Frederick Engels: Synopsis of Capital

Frederick Engels
Synopsis of Capital

Book 1: The Process of Capitalist Production

1. Commodities as such

2. The process of commodity exchange

3. Money, or the circulation of commodities

A. The Measure of Values
B. The Medium of Circulation

a. The Metamorphosis of Commodities
b. The Currency of Money
c. Coins. Symbols of Value

C. Money

a. Hoarding
b. Means of Payment
c. Universal Money


The wealth of societies in which capitalist production prevails consists of commodities. A commodity is a thing that has use-value; the latter exists in all forms of society, but in capitalist society, use-value is, in addition, the material depository of exchange-value.

Exchange-value presupposes a tertium comparationis by which it is measured; labor, the common social substance of exchange-values, to be precise, the socially necessary labor-time embodied in them.

Just as a commodity is something twofold: use-value and exchange-value, so the labour contained in it is two-fold determined:

The former produces use-value, the latter exchange-value; only the latter is quantitatively comparable (the differences between skilled and unskilled, composite and simple labour confirm this).

Hence, the substance of exchange-value is abstract labour and its magnitude is the measure of time of abstract labour. Now, to consider the form of exchange-value.

(1) x commodity a = y commodity b;

The value of a commodity in the use-value of another is its relative value. The expression of the equivalence of two commodities is the simple form of relative value. In the above equation, y commodity b is the equivalent. In it, x commodity a acquires it value-form in contrast to its (the commodity's) natural form, while y commodity b acquires, at the same time, the property of direct exchangeability, even in its natural form. Exchange-value is impressed upon the use-value of a commodity by definite historical relations. Hence, the commodity cannot express its exchange-value in its own use-value, but only in the use-value of another commodity. Only in the equation of two concrete products of labour does the property of the concrete labour contained in both come to light as abstract human labour i.e., a commodity cannot be related to the concrete labour contained in itself, as the mere form of realization of abstract labour, but it can be so related to the concrete labour contained in other kinds of commodities.

The equation x commodity a = y commodity b necessarily implies that x commodity a can also be expressed in other commodities, thus:

(2) x commodity a = y commodity b = x commodity c = u commodity d = u commodity e = etc., etc.

This is the expanded relative form of value. Here, x commodity a no longer refers to one, but to all commodities as the mere phenomenal forms of the labour represented in it. But, through simple reversal, it leads to

(3) the converse second form of relative value:

y commodity b = x commodity a

v commodity c = x commodity a

u commodity d = x commodity a

t commodity e = x commodity a

etc., etc.

Here, the commodities are given the general relative form of value, in which all of them are abstracted from their use-values and equated to x commodity a as the materialization of abstract labour; x commodity a is the generic form of the equivalent for all other commodities; it is their universal equivalent; the labour materialized in it represents in itself the realization of abstract labour, labour in general. Now, however,

(4) every commodity of the series can take over the role of universal equivalent, but only one of them can do so at a time, since if all commodities were universal equivalents, each of them would in turn exclude the others from that role.

Form 3 is not obtained by x commodity a, but by the other commodities, objectively. Hence, a definite commodity must take over for the role — for a time, it can change — and only in this way does a commodity become a commodity completely. This special commodity, with whose natural form the general equivalent form becomes identified, is money.

The difficulty with a commodity is that, like all categories of the capitalist mode of production, it represents a personal relationship under a material wrapping. The producers relate their different kinds of labour to one another as general human labour by relating their products to one another as commodities — they cannot accomplish it without this mediation of things. The relation of persons thus appears as the relation of things.

For a society in which commodity production prevails, Christianity, particularly Protestantism, is the fitting religion.


A commodity proves that it is a commodity in exchange. The owners of two commodities must be willing to exchange their respective commodities and, therefore, to recognise each other as private owners. This legal relation, the form of which is the contract, is only a relation of wills, reflecting the economic relation. Its content is given by the economic relation itself. (P.45 [84])

A commodity is a use-value for its non-owner, a non-use-value for its owner. Hence, the need for exchange. But, every commodity owner wants to get in exchange specific use-values that he needs, to that extent, the exchange is an individual process. On the other hand, he wants to realise his commodity as value, that is, in any commodity, whether or not his commodity is use-value to the owner of the other commodity. To that extent, the exchange is for him a generally social process. But, one and the same process cannot be simultaneously both individual and generally social for all commodity owners. Every commodity owner considers his own commodity as the universal equivalent, while all other commodities are so many particular equivalents of his own. Since all commodity owners do the same, no commodity is the universal equivalent, and, hence, no commodities posses a general relative form of value, in which they are equated as values and compared as magnitudes of value. Therefore, they do not confront each other at all as commodities, but only as products. (P.47 [86])

Commodities can be related as values and, hence, as commodities only by comparison with some other commodity as the universal equivalent. But only the social act can make a particular commodity the universal equivalent — money.

The immanent contradiction in a commodity as the direct unity of use-value and exchange-value, as the product of useful private labour... and as the direct social materialization of abstract human labour — this contradiction finds no rest until it results in duplicating the commodity into commodity and money. (P.48 [87])

Since all other commodities are merely particular equivalents of money, and money is their universal equivalent, they are related to money as particular commodities to the universal commodity. (P.51 [89]) The process of exchange gives the commodity which it converts into money, not its value, but its value-form. (P.51 [89]) Fetishism (belief in a supernatural power of objects): a commodity does not seem to become money only because the other commodities all express their values in it, but, conversely, they seem to express their values in it because it is money.


A. The Measure of Values
(Assuming Gold = Money)

Money, as the measure of value, is the necessary phenomenal form of the measure of value immanent in commodities — i.e., labour-time. The simple, relative expression of the value of commodities in money, x commodity a = y money, is their price. (P.55 [95])

The price of a commodity, its money-form, is expressed in imaginary money; hence, money is the measure of values only ideally. (P.57 [95])

Once the change from value to price is effected, it becomes technically necessary to develop the measure of values further, into the standard of price — i.e., a quantity of gold is fixed, by which different quantities of gold are measured. This is quite different from the measure of values, which itself depends upon the value of gold, while the latter is immaterial for the standard of prices. (P.59 [97-98])

Once prices are expressed in accounting names of gold, money serves as money of account.

If price, as the exponent of the magnitude of a commodity's value, is the exponent of its exchange ratio with money, it does not follow conversely that the exponent of its exchange ratio with money is necessarily the exponent of the magnitude of its value. Assuming that circumstances permit or compel the sale of a commodity above or below its value, these selling prices do not correspond to its value, but they are none the less prices of the commodity, for they are

(1) its value-form money, and (2) exponents of its exchange ratio with money.

The possibility, therefore, of quantities incongruity between price and magnitude of value is given in the price-form itself. That is no defect of this form, but on the contrary makes it the adequate form of a mode of production in which the rule can impose itself only as a blindly-acting law of averages of irregularity. The price-form, however, can also harbour a qualitative contradiction, so that price ceases altogether to be an expression of value.... Conscience, honour, etc., can... acquire the form of commodities through their price. (P.61 [102])

Measurement of values in money, the price-form, implies the necessity of alienation, the ideal pricing implies the actual. Hence, circulation.

B. The Medium of Circulation

a. The Metamorphosis of Commodities

Simple form: C - M - C.

Its material content C = C. Exchange-value is alienated and use-value appropriated.

A. First phase: C - M = sale, for which two persons are required, hence the possibility of failure — i.e., of sale below value, or even below the cost of production, if the social value of the commodity changes.

"The division of labour converts the product of labour into a commodity, and thereby makes necessary its further conversion into money."

At the same time, it also make the accomplishment of this transubstantiation quite accidental. (P.67 [108]) But, considering the phenomenon in its pure form, C - M presupposes that the possessor of the money (unless he is a producer of gold) previously got his money through exchange for other commodities; hence, it is not only conversely M - C for the buyer, but it presupposes that he made a previous sale, etc., so that we have an endless series of purchases and sales.

B. The same takes place i the second phase, M - C — i.e., purchase, which is, at the same time, a sale for the other party.

C. The total process, hence, is a circuit of purchases and sales. The circulation of commodities. This is quite different from the direct exchange of products; first, the individual and local bounds of the direct exchange of products are broken through, and the metabolism of human labour is made possible; on the other hand, here it already appears that the whole process depends upon social relations spontaneous in their growth and independent of the actors. (P.72 [112]) Simple exchange was extinguished in the one act of exchange, where each exchanges non-use-value for use-value; circulation proceeds indefinitely. (P.73 [112])

Here the false economic dogma: the circulation of commodities involves a necessary equilibrium of purchases and sales, because every purchase is also a sale, and vice versa — which is to say, that every seller also brings his buyer to market with him.

(1) Purchase and sale are, on the one hand, an identical act of two polarly opposite persons (poles are the two ends of the axis of a sphere); on the other hand, they are two polarly opposite acts of one and the same person. Hence, the identity of purchases and sale implies that the commodity is useless unless it is sold, and likewise that this case can occur.

(2) C - M, as a partial process, is similarly an independent process and implies that the acquirer of money can choose the time when he again converts this money into a commodity. He can wait.

The inner unity of the independent processes C - M and M - C moves in external antitheses precisely because of the independence of these processes; and when these dependent processes reach a certain limit of independence, their unity asserts itself in a crisis. Hence, the possibility of the latter is already given here.

Being the intermediary in commodity circulation, money is the medium of circulation.

b. The Currency of Money

Money is the medium by which each individual commodity goes into, and out of, circulation; it always remains therein itself. Hence, although the circulation of money is merely the expression of commodity circulation, the circulation of commodities appears to be the result of money circulation. Since money always remains within the sphere of circulation, the question is: how much money is present in it?

The quantity of money in circulation is determined by the sum prices of commodities (money-value remaining the same), and the latter by the quantity of commodities in circulation. Assuming that this quantity of commodities is given, the circulating quantity of money fluctuates with the fluctuations in the price of commodities. Now, since one and the same coin always mediates a number of transactions in succession in a given time, for a given interval of time, we have:

Sum of the prices of commodities Quantity of money functioning
————————————————————— = as the circulated medium
Number of moves made by a piece of money (P. 80 [120])

Hence, paper money can displace gold money if it is thrown into a saturated circulation.

Since the currency of money only reflects the process of commodity circulation, its rapidity reflects that of the change in the form of the commodities, its stagnation, the separation of purchase from sale, the stagnation of social metabolism. The origin of this stagnation cannot, of course, be seen from circulation itself, which puts in evidence only the phenomenon. The philistines attribute it to a deficient quantity of circulating medium. (P.81 [121])


(1) If the prices of commodities remains constant, the quantity of money circulating rises when the quantity of circulating commodities increased or the circulation of money is retarded; and drops vice versa.

(2) With a general rise in the prices of commodities, the quantity of money circulating remains constant if the quantity of commodities decreased or the velocity of circulation increases in the same proportion.

(3) With a general drop in the prices of commodities, the converse of (2).

In general, there is a fairly constant average from which appreciable deviations occur almost exclusively as a result of crises.

c. Coin. Symbols of Value

The standard of prices is fixed by the state, as are also the denomination of the particular piece of gold — the coin, and its coining. In the world market, the respective national uniforms are doffed again (Seigniorage is disregarded here), so that coin and bullion differ only in form. But a coin wears away during circulation; gold, as a circulating medium, differs from gold as a standard of prices. The coin becomes more and more a symbol of its official content.

Herewith, the latent possibility is given of replacing metallic money by tokens or symbols. Hence:

(1) small coinage of copper and silver tokens, the permanent establishment of which in place of real gold money is prevented by limiting the quantity in which they are legal tender.

Their metallic content is determined purely arbitrarily by law, and thus their function as coinage becomes independent of their value. Hence, the further step to quite worthless symbols is possible:

(2) paper money — i.e., paper money issued by the state, having compulsory circulation. (Credit money not to be discussed here as yet.)

So far as this paper money actually circulates in place of gold money, it is subject to the laws of money circulation. Only the proportion in which paper replaces gold can be the object of a special law, which is: that the issue of paper money is to be limited to the quantity in which the gold represented by it would actually have to circulate. The degree of saturation of circulation fluctuates, but everywhere experience determines a minimum below which it never falls. This minimum can be issued. If more than the minimum is issued, a portion becomes superfluous as soon as the degree of saturation drops to the minimum. In that case, the total amount of paper money within the commodity world still represents only the quantity of gold fixed by that world's immanent laws, and hence alone representable. Thus, if the amount of paper money represents twice the absorbable amount of gold, each piece of paper money is depreciated to half its nominal value. Just as if gold were changed in its function as the measure of prices, in its value. (P.89 [128])

C. Money

a. Hoarding

With the earliest development of commodity circulation, there develops the need, and the passionate desire, to hold fast the product of C - M, money. From a mere agency of change of matter, this change of form becomes an end in itself. Money petrifies into a hoard; the commodity seller becomes a money hoarder. (P.91 [130])

This form was dominant precisely in the beginnings of commodity circulation. Asia. With further development of commodity circulation, every producer of commodities must secure for himself the nexus rerum, the social pledge-money. Thus, hoards accumulate everywhere. The development of commodity circulation increases the power of money, the absolutely social form of wealth, always ready for use. (P.92 [131]) The urge for hoarding is, by nature, boundless. Qualitatively, or with respect to its form, money is unrestricted — i.e., the universal representative of material wealth — because it is directly convertible into any commodity. But, quantitatively, every actual sum of money is limited — and, therefore, of only limited efficacy as a means of purchasing. This contradiction always drives the hoarder back, again and again, to the Sisyphus-like (vain) labour of accumulation.

Besides, the accumulation of gold and silver in plate creates both a new market for these metals and a latent source of money.

Hoarding serves as a conduit for supplying or withdrawing circulating money with the continuous fluctuations in the degree of saturation of the circulation. (P.95 [134])

b. Means of Payment

With the development of commodity circulation, new conditions appear: the alienation of a commodity can be separated in time from the realization of its price. Commodities require different periods of time for their production; they are produced in different seasons; some must be sent to distant markets, etc. Hence, A can be a seller before B, the buyer, is able to pay. Practice regulates the conditions of payment in this way: A becomes a creditor, B a debtor: money becomes a means of payment. Thus, the relation of creditor and debtor already becomes more antagonistic. (This can also occur independently of commodity circulation — e.g., in antiquity and the Middle Ages.) (P.97 [135])

In this relation, money functions:

(1) as the measure of value in the determination of the price of the commodity sold;

(2) as an ideal means of purchase.

In the hoard, money was withdrawn from circulation; here, being a means of payment, money enters circulation, but only after the commodity has left it. The indebted buyer sells in order to be able to pay, or he will be put up for auction. Therefore, money now becomes the sale's end in itself through a social necessity arising out of the relations of the very circulation process. (Pp.97-98 [136])

The lack of simultaneity of purchases and sales, which gives rise to the function of money as a means of payment, at the same time effects an economy of the circulation media, payments being concentrated at a definite place. The virements (remittance by draft from own account to another) in Lyons in the Middle Ages — a sort of clearing-house, where only the net balance of the mutual claims is paid. (P.98 [137])

Insofar as the payments balance one another, money functions only ideally, as money of account or measure of values. Insofar as actual payment has to be made, it does not appear as a circulating medium, as only the vanishing and mediating form of metabolism, but as the individual embodiment of social labour, as the independent existence of exchange-value, as the absolute commodity. This direct contradiction breaks out in that phase of production and commercial crises that is called a monetary crisis. It occurs only where the progressing chain of payments, and an artificial system of settling them, are fully developed. With more general disturbances of this mechanism, no matter what their origin, money changes suddenly and immediately from its merely ideal shape of money of account into hard cash; profane commodities can no longer replace it. (P.99 [138])

Credit money originates in the function of money as a means of payment; certificates of debt themselves circulate, in turn, to transfer these debts to others. With the system of credit, the function of money as a means of payment again expands; in that capacity, money acquires its own forms of existence, in which it occupies the sphere of large-scale commercial transactions, while coin is largely relegated to the sphere of retail trade. (P.101 [139-40])

At a certain stage and volume of commodity production, the function of money-as-a-means-of-payment spreads beyond the sphere of the circulation of commodities; it becomes the universal commodity of contracts. Rents, taxes, and the like, are transformed from payments in kind into money payments. Cf. France under Louis XIV. (Boisguillebert and Vauban); on the other hand, Asia, Turkey, Japan, etc. (P.102 [140-41])

The development of money into a means of payment necessitates the accumulation of money against the date when payment is due. Hoarding, which, as a distinct form of acquiring riches, vanished as society further developed, again appears as a reserve fund of the means of payment. (P.103 [142])

c. Universal Money

In world trade, the local forms of coin — small coinage, and paper money — are discarded and only the bullion form of money is valid as universal money. Only in the world market does money function to the full extent as the commodity whose bodily form is at the same time the immediate social incarnation of human labour in the abstract. Its mode of existence becomes adequate to its concept. (Pp.103-04 [142]; details p.105 [145])