the time required for the sale of the finished product.
A constant factor influencing variation in selling time is the simple time taken by the journey to market. 3
Improvements in the speed of communication shorten the absolute period of the migration of commodities, but
not the relative differences between different commodity capitals. Increases in the frequency of communication
permit the distribution of the reflux over shorter periods of time. Changes in the frequency and volume of
transport, themselves arising from the needs of determinate places of production, in turn effect local shifts in the
circulation time of commodities or alter the distribution of already existing local variations.
The development of capitalist production and the concomitant development of means of transport introduce the
need to work for increasingly distant markets. In function of this the mass of commodities actually in transit, and
hence that part of social capital tied up in commodity form, grow, as does that part of social wealth laid out on the
means of transport, and the fixed and circulating capital necessary to keep them in operation.
A longer circulation time also supposes a greater risk of a change in price in the selling market occurring.
II Time of Purchase

In the period in which capital is transformed from the money form into the elements of production it must persist
for a greater or lesser period in the state of money capital, to the extent that a certain quantity of the total capital
advanced always exists in this state, since, as money capital is transformed into productive capital, it is added to by
the influx from circulation. Thus a definite portion of the capital advanced always exists in the state of money
capital, i.e. in a form pertaining not to its sphere of production but rather to its sphere of circulation. 4
Just as the simple distance from the market prolongs the time in which capital is confined to the form of
commodity capital, this same factor also delays the reflux of money, thus delaying the transformation of money
capital into productive capital.
Earlier, 5 we saw that how the time of purchase and the distance from sources of raw materials conditions the time
for which and quantity in which raw materials need to be kept available in the form of productive stock, thus
determining independently of the scale of production both how much capital needs to be advanced at a stroke
and for how long. In the same way, the timing in which raw materials appear on the market also determines the
terms of purchase of these raw materials, and hence the time in which capital persists in the money form. The point
here is that, independently of the quantity in which money capital needs to be advanced to purchase the elements of
To a certain degree the content of this chapter overlaps with that of chapter 5 (Karl Marx, Capital, vol. 2 (Harmondsworth,
1978) [hereafter C2], pp. 200-206), which was extracted from a different manuscript.
1

Where I insert my own subheads they appear, as here, in sans serif type.

As well as, of course, the time spent on the market actually awaiting sale.

C2, p. 331, italicisation added.

C2, pp. 219-20.

1

production, it always flows back little by little; one part (i.e. that not spent on wages), always has to accumulated as a
reserve fund, therefore.
The next chapter will consider how different circumstances arising from the production and circulation processes
influence the existence of capital advanced in the money form.

Chapter 15: Effects of Circulation Time on the Magnitude of the Capital Advanced1
The task of the next two chapters is to consider the influence of circulation time on the valorisation of capital.2

I Effect of Applying Additional Capital To Maintain Production during Circulation Period3

First Example

If we assume:

a commodity capital that is the product of a working period of nine weeks;

that the value of the product be equal to the circulating capital (raw materials, wages and ancillary materials)
advanced for its production, i.e. we disregard abstract from the value transferred from the wear and tear
of the fixed capital and the surplus-value added;
that this value be 900;
and a circulation period (independently of why) of three weeks;

then, after nine weeks production time (equal to working time),4 during which the weekly outlay is 100, production
is at a standstill until the completion of the turnover time, i.e., for the three weeks circulation time.
For production to be continuous, therefore, a new turnover period must begin in week 10. If the scale of production
is to be maintained, an additional circulating capital, of 300, is necessary.5 The sequence of operations is as
follows.
first turnover period: With regard to the first nine-week working period, the turnover of the capital here advanced is
completed by the start of week 13. During the last three weeks of the 12-week period an additional capital of
300 is deployed, opening a second nine-week working period.
second turnover period: At the start of week 13, 900 has returned and is ready to start a new turnover. But a new
turnover period began in week 10: the additional capital of 300 has been transformed into product. By the start
of week 13, this second turnover period has six weeks yet to run: 600 of the original 900 now enters
production, while 300 is set free to play the same role as the original 300 of additional capital in the first
turnover period. At the end of week 6 of the second turnover period (week 18 in total) the second working
period concludes. The 900 laid out in the period flows back three weeks later, at the end of week 9 of the
We should note here Engels remarks later in the chapter (Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2],
pp. 359-60): The preparation of this chapter for publication has involved no small difficulties. Despite Marxs firm grasp of
algebra, he was never at ease in reckoning with figures, [...] and in his turnover calculations Marx became confused, [...] [such
that] he ascribe[d] an importance to [...] a matter of little importance. I refer to what he calls the setting free of money
capital. Setting free, i.e. that capital in money form that flows back from circulation in immediately superfluous quantities is the
object of Marxs exposition on pp. 343-60. But it is not the case that this chapter is itself superfluous for being misguided, nor
that the section just referred to is without value. Nor is Anthony Brewer being entirely fair when he comments that Marx gets
enmeshed in a series of rather unnecessary numerical examples, and that Engels, as editor, comments on these and reports
that what he published is only an abridged version of a worse mess that Marx left him. (A Guide to Marxs Capital (Cambridge,
1984), p. 103) There is, as we shall see, much of importance in this chapter; and even the disputed section, in which Marx
shows that maintaining production continuously, even in the case of a single capitalist producing a single product, requires the
presence of more than one capital value, each of which circulates interdependently on the other, each subject to the limits of
quantity and quality that Marx investigates in the first part of the volume. I shall return to these remarks at the relevant part of
the chapter.
1

C2, p. 334.

Where I insert my own subheads they appear, as here, in sans serif type.

And it is immaterial that the product be discrete or continuous if a discrete quantum of product is placed on the market after
nine weeks production.
4

And we shall here ignore credit, and assume that the capitalist operates only with her own capital.
1

second turnover period; in this time the 300 set free is deployed. This begins the third working period in week
7 of the second turnover period, week 19 in total.
third turnover period: The end of week 9 of the second turnover period sees a new reflux of 900. But the third
working period began in week 7 of the second turnover period: by the beginning of the third turnover period it
has only three weeks to run. 300 of the 900 thus enters production. The fourth working period consists in the
last nine weeks of the third turnover period; thus the fourth turnover period and the fifth working period begin
week 37 of the process and we are back where we started.
Second Example

Assumptions (in addition to those of the first example):

working period of five weeks

circulation time of five weeks
therefore, a turnover time of five weeks
a fifty-week year
a capital outlay of 100 a week

Therefore the working period requires a circulating capital of 500 and the maintenance of production during the
circulation period an additional 500.
Therefore:

working period

weeks

commodities ()

returning

1-5

500

end of week 10

6-10

500

end of week 15

11-15

500

end of week 20

16-20

500

end of week 25

21-25

500

end of week 30

With a zero circulation time, i.e. with working time (which anyway = production time) = turnover time, there would
be 10 turnovers in our 50-week year with 5,000 (10 500) capital turned over. In our example, with a circulation
time of five 5 weeks, a value of 5,000 is still produced each year, but one tenth of this value is always in the form
of commodity capital, and returns after five weeks delay.
Third Example

Conditions:

working period = six weeks

circulation time = three weeks
weekly advance for the labour process = 100

first working period (weeks 1-6): at the end of week 6 we have a commodity capital of 600, which returns at the
2

end of week 9.
second working period (weeks 7-12): 300 additional capital advanced to maintain production in weeks 7-9. 600
returns at the end of week 9, 300 of which is advanced in weeks 10-12, such that 300 is free at the end of
week 12, when 600 is in the form of commodity capital, to return at the end of week 15.
third working period (weeks 13-18): the 300 free at the end of week 12 is advanced for weeks 13-15 when 600
returns, of which 300 is advanced for weeks 16-18. At the end of week 18, 300 is free as money, and 600 as
commodity capital, which returns at the end of week 21.
Thus, in nine working periods (54 weeks) 5,400 (600 9) of commodity is produced. At the end of the ninth
working period the capitalist holds 300 in money and 600 in commodities which have yet to complete their
circulation time.
Conclusions

1 Only in the second example do the original and additional capitals replace each successively, maintaining their
separate movements. This is because of the exceptional circumstance that production time and circulation
time are the same. In the other cases, the two capitals intersect.
2 During the circulation period the capital which has functioned in the production period lies idle. However,
the sum of additional capital necessary to maintain production is not determined by the total circulation time
in the year but by the ratio of circulation time to turnover period.
3 The above is the case independently of whether production time is longer than working time or not. If it is,
turnover time is extended, but no extra capital is required for the labour process: the additional capital is
simply necessary to maintain production in those disturbances provoked by circulation.6
4 The capital advanced for a working period is laid out, on the one hand, on constant circulating capital (raw
and ancillary materials) and, on the other, on payment for labour (variable circulating capital). The former, in
so far as it is not present in the form of productive stock, must exist in the form of money capital so that it
may be transformed into productive stock when the need arises.7 Wages, paid out on a regular short-term
basis, require capital to be present in money form. As capital returns from circulation, therefore, one part
must be kept in money form, while the other part may be converted into productive stock. This is also the
case with respect to the additional capital necessary to maintain production during the circulation period, but
with these important differences. This capital needs to be present at the beginning of the turnover period,
including that part in which it is not involved. While some of it may be transformed into productive stock (in
a proportion conditioned by existing and specific conditions), that to be advanced on wages exists in money
form throughout the whole of the initial working period. Hence, recourse to this additional capital, one,
increases the size of the capital advanced, two, lengthens the time for which the total capital is advanced, and,
three, increases that part of the capital advanced that exists in the form of a money reserve.8
5 In the second example, 500 of capital functions in the production process at any given time; since the
working period is five weeks this capital functions 10 times in our 50-week year. Disregarding surplus-value,
the commodity product = 10 500 = 5,000. From the perspective of functioning capital, circulation time
seems to have disappeared. But without the additional capital to maintain production in circulation time the
However, under conditions in which production is necessarily carried out spasmodically, for example to order, or according
to seasonal rhythms, where the turnover period is shorter than the season, the need for additional capital is reduced.

We are still excluding credit from our models.

The increased proportion of capital existing as money is not changed if the maintenance of production during periods of
circulation is achieved not through recourse to additional capital but through reducing the scale of production.
8

commodity product would only = 5 500 = 2,500. Instead of turning over ten times, the 500 capital has
only turned over 5, and for half the year it has stood idle. What the recourse to the additional capital of 500
achieves is to increase the total capital advanced to 1,000, and the total turnover from 2,500 to 5,000. But
now it appears as if we have five turnovers (of 1,000) rather than 10 (of 500). Again, circulation appears to
disappear. But we know, of course, that although the appearance is 1,000 functioning continuously, if this
really were the case the turnover would not be 1,000 5 = 5,000 but 1,000 10 = 10,000; but, of course
to achieve this we would again have to stop the gaps created by circulation and need a total capital advanced
of 2,000 rather than 1,000. This arises from the fundamental fact that one part [of capital] can function as
productive capital only on condition that another part is withdrawn from production proper in the form of commodity or money
capital.9

II The Effect on Turnover of Relative Lengths of Working Time and Circulation Time
We assume:

capital advanced per week = 100

turnover period = nine weeks
therefore, capital advanced for each turnover period = 900

1 Working period and circulation period equal

This case is but a chance exception,10 though since the conditions we need to consider are present in their most
palpable form it is a necessary starting point.
We shall henceforth denominate the original capital and the additional capital to maintain production during
circulation time as capital I and capital II respectively. As we saw above,11 in the conditions of working time =
circulation time capital I and capital II relieve one another in their movements without crossing each others
path;12 i.e. function, at least in effect, as independent capitals.
The results of this example are given in the table on the following page (the year is taken as 51 weeks; those weeks
falling outside the first year are enclosed in square brackets).
Considering the working periods of the two capitals, we have:
capital I has produced:

450 = 2,700

capital II has produced: 5

450 = 2,400

total: 5

900 = 5,100

In other words, the 900 capital advanced has functioned as productive capital 5 times in the year; the number of
working periods of the total capital advanced is equal to the value of the annual product of the two parts of the
capital advanced, divided by the total capital advanced [...].13 (It is immaterial as far as the production of surplus9

C2, p. 342.

10

C2, p. 343.

11

C2, p. 339.

12

C2, p. 343.

13

C2, p. 347.
4

value is concerned whether 450 in the production process continually alternates with 450 in circulation, or
whether 900 functions for four and a half weeks in circulation).

capital I
turnover

turnover period
(weeks)

working period
(weeks)

advance
()

circulation period
(weeks)

1-9

1-1st half 5

450

2nd half 5-9

II

10-18

10-1st half 14

450

2nd half 14-18

III

19-27

19-1st half 23

450

2nd half 25-27

IV

28-36

28-1st half 32

450

2nd half 32-36

37-45

37-1st half 41

450

2nd half 41-45

VI

46-[54]

46-1st half 50

450

2nd half 50-[54]

turnover

turnover period
(weeks)

working period
(weeks)

advance
()

circulation period
(weeks)

2nd half 4-1st half 14

2nd half 5-9

450

10-1st half 14

II

2nd half 14-1st half 23

2nd half 14-18

450

19-1st half 23

III

2nd half 23-1st half 32

2nd half 23-27

450

28-1st half 32

IV

2nd half 32-1st half 41

2nd half 32-36

450

37-1st half 41

2nd half 41-1st half 50

2nd half 41-45

450

46-1st half 50

VI

2nd half 50-[1st half 59]

2nd half 50-[54]

450

55-[1st half 59]

capital II

Let us now consider turnover.

[T]he exact sense of the statement that the capital of 450 advanced has made 5 turnovers is simply that it has
made five turnovers and only completed two thirds of its sixth. Nevertheless, the expression that the capital
turned over is 5 the capital advanced, thus [...] 2,550, is correct in the sense that, if this capital of 450 were
not supplemented by another capital of 450, then one part of it would have to exist in the production process,
and another part in the circulation process. If the turnover time is to be expressed in terms of the quantity of
capital turned over, it can only ever be expressed in a quantity of existing value (in fact, of finished products).
The circumstance that the capital advanced does not exist in a state in which it can reopen the production
process [...] is expressed in the form that only one part of it exists in a state suitable for production, or that, in
order to exist in a state of continuous production, the capital must always be divided into one part that is in the
production period and another part in the circulation period, according to the ratio between the two periods.14

14

C2, p. 345.
5

Here, we have:

capital I has turned over:

450 = 2,550

capital II has turned over:

450 = 2,325

total capital turned over: 5

900 = 4,875

In other words, the number of turnovers of the total capital is equal to the sum of the two amounts turned over,
divided by the sum of the two capitals advanced.15
2 Working period longer than circulation period
(a) Working time a simple multiple of circulation time

Assumptions:

capital advanced each week = 100

working period = six weeks
circulation period = three weeks

Therefore, the turnover period = nine weeks, capital I advanced = 600 and capital II = 300. Now, it is no longer
possible to present the turnover of capital as the movement of two independent capitals; now, capitals I and II
intersect. The process is this:
weeks 1-6:

capital I1 (600) is productively deployed

weeks 7-9:

capital I1 (600) moves into circulation; capital II1 (300) is productively deployed

weeks 10-12:

capital I1 (600) returns to function as capital I2; (300) is productively deployed

weeks 13-15:

capital II1 + of capital I2 move into circulation; other of capital I2 is productively deployed

weeks 16-18:

capital II1 + of capital I2 return; of this amount is deployed productively

etc.

Hence, we can discern the following full turnover periods of 600 capital:
I

weeks 1-9

II

weeks 7-15

III

weeks 13-21

...
VIII

weeks 43-51

Total capital turned over is 8 600 = 4,800; in addition, at the end of the (51-week) year the product of the final
three weeks (300) has only completed a third of its nine-week cycle and counts as 100 turned over. In summary:
annual product for 51 weeks = 51

100 = 5,100

capital turned over = 4,800 + 100 = 4,900

total capital advanced = 600 + 300 = 900
total capital turned over =

15

= 5 (slightly less than in the first case)

C2, p. 347.
6

(b) Working time not a simple multiple of circulation time

working period = 5 weeks

circulation period = 4 weeks
capital advanced = 100 a week

turnover I (weeks 1-9)

1st working period (1-5):

capital I (500) functions

1st circulation period (6-9):

500 returns as money at the end of week 9

turnover II (weeks 6-14)

2nd working period (6-14):

weeks 6-9: capital II (400) functions

500 returns as money at the end of week 9
week 10: 100 of the 500 functions; 400 stays free

2nd circulation period (11-14):

500 returns as money at the end of week 14

etc.

working period = 7 weeks

circulation period = 2 weeks
capital advanced = 100 a week
turnover I (weeks 1-9)
1st working period (1-7):

capital I (700) functions

1st circulation period (8-9):

700 returns as money at the end of week 9

turnover II (weeks 8-16)

2nd working period (8-14):

weeks 8-9: capital II (200) functions

700 returns as money at the end of week 9
weeks 10-14: 500 of the 700 functions; 200 stays free

2nd circulation period (15-16):

700 returns as money at the end of week 16

etc.

Conclusion: where the working period is longer than the circulation period, at the close of each working period there
is always set free a money capital of the same magnitude as the capital II advanced for the circulation period.

3 Working period shorter than circulation period

(a) Circulation time a simple multiple of working time

turnover period = nine weeks

working period = three weeks
circulation period = six weeks

We know have three capital values (capitals I, II and III), each of 300 each; 300 is constantly in production, while
600 circulates. As in case 1, these capital values do not intersect. It will suffice here to give the first and last
turnover periods for each of them in our 51-week year:

capital I
turnover

turnover period

working period

circulation period

1-9

1-3

4-9

VI

46-[54]

46-48

49-[54]

turnover

turnover period

working period

circulation period

4-12

4-6

7-12

VI

49-[57]

49-51

[52-57]

turnover

turnover period

working period

circulation period

7-15

7-9

10-15

43-51

43-45

46-51

capital II

capital III

The overall turnover of the capital is given as follows:

turned over by capital I: 300

5 = 1,700

turned over by capital II: 300

5 = 1,600

turned over by capital III: 3005

5 = 1,500

turned over by the total capital: 900

5 = 4,800

(b) Circulation time not a simple multiple of working time

turnover period = nine weeks

working period = four weeks
circulation period = five weeks
Hence: capital I = 400; capital II = 400; capital III = 100.

capital I
turnover

turnover period

working period

circulation period

1-9

1-4

5-9

II

9-17

9, 10-12

13-17

III

17-25

17, 18-20

21-25

turnover

turnover period

working period

circulation period

5-13

5-8

9-13

II

13-21

13, 14-16

17-21

III

21-29

21, 22-24

25-29

turnover

turnover period

working period

circulation period

9-17

10-17

II

17-25

17

18-25

III

25-33

25

26-33

capital II

capital III

Although capital III does not have an independent working period, since it combines with the first working week of
capital I, 100, equivalent to the value of capital III, is set free at the close of the working periods of both capital I
and capital II.
One caveat and one clarifying note now follow.
First, Marx notes that, although we have, for expositional purposes, been assuming that working time and
circulation time remain unchanged throughout the year in a given line of production, this is not only not necessarily
so but not even normally so.
Second, Marx also notes that, necessarily, we have here been investigating only the turnover of circulating, and not
fixed, capital. By definition, fixed capital is fixed to the extent that it is in use for a period greater than that of the
turnover period of circulating capital in that it is not completely consumed in each labour process it enters into,
and, as such, does not preserve its independent use-form. The circulating capital, on the other hand, applied in one
working period cannot be applied in a new one until it has completed its turnover, i.e. been transformed into
commodity capital, and thence money capital, and thence productive capital, once again: in order to begin a new
9

working period, more capital must be advanced, and in quantities sufficient to fill the gaps arising from the
circulation period of, precisely, circulating capital.
4 Results16
1 Given, on the one hand, the nature of circulating capital, that it is composed of those elements of production
that are completely consumed in the formation of their product, [...] transfer[ing] their entire value to the
product [and that] [t]his value is thus completely circulated via the product, transformed into money and from
money back into the elements of production of the commodity,17 and, on the other, that the circulation
segment of the turnover time of capital is not equal to zero, an investment of circulating capital (CII)
additional to the one originally made (CI) is necessary to maintain production continuously, i.e. to maintain
production once the first investment has passed into the sphere of circulation and before it returns in the
form of money capital.
2 In the case of the chance exception18 where working time is a simple multiple of circulation time (or vice
versa) the two capitals the original investment, CI and the additional capital, CII move through their
circular movements independently of each other, as if they were two independent capitals. In all other cases,
however, the movement of these capital values interpenetrate and in part condition each others movements.
3 When the working time is longer than the circulation time the ratio of CI to CII is given by the ratio of the
working time to the circulation time.
4 In the case of the circulation time being longer than the working time (at least) a third capital value (CIII)
appears, where the CI = CII and the ratio of CII + CIII to CI is equal to the ratio of circulating time to working
time.
5 The total circulating capital turned over in a working period (of, say, a year) which is composed of more than
one turnover period is given by the sum of the quantity of each capital involved multiplied by the number of
times it is turned over.
6 Given that the deployment of CII maintains production during the circulation time of CI it appears that what
is happening is the continuous productive investment of the sum of CI and CII rather than their separate and
interdependent movements through their cycles. As such, circulation itself as a distinct segment of the
turnover period of capital appears to disappear.
7 Given that, one, at least one additional capital value, CII (etc.), is necessary to maintain continuous production,
and, two, that circulating capital returns in money form after circulation while continuous production is
already in progress, a certain quantity of productive capital always exists in money form. This quantity grows in
function of the development of the scale of production itself. This surfeit of money capital19 set free by the
successive reflux of money capital from circulation must play a significant role, as soon as the credit system
has developed, and must also form one of the foundations for this.20

Given my remarks in the first footnote to my notes for this chapter above, what follows in this section is a relatively free
interpretation of Marxs (and Engels) conclusions.
16

17

C2, p. 244.

18

C2, p. 343.

19

C2, p. 358.

20

C2, p. 357.
10

5 Effects of changes in price

Up to now, we have assumed constant prices and lengthening and shortening of circulation time. Now we shall
assume the opposite: a constant turnover period and a fall or rise in the prices of raw materials, ancillaries and
labour.
Let us return to the assumptions of the first example we saw in this chapter, viz.

a commodity capital that is the product of a working period of nine weeks;

that the value of the product be equal to the circulating capital advanced for its production, i.e. we disregard
abstract from the value transferred from the wear and tear of the fixed capital and the surplus-value
added;
that this value be 900;
and a circulation period (independently of why) of three weeks;

but suppose that the price of the raw and ancillary materials falls by half, such that only 50 is needed per week
rather than 100. Now, instead of 900 returning in the form of money capital at the end of the first circulation
period only450 returns. The value of the annual product the same in volume will fall in value by half; at the
same time there will also be a change in the supply and demand of money capital, as a consequence of, one, that
less initial capital is required to start production, and, two, that less money capital is precipitated out of the
circulation process. The converse is also true.
In the case where the price of the commodities supplied by a firm falls, but all else remains the same, then
additional capital is required to maintain production, since now the reflux of money capital from circulation is
insufficient to replace that involved in the production process.
Case I: Scale of production remaining the same, constant process of elements of production and products; change in the period of
circulation and hence in the turnover period.
One ninth less total capital is necessary as a result of the reduction in the circulation period: 800 in place of 900,
with 100 precipitated out.
The business continuous to supply a product of 600 over six weeks; assuming uninterrupted production, in 51
weeks the value of the product is 5,100. But the reduction in circulation time supposes a necessary capital advance
of 800 rather than 900; the 100 precipitated out exists in the form of money capital, and now constitutes new
money capital a new element on the money market21 seeking investment.
Case II: Change in price of the materials of production, all other circumstances being unchanged.
Money capital is precipitated out to the value of a fall in the value of raw materials, etc. absolutely in the case of
this fall being due to a rise in productivity, rather than accidental circumstances.
Case III: Change in the market price of the product itself.
A fall of price means a part of the capital is lost and a new advance of money capital is necessary. A rise in price
means a portion of capital not advanced is appropriated from the circulation sphere.22

21

C2, p. 363.

Note, though: Though it is assumed here that the prices of the elements of the product were given before the latter entered
on the market as commodity capital, this price increase could still have been caused by a real change in value, to the extent
that this had a retrospective effect, e.g. if raw materials had subsequently risen in value. C2, pp. 367-8.
22

11

Chapter 16: The Turnover of Variable Capital

1 The Annual Rate of Surplus-Value
Let us consider a circulating capital of 2,500, of which, 2,000, is constant capital, and , 500, variable capital.
The turnover period is five weeks: four weeks working period + one week circulation period. Capital I is thus
2,000, 1,600 constant and 400 variable capital; capital II is 500, 400 constant and 100 variable capital. In
each working week, 500 is laid out. In a year of 50 weeks, an annual product of 50 500 = 25,000 is produced.
Capital I is turned over , i.e. 12 times; 12

2,000 = 25,000. Of this 25,000, , 20,000, is constant capital,

and , 5,000, variable. The total capital of 2,500 turns over

= 10 times.

Both the constant circulating capital and the variable circulating capital can serve again in the circulation process of
capital to the extent that the product in which their value is reproduced is transformed from commodity capital and
thence into money capital (unlike fixed capital, which maintains its function in production in its old shape through a
cycle of turnover periods of the circulating capital).
In the last chapter we dealt, in accordance with these properties, with the constant and variable parts of circulating
capital together. The first phase of the circulation of circulating capital CM is common to both the constant and
variable parts; in the second phase they separate. Here, we shall be dealing with the variable alone. We shall also
deal with surplus-value.
100 variable capital is laid out each week; we shall assume a rate of surplus-value 1 of 100 %: 100 per week, 500
over the turnover period of five weeks. But over the course of the year 10 turnovers 5,000 variable is laid out,
and 5,000 surplus-value produced. But the capital advanced is 500. Hence the annual rate of surplus-value =
=
1,000 %, in other words the rate of surplus-value produced by the variable capital in one turnover multiplied by the
number of turnovers of the variable capital, i.e. 100 % 5.
Let us compare two different cases, which we shall label variable capitals A and B:
variable capital A variable capital B
size

500

5,000

5 weeks

50 weeks

10

variable capital laid out/week

100

100

variable capital laid out/year

5,000

5,000

rate of surplus-value

100 %

100 %

surplus-value/week

100

100

surplus-value/year

5,000

5,000

annual rate of surplus-value

1,000 %

100 %

turnover time
n of turnovers/year

Ignoring files 2 and 3, the turnover time of the capital advanced and the number of turnovers per year, it may

Rate of surplus-value =

. Cf. Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], pp.

323-4, 668-72.
1

appear as if the rate of surplus-value did not depend only on the amount of variable capital and the rate of
exploitation of labour-power set in motion by it, but also on inexplicable influences deriving from the circulation
process. 2
But we are not comparing like with like. If B were wholly spent on labour-power in the same interval as A then
5,000 would be paid out in five weeks, 1,000 a week, 50,000 in a year. Given the rate of surplus-value of 100 %,
the annual rate of surplus-value would now be

, or 1,000 %, the same as A. Hence, if the annual rates of

surplus-value for A and B are the same; the masses of surplus-value produced stand in the same ratio as the capitals
advanced, i.e. 10:1.
The labour process is measured by time; a production period consists in a definite working day, a definite number
of workers and a definite number of working days. Variable capitals of the same size are applied if equal amounts of
labour-power are set in motion for the same interval of time.
The difference between A and B lies not in the variable capital applied but in the variable capital advanced. In the
case of A, 500 is advanced for five weeks, and 100, applied each week; in that of B 5,000 is effectively advanced
for the same period, but in five weeks only is applied. For the second five-week period 4,500 is advanced, and
so on. But that which is advanced, but not applied, is, for the labour-process, non-existent.
The mass of surplus-value produced over a period of time is governed by the capital applied during that time, not
that advanced.
What is striking is that, in the case of B, the rate of surplus-value and the annual rate of surplus-value are the same:
100 %; it is not in fact B that needs to be explained, but A.
The turnover time [...] modifies the ratio between the capital advanced for the production process [...] and the
capital applied for any given period [...]. 3 The latter, the capital applied for the given period, is given by the value of
the capital advanced multiplied by the number of turnovers for that period. 4 The real rate of surplus-value 5 only
expresses the mass of unpaid labour variable capital sets in motion in a given period, and takes no account of the
quantity of variable capital advanced.
Hence, if

Then,
And

if

And

if

A capital value, therefore, is precisely not spent, but advanced, which means that once it has passed through its
cycle it returns to its starting point to begin the cycle (and, moreover, enriched with surplus-value): capital by its

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 373.

C2, p. 377, italicisation added.

Obviously, this also says that the capital advanced for a given period is given by the capital applied for that period divided by
the number of turnovers during that period.

C2, p. 379.
2

very nature only maintains its capital character [...] by functioning as capital in ever repeated production processes. 6

2 The Turnover of an Individual Variable Capital

Marx here quotes himself from volume 1:
Whatever the social form of the production process, it has to be continuous, it must periodically repeat the same
phases. [...] When viewed, therefore, as a connected whole, and in the constant flux of its incessant renewal,
every social process of production is at the same time a process of reproduction. [...] As a periodic increment of
the value of the capital, or a period fruit borne by capital-in-process, surplus-value acquires the form of a revenue
arising out of capital. 7

Taking our example of capital A, Marx walks us through the steps of its turnover:

The variable capital advanced, 500, is converted, in its first turnover period, into labour-power, at the
rate of 100 a week

At the end of this period, the 500 spent on labour-power, having been converted into wages, ceases to
be capital.

The workers convert it into means of subsistence, which are consumed, from the workers point of view,
unproductively. 8

The capitalist, however, consumes the labour-power productively in the labour-process, at the end of five
weeks of which not only 500, the reproduced value of the variable capital, but another 500, newly
created surplus-value, of product have been brought into existence.

Thus the labour-power is consumed, and passes to exist as product; the labour-power active yesterday is
different to that active today yesterdays does not exist as labour-power but as commodity product,
which is then sold, i.e. converted into money and thence into variable capital.

Therefore, the 500 spent in the second turnover as variable capital is not the same as the 500 spent
as variable capital in the first, for the latter has been consumed.

Ignoring surplus-value, that 500 exists anew for the capitalist conceals the fact that he is operating with a newly produced
capital. 9 The same is, of course, for the third, fourth, etc. turnovers.
What is attained by the ten-fold turnover of the variable capital advanced, therefore, is not that this capital of
500 can be productively consumed 10 times over or that a variable capital hat suffices for five weeks can be
applied for 50. In fact, 10 500 of variable capital is applied in the 50 weeks; the capital of 500 is only ever
6

C2, p. 382.

C1, pp.711-12.

And it does not matter here if a part of this money is saved, it is still not capital.

C2, p. 385, italicisation added.

3

sufficient for five weeks, and must be replaced at the end of these five weeks with a newly produced capital of
500. 10

In the case of capital A, after its first five-week production period, 500 of variable capital exists in the form
(money, converted commodity product) necessary for it to be set in motion.
In the case of capital B, however, at the end of five weeks, even though 500 has been advanced and spent; even though
this value has been converted into labour-power and replaced by newly produced product; this replacement value
does not exist in the form necessary for it to be set in motion, i.e. it exists, but not in the form of variable capital. 11
Hence, in the case of B, at the end of five weeks another 500 of the 5,000 advanced needs to be set in motion.
In the case of A, the variable capital set in motion over the 50 weeks is paid for successively by the renewed money
form of the replacement value produced every five weeks. In the case of B, the variable capital deployed over the
course of the 50 weeks is paid for from the capital value advanced of 5,000.
Hence, with the same rate of exploitation of labour the same rate of surplus-value the annual rates of surplusvalue of A and B stand in inverse proportion to the quantities of money capitals advanced.
capital A =

= 1,000 %

capital B =

= 100 %

But 500v : 5,000v = 1 : 10 = 100 % : 1,000 %

The earlier or later transformation of the replacement value into money, and hence into the form in which the
variable capital is advanced, is evidently a circumstance quite immaterial to the production of surplus-value. The
latter depends on the magnitude of the variable capital applied, and on the level of exploitation of labour. But the
circumstance mentioned above does modify the size of the money capital that has to be advanced to set in motion a definite
amount of labour-power in the course of the year, and in this way does affect the annual rate of surplus-value. 12

3 The Turnover of Variable Capital Considered from the Social Point of View
Now we consider the matter from the point of view of the whole of society. Suppose:
1 worker costs 1 a week
the working day = 10 hours
In the cases of both A and B 100 workers are employed over the year (100 a week for 100 workers); each works
60 hours a week. Per week 100 workers perform 6,000 hours labour; per year, 300,000. This labour-power is
requisitioned by A and B, and cannot be spent on anything else; 13 this circumstance is the same for both A and B.
In addition, in both cases, 100 workers receive a total annual wage of 5,000, and withdraw means of subsistence
(weekly) from society, casting into circulation in return a monetary equivalent. In what lies the difference between
A and B?
First difference

In the case of A, the money the workers cast into circulation is not just the money form of the value of their
labour-power but, immediately from the second turnover period the money form of their own value product of the
preceding production period. In the case of B, payment for labour by means of the value product of the workers
themselves can only begin from the second year, and takes the form of payment with the value product of the
10

C2, p. 385.

11

Precisely, although does not say so explicitly at this point, because B has not completed its turnover.

12

C2, p. 387, italicisation added.

13

C2, p. 388.
4

previous year.
Hence, the shorter the turnover period of capital, one, the sooner is the variable capital originally advanced
transformed into the money form of the value product created by the worker as a replacement for this variable
capital; two, the shorter is the time for which the capitalist has to advance money from her own funds; as a
consequence, three, the smaller is the total capital, all else being equal, to be advanced for a given scale of
production; and, four, the greater is the mass of surplus-value, given the rate of surplus-value, relative to this. At a
given scale of production, the absolute size of the variable money capital advanced [...] is reduced in proportion t
the brevity of the turnover period [...]. 14
Second difference

In the cases of both capitals, A and B, the workers pay for means of subsistence with variable capital transformed
into means of circulation: commodities are withdrawn from the market, and replaced with money. In the former
case, this money is the money form of the workers own value product; in the case of B, therefore, no commodity
which this money could buy is sent to market during the year: hence, labour-power, means of subsistence, fixed
capital, and production materials are withdrawn from the market, and money cast into it, considerably before any
product able to replace the material elements of production (and, the greater the turnover time, the greater is this
period), with consequences for the money market. At the same time, withdrawing the elements of productive
capital from the market and replacing it not with more product but with money alone forces up demand without
providing extra supply. 15
[Max here inserts a note for future elaboration into the manuscript.
[Contradiction in the capitalist mode of production. The workers are important for the market as buyers of
commodities. But as sellers of [...] labour-power capitalist society has the tendency to restrict them to their
minimum price. Further contradiction: the periods in which capitalist production exerts all its forces regularly
show themselves to be periods of over-production; because the limit to the application of the productive powers
is not simply the production of value, but also its realisation. However the sale of commodities, the realisation of
commodity capital, and thus of surplus-value as well, is restricted not by the consumer needs of society in
general, but by the consumer needs of a society in which the great majority are always poor and must always
remain poor. 16]

Third difference

Insofar as turnover time is determined by working time, the greater the number of turnovers in a year the more is
facilitated the supply of variable or constant capital by way of its own product, as in the case of the production of
coal or ready-made clothes, for example.

14

C2, p. 389.

If we were to consider a communist society [] then money would immediately be done away with, and so too the
disguises that transactions acquire through it.[] [S]ociety [] [would have to] reckon in advance how much labour, means
of production and [] subsistence it can spend, without dislocation []. In capitalist society [] where any kind of social
rationality asserts itself only post festum, major disturbances can and must occur constantly. C2, p. 390.
15

16

C2, p. 391.
5

Chapter 17: The Circulation of Surplus-Value 1

I The use of capitalised surplus-value as capital advanced
In the case of the capitalist A of the last chapter, excepting the first turnover period of her business, consumption
is met out of the production of surplus-value; capitalist B has to wait for her surplus-value to be realised and hence
has to recourse to her own funds not only for consumption but also, when the need for extra capital arises during
production, 2 to advance capital as well. The capital necessary to carry on production on a given scale, in effect part
of capital advanced, may therefore come from the capital really originally advanced (B) of from capitalised surplusvalue (A).
II The relation between capital advanced and capitalised surplus-value, and credit
The relation between capital advanced and capitalised surplus-value becomes more intricate with the development
of the credit system. If A is lent productive capital, surplus value deposited by D, E and F, by banker C, although
for A, the money is no more than money, and not accumulated surplus-value, for D, E and F A is an agent who
capitalises the surplus-value they themselves have appropriated.
III The accumulation of surplus-value as money
Accumulation requires an expansion in the scale of production, which can be achieved in various ways (or
combinations of ways, including: raising the productivity of labour already deployed; increasing its intensive
exploitation; extending the working day), in addition to speculation in raw materials, etc. In these ways,
accumulation soaks up realised surplus-value. With shorter turnover periods bringing more frequent realisations of
surplus-value surplus-value needs to be accumulated as money before it can enter production. Hence, [b]esides real
accumulation, or the transformation of surplus-value into productive capital [...] there is thus accumulation of
money, scraping together a part of the surplus-value [...] to function as additional capital later on, when it has
attained a certain volume. 3
IV The accumulation of surplus-value as money and the credit system
From the social point of view, alongside the development of capitalist production there arises a system of credit, in
which money capital that the capitalist can not yet apply for her own benefit is employed by others: with an
increasing frequency of turnovers and an increasing scale of production of surplus-value the money as capital
placed on the money market, and the degree to which this is absorbed into production, grows.
Marx at this point quotes at length from Irish utopian socialist William Thompson, to the effect that The mass of
real accumulated wealth [...] ... is [...] utterly insignificant when compared to the powers of production [...]. 4
V The production of money
(We should note that from here up to part IX below we are assuming simple reproduction.)
The title here is misleading, for what this chapter deals with is principally the circulation of money. In addition, it is
fragmentary in the extreme, consisting in a series of digressions only loosely related to each other and even less with the
preceding discursion. I have therefore dispensed with subheadings as they appear in the book, which only serve to imply a
greater coherence than is actually present, and have throughout inserted my own.

As is the case with maintenance and repair costs: see Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p.
255.

C2, p. 396.

C2, p. 397.
1

The mass of metallic money existing in a country must be sufficient to cope with fluctuations in the circulation of
money (fluctuations caused by fluctuations in the velocity of circulation, in prices, in the proportions in which
money functions as means of payment and means of circulation).
The total mass of money in existence is the sum of money in circulation and money existing in the form of hoard
(although the proportions of these two categories may, and do, change).
For simplicitys sake here we are going to assume production of gold and silver within the country itself, rather than
conceive of the matter as an international transaction between the country in question and the gold and silver
producing countries.
Ignoring production for luxury items, the annual production of gold and silver must be as a minimum equal to the
annual wear and tear of the money metals occasioned by circulation; it must also grow with the growth in value of
the mass of commodities annually produced (insofar as this is not compensated for by an increase in the velocity of
circulation or an increase in the mutual settlement of sales and purchases).
Capitalists who produce gold and silver, therefore, assuming simple reproduction, cast their surplus-value into
circulation in the natural form of the product, not its transformed form; in addition, wages are not replaced by sale of
product but rather directly by a product whose natural form is money. The same applies to that part of the product
equal in value to the (fixed and circulating) constant capital consumed.
The turnover of capital in this sector can be represented by MC ... P ... M . The product M consists in money
equal to the variable capital plus circulating constant capital plus fixed capital used up plus surplus-value (if it were
less than this then either the mines in question would be unprofitable or, if generally the case, the value of gold
would rise, prices would fall so that the money laid out in MC would be less).
The M advanced here is cast into circulation to purchase labour-power and materials of production; this particular
capital cycle does not withdraw this money again, for its product is already money, needs not be converted into
money, but back into productive capital. But under our assumptions, the money produced here only replaces the
wear and tear of the social stock of money.
The total quantity of money in existence ([a]ccording to the law of commodity circulation 5) is equal to the quantity
of money necessary for circulation plus that sum existing as hoard; this latter increases or decreases in function of
the contraction or expansion of circulation, and serves in particular for the reserve fund of payment.
What is paid in money excepting direct balancing of accounts is the value of commodities; that a part of this
value is surplus-value is irrelevant.
If the producers all possessed their means of production independently, there would then be circulation between
the direct producers themselves. Ignoring the constant part of their capital, we could divided their annual surplus
product, by analogy with the situation under capitalism, into two parts: part (a), which simply replaces their
necessary means of subsistence, and part (b), which they partly consume as luxury products, and partly apply to
the expansion of production. 6

C2, p. 403.

C2, p. 404.
2

VI How can a capitalist withdraw more money from circulation than she throws into it? 7

Bourgeois economics takes surplus-value the formation of which is the real secret for granted, thus also for
granted that the capitalist casts an excess in the form of commodity capital over and above her capital into
circulation. This is not the problem to be solved here: the question here is not where surplus-value comes from, but
where the money into which it is turned comes from, i.e., from where does the money come to allow the
commodity capital (including the surplus-value) to be reconverted into productive capital by being sold?
We assume a total social (i.e. of the capitalist class) circulating capital of 500 advanced in money form, and a
surplus-value of 100. 600 is thus cast into circulation in commodity form: but the extra money needed for the
circulation of this additional commodity value [i.e., the 100 surplus-value] is not provided by the same operation. 8
Here are some of the incorrect explanations (plausible subterfuges 9) of the matter.
(a) Capital is not laid out all simultaneously
While one capitalist is selling her commodities another is buying means of production, for example. Yet we have
already seen 10 that a given sum of money, by acting alternately as the money fund for different productive capitals,
sets productive capital of a greater value in motion. Hence this solution presupposes what it seeks to explain, i.e. the
existence of the money.
(b) The delay between the outlay and reflux of the money advanced for the payment of wages
Before the reflux of this money, it can serve to convert surplus-value into money. But if the workers buy
commodities with this money the surplus-value contained in them must also be converted into money; in addition,
capitalist unproductive consumption also casts money into circulation so as to spend their surplus-value as revenue.
Money must be withdrawn from circulation to facilitate this. Again, the question remains: where does it come from?
(c) The gradual withdrawal of the money cast into circulation by the first investment of fixed capital
But the surplus-value contained in the commodities that serve as fixed capital must also converted into money in
payment. Again, where does this money come from?
The answer, Marx argues, is this: for a mass of commodities of value x to circulate the quantity of money necessary
is independent of whether, and to what degree, this value contains surplus-value of how much or how little of
this value accrues to the direct producers of these commodities. 11 The question is really: where does the quantity of
money needed in a country 12 for the circulation of commodities in general come from?
In fact, it is the capitalist class that casts into circulation the money that serves for the realisation of surplus-value:
but it casts this money in as money, and not as capital. Let us assume a capitalist (a farmer) who advances 4,000 in
constant capital and 1,000 in variable (the rate of surplus-value = 100 %). She also has to live, so she advances as
This section is a polemic directed at an (unnamed) opponent of Tooke (C2, p. 404). Thomas Tooke was a prominent
opponent of the Currency School (the monetarists of their day), who Marx commented favourably had been compelled [...]to
recognise that the direct correlation between prices and the quantity of currency presupposed by this theory is purely
imaginary, that increases or decreases in the amount of currency when the value of precious metals remains constant are
always the consequence, never the cause, of price variations, that altogether the circulation of money is merely a secondary
movement and that, in addition to serving as medium of circulation, money performs various other functions in the real
process of production. Karl Marx, A Contribution to a Critique of Political Economy, Marx Engels Collected Works vol. 29
(London and Moscow, 1987), p. 415. When Tooke died Marx commented to Engels that he had been the last English
economist of any value. Marx to Engels, 5 March 1858 Marx Engels Collected Works, vol. 40 (London and Moscow, 1987), p.
325.
7

C2, p. 405, italicisation added.

C2, p. 405.

10

In volume 1, chapter 3.

11

C2, p. 407.

12

The term is Marxs; it is problematic, but we shall pass over it here.

3

money 1,000 on means of subsistence. This money is cast into circulation and withdrawn in the form of commodity
values: through their consumption the value of these products is destroyed. At the end of the year he releases a
commodity product of value 6,000, and through its sale withdraws from circulation 6,000 in money. But by the
end of the year she has cast into circulation 6,000 too: 5,000 in capital advanced and 1,000 on means of
subsistence. The extra money (on means of subsistence) is not cast into circulation by the capitalist as capital.
However, it certainly pertains to the character of the capitalist that he should be capable of living off the means of
subsistence in his possession until the reflux of his surplus-value. 13 And if it is suggested that it is fortuitous that
the amount of money spent of the means of subsistence of an individual capitalist exactly equals surplus-value is
fortuitous, then it is not so, on the assumption of simple reproduction, for the capitalist class as a whole.
The capitalists who produce gold possess their product (including surplus-value) in form that is already money, and
is cast into circulation to withdraw products: one part of the capitalist class casts into circulation a commodity value
greater (by surplus-value) than the money capital advanced, while another casts into circulation a greater (by
surplus-value) money value than the commodity value they withdraw. Although a part of the value of the gold
commodity product consists in surplus-value, the size entire product is determined by the replacement of the
money necessary for the circulation of commodities (see part V above).
That the production of gold takes place in another country does not change the matter. In country A a part of the
social labour-power and means of production is transformed into a product and exported to gold-producing
country B to buy gold. The productive capital thus applied in country A no more throws commodities onto the
market in country A, as opposed to money, than if it had been directly applied in gold production. 14
VII The effect of a rise in wages on prices
All else remaining equal, changes in the length of turnover time change the amount of capital advanced necessary to
maintain production on the same scale. Monetary circulation must be sufficiently elastic to accommodate this
phenomenon.
If we assume no change in the size, intensity and productivity of the working day, but a changed division of the
value product between wages and surplus-value, no change in the quantity of money necessary for circulation is
effected, since the size of the value product is the same. Hence a general rise in wages and consequent general fall
in the rate of surplus-value causes the money value advanced as variable capital to rise, but the size of the surplusvalue to be realised to fall by the same amount.
But it is argued a rise in the share of wages with respect to surplus-value means a greater quantity of money in
the hands of the workers, hence greater demand for means of subsistence, and a rise in the price of commodities.
Now, while a temporary rise in prices may well occur, that the demand for subsistence commodities rises and that for
luxury goods falls (because of the fall in surplus-value, i.e. in the share of the social product falling to the capitalists)
a greater part of the social capital will be directed to the production of the former and a lesser part to the latter. 15
All that would occur would be some temporary oscillations. 16
It is also argued that a rise in the quantity of money in the hands of the workers would permit the capitalists to raise
the prices of commodities, to which Marx counters that were it within the will of the capitalists to raise their prices
at will they would do so anyway, under any conditions.
Marx now summarises:

13

C2, p. 410.

14

C2, p. 411.

Even if the rise in wages leads to a rise in consumption of luxury goods on the part of the workers this does not change the
fundamental direction of the process.
15

16

C2, p. 414.
4

1 If the sum of the prices of goods in circulation rises whether through a growth in volume or a rise in prices
all else remaining the same, the quantity of money in circulation also rises. The effect is then taken for the
cause. 17 But if wages rise with the increase in price of means of subsistence their rise is the result of the rise in
prices, not the cause.
2 A partial or local rise in wages may result in a partial or local rise in prices.
3 A general rise in wages provokes a rise in prices in those branches of industry in which variable capital
predominates and a fall in those in which constant or fixed predominates.

VIII The distinction between the circulation of money and its cycle 18
In volume 1 we saw that
The process of circulation, therefore, unlike the direct exchange of products, does not disappear from view once
the use-values have changed places and changed hands. The money does not vanish when it finally drops out of
the series of metamorphoses undergone by a commodity. [...] When one commodity replaces another, the money
commodity always sticks to the hands of some third person. Circulation sweats money from every pore. 19

Hence the constant retention of a part of capital in the form of money capital, and the constant presence of a part
of the surplus-value similarly in money form in the hands of the proprietor. 20
But this, moneys constant removal from its starting point, 21 refers to the circulation of money, which needs to be
distinguished from the cycle of money, its return to its starting point. The accelerated turnover of capital through its
nature involves an accelerated circulation.
variable capital: If a money variable capital of 500 turns over 10 times in a year then this aliquot part of the
money in circulation circulates 10 times its sum of values.
constant capital: If the constant part of capital = 1,000, with 10 annual turnovers, i.e. that the commodity
product is sold 10 times a year, then the constant circulating part of this value circulates too. In
addition means of production are also bought 10 times in a year. Hence, with 1,000 of money
10,000 of commodities are sold by the industrial capitalist and 10,000 of other commodities
are bought.
surplus-value: An accelerated turnover leads to quicker circulation of that quantity of money that realises
surplus-value.
On the other hand, an increase in the rate of monetary circulation does not lead to a more rapid turnover of capital,
i.e. does not impact on the speed of renewal of the reproduction process. More rapid circulation of money occurs
when an increased volume of transactions is carried out with the same quantity of money. This can occur for
technical reasons without a change in the reproduction period; the volume of transactions can increase (through
speculation on stock market futures, for example) without an increase a real replacement of commodities.

17

C2, p. 415, i.e. the change in the quantity of money is seen to cause the rise in prices.

Respectively, Umlauf (circulation) and Kreislauf (cycle). See my comments in the fourth footnote to my notes for chapter
1 of this volume.
18

19

Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], pp. 207-8.

20

C2, p. 416.

21

C1, p. 210, italicisation added.

5

IX The monetary preconditions of capitalist production

The capitalist mode of production, given that its basis is wage-labour, and therefore also the payment of the worker
in money and the general transformation of services in kind into money payments, 22 can develop on a large scale
only given the existence of a quantity of money sufficient for circulation and the hoard formation required by this
circulation But the formation of a preconditional hoard develops simultaneously with the mode of production.
Nevertheless, a historical precondition of all this is a supply of precious metals, hence the fact that he increased
supply of these from the sixteenth century onwards was of such importance for the development of capitalist
production. The additional commodities to be transformed into money find the precious metals necessary because
these are cast into circulation by production itself.
X Where does the extra money necessary for increased productive capital under expanded reproduction
come from?
(From this point on we are now considering expanded production.)
In the case of expanded reproduction an additional money capital is necessary for the function of increased
productive capital: this is supplied by the part of realised surplus-value cast into circulation by capitalists as money
capital, instead of the money form of revenue. With respect to the additional mass of commodities released into
circulation, a part of the money needed for their realisation is also released insofar as the value of these
commodities contains the value of the productive capital realised in their production. The question arises again:
where does the extra money to realise the extra surplus-value come from?
Since the total price of the mass of commodities in circulation has increased because the mass has increased (not
because of prices) the additional money must be created by either

a more efficient use of the money already in circulation

an acceleration of the circulation of the money already in circulation
the transformation of the money hoard 23

To the extent that these means are insufficient, there is also an increased production of gold. 24
XI Credit and the productivity of labour
Insofar as it involves the withdrawal of means of production and consumption from the production of real wealth,
the production of precious metals to serve as money counts as an item of social faux frais; insofar as the existence of
mechanisms of credit reduce the costs of the mehanism of circulation it increases the social productive forces.
22

C2, p. 418.

Marx here quotes himself from the Contribution: So that money as coin [i.e. money in its function of means of circulation]
may flow continuously, coin must continuously congeal into money. The continual movement of coin implies its perpetual
stagnation in larger or smaller amounts in reserve funds of coin which arise everywhere within the framework of circulation
and which are at the same time a condition of circulation. The formation, distribution, and reformation of these funds
constantly changes; existing funds disappear continuously and their disappearance is a continuous fact. This unceasing
transformation of coin into money and of money into coin was expressed by Adam Smith when he said that, in addition to
the particular commodity he sells, every commodity-owner must always keep in stock a certain amount of the general
commodity with which he buys. We have seen that MC, the second member of the circuit CMC, splits up into a series of
purchases, which are not effected all at once but successively over a period of time, so that one part of M circulates as coin,
while the other part remains at rest as money. In this case, money is in fact only suspended coin and the various component
parts of the coinage in circulation appear, constantly changing, now in one form, now in another. The first transformation of
the medium of circulation into money constitutes therefore merely a technical aspect of the circulation of money.
Contribution, Collected Works, vol. 29, p 360.
23

24

Or a part of the extra product is exchanged directly for gold.

6

XII Surplus-value formed into hoards

Let us now consider the case where, instead of actual accumulation, a part of realised surplus-value is stored as a
monetary reserve fund.
Where the money thus accumulated is extra money, it can only have come from the precious metal-producing
economy. If the quantity of money remains the same, the money that is stored up has flowed in from circulation,
changing its function. The money stored up is the money form of the surplus-value of sold commodities; a
capitalist who stores up money is a capitalist who has sold without buying.
Under conditions of general accumulation on the part of the capitalist class the following happens. The workers
spend their wages converted variable capital on commodities: thus this money flows back to the capitalist class.
But this sum, variable capital, can never permit the workers to buy back that part of the product equivalent to
constant capital or surplus-value.
Money capital stored up for later use consists in:

bank deposits 25
government papers (outstanding claims on the nations annual product 26)
shares: titles of ownership to real capital, and drafts on the surplus-value that flows in from this.

In none of these cases is there any real storage of money.

Under capitalist production, the formation of a hoard as such is never a purpose, but rather a result [...], 27 of either
stagnation in circulation, or of the storage required for turnover. A hoard can also be latent money capital.
If one part of surplus-value is hoarded, then another part is transformed into productive capital: storage in the
money form never occurs simultaneously at all points. 28

25

But, as Marx remarks, in monetary terms these are small quantities. Banks do not store money, but monetary claims.

26

C2, p. 423.

27

C2, p. 423.

28

C2, p. 423.
7

Part Three
The Reproduction and Circulation
of the Total Social Capital

Chapter 18: Introduction 1

1 The Object of the Inquiry
Marx here summarises where we are in our analysis. The immediate production process of capital is the process of
labour and valorisation. 2 The immediate process of production, the P in MC ... P ... C M, was the object of
analysis of volume 1: the result of this process [...] [is] the commodity product, and its determining motive the
production of surplus-value. 3
The process of reproduction of capital also involves the process of circulation of capital, or, more precisely, the place of
this circulation in the reproduction of capital. 4 This process, of the constant repetition of the cycle of capital, of its
perpetual re-emergence as productive capital, is conditioned by its transformations in its cyclical movement; at the
same time, the constant repetition of the production process is the condition for transformation of capital in the
sphere of circulation.
At the same time, we have to take account of the fact that each individual capital forms a fraction of the total social
capital. 5 The movement of the social capital is made up of the totality of movements of these autonomous
fractions, the turnovers of the individual capitals. 6
The overall process comprises:

productive consumption (the immediate process of production)

the changes of form which mediate this (materially manifested as exchange)

Insofar as these exchanges also comprise the conversion of variable capital into labour-power, the sale of
commodities for the individual consumption of the workers, and the circulation of surplus-value and therefore
the individual consumption of the capitalist the totality of the cycle of the individual capitals comprises not just
the circulation of capital but also commodity circulation in general. This last the general circulation of
commodities consists fundamentally in (1) the cycle of capital and (2) the cycle of those commodities that go into
It would be worth noting here that this final part of the work, in which Marx develops his celebrated (and controversial)
reproduction schemes, was intended by him as the concluding section of only the first part of the volume to follow volume 1,
the second part of which was to consist in what has come down to us as volume 3; thus the import of what Marx is to say
here will be clearer once volume 3 itself is taken account of. In this respect, we should also note that the material from which
Engels compiled volume 2 was written after that used for volume 3.

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 427.

C2, p. 427.

Having devoted Book [volume] I to the revelation of the class relation obscured from view by the market relations
structuring economic activity, Marx turns in Book [volume] II to the way in which the social class system is constituted by way
of those same market relations. [...] As products of capital, [...] commodities are intended for sale, transformation into money.
To continue to function as capital, that money (which, if all has gone well, includes an increment over the initial investment)
must be reinvested in the elements of production, which must be set to work in the creation of new value and surplus valuebearing commodities. Where the circulation of commodities, with which Book I began, implies relations among buyers and sellers,
or producers and consumers, the circulation of capital in the commodity form implies relations between capitals, on the one
hand, and capital and the owners of labour power, on the other. [...] Circulation is, according to Marx, the first totality among
economic categories, since it provides the forms for the interaction of all economic units. [...] The totality of the social
process, circulation is also the first form in which not only the social relation as is the case with a coin or with exchangevalue but also the movement of society itself can be seen as a fact independent of individuals. [...] It is this role of
circulation in the social reproduction process that gives rise to the idea of the economy as an autonomous system of forces,
to be studied by a science of economics. Paul Mattick, Jr., Economic Form and Social Reproduction: on the Place of Book
II in Marxs Critique of Political Economy, in Christopher J Arthur and Geert Reuten (eds.), The Circulation of Capital: Essays
on Volume Two of Marxs Capital (London and New York, 1998), pp. 25-6. (The quotation by Marx is taken from Maximilien
Rubels French edition of Marxs works: Mattick, Economic Form and Social Reproduction, pp. 30-1.)
4

What Marx in the Grundrisse and in his correspondence calls capital in general.

C2, 427.
2

individual consumption.
In volume 1 the process of production was analysed as an isolated event (the production of surplus-value)
and a process of reproduction (the production of capital). Circulation, other than involved in the buying and
selling of labour-power, was just assumed.
In part 1 of this volume we considered the forms of the cycle of capital.
In part 2 we considered this cycle as a periodic one, and the implications of this periodicity.
7
Now since the circuits [cycles] of individual capitals [...] presuppose one another we consider the
movement of the total social capital.

2 The Role of Money Capital

(Marx notes here 8 that this matter is necessary to take account of but that it is tangential to the argument at this
point.)
In connection with the turnover of the individual capital, we saw that money capital displays two aspects.. 9
I The productive capacity of a given quantity of money capital is determined by factors other than the
magnitude of its value 10

Commodity production presupposes commodity circulation; commodity circulation presupposes the representation
of commodities in money: 11 the duplication of commodities into commodities and money is a law of the
emergence of the product as a commodity. 12 Capitalist commodity production presupposes capital in money form,
as both prime mover and permanent driving force. 13 his is as true for social capital as for individual capitals. But:
the absolute scale of production of capitalist production is not determined [within limits] by the volume of money
capital in operation.
1 Given the rate of payment of labour-power, more or less severe exploitation, intensively and extensively, of
this can occur. If an increase in the amount of money capital (i.e. a rise in wages) coincides with greater
exploitation, the former does not necessarily rise in proportion to the latter.
2 The productive use of natural materials (soil, sea, etc., which do not form a part of capitals value) may be
more or less severely exploitative with a given amount of labour-power, hence without an increase in
money capital advanced.
3 In the case of means of labour, prolonging their daily use or raising the intensity of their application
increases the velocity of turnover of fixed capital; but, allowing for the fact that the elements of its
reproduction are supplied more quickly, also increasing the quantity of fixed capital deployed.

7
8

C2, p. 429.
C2, p. 430.

C2, p. 430. Bei Betrachtung des Umschlags des individuellen Kapitals hat sich das Geldkapital von zwei Seiten gezeigt. The
consideration of the turnover of individual capital has revealed two sides of money.
9

10

Where I insert my own subheads they appear, as here, in sans serif type.

11

C2, p. 430.

12

C2, pp. 430-1.

13

C2, p. 431.
3

4 The incorporation, which depends on scientific advances, of natural forces as productive agents costs the
capitalist nothing.
5 This last point also applies to the social combination of labour-power in the production process and to the
accumulated skills of the individual worker. 14

An increase in the productivity of labour in itself increases the quantity of products, but not their
value, excepting that more constant capital (of the same value) may be produced for the same
labour, which can form the basis for an increase in the accumulation of capital.
If the social organisation of labour heightens its social productivity, increasing the scale of
production and hence the amount of money capital necessary to be advanced, this last can be met by
the centralisation of capital, 15 without an absolute growth in its volume.

6 A reduction in the turnover period allows the same productive capital to be set in motion with less money
capital (or more productive capital with the same money capital).
Conclusion: What all this indicates is that capital advanced in form a given sum of money contains productive
powers whose limits are not just given by its value. Once the prices of the elements of production `...] are given,
the size of the money capital required to buy a certain quantity of these elements [...] is [...] determined. [...]
However, the scale on which this capital operates to form values [...] is elastic [...]. 16
II The necessity of capital in the money form

Independently of the fact that the ratio of capital in the money form to the total of productive capital is determined
by the lengths of the turnover period and of its component parts, i.e. by the continuity and scale of production, that
proportion of capital in process that can function as productive capital is restricted by the size of the capital
advanced that must exist alongside productive capital in money form. 17
A certain portion of social labour and means of production, and hence a reduction in the scale of social production,
is necessary for the production and acquisition of money; but money in circulation and as hoard already exists
alongside existing elements of production an cannot be considered a restriction on these. 18
The amount of money capital necessary to set a given amount of productive capital in motion is determined by the
length of the turnover period. In addition, the amount of capital that exists in latent or suspended form is
determined by the division of turnover time into working and circulation times.
The degree to which the turnover time is determined by working time is determined by the material, and not the
social, character of production. Under conditions of capitalist production, however, production of a greater extent
requires greater advances of money capital for more time and as such is restricted by the extent of money capital at
the capitalists disposal (a restriction overcome by the credit system).
Under social production, the extent to which labour-power and means of production would be withdrawn without
providing useful product for a given period of time (damaging those less extended branches of production) has to
be determined independently of the social character of production. Under collective production, 19 in which money
C2, p. 432.
15 Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], pp. 776-81.
14

16

C2, p. 433.

17

We here ignore that money capital that may be necessary cope with delays in circulation.

18

C2, p. 433.

A communistic society would have to make decisions about how much resources to allocate to projects with a long
gestation period. These activities subtract labour, means of production and means of subsistence from the total annual
production [...] without providing a return to society for a considerable period. Society must calculate in advance how large a
19

is dispensed with, society determines the distribution of labour-power and means of production. 20
Insofar as the necessity of money capital is determined by the length of the working period, two conditioning
factors exist.
1 That money capital is the necessary form in which capital begins its process is a product of capitalist
production and commodity production in general. This remains true independently of the form taken by
money metallic money, credit money, tokens of value, etc.
2 The quantity of money advanced depends on the fact that elements of production are withdrawn from society
before useful products that can be converted into money are returned. This is unaffected by either the form
of money or the form of production itself.

fraction of its resources it can afford to tie up in this way. In this section, Marx recognizes that there is a real social cost to the
use of more capital intensive (in the non-Marxist sense) methods of production. [...] In a capitalist society no co-ordinated
calculation is carried out [...]. Anthony Brewer, A Guide to Marxs Capital (Cambridge, 1984), p. 105.
C2, p. 434. There is no reason why the producers should not receive paper tokens permitting them to withdraw the amount
corresponding to their labour time from the social consumption stocks. But these tokens are not money; they do not circulate.
(Italicisation added.)
20

Chapter 19: Former Presentations of the Subject1

I Purpose
Despite the title of the chapter, its contents almost exclusively refer to what Marx called [Adam] Smiths dogma,2
that is, the widely held classical political economic view that that the price of commodities, and hence that of the
total social product, is entirely resolved into revenue, i.e. into wages, profit and rent (a resolution which excludes
constant capital).3 As Marx wrote to Engels in 1863 (when he was working on a draft of material that was to form a
part of volume 2):
You know that according to Adam Smith, the natural price or necessary price is composed of wages, profit
(interest), rent and is thus entirely resolved into revenue. [...]. Nearly all economists have accepted this from
Smith [...]. According to this, society would have to start afresh, without capital, every year.4

Marxs famous reproduction schemes, which appear in the following two chapters, are based in good part on his
refutation of this dogma. 5

II Quesnays Conception of Reproduction

Marx begins by complimenting Quesnay for showing, in his Tableau conomique, how [t]he numberless individual acts
of circulation [...] are grouped together [...] as a mass circulation between major economic classes of society that are
defined by their functions.6 In his demonstration of simple reproduction one part of the total product [...] is [...] a
bearer of old capital value reappearing in the same natural form, i.e. he comes to grips with the main question, that
reproduction includes the reproduction of constant capital.7

III Smiths Conception of Fixed and Circulating Capital

It is with respect to this that Smith represents a regression:8 [t]he narrowness of Smiths conception lies in his
failure to see what Quesnay had already seen, namely the reappearance of the value of the constant capital in a
renewed form.9
Smith argues that the price of every10 commodity, and hence the total social product, resolves itself into three
parts, wages, profits and rent, and that these three categories constitute the source of all revenue, revenue shared

It would be worth keeping in mind for this chapter the critique that Marx made earlier in the volume (Karl Marx, Capital, vol.
2 (Harmondsworth, 1978) [hereafter C2], pp. 268-92) of Adam Smiths false understanding of the distinction between fixed
and circulating capital. As we saw, Smith designates as circulating capital capital as it passes through the metamorphoses of
the cycle of capital (in reality commodity capital), and thus confuses the movement of industrial capital as a whole with the
distinct elements that exist within productive capital, in other words conflating the distinction between productive capital and
capital in the circulation sphere and that between fixed and circulating capital within productive capital. In Smith's conception,
all capital is fixed, when it is involved in production; and all capital is circulating, when it undergoes the changes of form
between commodity and money in circulation.
1

For example: C2, p. 446.

For this reason, I have eschewed the subheadings of the text and inserted my own throughout.
Marx to Engels (6 July, 1863), <http://www.marxists.org/archive/marx/works/1863/letters/63_07_06.htm>.

Cf. Fred Moseley, Marxs Reproduction Schemes and Smiths Dogma, in Christopher J Arthur and Geert Reuten (eds.), The
Circulation of Capital: Essays on Volume Two of Marxs Capital (London and New York, 1998), pp. 159-185.)

C2, p. 435.

C2, p. 435, italicisation added.

C2, p. 436.

C2, p. 438.
1

out in society in function of its origin. Clearly absent here from our point of view is that revenue necessary to
replace constant capital; from Smiths, capital per se. This latter, in Marxs phrase, is smuggled in11 by means of
Smiths distinction between total12 gross and net revenue: the former, the total produce of land and labour, the
latter that total produce less what is necessary for maintaining capital. As Marx points out, [i]f capital is to come in
as revenue [in the form of gross revenue less net revenue], then capital must previously have been spent [and
therefore appear in the value of the product].13
Not only does Smiths conception of fixed capital as capital which does not circulate exclude constant capital from
effective net revenue but it also excludes that (really) circulating capital required to maintain, repair and replace
fixed capital, i.e. excludes all capital that does not exist in a natural form destined for the consumption fund.14
Nevertheless, Smith, excluding the cost of maintaining fixed capital from net revenue, does distinguish between the
labour necessary for this, i.e. that involved in the production of means of production, and the labour involved in
production of means of consumption. In the former case, the price of labour may indeed form a part of revenue, in
that wages form part of the stock for consumption; in the latter, both the price of labour and its produce end up as
consumption. But as Marx points out, while it is true that the product in the former case contains a sum of value
equivalent to wages, which form a revenue for the workers involved, even though they have produced no
consumable product, i.e. their product does not enter into net revenue, it is also true that that value part of the
means of production which forms the revenue of the industrial capitalists as profit and rent too exists in (nonconsumable) means of production, which, before being used to provide means of consumption produced by the
second case of worker for the owners of capital must first be converted into money. A similar point may be made
for this second class of worker: even though their wages (and their product) enter into the consumption fund, their
wages, to be consumed, must be first transformed into product, and not necessarily product produced by the
workers themselves.
Smith argues that, even though circulating capital can form no part of an individuals net revenue, and can form a
part of the net revenue of society (even though the total circulating capital is no more than the sum of individual
capitals).15
Marx now outlines the steps Smith should have made at this point in his analysis.
1 Total social product can be divided into two parts: means of production, and means of consumption.
2 The total value of the former can be divided into that of the means of production consumed in the creation
of means of consumption, thus reappearing in new form; that equivalent to the sum of wages laid out by the
capitalists; and that which forms the source of profits. For Smith, this first element forms no part of the net
revenue, for neither the individual capitalist nor society. The other two elements, however, form revenue for
the productive agents (wages for workers, profits and rents for capitalists), but not for society, for which they
form capital; but the revenue-forming value components of the means of production department function as
capital not in the hands of their producers, but in those of:
3 The capitalists of the means of consumption department, for whom they replace the capital used up in
Smiths scheme admits the possibility that the price of certain individual commodities may only be resolved into two, and in
exceptional cases, one of these categories.
10

C2, p. 439.
12 Which, for Smith (as often for Marx), means national.
11

C2, p. 440. Smith also introduces the notion of gross and net profit, the latter the former less what is necessary to
compensate for occasional losses of stock, which Marx points out is just another way of saying that the workers provide
surplus labour for the [] insurance fund. (C2, p. 441)
13

14

C2, p. 441.

Smith cites the example of the goods in a merchants shop; Marx counters that he should have chosen the stocks amassed
in the storehouses of the industrial capitalists. (C2, p. 444)
15

production of means of consumption (less that representing the sum of wages), capital now existing in the
hands of the capitalists producing as means of production and thus the consumption fund for the capitalists
and workers in the means of production department.
Two conclusions now stand out:
1 Even though: total social capital is the sum of individual capitals, and (therefore) total commodity
product/capital is the sum of that of the individual capitals, and (therefore) that the decomposition of
commodity value into its component parts holds (in the final analysis16) for the total product as it does for
the individual commodities, the form of appearance which these components assume in the overall process
of social production is [...] different.17
2 Even under simple reproduction, the labour spent in reproducing means or production whose value
decomposes into wages (necessary labour) and surplus-value (surplus labour) is realised in new means of
production which replace the constant capital component expended in the production of means of
production.

IV The Missing Constant Capital Component in Smiths Dogma

According to the proposition that price decomposes into wages, profit and rent, commodity value = v + s.18 This
proposition is qualitative, and not quantitative, i.e. the formation of price is absolutely independent of its
distribution among three kinds of person.19 Smith now needs to conjure the constant part of capital out of
commodity value.20 He does so like this; as for the capital replacement cost, Smith argues that the price of the items
that make this up is itself resolvable into wages, profit and rent (i.e., v + s), and so on ad infinitum. Marxs critique of
this proposition is as follows:
His proof consists simply in the repetition of the same assertion. He concedes [...] that the price of corn not only
consists of v + s, but also of the price of the means of production consumed in the production of corn, i.e. that it
consists of a capital value that the farmer did not invest in labour-power. Nevertheless, [...], the prices of all these
means of production can themselves be decomposed [...] , just like the price of corn itself, into v + s. Smith
simply forgets to add: as well as into the price of the means of production used up in their own creation. [...]. The
statement that the entire price of commodities is either immediately or ultimately resolvable into v + s would
only cease to be an empty subterfuge if Smith could demonstrate that the commodity products whose price is
immediately resolved into c (the price of the means of production consumed) + v + s are finally compensated for
by commodity products which entirely replace these consumed means of production, and which are for their
part produced simply by the outlay of variable capital, i.e. capital laid out on labour-power.21

And this not only does he not do but he strongly implies elsewhere that it is not the case.

V The Distinction between the Value of the Annual Product and the Annual Value Product
The source of Smiths error lies in his own premises. If capital converted into labour power produces a value
greater than its own, whence this excess? Smith argues that the workers impart to the things they work on a
(surplus) value in excess of the value of their wages; and, as we know, here he is right.22 But this holds true for the
C2, p. 445.
C2, p. 445, italicisation in original.
18 It is explicit in Smiths theory, Marx shows us, that both rent and profit arise from surplus-value.
16
17

C2, p. 449.
20 C2, p. 449.
19

21
22

C2, p. 450.
[T]hey can do no other, comments Marx (C2, p. 451).
3

total social product as well; again, where can still more labour come from to produce a capital value not laid out on
labour-power?23
The source of Smiths error lies in equating
the value of the annual product with the annual value product. [...] The latter is simply the product of the current years
labour; the former includes, on top of this, all those elements of value that were used in the production of this
annual product, but which were produced in [...] previous year[s] [...]: means of production whose value only
reappears and which, as far as their value is concerned, have been neither produced nor reproduced by the
labour spent during the current year.24

This error is based on another, more fundamental: Smiths failure to distinguish the elements of the twofold nature
of labour itself:
[the] labour that creates value, by the expenditure of labour-power, and [the] labour that creates objects of use
[...]. The [...] total annual product is the product of the useful labour operating in the current year [...]. The total
annual product is thus the result of the useful labour expended during the year; but only one part of the value of
this product has been created during the year; this part is the annual value product, which represents the amount
of labour actually performed during the year [...].25

VI The Distinct Processes of Circulation and Exchange Hidden in Smiths Account

The component of the value of the commodity product equivalent to wages the variable capital advanced
returns to the capitalist in the form of a part of the value component of the commodities produced by the workers,
i.e. in commodity form; the worker receives in money the value equivalent of the labour-power she has sold. This
last the worker uses to buy means of subsistence means of reproduction of labour-power.
There are different process of circulation and production here not distinguished in Smiths account.
(1) circulation process: The worker sells her commodity labour-power and receives money advanced26 by the capitalist.
(2) production process: The labour-power forms part of functioning capital: the worker reproduces in commodity form
the value advanced by the capitalist in wages value eventually to be advanced afresh, dependent on:
(3) the sale of the commodity product
Two points to bear in mind here are:
1 Commodity exchange considered as commodity exchange is nothing other than commodity exchange: it is
immaterial, one, what happens to the money in the hands of the seller, and, two, what happens to the
commodities in the hands of the buyer.
2 Because the value of labour-power is determined by the amount of labour necessary to produce it, i.e. by the
amount of labour necessary to produce the means of subsistence, i.e. the amount labour needed to maintain
her life, the wage becomes the revenue the worker needs to live.
Smith says that that part of capital that serves as wages constitutes a revenue for the workers after having served as
capital for the capitalist. This is wrong, and in two senses.
(1) the dual function of labour-power
Money paid for wages serves as capital to the extent and only to the extent that it incorporates labour23

C2, p. 451, italicisation added.

24

C2, p. 453, italicisation in original.

25

C2, p. 453.

26

Note: advanced, not spent.

4

power into production. Labour-power here is capital.

But labour-power in the hands of the worker is not capital: it is a commodity, and only functions as capital
after its sale.
Labour-power thus serves two purposes.
The worker receives the money from the capitalist after she has given the use of her labour-power; the
capitalist thus receives this value before she pays for it.
Therefore it is not the money which functions twice (as variable capital and wages), but the labour-power as
first capital and then commodity. The worker therefore himself creates the payment fund from which the
capitalist pays him.27
(2) the determination of the workers revenue
The worker spends her wages on maintaining her labour-power, and hence on maintaining for the capitalist the
means for remaining a capitalist. Thus:
The repeated sale and purchase of labour-power perpetuates the function of labour-power as an element of
capital; the capital that buys labour-power is restored by labour-power itself.
The repeated sale of labour-power is the means of maintaining the workers life: labour-power appears as the
means through which she draws the revenue to live.
Revenue here, then, is the appropriation of values effected by the constantly repeated sale of [...] labourpower, [...] values [which] themselves serve only towards the constant reproduction of the commodity to be
sold.28
That the value component of the product for which the capitalist pays as equivalent as wages becomes a
source of revenue for the worker is true, but this says nothing about the magnitude of this value, for this latter
is determined independently. This component of value does not consist of revenue, nor is it resolved into
revenue. That it is revenue is that it becomes to be disposed of by the worker. Thus, rather than the
magnitude of the workers revenue determining the share of new value she receives, it is the share of this
value that determines the magnitude of her revenue.

VII Smiths Misguided Conception of Revenue

We see, then, that the root cause of Smiths whole trouble29 is the concept of revenue. For Smith, it is the
different types of revenue that form the component parts of the commodity value. In reality, it is the other way
around: it is the equivalent of variable capital that returns to the capitalist, along with surplus-value, from which
revenue arises. But these two parts are no more than labour-power expended in commodity production.
If it is the case that commodity value is composed of its component parts, then the question is what determines the
magnitude of each of these component parts; but, if it is that commodity value is resolved into its component parts,
now the question is what determines the magnitude of the whole commodity value. The two questions are different;
both cannot be posed at the same time.

27

C2, p. 457.

28

C2, p. 457.

29

C2, p. 458.
5

The truth is that the newly-created value contained in the annual product is equal to the sum of variable capital
advanced plus surplus-value produced.

VIII Labour-power as the Source of Revenue

Marx now summarises his case against Smith.
The notion that wages, profit and rent, as revenues, form three components of commodity value, Marx labels as
absurd.
This notion in turn is based on that which says that the commodity value resolves itself into these three component
parts, a notion which Marx sees as more plausible, but which is also false, and on two counts.
First, as we have seen, because the component of constant capital is missing from this scheme. But, argues Marx,
even allowing for this, there is a deeper error.
Insofar as a commodity has value, it does so because labour has been expended directly and indirectly in its
production. The magnitude of this value is measured by the amount of labour expended; the commodity value
cannot be resolved into anything further, and consists of nothing more.30
Under capitalist production, both the product of labour and its value belong to the capitalist. As use-value, it is
entirely the product of the labour process; the same is not true of its value, for one part is the value of the means of
production used up, value which has not been newly produced but which is passed on from the means of
production to the product; another part is the value of the labour-power the worker sells to the capitalist, also
determined in magnitude independently of the production process; a third part, that value created in production
beyond the value of the labour-power sold; surplus-value.
In an addendum to the chapter (taken from a different earlier manuscript), Marx notes that Smiths dogma is
incorporated in fundamental respects in the conceptions of, amongst others, Ricardo, Say, Proudhon, Sismondi and
John Stuart Mill. The result is that Smiths confusion persists to this day, and his dogma forms an article of
orthodox belief in political economy.31

30

C2, p. 462.

31

C2, p. 467.
6

Chapter 20: Simple Reproduction

This chapter, along with the one which follows, follows logically from the preceding analyses of this volume and of
volume 1.
The object of analysis of volume 1 was the immediate process of production, the P in MC ... P ... CM: [t]he
immediate production process of capital is its process of labour and valorisation, the result of this process being the
commodity product, 1 i.e., volume 1 considered capitalist production abstracted from its total process or
reproduction, specifically from its process of circulation. This has been the subject of volume 2: precisely the
process of circulation of capital, or, more exactly, the place of this circulation in its reproduction. We began, in part 1,
by tracing the cyclical movement of capital at the scale of the individual capital and its individual cyclical movement.
Then, in part 2, we considered this cycle as a periodic one, and the implications of this periodicity. Now, since the
circuits [cycles] of individual capitals [...] presuppose one another, 2 we are going to consider the movement of the
total social capital: [t]he movement of the social capital is made up of the totality of movements of these
autonomous fractions, the turnovers of the individual capitals. 3
Given the length of the chapter, and the fact that it was compiled from different manuscripts written over a period
of some years, 4 I have broken it down into three more easily digestible parts. This first part deals with the question
of simple reproduction as such, and introduces the notion of the two departments of production and that of the
mechanisms and conditions of exchange between them; in the second part, Marx explicitly directs his critical
attention to the concepts of classical political economy in general and Adam Smith in particular; and in the third,
Marx addresses the specific question of the reproduction of fixed capital (and consequently both changes the
abstracting assumptions adopted during the rest of the chapter and more directly anticipates the subject matter of
the following one, i.e. expanded reproduction). This first part incorporates the first six sections of the chapter; 5 the
second deals with sections seven, eight, nine, ten, twelve and thirteen; the third, dealing with the question of fixed
capital, summarises section eleven.
Part 1: Simple Reproduction and the Exchange between the Two Departments of Production 6

1 Formulation of the Problem

The question to be investigated is how the reproduction of the social capital proceeds, 7 in other words, [h]ow [...]
the capital consumed in production [is] replaced in its value out of the annual product, and how [...] the movement
of this replacement [is] intertwined with the consumption of surplus-value by the capitalists and of wages by the
workers. 8
Given that the overall process of reproduction [...] includes the consumption process mediated by circulation, 9 we
therefore need to consider the process of reproduction by analysing the circuit of commodity capital, 10 viz.:

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 427

C2, p. 429.
C2, p. 427. In volume 3 we shall consider the movement of the total social capital taking into account competition between
capitals.
2
3

C2, pp. 103-4.

C2, pp. 468-524.

Where I insert my own subheads they appear, as here, in sans serif type.

C2, p. 468.

C2, p. 469.

C2, p. 469.

10

C2, pp. 167-79.

1

M C ... P ... C
m c

With regard to the other cycles of industrial capital we considered at the beginning of the volume, the cycles of
money and of productive capital, respectively MC ... P ... C M and P ... C MC ... P, consumption, the sale of
the commodity, is assumed, but once so is immaterial for the movement of the individual capital. C C, on the
other hand, necessarily includes what becomes of each portion of the product C.
In addition to the value analysis of the product of capital, our account of the problem also needs to take account of
the material replacement of the components of C, i.e. we cannot just simply assume that the capitalist converts her
commodity product into money and thence back into commodity product, nor that the worker and the capitalist
consume a part of the social commodity product in spending, respectively, wages and surplus-value. In contrast to
the (formal) consideration of the immediate process of production, the reproduction of the total social capital is a
movement which is not only a replacement of values, but a replacement of materials, and is therefore conditioned
not just by the mutual relations of the value components of the social product but equally by their use-values [...]. 11
We shall be making the following assumptions in the following. First, we shall for the moment only be considering
simple reproduction. 12 Second, we shall be assuming exchange at value, 13 and an absence of revolution in values
with regards to the components of the productive capital. 14 Third, we also assume a (constant) rate of surplus-value
of 100 % in both departments. 15

2 The Two Departments of Social Production

Societys total product may be broken down into two departments: means of production (I) and means of subsistence
(consumption) (II). There are two points we should take note of here.
First, that while the distinction between means of production (i.e. articles of productive consumption) and means of
subsistence (i.e. articles of unproductive consumption) is a distinction in terms of use-value, Marxs treatment in
this chapter and the next of the exchanges that occur both within the departments and between them is couched
entirely in value terms.
11

C2, p. 470.

According to Anthony Brewer, an analytical fiction that Marx uses repeatedly (A Guide to Marxs Capital (Cambridge, 1984),
p. 107). Marx, however, a little later explains: Simple reproduction [...] seems to be an abstraction, both in the sense that the
absence of any accumulation or reproduction on an expanded scale is an assumption foreign to the capitalist basis. [...] But
since, when accumulation takes place, simple reproduction still remains a part of this, and is a real factor in accumulation, this
can also be considered in itself. C2, pp. 470-1.
12

Nevertheless, divergence of prices from values cannot exert any influence on the movement of the social capital (C2, p. 469,
italicisation added): the same mass of products are exchanged, even if the value relationships in which individual capitalists are
involved may change.

13

Here too, nothing is changed with regard to the relations between the value components of the total annual product if the
changes are evenly distributed; and even if they are not, all that is altered is the relative magnitudes of value between constant
and variable capitals.
14

In fact, Marx adopts a further set of assumptions, which will become clear over the course of his exposition, which it would
be well to summarise here; thus, in addition to the three just mentioned, we have that that either there is no fixed capital, or
that all fixed capital is used up during the production period (C2, p.473; note, however, that this particular assumption is
15

dropped for section eleven); that the value composition of capital,

, is taken as constant and the same for each

department (C2, p. 483); and that there is no foreign trade (C2, 546). Cf. Geert Reuten, The Status of Marxs Reproduction
Schemes, in Christopher J Arthur and Geert Reuten (eds.), The Circulation of Capital: Essays on Volume Two of Marx's Capital
(London and New York, 1988), pp. 192ff.
2

The second is this. The distinction between means of production and means of subsistence is not an arbitrary
abstraction. Repeatedly in volume 1, 16 and at the beginning of this volume, Marx pointed out that one of the
fundamental specificities of capitalist production is the separation of the worker from the means of production, a
separation of which the separation between means of production and means of subsistence is a consequence and
reflection. In chapter 1 he wrote:
[...] the conditions for the realization of labour-power, i.e. means of subsistence and means of production, are
separated, as the property of another, from the possessor of labour-power. [...] The capital relation arises only in
the production process because it exists implicitly in the act of circulation, in the basically different economic
conditions in which buyer and seller confront one another, in their class relation. [...] If the sale of ones own
labour-power (in the form of the sale of ones own labour, or the wage form) is not an isolated phenomenon, but
the socially decisive precondition for the production of commodities [...], this [...] implies the occurrence of
historic processes through which the original connection between means of production and labour-power was
dissolved; processes as a result of which the mass of the people, the workers, come face to face with the nonworkers, the former as non-owners, the latter as the owners, of these means of production. [...] Thus the
situation that underlies the act MC<

mp

is one of distribution; not distribution in the customary sense of

distribution of the means of consumption, but rather the distribution of the elements of production themselves,
with the objective factors concentrated on one side, and labour-power isolated from them on the other. [...] We
have already seen how capitalist production, once it is established, not only reproduces this separation in the
course of its development, but also expands on an ever greater scale until it has become the generally prevailing
social condition. 17

To return to the present chapter. In each department, capital is composed of two components: variable capital (v) and
constant capital (c). The value of the total product of each department breaks down into a part composed of constant
value c consumed 18 in production, and that part added by labour, which in turn is composed of the replacement of
variable capital v and the excess surplus-value s. The total annual product thus breaks down as c + v + s. 19
Let, then:
department I (means of production):
capital: 4,000c + 1,000v = 5,000 20
commodity product (in the form of means of production): 4,000c + 1,000v + 1,000s = 6,000
department II (means of consumption):
capital: 2,000c + 500v = 2,500
commodity product (in the form of means of consumption): 2,000c + 500v + 500s = 3,000
Considering this in the form of the cycle of commodity capital, viz.:
two departments thus:

16
17

M C ... P ... C , we can represent the

m c

Especially chapters 26 and 32: see Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], pp. 873-6 and 927-30.
C2, pp. 114-7.

Consumed and not applied, since only a part of the value of the fixed capital is passed on to the product. As just noted,
we here disregard that quotient of value transferred to the product through the wear and tear of that fixed capital that
continues to function.
18

A matter, Marx later (C2, p. 478) refers to as the most important question facing us here; this is of course the crux of his
critique of Adam Smith.
19

Marx emphasises that the figures are money, but that the currency is irrelevant; that they are money is a point Marx repeatedly
makes in this chapter, an important observation given subsequent neo-Ricardian interpretations, which see the quantities
which appear in Marxs reproduction schemes as quantities of use-value.
20

department I

...
C
M
C
4,000c
4,000c
4,000c
1,000v
1,000v
1,000v
+
1,000s m unproductive consumption

...

C
4,000c
1,000v
1,000s

...

C
2,000c
500v
500s

department II

...
C
C
M
2,000c
2,000
2,000c
c
500v
500
500v
v
+
500s m unproductive consumption

The total annual commodity product (excluding that fixed capital that continues to function) has a value equivalent
to 9,000.
For production to continue on the same basis (i.e. assuming simple reproduction) in the next (we are assuming
annual) production period this commodity product needs to be sold. It should be evident that department Is
product (means of production) will only be bought by capitalists (of both departments). It should also be evident
that department IIs product (means of consumption or subsistence) will be bought by both capitalists and workers.
Equally, it should be clear that the product of value equivalent to the surplus product of both departments, if it is to
be consumed unproductively (assuming simple reproduction), will be so in the form of department II commodity
product. 21
We can now make three initial temporary 22 observations:
1 The 500v of workers wages and 500s of capitalists surplus value (1,000 in total) in department II must be
spent on means of consumption: thus the wages and surplus-value of department II are converted within
the department into its product and therefore drop out of the account.
2 Likewise, the 1,000v of workers wages and 1,000s of capitalists surplus-value of department I must also be
spent on means of consumption, on the products of department II equal to 2,000IIc (which in turn also
drops out). 23

The main question analysed by Marx [here] [...] is how the different components of money capital invested are eventually
recovered as a result of the various transactions between and within [the] [...] two departments, so that capitalist production
can continue in the next year on the same scale. Fred Moseley, Marxs Reproduction Schemes and Smiths Dogma, in
Christopher J Arthur and Geert Reuten (eds.), The Circulation of Capital: Essays on Volume Two of Marx's Capital (London and
New York, 1988), p. 174.
21

C2, p. 474.
Combining observations (1) and (2), this means that the total output of department II must equal the variable capital
advanced as wages and surplus-value produced in both departments (if, that is, these two last are completely spent as revenue
under the conditions we are operating under); in other words, the annual value product the product of the current years
labour (C2, p. 453) is, under the conditions of the parenthetical caveat just noted, equal to the value of the annual product new
value produced plus that value passed on through means of production (C2, p. 453). We can represent this as I(v + s) + II(v + s)
= II(c + v + s) , which simplifies to I(v + s) = IIc , an equality which Marx will elucidate shortly.
22
23

3 The remaining 4,000Ic means of production which can be only used in I which serve to replace the
constant capital consumed there is disposed of by mutual exchange 24 among the individual capitalists of
I.

3 Exchange Between the Two Departments: I(v + s ) against IIc

I The mediation of the exchange
25

First we consider step 2 above: the value (1,000 + 1,000)I(v + s) is exchanged for a value of 2,000IIc . How is this
exchange brought about? Through a money circulation, which both mediates [the exchange] [...] and makes it
harder to comprehend. 26 Let us start by representing this mutual exchange like this:
means of production

(1,000 + 1,000)I(v + s)

means of consumption

2,000IIc

In other words, a value equivalent to the variable capital (wages) advanced in and surplus-value produced by
department I, existing initially in the natural commodity product form of means of production, is exchanged for a value
equivalent to the constant capital (means of production) advanced in department II, existing initially in the natural
commodity product form of means of consumption.
But here we need to recall that the circulation of capital forms a part of general commodity exchange, and
commodity exchange takes the form not of CC but of CMC. 27
Marxs reproduction schemas summarise the turnover of capital and commodities as a dual movement, [...]
mean[ing] that they are based upon a combined dual flow a flow of value produced in the process of production,
and a flow of money (money revenue and money capital) unleashed in the process of circulation in order to
realise the value of the commodities produced. The schemas are evidently not based upon barter: department I
does not exchange goods with department II simply according to mutual need. Before the capitalists or
employed workers of department I can obtain the goods they need, they must prove themselves to have
sufficient purchasing power to buy them from department II [...]. 28

The overall exchange we are considering is thus (prefix M indicating money of an unspecified currency):

means of production

(1,000 + 1,000)I(v + s)

money

money

commodities

M2,000

commodities

means of consumption

2,000IIc

C2, p. 474.
A word on the notation. Even though the distinction between departments of production is one based on use-value, it is
important to grasp that, for example, the expression 2,000IIc represents value, i.e., says a sum (2,000) of value equivalent to the
constant capital advanced in the means of consumption sector. This sum of value can clearly take different natural (i.e. usevalue) forms: money, commodity form (either means of production or means of consumption), productive capital.
24
25

26

C2, p. 474.

Remembering that the same quantity of money can mediate more than one exchange, according to the formula: quantity of
the sum of prices of commodities
money functioning as the circulating medium = number of times coins of the same denomination are turned over . Cf. C1, pp. 217-20.
27

28

Ernest Mandel, Introduction, C2, p. 25. Marx considers this aspect of the matter in more detail in section 5 below.
5

II The movement of Iv

The collective capitalist 29 in department I pays the workers M1,000 for the v-component of the value of means of
production produced by them; this M1,000 is used to buy means of subsistence from the capitalists of department
II, transforming half of the c-component of IIs commodity product into money. The capitalists of department II
use this M1,000 to buy means of production from those of department I. The v-component of department Is
commodity product is transformed into money to be converted into labour-power; in production, this variable
capital is converted into commodity product, which can then be sold so that variable capital flows back in money
form.
The metamorphoses 30 of the 1,000Iv capital value describe this path:

M
M1,000

C(L)

labourpower

[... P ...]

commodity
product

variable
capital

The displacement 31 of the M1,000I advanced as wages takes this course: 32

capitalist I
variable
capital

purchase

labour-power

workers I
wages

purchase

means of subsistence

capitalists II
constant
capital

purchase

means of production

capitalists I
variable
capital

III The realisation of IIc

If the money to realise one half of the c-component of department IIs commodity product comes from the wages
paid to the workers of department I, where does the money for the other half, which is exchanged for the scomponent of department Is commodity capital, come from? Marx remarks that, given the reserves of money that
exist alongside productive capital, it can come from a range of sources from countless individual sales and
purchases by individual capitalists in the two departments 33 and makes the assumption that half is advanced by
capitalists of department II, for the purchase of means of production to replace constant capital and the other half
spent by capitalists in department I on consumption. 34 If this is the case (and the case is an example), M500
advanced by department II purchases means of production from department I, and is used by department I to buy
means of consumption from department II, after which it returns to department II as money. Meanwhile,
department I anticipates the sale of that half of its commodity capital as yet unsold by advancing M500 to purchase
means of consumption from department II; with this M500 department II buys means of production from
department I. In sum, M4,000 worth of commodities has been exchanged through a monetary circulation of
M2,000.
Marxs general point here is that a relatively small amount of money can realise a relatively large exchange; 35 and
that, inherent to the system, as we have seen, there are already reserves of money in place.
The money that [the capitalists of each department] [...] cast into circulation over and above the total value of
their commodities, as a means for exchanging these commodities, returns to each of them from the circulation

29
30

C2, p. 475.
C1, pp. 198-209.

31

C1, pp. 210-13.

32

The metamorphoses and displacements together comprising the dual flow referred to above by Mandel.

33

C2, p. 475.

34

Although he notes that the exact proportions are immaterial.

The sum of money only being as high as it is because the entire annual product is depicted as having been exchanged all at
once in a few large amounts. C2, p. 476.
35

sphere to the exact amount that each of the two cast into it. Neither has become a farthing richer from all this. 36

III I(v + s) = IIc

Thus, for simple reproduction to occur, the value components v + s of department Is commodity capital (and
therefore an equivalent part of department Is commodity product) must be equal to the department IIs constant
capital (IIc) similarly precipitated out as a proportionate part of its commodity product. The condition is: I(v + s) =
IIc . 37 Simple reproduction, thus conceived, can be represented diagrammatically thus:

36

C2, p. 477.

This [...] basic condition of Simple Reproduction [...] says simply that the value of the constant capital used up in the
consumption goods branch must be equal to the value of the commodities consumed by the workers and capitalists engaged
in producing means of production. If this condition is satisfied, the scale of production remains unchanged from one year to
the next. Paul Sweezy, The Theory of Capitalist Development (London and New York, 1968), p. 77.
37

4 Exchange within Department II. Necessary Means of Subsistence and Luxury Items
I The overall movement between departments I and II

So far we have seen, (1), that commodity product in the form of means of production which can be only used in
department I and which serves to replace the constant capital consumed there to the value of 4,000 Ic is disposed
of by mutual exchange between the capitalists of this department; (2), that values I(v + s) IIc exchange, and how this
is carried out; and, (3), that the 500v of workers wages and 500s of capitalists surplus value (1,000 in total) in
department II are be spent on means of consumption (i.e. within this department), workers effectively buying back
their own product and capitalists buying back the surplus; viz::

I
4,000c
1,000v

II
1

2,000c

1,000s

500v

500s

We now need to investigate the mechanics of this third set of exchanges, i.e. those involving II(v + s) .
II Necessary and luxury means of consumption

II(v + s) exists in the natural form of means of consumption: the workers in this department buy back their own
product, allowing the capitalists to retransform the money paid out as wages into money form and thence into
variable capital.
If we divide department II into two sectors, IIa, which produces necessary means of subsistence, which form the
consumption of the workers and a part of that of the capitalists, and IIb, which produces luxury products, which
only enter the consumption of the capitalist class, we see that:
1

In the case of sector IIa, the variable capital laid out flows back directly to the capitalists (i.e. those of IIa): the
reflux is a direct one.

In that of IIb, the component of value produced, IIb(v + s) exists in the natural form of luxury items, products
workers (here by definition) cannot buy. The reflux of the variable capital here is mediated indirectly
(analogously to the case of Iv ).

Let us recall that:

IIv = 500
IIs = 500
And assume:
IIav = 400 and IIas = 400, i.e. IIa(400v + 400s)
8

IIbv = 100 and IIbs = 100, i.e. IIb(100v + 100s)

Therefore: the workers in IIb receive M100 for their labour-power. They use this money to buy 100 of means of
consumption from sector IIa. The capitalists in IIa use this money to buy 100 luxury product from sector IIb.
If the capitalists in sectors IIa and IIb both divide their expenditure of revenue (whencever it comes) to spend on
necessary means of consumption and

on luxury items, 38 then capitalists IIa spend

400IIas (240IIas) on their

products, necessary means of subsistence, and 400IIas (160IIas) on luxury items from sector IIb, while capitalists
IIb spend 100IIbs (60IIbs) on necessary means of subsistence from sector IIa and 100IIbs (40IIbs) on their own
luxury product.
We shall now see how luxury product equivalent to IIas flows to capitalists IIa.
1 IIav is consumed directly by the workers of IIa; wages flow back directly to the capitalists.
2 As we have seen, a part of IIas equivalent to 100IIbv has been realised through the workers in IIb spending
M100 wages on means of consumption from IIa (a quarter of IIas), and the capitalists in IIa using this money
to buy 100 luxury product from IIb (100IIbv). IIbv thus flows back in money form, to be reapplied as variable
capital.
3 The workers have spent their wages, accounting for the consumption of 400IIav, 100IIbv and 100IIas . There
remains 300IIas and 100IIbs 400s in total to be consumed by the capitalists. Given the proportion between
spending on necessary means of subsistence and on luxury items on the part of the capitalists of 3:2 that we
assumed earlier, we can divide IIas into 240s necessary consumption and 160s luxury consumption and IIbs into
60s necessary consumption and 40s luxury consumption. Given the luxury consumption of IIa100s supposed by

step 2 above, 60IIas luxury consumption (along with 40IIbs) remains. The latter is consumed by the capitalists
of this sector out of the their own product

of their surplus product while the remaining 60IIbs is

consumed by the capitalists of IIb exchanging their product with sector IIa. [The remaining 240IIas (100 was
accounted for in step 2 above) is consumed by the capitalists of IIa out of their product
product.] 39

of their surplus

III The overall movement between sectors IIa and IIb

These three steps can be represented like this:

These are not arbitrary proportions. As a footnote (by Engels?) points out (C2, p. 481), IIb(v+ s) in its entirety is consumed
by capitalists, and the equivalent of IIav and IIbv by the workers. The capitalist consumption fund is then given by

38

necessities: [IIa(v + s)] [IIav + IIbv] = IIas IIbv = 400 100 = 300.
luxuries: IIb(v + s) = 100 + 100 = 200.
The step in square brackets is implied but not explicit at this point in Marxs account, although he does so refer to it later
(C2, p. 488).
39

IIa
400v
3
240

IIb

1
100

400s

60

100v

100s

3
40

In these exchanges 500(a + b)v has been realised in 400av and 100bs [steps 1 and 2 above]; and 500(a + b)s in 300as
[3], 100bv [2] and 100bs [3]. We can describe these exchanges like this:

IIa:

= 800

IIb:

= 200
1,000

Following our assumptions for the ratio between constant capital and variable capital above (i.e. 4:1), and assuming
this is the same in the two sectors IIa and IIb, 40 then we arrive at the following subdivisions for department II:
IIa: 1,600c + 400v + 400s = 2,400
IIb:

400c + 100v + 100s =

600

total: 2,000c + 500v + 500s = 3,000

When we saw above that I(v + s) = IIc , we can now see that
(1) 1,600I(v + s) = IIac
(2) 400I(v + s) = IIbc
Since the 2,000I(v + s) = (1,000v + 1,000s), then
(1) 1,600I(v + s) = IIac = (800v + 800s)I
(2) 400I(v + s) = IIbc = (200v + 200s)I
IV The conditions for simple reproduction

Three conclusions flow from all this:

1 The new value annual product of department I (i.e. v + s) is equal to the constant capital value component
of the product of department II. If the former were smaller than the latter, department II would not be
able to completely replace its constant capital; if larger, then a surplus would arise. In both cases, the
assumption of simple reproduction would be destroyed. 41
2 The variable capital component of the luxury means of consumption sectors annual product can only be
40

[A]lthough this is in no way necessary, says Marx (C2, p. 482).

41

C2, p. 484.
10

reconverted into capital through exchange with a part of the surplus-value component of the necessary
means of consumption sectors product. This implies two things: not only this exchange itself, but also that
IIbv < IIas .
3 These two ratios I(v + s) = IIc and IIbv < IIas remain qualitatively decisive in every distribution of the
annual social product, in as much as this actually goes into the process of annual reproduction mediated by
circulation; 42 are, in other words, the necessary conditions for simple reproduction. 43

V Reproduction and crises

Marx now emphasises that the proportions in spending on the part of the capitalist class on necessary and luxury
means of consumption are arbitrary, and to be interpreted as social averages (on an individual level, being
determined by individual tastes, the proportions will vary accordingly). What matters here is the qualitative relation:
changes in the quantitative relation, the conditions of reproduction change accordingly. If consumption of luxury
means of consumption declines (as it does in a crisis), the retransformation of IIbv into money is slowed down; this
lack of variable capital in this sector leads to a decline in the production of luxury goods, which in turn, because of
IIbv IIas , leads to restrictions in the production and sale of necessary means of consumption. In this respect,
Marx now makes a rather important remark about the nature of crises, an argument against those
underconsumptionist theories that have subsequently become rather popular:
It is a pure tautology to say that crises are provoked by a lack of effective demand or effective consumption. [...].
The fact that commodities are unsalable means no more than that no effective buyers have been found for them,
i.e. no consumers (no matter whether the commodities are ultimately sold to meet the needs of productive or
individual consumption). If the attempt is made to give this tautology the semblance of greater profundity, by the
statement that the working class receives too small a portion of its own product, and that the evil would be
remedied if it received a bigger share, i.e. if its wages rose, we need only note that crises are always prepared by a
period in which wages generally rise, and the working class actually does receive a greater share in the part of the
annual product destined for consumption. From the standpoint of these advocates of sound and simple
common sense, such periods should rather avert the crisis. It thus appears that capitalist production involves
certain conditions independent of peoples good or bad intentions, which permit the relative prosperity of the
working class only temporarily, and moreover always as a harbinger of crisis. 44

VI The motive of simple reproduction

Marx concludes this section with an important, albeit tangential, comment on considering reproduction as simple
reproduction.

C2, p. 484. With these ratios fixed, an increase (or decrease) [for example] in the scale of department I will increase (or
decrease) v + s in that department, and similarly any change in department II will alter c in department II. If v + s in I exceeded
c in II, then capital would have to be transferred from I to II in order to reach the necessary balance, and so on. Such a transfer
would not, of course, normally take place smoothly but would involve a crisis, a temporary breakdown in reproduction. What Marx demonstrates
is that it is logically possible for a capitalist society to reproduce itself, not that it will always do so smoothly. Anthony Brewer, A Guide
to Marxs Capital , p. 116, italicisation added.
42

At which point Marx adds a rather important caveat: It goes without saying [!] that this applies only to the extent that all this is
really a result of the reproduction process itself, i.e. in as much as [for example] the capitalists in IIb do not [...] obtain their v on
credit from another source. C2, p. 484, italicisation added. Marx here also reminds us that we assuming that the scale of
production and the value ratios involved in it remain constant, i.e. that we are excluding foreign trade from our picture, a
remark that not only tells us something important about simple reproduction but also about foreign trade.
43

C2, pp. 486-7. Exploitation is not a cause of crisis, but a necessity for capitalist reproduction. Anthony Brewer, A Guide to
Marxs Capital , p. 117.
44

11

Simple reproduction is oriented by nature to consumption as its aim. Even though the squeezing out of surplusvalue appears as the driving motive of the individual capitalist, this surplus-value no matter what its
proportionate size can be used here [...] only for his individual consumption.
Insofar as simple reproduction is also part of any annual reproduction on an expanded scale, and the major part
at that, this motive remains alongside the motive of enrichment as such and in opposition to it. 45

5 The Mediation of the Exchanges by Monetary Circulation

I The reflux of capital as money

After summarising what we have seen so far, Marx then quotes himself from volume 1:
The process of circulation, therefore, unlike the direct exchange of products, does not disappear from view once
the use-values have changed places and changed hands. The money does not vanish when it finally drops out of
the series of metamorphoses undergone by a commodity. It always leaves behind a precipitate at a point in the
arena of circulation vacated by the commodities. 46

Earlier, considering the exchanges between IIc and I(v + s), we assumed that M500 was advanced by department II to
buy means of production from department I, who in turn used the same sum to buy means of consumption from
II. The money flows back to whence it started. No one is any the richer at the end of the process.
II The reflux of variable capital

In department I, the money advanced as wages retunes, but indirectly; that advanced in department II as wages
directly. But in both cases it returns. In both cases the worker confronts the capitalist first as the seller of labourpower, and then as buyer of commodities, and in this way the capitalists money flows back to her. If equivalents are
exchanged no one is swindled.
Marx here emphasises the important role of variable capital/wages in overall monetary circulation. Not only must
variable capital always reappear in money form, it must always be advanced in money form in all branches
continuously and simultaneously the working class, which lives hand to mouth, cannot afford long-term credit to
the capitalist class. 47
III The movement of money and the realisation of commodity circulation

We now consider I(v + s) IIc from a different point of view. We shall consider two sets of exchanges, A and B
(for future reference we indicate each act of exchange there are seven with a lower case roman numeral).
A We saw that, in department I, M1,000 advanced as wages (i) was used by the workers to buy 1,000 means of
subsistence from department II (ii); the capitalists of department II use this money to buy means of
production from department I (iii), such that the variable capital they advanced has returned to them in
money form.
B The capitalists of department II advance a further M500 for means of production from department I (iv). The
capitalists of department I spend this money on means of consumption from department II (v). Department
II uses the same money to further means of production from department I (vi). Department I buys a further
500 means of consumption from department II (vii). Thus, at the close of the process, the money again flows
back to department II, such that its capitalists are again in possession of M500 and 2,000c , although the latter
45

C2, p. p. 487.

46

C1, p. 280.

47

Even if labour-power is bought before it enters production it is only paid for after it has been expended.
12

has been converted from the commodity form back into productive capital. 48
The movements (of money) we are considering are these:
I

II
A: M1,000

1,000v

2,000c

1,000s

B: M500

The displacement of the money in exchanges A (i-iii)takes this form:

capitalists I
variable
capital

purchase

labour-power

workers I
wages

purchase

capitalists II

means subsistence

constant
capital

purchase

capitalists I

means production

variable
capital

And B (iv-vii), this:

capitalists II
constant
capital

purchase

means production

capitalists I
revenue 49

purchase

means subsistence

capitalists II
constant
capital

purchase

means production

capitalists I
revenue

purchase

means subsistence

capitalists II
constant
capital

With M1,500 5,000 commodity mass has circulated. There are two results of these processes:
1 In addition to spending 1,000 from its own commodity product on means of consumption; i.e. spending the
money received from the sale of means of production, department I also possesses 1,000 variable capital in
money form, the same value it originally advanced to circulation. In addition, the relationship between wagelabourers and capitalists is also reproduced: 50 labour-power has been reproduced in consumption, to be
resold, on pain of starvation.
2 Department IIs constant capital has been replaced in the same original form; and the M500 it advanced into
circulation has been returned.
We should note, as a footnote (by Engels) points out, that this account differs from that given in C2, p. 476, in that, in the
latter, department I also cast M500 into circulation. That example, however, as we noted, was just that, an example, one
possibility amongst many.
48

[Department] Is commodity undergoes the act CM and is transformed into money, although it does not represent any
component of capital value but rather realized surplus-value which is simply spent on means of consumption. C2, p. 493.
49

50

C2, p. 492.
13

For the workers of department I, circulation A above takes this form:

C
labourpower

M
1,000v

C
means of
subsistence

For the capitalists of department II, the same process is CM, the transformation of a part of their commodity
product (means of subsistence) into money form, money which is in turn transformed in exchange with
department I into constant capital.
In the act MC (iv and vi), through which the capitalists of department II advance money to purchase means of
production (circulation B), they anticipate the money form of that part of II which is still in commodity (means of
consumption) form; in the exchange, department IIs money is transformed into productive capital, while passing
to the capitalists of department I, for whom it represents not capital but realised surplus-value to be spent on means
of consumption.
What is for one capitalist the first act MC of the circulation MC ... P ... CM is for another the final act CM; it
is immaterial whether C (or C) represents constant or variable capital, or surplus-value.
IV The amount of money necessary to realise commodity circulation

With respect to the v + s component of their commodity product, the capitalists of department I withdraw more
money from circulation than they cast into it: their M1,000 variable capital returns (iii); they sell means of
production for M500, converting half of their s into money form (iv), they then sell another 500 means of
production (vi), after which their entire s has been withdrawn from circulation in money form in short, after
casting M1,000 into circulation, 1,000v + 1,000s = M2,000 has been withdrawn. Of course, the capitalists of
department I have only withdrawn as much money as commodities they have cast in: that the value of these is
surplus-value, and has cost the capitalists nothing, is irrelevant to the value itself.
The realisation of value is temporary in that it lasts no longer than the time between the transformation of
commodities into money and the transformation of money into commodities. The sum of money necessary to
circulate commodities to be exchanged is given by the number of exchanges on the one hand and the sum of the
prices of the commodities to be exchanged on the other: if we assume shorter turnover times (equally: greater
velocity of monetary circulation), then less money is necessary to circulate the commodities to be exchanged.
For example: if wages are paid four times a year in department I, 4
necessary for the circulation Iv

250 = M1,000, and hence M250 would be

IIc and for the circulation between Iv and labour-power I. Equally: if the

circulation between Is and IIc consisted of four turnovers M250 would be sufficient to realise it, and M500 (M250 +
M250) would be sufficient to exchange 5,000 commodities (Iv IIc + Is IIc ). A quarter of the surplus-value
would be realised four times a year instead of half of it twice.
V The necessity of the reflux of money for reproduction

If we reverse the direction of exchanges (iv) to (vii) above so that:

(iv) I spends M500 on means of consumption: Is IIc
(v) II buys means of production: IIc Is
(vi) I buys means of consumption: Is IIc

14

(vii) II buys means of production: IIc Is

Now, the M500 returns to department I (who cast it in), not department II (as before). Now, the surplus-value is
realised by the money spent by capitalist producers themselves, anticipating income from surplus-value contained in
products as yet unsold, on their own private consumption. Realisation of surplus-value does not take place through
the reflux of the M500: the M500 is an additional sum (cast into circulation alongside commodities 1,000Iv ) the
reflux of the M500 means that department I recoups its original (extra) money. The commodities that department I
receives through these exchanges cost it nothing: they are part of its surplus-value (exchange: Is IIc ): what
realises the surplus-value is the M500 originally cast in.
Imagine now that that exchange (vii) in our second, reversed, sequence does not, for whatever reason, take
place: department II now does not buy means of production with the M500. Now, department I has paid M1,000
(not M500) for means of consumption, and consumed as revenue all its surplus-value; in addition, it has 500 of
commodities unsold. Meanwhile, department II has transformed only three quarters of its constant capital from
commodity capital into productive capital, leaving one quarter (M500) in idle money form. What happens now?
Department II will eventually have to reduce its scale of production (for lack of productive capital); the 500
commodity capital held by department I representing not unrealised surplus-value but more or less temporarily
unrealisable commodity. Reproduction is disrupted, because the money cast into circulation has not returned to who
cast it in.
Once a capitalist spends money on means of consumption it is gone; if it returns to her then this is because she has
cast commodities into circulation, i.e. is realising a portion of surplus-value. In the cases of individual capitalists, this
casting money into circulation to realise surplus-value may occur when a firm is new, and has not sold enough
commodity product to fund capitalist consumption out of this source, or when a capitalist anticipates receipts of
revenue. At the level of the capitalist class, however, this phenomenon casting the money necessary to realise its
surplus-value (and circulate its constant and variable capital) into circulation rather than being a paradox, is a
necessary condition of the overall mechanism. 51
[...] [H]ere there are just two classes: the working class, which only disposes of its labour-power, and the capitalist
class, which has the monopoly of the means of social production, and of money. It would rather be a paradox if,
instead, it was the working class that initially advanced the money required to realize the surplus-value contained
in commodities, out of its own resources. 52

Two factors obscure this movement:

1 The role of commercial and money capitalists (who produce no product) in the process of circulation of
industrial capital.
2 The division of surplus-value into different categories, viz those of the landlord, the money-lender, the
government and its officials, rentiers, etc.
What these two factors obscure is the source of surplus-value: the industrial capitalist and industrial production.

6 The Constant Capital in Department I

We turn now to the last part of how the components of the capital of the two departments are recovered.
The constant capital in department I (4,000c ) is equal in value to the commodities consumed as means of
production in the production department Is commodity product. Considering the capitalist class as a whole, insofar
51

C2, p. 497.

52

C2, p. 497.
15

as this product enters into circulation, it circulates within department I. The components of department Is product
equivalent to variable capital and surplus-value (1,000v + 1,000s = 2,000), one third of the entire product, do not
exist in a form in which they can enter into the departments consumption fund, but first must be exchanged with
department II. One third of this product thus replaces department IIs constant capital, the remainder replace the
constant capital of department I.
Evidently, department I considered as a whole (as does department II too) consists in a wide range of branches of
production: the overall social capital, in part constant capital and in part labour-power, invested in production
breaks down, in its natural, i.e. use-value, form according to the division of labour, according to the specific kind of
labour that it has to perform in the sphere of production in question. 53
Equally evidently, part of the product of department I simply goes back into production within the particular
branch, or even firm, from which it emerged. The rest is distributed through mutual exchange amongst the
capitalists of the department: each capitalist withdraws the appropriate means of production from the mass of
commodity product in function of the value of her own product (sold to other capitalists of the department): means
of production are thus replaced both in value and in kind.

53

C2, p. 500.
16

Chapter 20: Simple Reproduction

Part 2: On Political Economy 1

7 Variable Capital and Surplus-value in the Two Departments

Evidently, under conditions of simple reproduction the total means of consumption produced in a single
production period is equal in value to the variable capital reproduced and the surplus-value newly produced in the
same period in both departments: the total value product (new value) is equal to the total value of means of
consumption produced. On the assumptions here II(c +v +s) = 3,000 and = 100 % the total social working
day 2 breaks down into necessary labour = 1,500v and surplus labour = 1,500s . The total value of means of
consumption therefore = the total value the whole social working day produces during the production period = the
value of total social variable capital plus total social surplus-value = total annual new product.
These equalities exist not because the total value of means of consumption has been produced in department II but
because the constant value that reappears in department II is equal to the new value (variable capital plus surplusvalue) produced in department I, i.e. because I(v + s) = IIc .
Consequence: the product of department I, which breaks down into c + v + s, also breaks down into v + s when
considered from the social point of view. But this resolution of commodity value (Adam Smiths dogma) only
applies to that part of the total product consisting of means of consumption, and only applies in the sense that:
II(c + v + s) = II(v + s) + I(v + s)
because, in other words,
IIc = I(v + s)
Although the social working day, just like the individual working day, can be broken down into necessary labour
and surplus labour, one part is exclusively dedicated to production of fresh constant capital, i.e. if the total social
working day = 3,000m, one third of this is produced in department II, which produces the commodities in which
the total variable capital and surplus-value is realised, such that two thirds of the social working day is dedicated to
the production of new constant capital, i.e. a product on which neither wages nor surplus-value can be spent.
No part of the social working day is spent producing the value of the constant capital applied in both departments:
all that is produced is the value 2,000I(v + s) + 1,000II(v + s) additional to the constant capital 4,000Ic + 2,000IIc . The
new value produced in the form of means of production is not yet constant capital.
In use-value form the product of department II is the product of concrete labour; insofar as one value component
of this represents constant capital its value has been transferred by the labour process from its old natural form to
its new one. But two thirds of this value has not been produced in the current valorisation period.
From the point of view of the valorisation process, the value of the product, 3,000, is composed of the new value
produced (500v + 500s ) and a part (2,000) in which past working days are objectified, this latter naturally existing in
the form of product to the value of 2,000. Hence, the exchange 2,000Ic 1,000Iv + 1,000Is is the exchange of that
two thirds of the working day which does not form part of current labour with that one third which does.
The total social product of departments I and II appears as the product of the current production period but only
insofar as this labour is considered as useful, concrete labour, not as the expenditure of labour-power, as valueforming labour. The failure to see the distinction between the total value existing in the production periods

Where I insert my own subheads they appear, as here, in sans serif type.

Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], p. 501; i.e. the labour spent by the entire working class
over a whole year, C2, p. 502.

commodity product and the new value produced in this period thus stems from a failure to distinguish between
labour existing in its concrete use-value producing form and labour in its abstract, value producing form.

8 The Constant Capital in Both Departments

Let us consider the total social product (taking the production period as a year) as consisting in three one-year social
working days, the value expression of each being 3,000, such that the value expression of the total product is 9,000.
Then:
The labour-time spent before this current year is four thirds of a working day in department I (4,000Ic) and two
thirds of a working day (2,000IIc ) in department II, in total two one-year social working days: 4,000Ic +
2,000Ic = 6,000c stands as the value of constant capital (means of production) appearing in the value of the
overall product.
Out of the one-year working day of new value, one third is necessary labour (1,000Iv ) in department I, one
sixth necessary labour (500IIv ) in department II: 1,000Iv + 500IIv = 1,500v (one half of one social working
day) is the value expression of necessary labour.
One third of a total day (1,000Is ) is surplus labour in department I, and one sixth of a working day (500IIs )
surplus labour in department II: 1,000Is + 500IIs = 1,500s (the other half of the social working day) is the
value expression of surplus-value.
Hence,
value of the years labour = v + s = 3,000
value of the total product = c + v + s = 9,000
Thus the difficulty [i.e. Smiths difficulty] does not lie in analysing the value of the social product itself. It arises
when the value components of the social product are compared with its material components. 3
To the extent that the total social working day seems to be spent on the production of means of consumption (for
the product of that department of production which produces means of production produces a product which is
not consumed in this sense) the value expression of the total social working day seems to resolve itself into 1,500v
+ 1,500s , because this value product is equal to the value of the product of the department which produces means
of consumption. But this value is really only one third of the total value product once we see this as consisting both
of means of consumption and means of production. Thus, really, only one third of annual labour is spent producing
means of consumption, while two thirds is spent producing means of production. The total value of the means of
consumption in department II = the sum of new value product in departments I and II:
II(c + v + s) = I(v + s) + II(v + s)
Thus, the value product created in department I = the variable capital reproduced and surplus-value created =
constant capital value of department II which reappears in department I as means of consumption.
C2, p. 506. Again, the failure here is to distinguish between concrete labour and abstract labour, and hence between new
value created (by abstract labour) and value passed on (by concrete useful labour). Smith's confusion over net and gross
output arises from a failure to distinguish the value of the product from its material character. Both departments reproduce
the value of the means of production that they consume, and both add new value to their product. In terms of the material basis
of reproduction, department I reproduces the means of production used up in both departments, while department II does
not reproduce the material elements of the means of production that it uses, but produces all of societys consumer goods.
Hence the exchange between them. Anthony Brewer, A Guide to Marxs Capital , p. 118.

The difficulty with the annual social product [...] comes from the fact that the constant portion of value is
represented in a kind of product means of production completely different from the means of consumption
in which the new value v + s added to this constant portion of value is represented. It seems, therefore, as if two
thirds of the mass of products consumed in value terms exist once again in a new form, as new product,
without any kind of labour having been expended by the society on their production. 4

But this is not how the matter appears at the individual level.
Consider a capitalist of department I, producing 18 machines a year with constant capital = 6,000c , variable capital
= 1,500v and surplus-value = 1,500s . The total product = 9,000, and each machine 500. Twelve machines therefore
comprise a value equal to the constant capital (6,000c ) advanced in their production; but this is not the case because
the labour contained in these machines took place before their production, that the means of production has been
transformed in itself into twelve machines; rather, it is that the value of these 12 machines (which consists in 4,000c
+ 1,000v + 1,000s ) is equal to the constant capital value contained in the 18 machines. The capitalist needs to sell 12
machines to replace the constant capital needed to produce 18.
This is the contrast between individual and social production. At the individual level, the product of each individual
and independently functioning capital will have a given use-value form, any form, the only condition being that it
does have one: it is thus immaterial whether it returns as means of production in the same production process that
produced it as a product, or whether its value is transformed by sale and purchase into other material elements of
production.
At the level of total social capital, on the other hand, all material elements of reproduction must form parts of the
product in their natural form. The part of constant capital consumed can be replaced within overall production only
if the total reappearing constant part of capital reappears in the product in the natural form of means of production
which really function as constant capital. Under conditions of simple reproduction, therefore, the value of the part
of the product that consists in means of production must be equal to the constant portion of the value of the social
capital consumed.
In addition, for the individual capitalist, the only value that is produced by the production process is the value
equivalent to variable capital and surplus-value: the value of the constant capital advanced is simply passed on by
the concrete form of the labour process. At the level of total social capital, however, that part of the social labour
process that produces means of production, by creating new value and by passing on value consumed by the means
of production consumed, creates only means of production, product that can only function as constant capital,
product, which, considered socially, can only be resolved into constant capital. At the level of the social, therefore:
[w]hat we have to deal with is the collective capitalist. The total capital appears as the share capital of all
individual capitalists together. This joint-stock company has in common with many other joint-stock companies
that everyone knows what they put into it, but not what they will get out [...]. 5

9 A Look Back at Adam Smith, Storch and Ramsay6

Marx first summarises.

C2, p. 507.

C2, p. 509.

total value of the social product = 6,000c + 1,500v + 1,500s = 9,000.

6,000 reproduces the value of means of production

3,000 reproduces the value of means of consumption

This section is a shorter, earlier (written in 1870) version of the critique of Smiths dogma contained in chapter 19 (written
in 1878).
6

value of the social revenue 7 (v + s) = 3,000

amount of product totality of consumers 8 can withdraw = of total social product

value of constant capital to be replaced in kind = of total social product

Then states Smiths position like this:

Adam Smith put forward this fanciful dogma [...] according to which the entire value of the social product
resolves itself into revenue, i.e. into wages plus surplus-value, or as he expresses it, into wages plus profit
(interest) plus rent. He also put it forward in the still more popular form that the consumers must ultimately pay
the producers for the entire value of the products. Right to the present, this remains one of the most well-loved
platitudes, or rather eternal truths, of the so-called science of political economy. 9

Marxs explicit criticism of Smith here is this:

The phrase that the entire value of the annual product must finally be paid by the consumers would be correct
only if the expression consumers were taken to include two quite different kinds of consumer, individual
consumers and productive ones. But if a part of the product has to be consumed productively, this means nothing
more than that it has to function as capital and cannot be consumed as revenue. 10

10 Capital and Revenue: Variable Capital and Wages

Marx begins by noting that the value product of the current (i.e., here, annual) production period is smaller than the
value of the product, the difference arising from the value of the means of production consumed in production, which
is passed on to new product, but which is itself created in (a) previous production period(s). This value is not value
really reproduced, but simply value that reappears in a new form of existence [...]. 11
To remind ourselves, after exchange (between departments I and II, and within department II), we have:

department I: 4,000c + 2,000v + 2,000s = 6,000

department II: 2,000c + 500v + 500s = 3,000

total social product = 9,000

Total value product, therefore, = 2,000I(v + s) + 1,000II(v + s) = 3,000

But, 2,000I(v + s) , i.e. two thirds of the labour carried out in this department, functions to restore means of
production to department I, not only in value but also in appropriate use-value form.
From this platform, Marx now directs himself against the notion that what is capital for one person, is revenue for
another, and vice versa.
First, he addresses the notion that variable capital functions as capital in the hands of the capitalist and revenue in
the hands of the worker.
Variable capital, insofar as it exists in the hands of the capitalist as money capital functions as money capital insofar
as it buys labour-power. But even thus far it is variable capital only potentially: it truly becomes variable capital once
it assumes the form of labour-power in production. When this happens, the money that functioned as the money
form of variable capital now functions in the hands of the worker as the money form of her wage. It is not therefore
7

C2, p. 509.

That is, both workers and capitalists, C2, p. 509.

C2, p. 510.

10

C2, p. 512.

11

C2, p. 513.
4

variable capital that functions twice as capital and as revenue but money. 12 The error labelling the revenue of
the worker as capital originates from a failure to differentiate money and capital, and specifically to see what it is
about money capital that makes it money, and what it is that makes it capital. 13
Second, that, in the exchange I(v + s) IIc , what is constant capital for some (IIc ) becomes variable capital and
surplus-value, i.e. revenue, for others; and what was variable capital and surplus-value (I(v
some, becomes constant capital for others.

+ s)

), i.e. revenue, for

1 First, we consider the exchange Iv Ic .

The collective worker in I, who has sold her labour-power, receives her wage from the collective capitalist;
with this same money, she buys means of consumption from II. The capitalist in II confronts her as a mere
seller of commodities. 14 Her labour-power follows the path of simple commodity circulation:
[labour-power I] CMC [means of subsistence II]
Her wage, spent as revenue, is realised in means of subsistence.
2 Second, we consider the same exchange from the point of view of the capitalist.
The commodity product of II is means of subsistence; but for the capitalist, a part of this product, is the form
in which a part of the constant capital value of her productive capital appears, and she needs to convert this
part of the product back into the natural form in which it can function as such anew. By selling it to the
workers of I, capitalist II manages to convert half (1,000c ) of her product into money form. But, again, it is
not variable capital which has been converted into this constant capital value but the money paid to the
workers of I as wages, money, as we have seen, used to buy means of subsistence in the simple commodity
circulation [labour-power I] CMC [means of subsistence II]. Neither can this money function as constant
capital, for it is, for now, still only money, and has to be converted into the fixed or circulating elements of
constant capital.
But this conversion, [means of subsistence] CMC [means of production], is, for the capitalist of II, a
movement of capital, since it amounts to a transformation from commodities back into the material elements
of the formation of these commodities. 15
The variable capital in department I undergoes the following changes of form:
[T]he purchase of labour-power converts the variable capital of the capitalists from the form of money to the form of
labour-power. But since the variable capital remains in the hands of capitalists, although in a different form, it cannot become
revenue for workers. Instead, from the point of view of workers, what is converted into revenue by the sale of their labour-power is the value of this labour-power, not the variable capital of the capitalists. Fred Moseley, Marxs Reproduction
Schemes and Smiths Dogma, p. 177.
12

Note Marxs comments in the first chapter of this volume. [M]oney capital [...] [as money] exists in a state in which it can
perform monetary functions [...] Money capital does not possess this capacity because it is capital, but because it is money. [...]
[T]he capital value in its monetary state can perform only monetary functions, and no others. What makes these into functions
of capital is their specific role in the movement of capital [...]. C2, p. 112. In the conception of money capital we customarily
find two interconnected errors [...]. Firstly, the functions that capital value performs as money capital, and which it is able to
perform because it happens to be in the money form, are erroneously ascribed to its character as capital, whereas they are
simply due to the money state of the capital value, its form of appearance as money. Secondly, and inversely, the specific
content of the money function that makes it simultaneously a function of capital is deduced from the nature of money (money
is here confused with capital), whereas this function presupposes social conditions [...] that are in no way given simply by
commodity circulation [...]. C2., pp. 115-16.
13

Which would be the case even if she bought means of subsistence from her own capitalist (as we saw in section 4 above, in
the case of the workers in sector IIa).
14

15

C2, p. 518.
5

1 From 1,000Iv in money form to labour-power of the same value.

2 From labour-power to that in which [...] [it] actually varies, i.e. actually functions as variable capital, [...]
pertain[ing] exclusively to the production process [...]. 16
3 To the form of commodity product, to the value of 1,000v + 1,000s .
4 To money form again, through the sale of 1,000v commodity product to II.
Since this variable capital always remains in one form or other in the hands of the capitalist, it can in no way be said to be converted
into revenue for anyone. 17 What is resolved into revenue is the money, that functioned as (potential) variable capital, but
which stopped so functioning as soon as it was converted into labour-power (in thee capitalists hands) and passed
to the workers. The problem is that it is very difficult for the capitalist, and still more for his theoretical interpreter,
the political economist, to rid himself of the idea that the money paid to the worker is still the capitalists money. 18

12 The Reproduction of the Money Material 19

I The production of gold

Money is, here, gold (and silver). 20 For our purposes here, we are going to consider gold production within our
system of annual production, i.e. we are abstracting from foreign trade in general, including that that accounts for
production of bullion. 21 Conceived like this, the production of gold belongs to department I.
Let us assume that gold production amounts to: 20c + 5v + 5s = 30 22
20c is destined to be exchanged against other elements of Ic ; the 10(v + s) against II.
Imagine the following sets of transactions. M5v is paid by Ig (as we shall denote the gold-producing sector of
department I) to its workers as wages, but not as gold produced by Ig but from a part of the already-existing money
stock. The workers use this money to buy means of consumption from department II; department II uses the
money to buy means of production from department I. Department II buys 2 gold from Ig as means of production
(so that M2v flows back to Ig). Meanwhile, a capitalist firm in I pays her workers 5v, who use the money to buy

16

C2, p. 522.

17

C2, p. 523.

18

C2, p. 523.

Section 11, which deals with the replacement of fixed capital, is dealt with in part 3 of my notes for this chapter; this
section, section 12, has as its principal target the views of Tooke and Smith regarding the quantity of money necessary for
circulation.
19

Marx discussed the production of money (i.e. principally of gold, but also of other precious metals) in chapter 12: see C2,
pp. 400-1. Let us here remind ourselves that the cycle of money capital in the precious metals production sector, since its
commodity product is money in form, i.e. since C M, is: MC ... P ... M.
20

Capitalist production never exists without foreign trade. If normal annual reproduction on a given scale is presupposed,
then it is also supposed [...] that foreign trade replaces domestic articles only by those of other use or natural forms, without affecting
value ratios, and therefore without affecting either the value ratios in which the two categories , means of production and means
of consumption, mutually exchange for one another, or the ratios between the constant capital, variable capital and surplusvalue into which the value of the product of each of these categories can be broken down. Bringing foreign trade into an
analysis of the value of the product annually reproduced can therefore only confuse things, without supplying any new factor
either to the problem or to its solution. C2, p. 546, italicisation added.
21

22

Marx comments (C2, p. 546) that this notional figure is unrealistically high.
6

means of consumption from II, who uses the money to buy the commodity product, value disregarding surplusvalue 5, so that the 5v flows back to the capitalist in I. The money flows involved in these exchanges are these:

Ig

5
5

II

5
5

The results of this?

1 Ig advanced M5v; only M2v returned. I advanced M5v ; all of it returned. But Ig can rebegin production just as
well as I because, before these exchanges, its workers had already supplied it with 5 gold, 2 of which was
spent and then returned. Its whole variable capital still exists in money form.
2 IIg laid out M5v, while II laid out M2 for gold (means of production): M3 remains in II as a money (gold)
hoard; given the fact of I(v

+ s)

IIc , already established above, i.e. that IIs commodity product in its

entirety is exchanged for means of production, this hoard is a form of existence of IIs .
Result 2 hoard formation is an inevitable product of this process. If capitalist(Ig) advances v as M, it is the
workers who buy from department II: with respect to v (though not with respect to s) capitalist(Ig) never acts as
buyer initiating an exchange, only when II buys gold as means of production; capitalist(Ig) replaces her v with her
own product. Thus, in the proportion to which advanced v does not flow back to Ig, a part of her surplus value is
not transformed into means of consumption and a hoard is formed in II.
II How can a capitalist withdraw more money from circulation than she throws into it?

These points established, Marx now turns his attention to a matter he addressed in chapter 17, viz.:
how is it possible for each capitalist to withdraw a surplus-value from the annual product in money, i.e. to
withdraw more money from the circulation sphere than he cast into it, since in the final analysis the capitalist
class itself must be seen as the origin of all money in circulation? 23

C2, p. 549; cf. C2, pp. 404-13. Marx attributes this view, i.e. that it should be impossible for the capitalist to withdraw more
money from circulation that she cast into it, that the notion of surplus-value thus conceived is impossible, to an (unnamed)
opponent of Tooke (C2, p. 404). Thomas Tooke was a prominent opponent of the Currency School (the monetarists of their
day), who Marx commented favourably had been compelled [...] to recognise that the direct correlation between prices and
23

Marx refutes this view with four arguments.

1 Marx repeats the argument he developed in chapter 17: that the question here is not whether there is sufficient
money in circulation to realise surplus-value, but that there be sufficient money to allow the commodity capital
(including the surplus-value) to be reconverted into productive capital by being sold, i.e. the question is where
the money comes from to convert the total commodity product?
Considered both individually and socially, commodities consist of c + v + s: the money advanced as capital for
c and v returns to the capitalist with the sale of the product; the realisation of the surplus-value comes about
because the capitalist does not consume her surplus product in kind but withdraws commodities form the total
product to this value. What the process of circulation of money brings about is that the money the capitalist
casts into circulation to be spent as revenue is then withdrawn again, so that the process can begin anew. If the
capitalist buys commodities with unit M1 of money, and then the seller of these commodities buys from the
capitalist commodities with this same unit of money, then the money has returned, to be spent again. the
capitalist constantly receives this money back as the realisation of surplus-value that cost him nothing. 24 While
value is consumed, money circulates; the fundamental problem of political economy of all types lies therefore
not in determining where the money comes from to realise the value of the commodity product, but what this
value really is, which brings us back to Smiths dogma:
We saw that for Adam Smith the entire value of the social product resolved itself into revenue, into v + s,
and that the value of the constant capital was therefore taken as zero, It necessarily follows from this that
the money required for the circulation of the annual revenue would also be sufficient for the circulation of
the entire annual product; and that in our case, therefore, the money needed for the circulation of means of
consumption to the value of 3,000 would be sufficient for the circulation of a total annual product to the
value of 9,000, This was in fact Adam Smith's opinion, and it is repeated by Thomas Tooke. This false
conception of the ratio between the quantity of money needed to realise revenue and the quantity of money
that circulates the total social product is a necessary result of the uncomprehending, thoughtless manner in
which they view the reproduction and annual replacement of the different material and value elements of
the total annual product. It is therefore already refuted. 25

For as Marx has previously argued, the source of Smiths error lies in equating
the value of the annual product with the annual value product. [...] The latter is simply the product of the current years labour;
the former includes, on top of this, all those elements of value that were used in the production of this annual product,
but which were produced in [...] previous year[s] [...]: means of production whose value only reappears and which, as
far as their value is concerned, have been neither produced nor reproduced by the labour spent during the current year. 26

2 At the outset of production, an industrial capital casts into circulation the entire fixed part of capital, capital
recovered gradually over a multiple of turnovers. More money is cast into circulation than is initially recovered.
Whenever fixed capital is replaced in kind, either partially or totally, this is repeated. In addition, capitals with
long production times repeatedly cast money into circulation in exchange for means of production and
the quantity of currency presupposed by this theory [of the Currency School] is purely imaginary, that increases or decreases in
the amount of currency when the value of precious metals remains constant are always the consequence, never the cause, of
price variations [...]. Karl Marx, A Contribution to a Critique of Political Economy, Marx Engels Collected Works vol. 29
(London and Moscow, 1987), p. 415. The Currency School, holding to a quantity theory of money, had held that an over issue
of paper money would cheapen the price of money leading to general inflation. Amongst others, Tooke argued that what
determined price was not the quantity of money in circulation, but the money income of the economy: changes in prices thus
determine the amount of money in circulation, not the other way around. Marxs high opinion of Tooke (when Tooke died
Marx commented to Engels that he had been the last English economist of any value. Marx to Engels, 5 March 1858 Marx
Engels Collected Works, vol. 40 (London and Moscow, 1987), p. 325) was based on his own trenchant opposition, for different
reasons, to a quantity theory of money.
24

C2, p. 551.

25

C2, p. 551.

26

C2, p. 453.
8

consumption over this period before the money is recovered. If at one point more money is withdrawn from
circulation than is cast in, the reverse is the case at another point. 27
3 Gold and silver producing capitalists, unlike others, cast only money into circulation, withdrawing only
commodities from it: most of their variable capital and all their surplus-value (less that hoarded) is cast into
circulation as money.
4 Many commodity products circulate long after the production period in which they were produced, such as
plots of land and houses; others have a production period which extends far beyond that of other, normal,
commodity products: cattle, wood, wine, etc. In these cases, in addition to the money necessary for direct
circulation, a certain quantity always exists in a latent state.
In addition to this, not everything encompassing the reproduction process is mediated by the circulation of
money: production itself lies outside it, as do the products consumed directly by the producer.
Hence, the quantity of money that circulates the annual product is present in society and has been accumulated bit
by bit. It does not form part of the value product of the present year [...]. 28
III Money within Capitalist Reproduction

Up till now we have assumed the circulation of money exclusively in the form of precious metals, i.e. we have
ignored money as means of payment, 29 and the operation of credit. However, Marx notes, rather cryptically, the
simplest consideration of monetary circulation in the form in which it developed spontaneously and this
monetary circulation is here an immanent moment of the annual process of reproduction shows the following
[...], 30 a remark I interpret to mean that the consideration of money in this simplest manifestation reveals the
fundamental role that money plays within the reproduction of capital, i.e. what is specific to money under capitalism,
within which money in its more complex manifestations means of payment, credit, etc. can be understood.
Marx goes on to list the following phenomena.
1 Under developed capitalist production, i.e. the domination of the system of wage-labour, 31 money capital
predominates because money is the form in which variable capital is advanced. To the degree that the wage
system develops, all products are transformed into commodities, and all with a few important exceptions
must therefore jointly undergo the transformation into money as a phase in their development. 32 The greater
part of the money necessary for the realisation of commodities exists as money advanced as wages.
This contrasts with what pertains under conditions of natural economy. 33 As natural economy Marx cites
the example of slave economy, within which money capital laid out on the purchase of labour-power plays
27

C2, p. 552.

28

C2, p. 553.

I.e. money used to settle accounts at the end of a sale on credit, commodities having circulated without the actual presence
of money. Cf. Karl Marx, Capital, vol. 1 (Harmondsworth, 1990) [hereafter C1], pp. 232-40.
29

C2, p. 554.
31 C2, p. 554.
30

C2, p. 554. [C]apitalist production is commodity production as the general form of production, but it is only so, and
becomes ever more so in its development, because labour appears [...] as a commodity, because the worker sells labour, i.e. the
function of his labour-power [...]. The producer becomes an industrial capitalist to the same extent as labour becomes wagelabour. In the relation between capitalist and wage-labourer, the money relation [...] becomes a relation inherent in production
itself. But this relation rests fundamentally on the social character of production, not on the mode of commerce [...]. It is
typical of the bourgeois horizon [...] to see the foundation of the mode of production in the mode of commerce
corresponding to it, rather than the other way round. C2, p. 196.
32

33

I.e., a system of production within which commodity exchange does not predominate.
9

the role of fixed capital in the money form [...]. 34 In addition, the slave market is replenished by means other
than monetary circulation, i.e. through pillage and war effectively appropriation in kind.
2 This spontaneous development of monetary operations using money in its simplest form also reveal:

the flows of money necessary to realise the social product;

the advance of fixed capital and its gradual and long-term reconversion through hoard formation;

the varying lengths of time money has to be advanced according to variations in production periods
(and hence the necessity prior formation of a hoard before the money can be

withdrawn from circulation by the sale of the commodity;

the varying times for the advance of money resulting from variations in circulation time and the
varying needs in relation to the need for stocks of constant capital.

It is out of these operations and their necessities, i.e. out of the inherent functions of money in commodity
circulation and the reproduction of capital, that the more complex manifestations of money arise.

13 Destutt de Tracys Theory of Reproduction

The French Enlightenment philosopher Antoine Louis Claude Destutt advanced the notion that surplus-value
arises by capitalists selling their commodities at prices that exceed their value.
Destutt de Tracys theory proposes:
1 That capitalists sell their products dearer to each other. Marx demonstrates that this is impossible like this. If
the part of the surplus-value that the capitalists devote to private consumption is, say, 400, this 400 may
become 500 if each sells her part to the others party 25 % too dear; but if all do this, the result is as if they
had sold to each other at the right price, except that a quantity of money of 500 rather than 400 is
necessary to circulate a commodity value of 400, which would require a part of the total capitalist to be held
in the form of means of circulation. No profit can arise. 35
2 That capitalists sell their products dearer to their (and other) workers. Again Marx demonstrates the falsity of
the idea.
Do the capitalists thus pay the workers 100 in wages, and then sell the workers their own product for
120, so that both the 100 has flowed back to them, and a further 20 has been obtained in addition?
This is impossible. The workers can pay only with the money that they receive in the form of wages. If
they receive 100 in wages from the capitalists, they can buy only for 100, and not for 120. This would
not work at all. 36

Neither can the capitalists achieve the same end by selling commodities to a lesser value to the workers than
the latter receive in wages. If the workers are paid 100 in wages, but are sold only 80 in commodities, all
the capitalists achieve is the circulation of 80 of commodities through the advance of 100 in money.
3 That capitalists sell their products dearer to idle capitalists, i.e. those who receive rent and those who lend
money. Again, this is impossible. The money paid by industrial capitalists to idle capitalists reaccrues to the
former when the latter use it to buy commodities. That land, for example, is profitable to those who rent it
out, is true, but this profit derives not from the price paid for it but from the use made of it: to see otherwise
34

C2, p. 554.

35

Cf. Marxs demonstration in C1, pp. 258-69, that circulation, the exchange of commodities, can create no new value.

36

C2, p. 559.
10

is the confusion that we are led into if phenomena of circulation, such as the reflux of money, are lumped
together with the distribution of the product that is simply mediated by these phenomena of circulation. 37

37

C2, p. 562.
11

Chapter 20: Simple Reproduction

Part 3: Fixed Capital in the Reproduction Process 1

11 The Replacement of the Fixed Capital 2

I: 4,000c + 1,000v + 1,000s
II: 2,000c + 500v + 500s
which resolves into:
4,000Ic + 2,000IIc + 1,000Iv + 500IIv + 1,000Is + 500IIs
= 6,000c + 1,500v + 1,500s
= 9,000
We now have to consider a new difficulty. One part of the constant capital value, that which consists of
instruments of labour, 3 is transferred to the commodity product while these instruments continue to function as part of
productive capital. We shall not be considering here those components of fixed capital whose life is shorter than a
single (here, annual) production period, for if they need to be replaced during the production period, they can be
treated in the same way as circulating capital.
The problem under consideration here is this:
[T]he part of the money received from the sale of commodities that represents the realised value component of
the commodities, which is equal to the wear and tear of the fixed capital, is not transformed back again into the
component of productive capital whose loss of value it replaces. It settles down alongside the productive capital
and persists in its money form. This precipitation of money is repeated until the reproduction period during
which the fixed element of the constant capital continues to function in the production process in its old natural
form, and which consists of a greater or lesser number of years, has elapsed.

This disruption in the circulation of money supposes a disruption in reproduction itself.

We now need to investigate the various ways in which this disruption might be resolved.

Where I insert my own subheads they appear, as here, in sans serif type.

Section 11 of Chapter 20 [...] [was] written late (1878) in one of the last Volume Two manuscripts (VIII) and introduce[s] an
important new theme into Marx's analysis of reproduction, which Marx seems to have discovered while working on his
reproduction tables: the effects of the discontinuity of investment in fixed capital on the reproduction of capital. In the case of
simple reproduction [...], this discontinuity of investment results from the fact that buildings and machinery and other forms
of fixed capital are not replaced every year, but only after a number of years. This discontinuous reinvestment means that part
of the constant capital recovered by some capitalists is not immediately used to replace buildings, machinery and so on, but
instead remains in the form of a money hoard. Fred Moseley, Marxs Reproduction Schemes and Smiths Dogma, pp. 178-9.

Or means of labour: those means of production which, by interposing themselves between the producer and the objects of
production, mediate the action of the former. They consist in tools, etc., and those other elements on which production
depends, such as workshops, roads, canals, etc. Instruments of labour are to be distinguished from objects of production (and
from labour-power too) in the way that, as use-values, they are consumed in production. Instruments of labour enter
constantly and directly into the valorisation process but only in parts into the labour process. Instruments of labour thus give
up their value to the product in proportion to their loss of use-value: the extent to which they pass on their value to the
product is an average calculation in function of the time from which they enter production to that when they are used up or
worn out and need to be replaced. As the instruments are used up, one steadily declining part of their value remains fixed
in the production process. Instruments of labour thus form a part of fixed, and not circulating, capital. Cf. Karl Marx, Capital,
vol. 1 (Harmondsworth, 1990) [hereafter C1], pp. 285-6 and 313-4, and Karl Marx, Capital, vol. 2 (Harmondsworth, 1978)
[hereafter C2], pp. 237-8.
3

(a) Replacement of the Depreciation Component in Money Form

I: 4,000c + 1,000v + 1,000s
II:

2,000c

+ 500v + 500s

IIc I(s + v) supposes that the value component IIc is converted in its entirety in kind from means of
consumption to means of production. But if this value contains an element of depreciation of fixed capital, which
cannot be replaced in kind, but is rather transformed into money in the exchange, one part of this value component
equal to the value of wear and tear of fixed capital cannot be converted into constant capital form but has to
remain in money form, and cannot participate more in circulation. Where does this money come from? Precisely
from I(s + v). But earlier we said that money advanced into circulation has to return to the capitalist producer who
cast it in, so that she can repeat the process.
If we assume that the depreciation element = 200, then department II sells 2,000 to department I, but only buys
from I 1,800. The commodity value 2,000IIc breaks down into 1,800 commodity product to be exchanged against
means of production, and 200 for the replacement of wear and tear, to be maintained in money form. We thus have
the following exchange (suffix d indicating depreciation).
I: 1,000v + 1,000s
II:

1,800c

200c(d)

The following sets of exchanges now take place:

A The workers of department I buy 1,000 consumption commodity with their wages; this money returns in
exchange for means of consumption (such that capitalists I receive their variable capital back in money form).
B Department II advances M400 to buy means of production Is , and department I uses this same sum to buy
means of consumption IIc ; the M400 returns to the capitalists of II.
C Department I now advances M400 to buy means of consumption; department II uses this money to buy
means of production from department I ; the M400 once more has returned.
Diagrammatically, we can represent these three sets of transactions like this (blue indicating movement of
commodities, red exchange of money; dotted lines indicating a hypothetical fourth set of exchanges which, for
reasons explained below, does not take place):

II

1,000v

1,000c

400s

400c

400s

400c

200s

200c(d)
2

After these exchanges, in which all money cast into circulation has returned to who cast it in, and all commodity
product values (bar the last 200) has been exchanged, I holds 200Is in commodity form (means of production) and
II 200IIc(d) as means of consumption. On our assumptions up till now, department I would buy the outstanding
200IIc(d) with M200 received from II to buy Is product of 200Is (means of production) the dashed exchanges in
the diagram above; however, this value represents (partial) wear and tear, not (completely) spent means of
production: II thus holds on to the M200, and I cannot realise 200Is surplus-value. To realise 200IIc(d) , i.e. to
complete I(v + s) IIc , an extra M200 has to appear, as it were, as if it had rained down from heaven. 4
The law that, in the normal course of reproduction (whether simple or on an expanded scale), the money
advanced to circulation by the capitalist producer must return to its starting-point [...] excludes once and for all
the hypothesis that the 200IIc(d) can be realized by the money advanced by department I. 5

Thus the conclusion we have arrived at is that the realisation of the 200IIc(d) has to be achieved, assuming simple
reproduction as conceived here, through means other than the advance of money from department I.
(b) Replacement of the Fixed Capital in Kind
If department II advanced the M200 equivalent to 200IIc(d), buying 200Is , this money would flow back as I bought
200 of means of consumption; department II does not do this, hoarding the money as depreciation fund. 200Is is
consequently not realised.
But the various capitalists in department II find themselves at different points in terms of when they need to
replace their fixed capital: those at the point when replacement is immanent have to advance money capital to the
value of the fixed capital to be replaced as well as to the value of circulating constant and variable capital.
Let us assume that department II casts M200 6 into circulation to exchange with department I. Let us also assume
that, say, one half of this sum emanates from those capitalists in department II who not only have to renew in kind
by sale of commodity product their circulating capital, but also to renew with money their fixed capital (let
us call these capitalists sector II1 ), while the other derives from those in II who renew only their circulating capital
(sector II2 ). Sectors II1 and II2 , in some combination, advance M100 together to renew circulating capital; II1 also
advances a further M100 (to be reaccumulated little by little in the form of the depreciation component of the
commodities to be produced by the fixed capital equivalent to this value). The M200, as it flows back (as I buys
means of consumption) is differentiated proportionally between these two sectors of department II. Thus, II1
converts M100 into elements of fixed capital in kind, while II2 , rather then receiving commodities in kind from
C2, p. 532. Marx here raises the point tangential at this stage of the exposition but important when we come to the matters
under consideration in volume 3, that this hypothesis (i.e. money raining down from heaven) would appear less absurd if
instead of appearing, as [...] a component of the value of commodities that their capitalist producers have to realize in money
by selling them [Is] appears in the hands of the capitalists co-partners, e.g. [....] in the hands of the landlord or [...] the moneylender. If the part of the surplus-value in commodities that the industrial capitalist has to deduct as ground-rent or interest for
other persons with a claim on surplus-value cannot be realised in the long run by the sale of the commodities themselves, there is
then an end to the payment of rent and interest [...]. It helps just as little if, instead of direct exchange between departments I
and II [...] the merchant is brought in as mediator [...]. In the given case [...], 200IIs must finally be disposed of to the industrial
capitalists of department II. It may go through the hands of a whole series of merchants, but the last of these still finds
himself in the same position vis--vis department II [...] as the capitalist producers of department I did at the beginning, i.e.
they cannot sell the 200Is to department II; and as this sum of purchases has thus stuck fast, it prevents department I from
repeating the process. C2, p. 532.
4

C2, p. 533.

From this point on I have changed Marxs figures (by halving them) to maintain numerical consistency with the examples
that have preceded.

department I is paid with the money with which II1 bought fixed capital. II1 thus renews its fixed capital while II2
conserves a stock of money so as to be able to renew its fixed capital in kind at a later date. This is shown
diagrammatically below (again, red lines indicate transfers of money; blue of commodities).

purchase of means of consumption

replacement of fixed capital

II1c
Is
II2c

replacement of circulating capital

Let us assume here then that we are dealing with the exchange 200Is 200IIc . We shall consider three cases.
Case 1: Of the 200IIc , a certain proportion has to replace the proportion of circulating parts of the constant capital
for sections 1 and 2 in the ratio of half each.
Sector II1 holds 50c and sector II2 150c , of which 100c represents depreciation. II1 casts in M150: M50 to buy Is
circulating capital and M100 to replace fixed capital. M50 returns to buy means of consumption 50II1c . II2 casts in
M50 (to buy 50Is circulating capital), which returns in exchange for means of consumption 50II2c . II2 also receives
the M100 cast in by II1 (in exchange for fixed capital) in exchange for means of consumption 100II2c(d) . The fixed
capital depreciation in II2 is thus balanced by the money cast in by II1 .

fixed capital = 100

100

100

200Is

means consumption = 50

50II1c
50c

50

circulating capital = 50
circulating capital = 50

200IIc
50

means consumption = 50

means consumption = 100

150II2c
100c(d)
50c
4

Case 2: II1 has sold its entire commodity, so that II2 still has 200 to sell.
II1 simply buys 100Is fixed capital. This money returns to II2 in exchange for means of consumption; II2 also casts
in M100 in exchange for circulating capital, money which returns in exchange for means of consumption. Again,
the fixed capital depreciation in II2 is balanced by the money cast in by II1 . 7

fixed capital = 100

100

II1
200Is

circulating capital = 100

200IIc
100

means consumption = 100

100II2c
50c
50c(d)

means consumption = 100

Case 3: II2 has sold all except the 100 that carries the depreciation value.
II1 advances M200: M100 in mutual commodity exchange with I and M100 to buy fixed capital. With this second
M100 I buys means of consumption from II2 . Once again, fixed capital depreciation in II2 is balanced by the
money cast in by II1 .

Marx draws a distinction between the advance of [...] [M100], which makes possible the exchange of means of production
for means of consumption, and [...] [M100], which is used to buy means of production without a corresponding sale of means
of consumption and which, therefore, must come from the reserve fund. While the [...] [M100] which has been advanced by
section II1 returns to it, the [...] [M100] used by section [...] II1 as a mere purchaser does not return to it, since department I
does not use this [...] [M100] to buy means of consumption from section II1 . Department I uses this [...] [M100] to buy [...]
[100 means of consumption] from section II2 . The [...] [M100] that is withdrawn from the reserve fund by some capitalists is
compensatedby the [...] [100] that is saved by some other capitalists. Withdrawals and deposits offset each other and thus
neither one increases nor decreases department IIs purchasing power. G Carchedi and W de Haan, On the Replacement of
Fixed Capital in Marxs Simple Reproduction, History of Political Economy 27.3 (1995), pp 602-3.
7

fixed capital = 100

100

circulating capital = 100

100

II1

100c

means consumption = 100

200Is

200IIc
II2

100c(d)
means consumption = 100

We now look now at a variant of this last case, in which department I begins the exchange process by casting in
M100 to buy means of consumption from II2 , money which stays with the buyer, even though II1 still advances
M200.

fixed capital = 100

100

means consumption = 100

II1

100c

100

200Is

circulating capital = 100

200IIc

100
means consumption = 100

II2

100c(d)

We started with the exchange:

I: 4,000c + 1,000v + 1,000s
II:

2,000c

+ 500v + 500s
6

We saw earlier in the chapter that 4,000 Ic is disposed of by mutual exchange between the capitalists of this
department and that the 500v of workers wages and 500s of capitalists surplus value in department II are spent on
means of consumption within this department. What we are investigating here is the exchange I(v + s) IIc .
The problem we introduced was what happens when commodity value 2,000IIc breaks down into 1,800IIc
commodity product to be exchanged against means of production, and 200IIc(d) for the replacement of wear and
tear, to be maintained in money form, thus:
I: 1,000v + 1,000s
II:

1,800c

200c(d)

In reality, then, since 1,800I(v + s) 1,800IIc is uncomplicated, we are focusing on the exchange 200Is 200IIc ,

which we have broken down into 200Is [ II1c + II2c ], where II1 represents that sector of department II which is
at the stage in which it does not only have to renew in kind by sale of commodity product its circulating capital,
but also to renew with money their fixed capital, and II2 that sector in which it only has to renew its circulating
capital, since its fixed capital is not yet exhausted (but, because of this, it needs to accumulate a hoard of money for
future fixed capital renewal.
Our resolution of the problem was for II1 to advance money to balance the fixed capital depreciation of II2c(d) ;
essentially, either directly or indirectly:

fixed capital

II1
Is

IIc
II2
means consumption

The solution to our problem therefore reduces itself to this:

[T]he fixed component of department IIs constant capital which in any given year has been transformed back
into money to its full value and thus has to be renewed in kind (section 1) has to be equal to the annual wear and
tear of the other fixed component of the constant capital in department II which still goes on functioning in its
old natural form, and whose wear and tear, the loss of value that it transfers to the commodities in whose
production it is involved, has first to be replaced in money. Such a balance accordingly appears as a law of
reproduction on the same scale [...]. 8

Thus, if we denote the money that sector II1 casts in exchange for fixed capital MII1c , and that which sector II2
receives as a depreciation fund in exchange for consumption goods (really the same money money that circulates
8

C2, p. 540, italicisation added.

7

simply to exchange commodities between I and II: money that does not mediate reciprocal commodity exchange,
but appears in its unilateral function as a means of purchase 9) MII2c(d), then the condition for the reproduction of
fixed capital to occur without impeding the (simple) reproduction of the whole system is MII1c = MII2c(d). Equally
evident, the two possible conditions under which this equality is broken are (1) MII1c > MII2c(d) and (2) MII1c <
MII2c(d). We now need to look at these two conditions in turn.
(1) MII1c [= 110] > MII2c(d) [= 100]
In this case, either (a):

fixed capital = 100

100MII1c
10MII1c

II1

Is

IIc
II2

100MII2c(d)
means consumption = 100

Here, 10MII1c cannot be transformed into fixed capital in kind.

Or (b):

fixed capital = 110

110MII1c

II1

Is

IIc
10MIs

II2

100MII2c(d)
means consumption = 100

Now, there is 10MIs which cannot be realised, i.e. cannot be transformed into means of consumption.
In both these cases, there is a remnant of money a surplus which cannot be converted into commodities. In
9

C2, p. 543.
8

case (b), importing foreign commodities would permit the monetary surplus on Is to be realised.
(2) MII1c [= 90] < MII2c(d) [= 100]

fixed capital = 90
90MII1c

II1

Is

IIc
II2

90MII2c(d)
means consumption = 90
10Is

10II2c(d)

Now, we are left with an unsalable 10Is and 10II2c , commodities to the value of 20 which cannot be converted into
money: now a monetary deficit means a surplus of commodities. Here, exporting means of consumption would
help to realise the depreciation component of IIc in means of production.
Even assuming an equal and constant level of productivity (i.e. a fixed value relation), these results will be
consequent when we come to consider expanded reproduction.
(c) Results
Assuming all else (scale of production, productivity of labour) to be equal, then: (1) if a greater part of the fixed part
of IIc needs to be replaced in kind, then that part of proportion of the fixed part of IIc that needs to be replaced
with money has logically, because we are assuming the sum of fixed capital functioning to be constant, to be
proportionally smaller; (2) if more of Is commodity capital consists in IIcs fixed capital, then, since we assuming a

given and fixed level of production in department I, including what department I produces for IIc, IIcs circulating
component must be proportionally less; and (3) the total production of department II remains unchanged;
This leads to the following problems:
1 Department IIs production cannot stay the same if the proportion of constant capital in circulating form goes
down
2 The increased money that accrues to I in exchange for fixed capital money that circulates simply to exchange
commodities between I and II: money that does not mediate reciprocal commodity exchange, but appears in its
unilateral function as a means of purchase 10 is only matched by decrease in IIc(d), i.e. not only does more money
flow from department I to II, but there is less of that commodity product against which I only functions as buyer.
A greater part of Is would be unconvertible against II, and would be stuck in money form. There would be a crisis
10

C2, p. 543.
9

 a crisis of production despite reproduction on a constant scale. 11 Under our assumptions of given and constant
productivity,
if [...] a constant proportion is not assumed between the defunct fixed capital [i.e., II1c] [...]and the fixed capital
which continues to operate in the old natural form [i.e., II2c(d)] [...] then in one case the amount of circulating
components to be reproduced remains the same, but the amount of fixed components to be replaced will have
increased; the total production of department I therefore has to grow, or else there would be an insufficient
amount of reproduction quite independent of the monetary relations. In the other case, if the proportionate size
of the fixed capital in department II that has to be reproduced in kind declines, then the amount of constant
capital IIs circulating components that have been reproduced by department I remains unchanged, while the
fixed components to be reproduced have declined. There is thus either a reduction in the total production of
department I, or alternatively a surplus (as previously a deficit) [...] that cannot be realized. 12

An increase in productivity in department I would, in the first case (i.e., MII1c > MII2c(d)) mitigate these imbalances,
but this would also have deleterious consequences: (1) transfers of labour and capital between branches of
production would be necessary, producing temporary dislocations; (2) department I would have more value to
exchange with department II, i.e. department Is product would depreciate. In case 2 (MII1c < MII2c(d)), department
I would have to either contract its production, or supply a surplus. In both these instances, crisis results. 13
In both cases, foreign trade would mitigate the imbalance: in the first case, supplying means of consumption for
exchange with department I, in the second to dispose of surplus commodities. But foreign trade, insofar as it does not
just replace elements (and their value), only shifts the contradictions to a broader sphere, and gives them a wider orbit. 14
Looked at technically (i.e. from outside the context of capitalist reproduction), what the problem reduces itself to is
that the quantity of fixed capital that needs to be replaced in kind will vary over production periods, while,
independently of this, the mass of circulating capital that needs to be replaced in a production period, all else being
equal, stays the same. The only remedy to the problem, looked at technically, would be a perpetual relative
overproduction, either of fixed capital or of stocks of raw materials. Over-production of this kind is equivalent to
control by the society over the objective means of its own reproduction. Within capitalist society, however, it is an
anarchic element. 15
Marx concludes by noting that disproportions within the production of fixed and circulating capital does not just, as
then contemporary political economists understood it, explain crisis, i.e. it is not an exceptional circumstance
provoking exceptional problems, but is something that can and must arise from the mere maintenance of the fixed
capital; that [...] can and must arise on the assumption of an ideal normal production [...]; 16 and that, by implication,
crisis too is a fact that can and must arise on the assumption of an ideal normal production.

11

C2, p. 543

12

C2, pp. 543-4.

13

Of themselves, [...] surpluses are no evil [...]; in capitalist production however, they are an evil. C2, p. 544.

14

C2, p. 544, italicisation added.

15

C2, pp. 544-5.

16

C2, p. 545.
10

Chapter 21: Accumulation and Reproduction on an Expanded Scale

This final chapter of the volume, which comes from a draft written significantly later than large parts of the rest of
the book,1 and which is one of the volumes more underwritten parts, has been the subject of significant
disagreement as to how what Marx depicts within should be interpreted. Are the conditions that Marx uses to
illustrate both simple and expanded reproduction so chosen so as to present capitalist reproduction as a balanced
process, able spontaneously to generate the conditions for its own perpetual repetition, or are these preconditions
supposed to show that balanced reproduction is an impossible to realise hypothesis, that capitalist production can
reproduce itself, but not without crisis? If forced to choose, I would strongly favour the latter interpretation over
the former, and will make some tangential references to it in the notes which follow.
But it is also possible to interpret Marxs schemes in another way:
It is clear [...] that Marxs main purpose in developing the schemes was not to model balanced growth nor to
model unbalanced growth. The main purpose of the schemes [...] was to refute the attempt of Adam Smith (and
the classical economists who accepted his analysis) to conjure the constant part of capital out of commodity
value. [C2, p. 449]. Smiths theory implies that all accumulated surplus-value [...] must ultimately be used to pay
more wages in order to hire additional workers and/or increase wage rates. [...] The reproduction schemes
helped Marx to present his refutation of Smiths theory in a clear and simple way. The schemes division of all
output and inputs into means of production and means of consumption allowed Marx easily to track the
destination of investment. He showed that only one portion of investment is used to hire more workers; the
remainder in every period, and therefore ultimately as well is used to accumulate additional constant capital.2

*****

Let us assume that the product of an individual capital of 400c + 100v with a surplus-value after one (here we still
assume annual) production period of 100s is converted into M600,3 of which M400 is converted into constant
capital, M100 into labour-power, and M100, equivalent to 100s , now assuming expanded reproduction, is
accumulated, being converted into 100 constant capital.4
We make the following assumptions: (1) that this sum is sufficient either for the expansion of already existing
constant capital or for the establishment of new business, independently of whether or not a hoard of surplus-value
needs to be established for a greater or lesser period of time before this takes place; and (2) that, given that surplusvalue, hoarded or otherwise, to be transformed into elements of production must be able to find those elements

Cf. Karl Marx, Capital, vol. 2 (Harmondsworth, 1978) [hereafter C2], pp. 103-4

Andrew Kliman, The Reproduction Schemes as an Unbalanced Growth Model,

<http://akliman.squarespace.com/writings/Reprod.%20schemes%20web.doc>, p. 12. Fred Moseley (Marxs Reproduction
Schemes and Smiths Dogma, in Christopher J Arthur and Geert Reuten (eds.), The Circulation of Capital: Essays on Volume Two
of Marx's Capital (London and New York, 1988), p. 160) seems to agree with this view: the most important immediate
purpose of Marxs reproduction tables was to refute the widely-held, but erroneous, view of Adam Smith that the price of the
total social product is entirely resolved into revenue, that is, into wages plus profit and rent.
2

As in my notes for the previous chapter, prefix M indicates money of an unspecified currency.

We are here disregarding the fact that an expanded scale of reproduction, all else being equal, supposes a greater advance on
labour-power, that a part of the surplus-value to be accumulated would have to be converted into variable capital alongside
constant capital.
4

already in existence, we find ourselves in a situation of already existing expanded reproduction.5

1 Accumulation in Department I
(a) Hoard formation
The two ways of expanding production are the expansion of functioning capital, and the setting up of new
businesses. To do this, money capital, gained through the realisation of surplus-value, is hoarded, and then
converted into means of production. Evidently, while some capitalists are hoarding, others are converting. The two
groups of capitalists (of department I) thus conceived confront each other as sellers and buyers respectively.
A sells 400c + 100v + 100s to B, M100 is hoarded, i.e. withdrawn from circulation, and thus represents an obstacle
to circulation.6 When capitalist A, A, A, etc. hoard, they sell without buying; B, B, B, etc. cast money into
circulation and withdraw commodities, constant capital, both circulating and fixed.
We need to remember here that the circulation of the social product including the reproduction of capital does
not consist in simple Says law balances of sales and purchases, simple exchanges (barters) of one commodity for
another. As we saw in the last chapter,7 the renewal of the fixed capital component of IIc supposes unilateral
purchases for that part of the fixed capital to be renewed in kind and unilateral sales for the other to realise the
depreciation fund precipitated out in money form. Our assumption, so that reproduction not be disrupted, is that
one-sided purchase at one point must be covered by and one-sided sale at another.8 We assume that, in Is , the
hoard-forming sales of A, A, A, etc. balance the one-sided purchases made by B, B, B, etc.
To the extent that unilateral buyers later make unilateral purchases, and vice versa, Marx comments that the real
balance [...] as far as the actual commodity exchange is concerned, i.e. the reconversion of the various parts of the
annual product, requires that equal values of commodities are reciprocally exchanged.9
Expanding on this, Marx makes a point of general methodological significance with respect to his reproduction
models and their interpretation. He notes that unilateral exchanges are inevitable in capitalist production, and he
notes that, in capitalist production, in addition to means of circulation, money also functions as money capital in the
circulation sphere. Then he says that, as a result, there exist conditions for the normal course of reproduction,
conditions peculiar to the capitalist mode of production, which turn into an equal number of conditions for an
abnormal course, since on the basis of the spontaneous10 pattern of this production, this balance is itself an
accident.11
Marx now introduces another illustration of the difficulty of achieving the necessary conditions for reproduction,
The money on the one side calls into being expanded reproduction on the other only because the possibility of this already
exists without the money; for money in itself is not an element of real reproduction. C2, p. 566. This is important because, pace
Andrew Kliman ([T]he evidence [...] indicates that Marx continually compared simple and expanded reproduction instead of
counterposing them as distinct models, that he regarded them as occurring in temporal succession [...]. The Reproduction
Schemes as an Unbalanced Growth Model, pp. 13-14.), where Marx talks about the transition (bergang) from simple to
expanded reproduction (for example, C2, p. 572), he seems to be referring to a logical, and not to a historical, transition.
5

Marx adds here (C2, p. 569) that the quantity of money present in society is always greater than that part in active
circulation. He also notes that what the credit system does is to concentrate these hoards, as disposable loanable capital.
6

C2, pp. 524-45.

C2, p. 570.

C2, p. 570.

10

Naturwchsigen naturally occurring, occurring of its own accord and according to its own inherent natural dynamics.

C2, p. 571. This comment, that it is necessary to fulfil conditions which could only be fulfilled by chance, i.e. that each
condition is not a precondition for order but an obstacle to it, lends weight to the interpretation of the reproduction schemes
not as a description of how capitalist reproduction does take place, but how capitalist reproduction would have to take place if it
were to take place in a balanced way and untroubled by crisis.
11

and how balance in exchange expresses itself. The exchange between capitalists (I) and capitalists (II) for the value
components Iv and IIc is indirect: it is mediated by the necessary first step of sale of commodities on the part of
capitalists (II) to workers (I). Capitalist (II), in order to be able to buy commodities (means of production) from
capitalist (I), needs first to sell commodities (means of consumption) to workers (I), i.e. needs first to convert the
commodity value IIc into money form equivalent to Iv , like this (commodity movements in blue, displacement of
money in red):

capitalists
I

capitalists
II

workers
I

Hence, behind Iv IIc lies a set of conditions a continuous supply of labour-power in I, the transformation of a
part of Is commodity capital into the money form of v, the replacement of a part of IIs commodity capital in kind
necessary preconditions [which] mutually require one another, but [which] [...] are mediated by a complex process
which involves [...] processes of circulation that proceed independently [...]. The very complexity of the process
provides many occasions for it to take an abnormal course.12
(b) The additional constant capital
The surplus product is the repository of surplus-value; initially in the hands of A, A, A, etc. this surplus product
exists in the natural (use-value) form of means of production: constant capital for B, B, B, etc., but as yet only
potentially. If we simply consider the level of reproduction on the part of department I in value terms , then we still
find ourselves within the limits of simple reproduction. [...] The distinction [between simple and expanded
reproduction] here lies only in the form of the surplus labour applied [...];13 i.e. on whether it has been spent on
means of production for department I (expanded reproduction) of on means of production for department II, i.e.,
on means of production of means of production or means of production of means of consumption.
In the case of simple reproduction, [...] the whole of the surplus-value in department I was spent [...] on
commodities from department II; it consisted only of those means of production needed to replace the constant
capital IIc in its natural form. [...] [I]n order to make the transition from simple reproduction to expanded
reproduction, production in department I must be in a position to produce fewer elements of constant capital
for department II, but all the more for department I.14

Considering expanded reproduction exclusively from the point of view of value, its material substratum15 the
surplus labour spent in department I on the production of means of consumption already exists within simple
reproduction.
The sale of this surplus product under conditions of expanded reproduction leads to the formation of virtual16
12

C2, p. 571.

13

C2, p. 572.

14

C2, p. 572.

15

C2, p. 573.

16

C2, p. 573.
3

potential money capital, but the accumulation of this potential money capital does not represent an increase in the
amount of money in existence:17 all that has happened is that money already in circulation assumes a different
function, now that of a hoard. Hence [t]he formation of additional money capital and the quantity of precious
metals existing in a country [] do not stand in any causal connection with one another.18
Another conclusion that flows from these observations is this. The greater the quantity of functioning productive
capital, and the higher the level of productivity, and hence the greater the amount of surplus-value, the greater (1)
the additional potential capital in the form of surplus product in the hands of A, A, A, etc., and (2) the quantity of
this product transformed into money.
The surplus product produced (and appropriated) by the capitalist of department I is the real basis for capital
accumulation.19 Nevertheless, this product, as a hoard, formed piecemeal, is absolutely unproductive in its
monetary metamorphosis:20 as a hoard it lies not inside the system of production, but alongside it. It is on the basis
of this hoarded surplus that the credit system arises.
With the increase in the quantity of productive capital functioning the absolute quantity of surplus product in
money form also grows. This increase in size facilitates is segmentation i.e. its separation from its parent capital,
allowing it to be invested in independent businesses.
As we have seen, the surplus product, potential productive capital, really functions as such in the hands of B, B, B,
etc. (department I), and not in those of A, A, A, etc.: capitalists B, B, B, etc. need to buy the surplus product
from A, A, A, etc., i.e. it needs to enter into circulation. We need to note here that this additional constant
capital, when it passes from A, A, etc. to B, B, etc., will, in its greater part, enter into production in the next, or
even a subsequent, production period.
To the extent that the product of B, B, etc. enter in kind into their own production process, B, B, etc. cannot
realise the surplus of A, A, etc.
When looking at simple reproduction, we saw that the capitalists of both departments were able to exchange their
surplus product because of money that already existed in their hands. In the case of expanded reproduction, the
money that would have been spent as revenue now returns to the capitalists to the degree that it has been advanced
for the exchange of their respective product; i.e. the money is the same, but the function is different. The As and
Bs (department I) supply one another with the money for transforming their surplus products into additional virtual
money capital, and alternately cast the newly formed money capital into the circulation sphere as a means of
purchase.21 The only thing that needs to be assumed here is that the quantity of money in existence is sufficient (1)
to maintain circulation; and (2) to maintain the reserve hoards. As capitalist production develops, the quantity of
money necessary also grows, because (1) more and more products are produced as commodities; (2) as the mass
and value of commodity capital grow so does its rate of growth; (3) the variable capital to be converted into money
capital is increasingly extensive (proportionate growth of the proletariat(; (4) of the proportionate growth of new
money capital along with production itself.22
17

Except, Marx notes, when the buyer of the product is a producer of precious metals, i.e. of money itself.

18

C2, p. 573.

19

C2, p. 574, although it will only really function as such in the hands of B, B, B, etc. (department I).

20

C2, p. 574.

21

C2, p. 575.

Marxs next comment (C2, p. 576) is methodologically significant for the theoretical accommodation of fiat money. If this
[i.e. the growth in the necessary quantity of money with the development of capitalist production] is true absolutely for the
early phase of capitalist production, where the credit system is accompanied by a predominantly metallic circulation, it is just
as true, too, for the most developed phase of the credit system, which still has metallic circulation as its basis. On the one
hand, the extra production of precious metals, according to whether this makes them abundant or scarce, can now exert a
disturbing influence on the price of commodities, not only in the long term, but also within very short periods; on the other
hand, the whole credit mechanism must constantly be engaged in restricting the actual circulation of metal by all kinds of
operations, methods, technical devices, to what is relatively an ever decreasing minimum though this also increases in the

22

(c) The additional variable capital

Marx suffices by noting that in volume 1 it had been observed23 that labour-power is always on hand, and [...], if
necessary, more labour can be extracted without an increase in the number of workers employed, or the mass of
labour-power.24

2 Accumulation in Department II
Up to now we have been assuming the sale of surplus product from A, A, etc. to B, B, etc., within department I.
Now, let us assume that A(I) sells to B(II). Evidently, under conditions of expanded reproduction, this sale is
unilateral, since, once A(I) has sold surplus product in the form of means of production to B(II) she will not go on
to buy means of consumption.
Previously, considering simple reproduction, the exchange I(v + s) IIc involved I selling means of production to II
and then using the money received to buy means of consumption, allowing the realisation of IIc . Now, of course,
with respect to Is IIc , that part of IIc that corresponds to Is , or at least that part of Is that is accumulated, is tied
up as commodity product: a part of IIs constant capital cannot be converted into productive form.25
If we assume that one half of Is , i.e. 500Is , is accumulated, i.e. reincorporated into department I as constant
capital,26 then, instead of being converted into means of consumption, it is incorporated into department I as means
of production, and instead of 2,000I(v

+ s)

being available for exchange with 2,000IIc only (1,000v + 500s)I is

available, leaving 500IIc unable to be transformed from commodity form into (constant) capital II. There is
overproduction in department II; and not only this: if we recall, the exchange Iv IIc was mediated by the need on
the part of capitalist (II) first to sell commodities (means of consumption) to workers (I), this overproduction in
department II might react on department I such that the reflux back to department I of the money spent by
workers (I) on means of consumption may be impeded.27 The very attempt to expand production in department I

same proportion of the artificial character of the entire machinery and the chances of its normal course being disturbed. Marx
also comments (C2, p. 576) that in analysing the flows of money, even though money may only function as means of payment
(i.e. to settle balances) and thus not circulate as such, [i]t is important above all [] to start by assuming metal circulation in
its most simple original form, since in this way the flux or reflux, settlement of balances, in short all those aspects that appear
in the credit system as consciously regulated processes, present themselves as existing independently of the credit system, and
the thing appears in its spontaneous form, instead of the form of subsequent reflection.
23

For example, Karl Marx, Capital vol. 1 (Harmondsworth, 1990) [hereafter C1], pp. 727, 874.

24

C2, p. 577.

Marx notes that, under assumptions of simple reproduction, the supposition was the spending of surplus-value in its
entirety as revenue, i.e. on the part of the capitalists on means of consumption. In reality, under assumptions of expanded
reproduction, one part of surplus-value is accumulated as new capital, while another part is spent on means of consumption.
Only with this precondition does real accumulation take place. But the idea that accumulation is achieved at the expense of
production considered in this general way is an illusion that contradicts the essence of capitalist production, in as much as
it assumes that the purpose and driving motive of this is consumption, and not the grabbing of surplus-value and its
capitalisation, i.e. accumulation. C2, p. 579.
25

26

We are still for the moment disregarding the accumulation of the surplus product as variable capital.

Under these conditions, [t]he normal reaction would be for department II to cut back production, which would be fine if
it were to the extent of the means of production they could not get from department I anyway. However, given their
overproduction, they might want to cut back production more than that, and thus buy even less means of production [...].
Geert Reuten, The Status of Marxs Reproduction Schemes, in Christopher J Arthur and Geert Reuten (eds.), The Circulation
of Capital: Essays on Volume Two of Marx's Capital (London and New York, 1988), p. 205.
27

may in the end in fact impede it.28

Marx notes, without developing the matter further, that one way of overcoming this difficulty would be this. 500IIc
is unsold for assumptions here, under which there are neither merchants nor bankers, i.e. classes that merely
consume, in the hands of its producers but this 500IIc in commodity form represents [...] [a] commodity stock in
means of consumption that ensures the continuity of the consumption process involved in reproduction, and
therefore the transition from one year to the other.29

3 Schematic Presentation of Accumulation

(a)

4,000c + 1,000v + 1,000s = 6,000

II

1,500c +

376v +

376s = 2,252
total: 8,25230

(b)

4,000c +

875v +

875s = 5,750

II

1,750c +

376v +

376s = 2,502
total: 8,252

(Note here that the ratio c : v = 4 : 1 in case (a) and 4 : 1 in case (b).)
We need to remember here that a condition for simple reproduction is I(v + s) = IIc .
In case (a), I(v + s) = (1,000v + 1,000s)I = 2,000, and IIc = 1,500, so there is a surplus of 500Is for accumulation in
department I. In case (b), I(v + s) = (875v + 875s)I = 1,750, and IIc also = 1,750; I(v + s) = IIc , i.e. there is a
functional arrangement [...] [of the schemas elements] such that reproduction begins again on the same scale.31 (As
Marx later32 makes explicit, a condition for expanded reproduction in department I, which we shall see is itself a
precondition for expanded reproduction per se, is precisely that I(v + s) > IIc .)
Let us assume in case (a) that half the surplus-value in both department I and department II is spent as revenue,
and the other half accumulated. Then, if 500Is is accumulated, (1,000v + 500s) is spent as revenue. Hence, we have
the exchange (1,000v + 500s) 1,500IIc . Given too that the 4,000Ic , as we have already seen,33 is disposed of
through mutual exchange among the capitalists of department I, all that remains to be considered is the 500Is and
the (376v + 376s)II. This will involve considering the movements within the departments, as well as between them.

Marx emphasises here (C2, p. 580, italicisation added) that so far we have seen nothing but simple reproduction so far in
department I: the elements [are] merely [] grouped together differently [], in accordance with the needs of future
expansion, say in the coming year.
28

29

C2, p. 580.

This is the first of three numerical schemes of expanded reproduction Marx will present in this chapter; I shall label them,
respectively, S1, S2 and S3. Marx will soon abandon S1, for it does not work. Why it does not work will become clear after we
have worked through S2.
30

31

C2, p. 582.

32

C2, pp. 590-1.

33

C2, p. 474.
6

As we are assuming accumulation of half of s in department II as well, 180IIs has to be transformed into capital,
Marx notes that 47IIs , which he rounds to 48IIs , has to be transformed into variable capital, and the rest, 140IIs
into constant capital.34 Now, this 140IIs can be transformed into productive capital only insofar as it is replaced by
commodities Is to the same value; and these commodities must be means of production, destined either for both
departments of exclusively for department II. But 500Is , as we shall see, is destined for accumulation in department
I, and cannot be exchanged for commodities from II. 140s is therefore bought unilaterally (i.e. without the money
flowing back through subsequent sale) by department II. This, moreover, is repeated each production period. What,
Marx asks, is the source of the money for this operation? Marx does not answer this question directly here, but he
does reject as a theoretical solution that capitalists could, and even do, pay their workers below the normal wage,
directly or indirectly (through the truck system, for example). [I]n an objective analysis of the capitalist mechanism,
certain blemishes that still stick to it, and with extraordinary tenacity, cannot be used as subterfuges for getting
round theoretical difficulties.35
(a) First example
Marx now sets out two complete numerical models of expanded reproduction.36 Before we examine them, it would
be useful to remind ourselves of the exchanges necessary to convert the commodity product of departments I and
II of one production period into the necessary form to begin the next that we saw under conditions of simple
reproduction.
I Simple reproduction37

We started with:

4,000c + 1,000v + 1,000s = 6,000

II

2,000c +

500v +

500s = 3,000
total: 9,000

The following sets of exchanges then took place:

1 4,000Ic commodity product in the form of means of production mutually exchanged between capitalists
(I);
2 1,000Iv exchanged with 1,000IIc , and 1,000Is with the other 1,000IIc ;
3 (500v + 500s)II means of consumption bought by workers (II) buying back their own product and
34

Which to my mind appears a slip of the pen, for if the ratio of constant capital to variable capital is 4 : 1 then the portion of

180IIs that needs to be converted into variable capital should be one fifth, not one quarter, i.e. 36IIs , and that into constant
capital therefore not three quarters but four fifths, i.e. 144IIs . This is not of great importance, because, for Marx will shortly
abandon this scheme.
35

C2 p. 585.

36

Respectively, S2 and S3.

37

Where I insert my own subheads they appear, as here, in sans serif type.
7

capitalists (II) buying back the surplus.

II

4,000c

1,000v

1,000

2
2

1,000

1,000s

2,000c
500v

500s

These exchanges are represented diagrammatically above. We can now return to Marxs first numerical scheme of
expanded reproduction.38

II Expanded reproduction: the starting conditions

The starting point for this the first fully worked-through model of expanded reproduction is this:
I

4,000c + 1,000v + 1,000s = 6,000

II

1,500c +

750v +

750s = 3,000
total: 9,000

This is the capital deployed, and surplus-value produced, during the first production period, which I shall call Pt (we
should, however, not forget that one of Marxs assumptions here is already-existing expanded reproduction). We
should note that the ratios c : v for departments I and II are 4 : 1 and 2 : 1 respectively, and that I(v + s) [= 2,000] >
IIc [= 1,500].
We assume that half of Is is accumulated.

III The exchanges during Pt

Following from these starting conditions and assumptions, there is an exchange (1,000v + 500s)I 1,500IIc ([Iv
+

1
2

Is] IIc), effectively composed of 1,000Iv 1,000IIc , workers (I) using wages to buy 1,000 means of

consumption, and capitalists (II) using this money to buy means of production and 500Is 500IIc , capitalists
(II) advancing money to purchase means of production and capitalists (I) anticipating the sale of means of
production to buy means of consumption, the money flowing back and forth to complete the exchanges.39 This
set of exchanges is labelled 1 in the diagram which follows on the next page.

38

Under my nomenclature, S2.

39

As we saw in C2, pp. 475-7.

8

4,000c

II
4,000

1,500c

1,000

1,000v

750

750v

600

600s
100s
50s

500

500s
400s
100s

7
3

400

100

50

There now remains in I 4,000Ic and 500Is .

The conversion of 4,000Ic from means of production, into money, and then into commodity capital (means of
production) is achieved, as we have seen under conditions of simple reproduction, through mutual exchange
among capitalists (I). This is labelled 2 above.

We now assume that of the 500Is to be accumulated 400Is is to be converted into constant capital, and 100Is into
variable capital (i.e. maintaining the ratio of c : v in department I as 4 : 1).

The conversion of 400Is from its natural form of means of production, into money, and then into the natural
form of constant capital occurs among the capitalists of department I, as we saw above:40 3 above.

With regard to the 100Is , in the form of means of production, this is bought by department II as extra constant
capital with money advanced in anticipation of the realisation of the sale of 100IIs means of consumption,
money which flows back when the sale is realised. 4 above.

The commodity product 750IIv is bought back by workers (II) with their wages. This is labelled 5.

As department II has bought 100Is in the form of means of consumption, an extra 50v needs to be found for
the next production period (in order to maintain the ratio c : v as 2 : 1 in department II). This comes from the
capitalists consumption fund IIs. Marx does not say so as such, but what this means is that 50IIs , rather than
being bought through exchange among capitalists (II), is bought by workers (II), but in the next production period

40

C2, pp. 572-7.

9

(note Marxs comment above regarding the formation of a commodity stock in means of consumption that
ensures the continuity of the consumption process involved in reproduction, and therefore the transition from
one year to the other.41). This is labelled 6.

Because of the accumulation of 150IIs , the capitalist consumption fund now stands at 600; 600IIs is realised
through exchange among the capitalists of department II. This is labelled 7.

IV The distribution of the product at the end of Pt

The distribution of the annual product at the end of Pt , the first production period, in order to start the next one
Pt+1 is therefore:
department I
product:

4,000c + 1,000v + 1,000s = 6,000

distribution:

4,400c + 1,100v + 500s = 6,000

capitalists consumption fund

department II
product:

1,500c + 750v + 750s = 3,000

distribution:

1,600c + 800v + 600s = 3,000

capitalists consumption fund

Hence the capitalisation process for Pt , the first production period considered here, for both departments is like
this:

department I
c

total

start

4,000

1,000

5,000

end

4,000 + 400 = 4,400

1,000 + 100 = 1,100

5,500

total

start

1,500

750

2,250

end

1,500 + 100 = 1,600

750 + 50 = 800

2,400

department II

41

C2, p. 580.
10

The total capital (constant plus variable) at the end of the period (to be deployed at the start of the next one, Pt+1 )
is therefore 5,500I + 2,400II = 7,900, whereas at the beginning of the period we had 5,000I + 2,250II = 7,250.

V Accumulation during Pt+1

If we now assume that production proceeds on this expanded basis, at the end of Pt+1 we have the following
commodity product:

department I:

4,400c + 1,100v + 1,100s = 6,600

department II:

1,600c + 800v + 800s = 3,200

If we further assume that in department I accumulation continues at the same rate, i.e. that one half of the surplus1

value, i.e. 500Is , is accumulated, then we see immediately that we have a problem with the exchange [ Iv + Is ]
2

IIc , for while [ Iv + Is ] = 1,650, IIc = 1,600. IIc needs to be supplemented with 50IIs ; but, given the ratio of c : v
2

of 2 : 1 a further 25IIs also needs to be deployed as variable capital.

If we assume that the ratio c : v in department I is maintained, then of the 550Is to be accumulated 440 is so as
constant capital and 110 as variable; this latter, 110Is , is realised against IIs in the form of means of production to
be accumulated in department II; this means that means of consumption to the value of 110 are consumed by
workers (I) rather than by capitalists (II) the latter, rather than consuming this surplus are now forced42 to
capitalise it (as means of production, i.e. as constant capital); but alongside this, because of c : v = 2 : 1, a further
55Is has to be capitalised as variable capital.
In summary, then, of the 800IIs with which we started Pt+1 , we have subtracted 50 to be deployed as constant
1

capital, so as to facilitate [ Iv + Is ] IIc , and 25, along with this, as additional variable capital; and now a further
2

110, along with another 55, to be capitalised as constant and variable capital respectively; all this leaving a capitalist
consumption fund in department II of 560IIs .
Thus the next stage of the capitalisation process at the end of Pt+1, i.e. the total product reassembled for further
expanded reproduction in Pt+2, looks like this:

department I
c

total

start

4,400

1,100

5,500

end

4,400 + 440 = 4,840

1,100 + 110 = 1,210

6,050

42

Marxs word, my italicisation: C2, p. 588.

11

department II
c

total

start

1,600

800

2,400

end

1,600 + 50 + 110 = 1,760

800 + 25 + 55 = 880

2,640

Marx now comments, rather cryptically to my mind, that [i]f things are to proceed normally, accumulation in
department II must take place quicker than in department I, since the part of I(v + s) that has to be exchanged for
commodities IIc would otherwise grow more quickly than IIc , which is all that it can be exchanged for.43

VI Accumulation during Pt+2 and beyond

We assume now that accumulation proceeds on this same basis, with half of department Is surplus-value being
accumulated. Accumulation in department II is driven by this: the Is to be converted into variable capital in
department I is bought by department II in the form of means of production as extra constant capital, and one half
of this value (to maintain the ratio between constant and variable capital in the department) is also accumulated by
1

II, out of its surplus-value, as variable capital. In addition, the shortfall on the part of II in the exchange [ Iv + Is ]
2

IIc is supplemented with an equivalent IIs , accumulated as constant capital, in turn supplemented by half this
value, to be accumulated as variable capital.
The surplus-value accumulated in department II is the sum of these four elements:
(1) value equivalent to the surplus-value accumulated as variable capital in department I (accumulated as
constant capital in department II);
(2) taking into account the value composition of the surplus-value to be accumulated in II, value equal to the
variable capital necessary to set this constant capital (1) in motion;
1

(3) value equal to the shortfall in the exchange [ Iv + Is ] IIc , accumulated as constant capital;
2

(4) again taking into account the value composition of the surplus-value to be accumulated in II, the variable
capital necessary to set this constant capital (3) in motion.
We can express this algebraically like this.
(1) If we denote in one production period the surplus-value to be accumulated in department I in the next as
SI , then the Is to be converted into variable capital in the next, given the ratio of constant capital to variable
SI
capital of 4 : 1, is .
5
(2) This Is , in the form of means of production, is realised by being exchanged for means of consumption with
department II, and is then accumulated by the latter as constant capital. Given the ratio of constant capital
to variable capital in department II of 2 : 1, the variable capital needed to set this constant capital in motion

43

C2, p. 588.
12

is one half of

SI
SI
, i.e. .
5
10

(3) The shortfall in the exchange [ Iv +

I
2 s

] IIc is obviously given by (Iv +

I)
2 s

IIc (3); this shortfall is

accumulated out of IIs as further constant capital in II.

1

(4) This shortfall in the exchange [ Iv + Is ] IIc is further supplemented by the necessary variable capital,
2

again one half of this value, i.e. 2 ([ Iv + 12 Is ] IIc).

Hence, SII , the surplus-value to be accumulated in department II, is given by:
SII = (1) + (2) + (3) + (4)
=

SI
5

SI
10

+ ([ Iv + Is ] IIc) + 12 ([ Iv + 12 Is ] IIc)
2

This formula holds for the given ratios of constant to variable capital and the rate of accumulation of surplus-value
in department I that are our assumptions in this model. However, if we notate the value composition of capital,
c 44
SI
, in department I as I , that in department II as II , and the rate of accumulation of surplus-value, , in
c+v
Is
department I as rI (so that SI = rI Is), we can rewrite expressions (1), (2), (3) and (4) like this:
(1) rI I (1 I)
s
(2) r I (1 )
I s
I

( 1

II

(3) [Iv + (1 rI) Is] IIc

(4)

( 1

II

1 ([Iv + (1 rI) Is] IIc)

This then gives us the general formula for the surplus-value to be accumulated in department II as:
SII = rI Is (1 I) + rI Is (1 I)

( 1

II

1 + ([ Iv + (1 rI)Is ] IIc) +

( 1

II

) ([ Iv + (1 r )Is ] IIc)

which simplifies down to:

SII =

Is (1 rI I ) + Iv IIc

II

If we now denote the constant and variable capital values to be accumulated in department II as SII(c) and SII(v)
respectively, we get:
SII(c) = II SII

44

An alternative measure would be ; athough, given that Marx makes great use of an inverse measure of the value
v

composition of capital, variable capital as a proportion of total capital deployed (

v
C

) in volume 3 (Cf. Marx, Capital, vol. 3

(Harmondsworth, 1981), pp. 141ff.) to significant effect, conceiving of the value composition as the quantity of constant
capital value as a proportion of total capital makes sense, and is also consistent with what Marx says later in volume 3 (p. 248):
Differing organic compositions of capitals are thus independent of their absolute magnitudes. The only question is always
how much of each 100 units is variable capital and how much is constant.
13

= Is (1 rI I ) + Iv IIc
and

SII(v) = (1 II) SII

( I (1 r ) + I II ) (I (1 r ) + I II )

(i.e., and obviously, SII SII(c) )

II

There is an important conclusion to be drawn from these equations. The amount of constant capital to be
accumulated in department II is determined by conditions of reproduction in department I and the amount of
constant capital already deployed in department II, but not the value composition in department II; this latter
determines the amount of extra surplus to be accumulated as variable capital, and in this way the total surplus-value
to be accumulated. We can now see why S1, the first numerical example that Marx developed, did not work. In that
S
example Marx assumed a rate of accumulation of surplus-value
(S being the surplus value to be accumulated) of
IS
50% in both departments. The unrealisable commodity product in department II arose precisely because of this
arbitrary, i.e. independently of department I, setting of the rate of accumulation of surplus-value in department II.
A table of values for this numerical example of Marxs, S2, is given at the end of these notes.
(b) Second example45
We start with the following conditions.

5,000c + 1,000v + 1,000s = 7,000

II

1,430c +

285v +

285s = 2,000
total: 9,000

The ratio c : v in both departments is 5 : 1.46 We assume a rate of accumulation of surplus value of 50%.
1

Hence, again, in the exchange [ Iv + Is ] IIc there is a shortfall, of 70, which is provided from IIs (which, after
2

this deduction, stands at 215 IIs . In addition to this 70IIs , to be accumulated as constant capital, 14IIs needs to be
accumulated as variable capital. IIs now stands at 201IIs .
Of the 500s to be accumulated, 417 will be so as constant capital and 83 as variable (c : v = 5 : 1). In addition, as in
the previous example, the Is to be accumulated as variable capital (83Is ) withdraws a further equivalent value from
IIs , which is accumulated as constant capital, which in turn withdraws an additional 17IIs , to be accumulated as
variable capital.
Proceeding thus, for period Pt , we have the following product and its distribution:

45

S3.

A fact, Marx observes, which presupposes a significant development of capitalist production and, accordingly, of the
productivity of social labour as well; a significant prior expansion of the scale of production; and [] a development of all the
circumstances that produce in the working class a relative surplus population. C2, p. 589.
46

14

department I
product:

5,000c + 1,000v + 1,000s = 7,000

distribution:

[5,000c + 417s = 5,417]c + [1,000v + 83s = 1,083]v + 500s = 7,000

capitalists consumption fund

department II
product:

1,430c + 285v + 285s = 2,000

distribution:

[1,430c + 70s + 83s = 1,583]c + [285v + 14s + 17s = 316v] + 101s = 2,000

capitalists consumption fund

1

At this point Marx digresses to comment on the exchange [ Iv + Is ] IIc .

2

Marx notes that the exchange 1,500(Iv + Is) 1,500II is a process of simple reproduction; its peculiarities under
2

conditions of expanded reproduction arise in that a part of [ Iv + Is ] is replaced not only by IIc but by a part of IIs
2

as well. Marx now remarks that the necessity that I(v + s) > IIc under conditions of expanded reproduction is selfevident.47 He then goes on to explain why this (that I(v + s) must > IIc) should be. First, because what department I
accumulates from its own surplus product as constant capital it cannot then exchange for means of consumption;
and, second, because department I has to provide department II with the constant capital necessary for the latters
accumulation out of its own surplus product.
In addition, it is department II that supplies out of its own surplus product the means of consumption necessary for
the variable capital that is to set in motion the additional constant capital. The mechanism by which this happens is
through the workers who make up this additional variable capital using the money stored up by capitalists I to this
end to buy the means of consumption necessary for their subsistence. Department II accumulates both for
department I and for itself, as far as the variable capital is concerned, in as much as it reproduces a larger portion of
its total production, and of its surplus product in particular, in the form of necessary means of consumption.48
The upshot of all this is that, for expanded reproduction to occur, I(v + s) must be greater than IIc by that value equal
to the extra portion of constant capital needed to expand production in department II, and the minimum for this
expansion is that without which genuine accumulation, i.e. the actual extension of production in department I,
cannot be carried out [...];49 or, to put it another way, IIc must be smaller (by the amount just referred to) than that
product of department I that is spent as revenue on means of consumption.
1

To return to S3. Since [ Iv + Is ] = 1,500 and IIc = 1,430, 70IIs must be realised in order to convert the 1,500(Iv +

Is). As far as the 1,500II is concerned, the 1,430IIc exchanges with I(v + s) as we saw under conditions of simple
reproduction, for department II the transformation of constant capital back from commodity form into its natural
form; but the 70IIs is accumulated, through the transformation of surplus product from the form of means of
47

C2, p. 590.

48

C2, p. 593.

49

C2, p. 593.
15

consumption into that of constant capital. (And, as we have seen, this 70IIs which is accumulated as constant capital
also needs an additional value form IIs , 14IIs in this case, to be accumulated as variable capital, and, as a
consequence, a proportional increase in that part of the surplus product consisting in necessary means of
consumption.)
Production period Pt+1 now proceeds like this:
I:

5,417c + 1,083v + 1,083s = 7,583

II:

1,583c + 316v + 316s = 2,215

Reproduction continues as it did with regard to S2. Again, a table of values for this numerical example, S3, is given
at the end of these notes.

(c) The exchange of IIc in the case of accumulation

We need now to consider the various possible relationships between I(v + s) and IIc .
As we have seen, in the case of simple reproduction, for reproduction to proceed undisturbed,50 I(v + s) must = IIc .
1

In the case of expanded accumulation, in the above numerical examples, a constant rate of accumulation ( = Is ) in
2

department I was assumed; what varied was the value composition of the accumulated capital. From this we saw
three different cases:
1

1 [ Iv + Is ]51 = IIc (and hence, since [ Iv + Is ] < I(v + s) , IIc < I(v + s) ; of course, if IIc I(v + s) department I
cannot accumulate).
1

2 [ Iv + Is ] > IIc (and again, from [ Iv + Is ] < I(v + s) , IIc < I(v + s) ). In this case, IIc is supplemented by a part
2

of IIs ( = [ Iv

+ 2 Is

] IIc ). For department II, this exchange is not [] the simple reproduction of its

constant capital, but already accumulation, the increase of its constant capital by a part of its surplus product
which it exchanges for means of production from department I [].52 In addition, in this case department II
also (and proportionally) augments its variable capital from its own surplus product.
1

3 [ Iv + Is ] < IIc . Now, department II cannot fully reproduce its constant capital, and has to compensate by
2

buying from department I to the value of IIc [ Iv + Is ] , an act which achieves the full reproduction of IIs
2

constant capital (obviously without further accumulation of variable capital on its part, since the additional
exchange is to facilitate the reproduction of the constant capital that would have been accumulated were it the
1

case that [ Iv + Is ] IIc ).

2

50

C2, p. 595.
1
Is
2

because of the rate of accumulation of surplus-value of 50%; a more generic expression would be (Iv + [1 r I ] Is),
SI
(SI being the surplus value to be accumulated in
where r I = the rate of accumulation of surplus value in department I
IS
51

department I), or even, as we shall shortly see, (Iv + Is/x), where Is/x is that part of Is that is spent by the capitalists of
department I as revenue. (C2, p. 597)
52

C2, p. 596.
16

We are concluding that the precondition for simple reproduction (I(v + s) = IIc ) is incompatible with accumulation,
and hence with capitalist production;53 first, for the exigencies of the value relations in exchange dealt with here; and
second, because given the natural annual growth of the population, simple reproduction would mean that a
proportionately greater number of unproductive servants [would have] [] to share in [] the total [and constant ]
surplus-value.54 But what would happen if, as a result of the accumulation achieved in the previous run of
production periods,55 the circumstance IIc I(v + s) actually did arise? This would mean over-production in
department II, and could only be balanced out by a major crash, as a result of which capital would be transferred
from department II to department I.56 Hence Marxs statement that [i]n the case of capitalist production,
therefore, I(v + s) cannot be equal to IIc57 must be understood in the sense that this equality cannot occur without
crisis being provoked.
Nevertheless, even if in general terms I(v + s) = IIc is incompatible with capitalist production, as we have seen, if
we denominate as Is/x that part of Is that is spent by the capitalists of department I as revenue, then each of I(v + s/x)
= IIc , I(v + s/x) < IIc and I(v + s/x) > IIc may obtain, but only if I(v + s/x) < II(c + s) (where I(v + s/x) II = that part of
IIs that the capitalists of department II will anyway consume).

C2, p. 596, italicisation added; although Marx immediately adds that this does not rule out the possibility that in one year of
the industrial cycle [] there may be a smaller total production than the preceding, i.e. that even simple reproduction fails to
take place in relation to the previous year.
53

54

C2, p. 596.

55

C2, p. 596.

56

C2, p. 596.

57

C2, p. 597.
17

c+v

100

surplus-value produced during the period under consideration percentage rate of surplus value

100

100

100

revenue : overproduction =

overproduction in current period

variable capital in next period + capitalists consumption fund in next period

II

overproduction = that extra variable capital that needs to be found in department II to set in motion the Is accumulated in department I as variable capital (a
1
value, in the form of means of consumption, realised in the following production period) = rI Is (1 I)
1

(total social product produced in previous period)

(total social product produced in current period) (total social product produced in previous period)

(total capital deployed in previous period)

(total capital deployed in current period) (total capital deployed in previous period)

percentage rate of growth of social product =

percentage rate of growth of capital =

capitalists consumption fund = (surplus-value produced during the period under consideration) (surplus-value to be accumulated in next period)

surplus-value to be accumulated in next period =

surplus-value produced in current period

surplus-value to be accumulated for next period

100

percentage rate of accumulation of surplus value =

s
percentage rate of surplus-value = 100
v

percentage value composition of capital =

s = surplus-value produced during the period under consideration

v = variable capital deployed in the period under consideration

c = constant capital deployed in the period under consideration

The following two tables summarise Marxs final two numerical schemes S2 and S3; values in red are given by Marx as his starting conditions, other values are
derived thus:

18

Appendix: Marxs numerical schemes summarised

18

period

1,331

1,464

1,611

5,324

5,856

6,442

1,611

1,464

1,331

100

100

100

100

80

80

80

80

50

50

50

50

550
605
606
732
805

surplus-value to be
accumulated*

* values rounded to the nearest whole number

Pt+5

Pt+4

Pt+3

1,210

1,210

4,840

50

550
605
666
732
805
10

10

10

10

10

rate of growth of
capital (%)

100

10

10

10

10

10

rate of growth of
product (%)

80

2,343

2,130

1,936

1,760

1,600

1,500

1,171

1,065

968

880

800

750

1,171

1,065

968

880

800

750

67

67

67

67

67

67

100

100

100

100

100

100

30

30

30

30

30

20

351

319

290

264

240

150

820

745

678

616

560

600

10

10

10

10

rate of growth of
capital (%)*

Pt+2

value composition
(%)

1,100

rate of surplus-value
(%)

1,100

rate of accumulation
of surplus-value (%)

4,400

500

10

10

10

10

rate of growth of
product (%)*

Pt+1

capitalists
consumption fund*

500

value composition
(%)*

50

rate of surplus-value
(%)

100

s*

rate of accumulation
of surplus-value (%)

80

v*

surplus-value to be
accumulated*

1,000

c*

capitalists
consumption fund*

1,000

s*

81

73

67

61

55

50

overproduction*

4,000

v*

Department II

19

15

15

15

15

15

15

revenue :
overproduction*

Pt

c*

Department I

Scheme 1 (S2)

19

period

1,331

1,464

1,611

5,324

5,856

6,442

1,611

1,464

1,331

100

100

100

100

80

80

80

80

50

50

50

50

550
605
606
732
805

surplus-value to be
accumulated*

* values rounded to the nearest whole number

Pt+5

Pt+4

Pt+3

1,210

1,210

4,840

50

550
605
666
732
805
10

10

10

10

10

rate of growth of
capital (%)

100

10

10

10

10

10

rate of growth of
product (%)

80

2,343

2,130

1,936

1,760

1,600

1,500

1,171

1,065

968

880

800

750

1,171

1,065

968

880

800

750

67

67

67

67

67

67

100

100

100

100

100

100

30

30

30

30

30

20

351

319

290

264

240

150

820

745

678

616

560

600

10

10

10

10

rate of growth of
capital (%)*

Pt+2

value composition
(%)

1,100

rate of surplus-value
(%)

1,100

rate of accumulation
of surplus-value (%)

4,400

500

10

10

10

10

rate of growth of
product (%)*

Pt+1

capitalists
consumption fund*

500

value composition
(%)*

50

rate of surplus-value
(%)

100

s*

rate of accumulation
of surplus-value (%)

80

v*

surplus-value to be
accumulated*

1,000

c*

capitalists
consumption fund*

1,000

s*

81

73

67

61

55

50

overproduction*

4,000

v*

Department II

20

15

15

15

15

15

15

revenue :
overproduction*

Pt

c*

Department I

Scheme 2 (S3)

20

Capital volume 2: An Interpretive Glossary

[NoteLike my glossary for volume 1, this glossary of volume 2 of Marxs Capital has been produced principally for purposes
of self-clarification. It is thus not exhaustive of the terms and concepts Marx deploys in the volume, but it does try to deal
with some of the most important, and sometimes the more difficult to grasp, of them. It is interpretative in the sense that the
definitions given are my recapitulated interpretations of what I think the terms mean, rather than direct textual citations of
what Marx says or implies they mean (even if, given that the glossary has been prepared from my own reading notes, I may in
places more or less closely paraphrase Marx). At some point in the future I do intend to produce a textual glossary of some of
these terms using Marxs own words the two glossaries, the textual and the interpretative, would then complement one
another. Where there are supporting references to Marx, however, these are indicated in blue: the work cited is Karl Marx,
Capital, vol. 2 (Harmonsdworth, 1978). Main entries appear in bold red, as do cross-references to this glossary; crossreferences to the glossary for volume 1 appear in bold green. Given that this glossary forms part of a longer term and ongoing
project, I welcome being corrected on errors of fact, superfluity, omission, and interpretation; and I naturally welcome all
other constructive comments.]

annual rate of
surplus-value

The actual rate of surplus-value multiplied by the number of times the capital advanced is turned
over in a year (throughout volume 2 Marx assumes an annual production period). The
significance of the concept lies in the fact that the same value of variable capital advanced will
yield quantities of surplus-value ever greater in proportion to the number of times this value turns
over. [369-83]
See also: turnover time

buying time

See: purchase time

capital in circulation

The movement of industrial capital through the phases of exchange in the cycle of capital,
namely MC and CM, during which it assumes the forms of money capital and commodity
capital. Central to Marxs critique of classical political economy was its conflation of capital in
circulation and circulating capital. [274-6]
See also: circulation time; fixed capital; forms of capital; purchase time; selling time

circuit of capital

See: cycle of capital

circuit of commodity
capital

See: cycle of commodity capital

circuit of money
capital

See: cycle of money capital

circuit of productive
capital

See: cycle of productive capital

circulating capital

Those elements of productive capital that are completely consumed in production, and which
therefore transfer their entire value to the product without their turnover being interrupted (and
which are therefore constantly renewed in kind), viz. objects of labour and labour-power
(variable capital). The contrast here is with fixed capital, which preserves its use-value form
while its value is reproduced in the product; by contrast, circulating capital (Marx also uses the term
fluid flssiges, more properly liquid capital) enters the product both materially and as value.
[243-6] This distinction (between fixed and circulating capital) is significant in that while a part of
the value of fixed capital remains tied up (fixed) in its use-value form, the total value of the
circulating capital circulates in the material form of the product; which leads, in the former case, to
discontinuity in investment within reproduction.
It should be noted that the opposition between fixed and circulating capital only exists for
industrial capital when it assumes the form of productive capital, and not when it assumes the
forms of money capital and commodity capital. These last two forms are certainly capital in
circulation (contrasted with productive capital), but this is not the same distinction. [246-7]
Hence, Marx sharply criticises Adam Smith for his designation as circulating capital capital as it
passes through the metamorphoses of the cycle of capital, thus confusing the movement of
industrial capital as a whole with the distinct elements (fixed and circulating) that exist within
productive capital, effectively conflating the distinction on the one hand between productive
capital and capital in circulation and on the other that between fixed and circulating capital within
productive capital. In Smiths conception, all capital was fixed when it was involved in production;
and all capital was circulating when it underwent the changes of form between commodity and
money in circulation. [274-6]

circulation of capital

See: capital in circulation

circulation time

The time capital circulates as commodity capital and money capital, in which it transforms
itself from commodity form to money form and back again, transformations which are simple
metamorphoses of commodities. The mutual exclusion of production time and circulation
time is important for Marxs critique of classical political economy: circulation represents an
interruption in production, during which capital does not function as productive capital and
produces neither commodities nor surplus-value. [200-4]
Given that circulation is composed of two acts, CM and MC, circulation time can be further
broken down into selling time and purchase time. [326-33]
See also: capital in circulation

commodity capital

Industrial capital when it assumes the form of the commodity product C, the result of the
process of production P. As self-valorised value, C already embodies surplus-value.
Commodity capital is one of the two forms assumed by industrial capital in its process of
circulation (the other being money capital).
It is important to grasp that commodity capital as the form assumed by industrial capital is the
L

commodity product C, and not the factors (forces) of production C<mp , labour power and

means of production, purchased with the money capital advanced (although these too assume
commodity form). These latter confront the capitalist as buyer merely as commodities, and not
capital. The means of production may certainly be C, i.e. commodity capital, for their seller (in the
act CM); labour-power, on the other hand, is always just a commodity for the worker, and only
becomes capital in the hands of its buyer, as a component part of the process of production. The
2

factors of production can thus never function in the the cycle of capital as commodity capital but
only function within the cycle as capital in commodity form, and, as such, only more or less
L

fleetingly. In effect, in the movement M C<mp ... P, C<mp , as factors of production, is subsumed
into the process of production as productive capital, rather than assuming a fixed capital form in
itself. [167-9]

See also: cycle of commodity capital

cycle of capital

A sum of money (M) which is advanced to function as industrial capital will be used to buy the
commodities necessary for production to take place, namely means of production and labourL

power (MC<mp ). These commodities are deployed in production (P), which yields a commodity

product (C) with a value (if all has gone according to intention) greater than that originally
advanced. This commodity product is sold for money (M). We can represent this movement like
this:
L

M C<mp ... P ... CM

In the course of this movement, the industrial capital value has assumed the functionally distinct
L

forms of money (M), commodities (factors of production) (C<mp ), the process of production (P),

commodity product (C, i.e. C + C) and money (M, M + M) again; the capital value undergoes
a sequence of metamorphoses. Of course, if reproduction is to take place, the money yielded from
this sale (M) is used depending on the scale of the reproduction, in whole or in part as new M
to buy more means of production and labour-power. This cycle (Marx uses the term Kreislauf,
frequently translated as circuit) thus repeats itself, in principle ad infinitum, and can be represented
like this:
L

M C<mp ... P ... CM . M C<mp ... P ... CM . M C<mp ... P ... etc.
Given this, that the movement of industrial capital describes an indefinitely repeating circular path,
it is possible to view it from different points of view (as different cycles), taking in each a different
element as the starting point, each corresponding to a distinct phase in the movement of capital
(viz. MC; P ; and CM); respectively:
MC ... P ... CM

the cycle of money capital (M ... M)

P ... CMC ... P

the cycle of productive capital (P ... P)

CMC ... P ... C

the cycle of commodity capital (C ... C).

L

(We should note that industrial capital in the form of factors (forces) of production C<mp , labour

power and means of production, is subsumed into the process of production, rather than assuming
a fixed capital form in itself.)
To each cycle corresponds a particular form of capital, respectively money capital, productive
capital, and commodity capital.

Nevertheless, the overall movement of industrial capital, and its characteristics, cannot be reduced
to either one of these cycles; rather, it is the product of their overall imbrication (and the same
remark may be made with respect to industrial capital itself, and its forms). [109; 142-3; 180] This
said, however, precisely because each cycle describes the movement of capital in a one-sided and
partial way, each in turn offers a privileged insight into different aspects of capitalist production
and reproduction. Hence the cycle of money capital is the appropriate site for the analysis of
turnover; the cycle of productive capital that most appropriate for the analysis of reproduction; and
the cycle of commodity capital that for the analysis of the overall movement of social capital.

See also: forms of capital

cycle of commodity
capital

The movement of industrial capital examined from the point of view of commodity capital as
its start (and hence end) point, i.e. CMC ... P ... C.
Marx notes that, insofar as commodity production is generalised, all commodities (except labourpower) are commodity capital in the hands of their sellers. As such, the cycle of commodity capital
describes the movement of industrial capital in its totality, i.e. in terms of total social capital.
Marx complements the Physiocrats for having selected this cycle of capital as an object of analysis
over the others. [176-9]
See also: cycles of capital; cycle of money capital; cycle of productive capital

cycle of money
capital

The movement of industrial capital examined from the point of view of money capital as its
start (and hence end) point, i.e. MC ... P ... C M. Given that the cycle expresses that the money
with which it begins is not simply expended as money but advanced as capital the cycle expresses
as its determining aim valorisation: money capital breeding money. Although Marx gives
expositional precedence to this cycle over the others (for this reason), he also notes that analysis of
the movement of capital exclusively through the cycle of money capital appears to suggest that
valorisation is a function of money, and not of capital. Marx associates this view to Mercantilism,
and the cycle of money capital to its ideological standpoint. [110-143]
See also: cycles of capital; cycle of commodity capital; cycle of productive capital

cycle of productive
capital

The movement of industrial capital examined from the point of view of productive capital as
its start (and hence end) point, i.e. P ... C MC ... P. Contrasted with the case of the cycle of
money capital, in which production mediates circulation, here circulation mediates production.
As such, P ... P suggests industrial capital in a form in which it must continue to function as
productive capital; the cycle thus suggests the inevitability of reproduction (and, as such
represented the ideological standpoint of classical political economy). [144-66]
See also: cycles of capital; cycle of commodity capital

departments of
production

At the end of the volume, investigating the question of reproduction, Marx divides the total social
commodity product into two categories: that produced as articles of productive consumption (i.e.
means of production, produced in Department I), and that as articles of unproductive
consumption (i.e. means of consumption, produced in Department II). [471-3] (At one point,
discussing simple reproduction, Marx introduces a subdivision within Department II between that
part which produces necessary means of consumption (Department IIa) and that which produces
non-necessary luxury items (Department IIb).) [478-87]
Taking into account that the product of Department I is bought and consumed (productively) by
the capitalists of both departments, and that of Department II unproductively by the capitalists and
workers of both departments, Marx then traces the exchanges both within and between the
departments that would be necessary to ensure, first, simple reproduction, and, second, a
balanced (his word) expanded reproduction. It is necessary here to grasp that, while the division
between departments in terms of their product is a functional one, i.e. one founded on use-value
(subsequent Marxists have developed economic models based on more than two departments,
introducing, for example, departments dedicated to the production of gold (i.e. money),
armaments, and so on), the exchanges that Marx goes on to discuss are dealt with exclusively in
terms of value.
4

expanded
reproduction

Reproduction of production in which, either in whole or in part (in the real world, in which
capitalists too consume unproductively, always in part), surplus-value is accumulated as new
capital in the following production period (rather than being consumed unproductively), thus
ensuring, independently of physical output (which is a function of the productivity of labour) that
production in this period is on a greater scale in value terms than in the preceding one.
See also: simple reproduction

fixed capital

That part of the constant capital fixed in production as instruments of production, which, by
interposing themselves between the producer and the objects of production, mediate the action
of the former. What is specific to fixed capital is that it circulates not in its use-value form, but
rather as value. Fixed capital is to be distinguished from circulating capital since the former
circulates only to the degree in which its value is transferred to the product, which then circulates
as a commodity (it is thus the function of a commodity in the production process, and not its
intrinsic nature, that allows us to classify it as fixed or circulating capital). Insofar as they continue
to function, part of the value of the elements of fixed capital remains fixed in the production
process, distinct from the products to whose production it contributes (those components of
constant capital which also do not enter materially into the product, but which are by their nature
completely consumed in every labour process in general ancillaries: power for machines,
energy for lighting and heating, etc. form, for this reason, a part of circulating, not fixed, capital).
[237-43] There occurs as a consequence and herein lies the significance of the distinction
between fixed and circulating capital a discontinuity in the investment in fixed capital within
reproduction, a discontinuity which results from the fact that the reproduction period of the
elements of fixed capital can coincide with any given production period only through
happenstance. In practice, in the analysis of the reproduction of capital, those components of fixed
capital whose life is shorter than a single given production period, which therefore only need to be
replaced during the production period, can be treated analytically in the same way as circulating
capital would be. [524-6]
It should be noted that the opposition between fixed and circulating capital only exists for
industrial capital when it assumes the form of productive capital, and not when it assumes the
forms of money capital and commodity capital. These last two forms are certainly capital in
circulation (contrasted with productive capital), but this is not the same distinction. [246-7]
Hence, Marx sharply criticises Adam Smith for his designation as circulating capital capital as it
passes through the metamorphoses of the cycle of capital, thus confusing the movement of
industrial capital as a whole with the distinct elements (fixed and circulating) that exist within
productive capital, effectively conflating the distinction on the one hand between productive
capital and capital in circulation and on the other that between fixed and circulating capital within
productive capital. In Smiths conception, all capital was fixed, when it was involved in
production; and all capital was circulating when it underwent the changes of form between
commodity and money in circulation. [274-6]

forms of capital

One way of understanding capital as self-valorising value is as value in motion [185], i.e. value
which undergoes a series of transformations of form metamorphoses as it moves through its
process of self-valorisation.
L

As it traverses the cyclical movement M C<mp ... P ... CM, industrial capital value in turn

assumes the functionally distinct forms of money advanced as capital, factors of production,
process of production, commodity product, and money realised by the sale of this product.
Aside from production, which is a process, each of these forms is distinct in virtue of its function
in the self-valorisation of value, i.e. is distinct in terms of use-value; but each is capital in virtue
not of its use-value form but of the place of this form within the overall movement of capital in its
5

journey of self-valorisation and its relations with the other forms in which this journey consists.
Industrial capital, even though it assumes these forms, cannot be reduced to any of them, but has
to be conceived as the imbrication of them and the relations between them over the course of the
movement of self-valorisation.
See also: commodity capital; cycle of capital; money capital; productive capital

industrial capital

Capital value, considered either individually or in general, deployed so that its self-valorisation
occurs through in the capitalist process of production. As it moves through its cycle, industrial
capital assumes the forms of money capital, commodity capital and productive capital. [135-6]
See also: cycle of capital; forms of capital

money capital

Industrial capital in money form; in the form of the money realised by the sale of the
commodity product, and hence the money advanced to start a new cycle of money capital.
Money capital is one of the two forms assumed by industrial capital in its process of circulation
(the other being commodity capital).
See also: productive capital

production period

See: production time

production time

The total time industrial capital persists in the form of productive capital. Production time
consists in working time, i.e. that time in which industrial capital is engaged in self-valorisation,
creation of surplus-value (including that time in which it is engaged in self-valorisation while idle,
for example in the case of buildings necessary for storage), and that time in which it is
unproductive (in the case of interruptions in the process of production, for example), and no
surplus-value is produced. [200-3; 241]
See also: circulation time; purchase time; selling time; turnover time;

productive capital

Industrial capital in the form of process of production. Productive capital consists in the factors
of production (labour-power and means of production; variable capital and constant capital)
in production. Productive capital is therefore a process.
L

Money capital is converted into productive capital through the exchange MC<mp , in the
L

purchase of means of production and labour-power; but while C<mp persists in commodity form,

it assumes the form of industrial capital in commodity form (and is neither commodity capital
nor productive capital). [167-9] It is only when the factors of production are deployed in
production as a process of their transformation into the commodity product can they be said to
constitute productive capital, and it is only when productive capital is constituted are both
commodities and surplus-value produced.
It is important to note that the distinction between circulating capital and fixed capital pertains
exclusively to industrial capital when it subsists in the form of productive capital.
See also: circulation time; commodity capital; cycle of productive capital; money capital

purchase time

The period in which industrial capital persists in money form, after the sale of the commodity
product and before the purchase of the factors of production means of production and labourpower. Purchase time forms one part of circulation time (the other part is composed of selling
time). [207-9; 331-3]

reproduction

Capitalist production, in addition to producing commodities, also produces the conditions for
further production; reproduction in this sense refers to the periodic and repeated operation of
productive capital and to the conditions under which this periodic and repeated function
operates. [144] In this sense, Marx distinguishes between simple reproduction, and expanded
reproduction.

reproduction period

In a general sense, the time an element of productive capital functions before it needs to be
replaced. Specifically, the term is used with special reference in the case of fixed capital; here, its
significance lies in the fact that the lifetime for a particular element of fixed capital may be
significantly longer than the turnover time for the overall capital value advanced, leading thus to a
discontinuity in the investment in fixed capital compared to the production period for the overall
value of productive capital operating. [524-6]

reproduction time

See: reproduction period

selling time

The period in which industrial capital persists in the form of commodity capital, i.e. the time
between the completion of the production period and the sale of the commodity product.
Selling time forms one part of circulation time (the other part is composed of purchase time).
[207-9; 326-9]
See also: capital in circulation

simple reproduction

Reproduction of production in which surplus-value produced is consumed unproductively in

its entirety, such that in the following production period, independently of physical output, which
is a function of the productivity of labour, production proceeds on the same scale in value terms
as in the preceding one.
Even though, insofar as its premises contradict the basic motive of capitalist production, the selfvalorisation of value, i.e. the production and accumulation of surplus-value, simple reproduction is an
analytical fiction, Marx comments that insofar as expanded reproduction includes simple
reproduction the latter forms a part of real accumulation and is thus a worthy object of analysis.
[470-1]

social capital

What Marx in his correspondence and in the Grundrisse called capital in general: capital
considered as an undifferentiated mass, or as one great capital, abstracting away from the relations
between (including competition) individual capitals. The movement of the social capital is thus
conceived of as the product of the totality of the movements of the individual capitals. [427]

time of purchase

See: purchase time

turnover time

For a given capital the sum of its production time and circulation time; the overall time that
elapses from the moment that a capital value is advanced in one of its forms until it returns to that
form. [233]
See also: cycle of capital; forms of capital

working period

The time (measured as, for example, working days) required to complete a finished product. The
significance of the concept lies in the fact that, in the case of products requiring a more continuous
production process, more additional outlay on circulating capital is required, since the period
during which this capital is unable to exist in a form capable of circulation in a finished
commodity is longer. Hence, even if, considering different products with different working
periods, equal capitals, divided equally into fixed and circulating capital, are invested, the reflux of
these capitals is different. In addition, although the same amount of productive capital is may be
applied in these two cases, the amount of capital invested is greater in the case of the longer working
period than in that of the shorter. [306-15]
See also: capital in circulation; circulation time

working time

That part of production time in which industrial capital, in the form of productive capital, is
engaged in self-valorisation, creation of surplus-value (including that time in which it is idle, for
example in the case of buildings necessary for storage). [200-3]