Capital Volume II

Chapter 3: The Circuit of Commodity-Capital

The general formula for the circuit of commodity-capital is:

C' — M' — C ... P ... C'.

C' appears not alone as the product but also as the premise of the two previous circuits, since that which M — C means for the one capital C' — M' means for the other, inasmuch as at least a part of the means of production is itself the commodity-product of other individual capitals describing their circuits. In our case for instance coal, machinery, etc., represent the commodity-capital of the mine-owner, of the capitalist machine-manufacturer, etc. Furthermore we have shown in Chapter 1.4, that not only the circuit P ... P but also the circuit C' ... C' is assumed even in the first repetition of M ... M', before this second circuit of money-capital is completed.

If reproduction takes place on an extended scale, then the final C' is greater than the initial C' and should therefore be designated here as C''.

The difference between the third form and the first two is as follows: First, in this case the total circulation with its two antithetical phases opens the circuit, while in the Form I the circulation is interrupted by the process of production and in Form II the total circulation with its two complementary phases appears merely as a means of effecting the process of reproduction and therefore constitutes the movement mediating between P ... P. In the case of M ... M', the form of circulation is M — C ... C' — M' = M — C — M. In the case of P ... P it has the inverted form C' — M'. M — C = C — M — C. In the case of C' — C' it likewise has this form.

Secondly, when circuits I and II are repeated, even if the final points M' and P' form the starting-points of the renewed circuit, the form in which M' and P' were produced disappears. M' = M plus m and P' = P plus p begin the new process as M and P. But in the form III the starting-point C must be designated as C', even if the circuit is renewed on the same scale, for the following reason. In Form I, as soon as M' as such opens a new circuit it functions as money-capital M, as an advance in money-form of the capital-value that is to produce surplus-value. The size of the advanced money-capital, augmented by the accumulation achieved during the first circuit, has increased. But whether the size of the advanced money-capital is £422 or £500 does not alter the fact that it appears as simple capital-value. M' no longer exists as self-expanded capital or a capital pregnant with surplus-value, as a capital-relation. Indeed, it is to expand itself only during its process. The same is true of P ... P'; P' must steadily continue to function as P, as capital-value which is to produce surplus-value, and must renew its circuit.

The commodity-capital circuit, on the contrary, does not open with just capital-value but with capital-value augmented in the commodity-form. Hence it includes from the start the circuit of not only capital-value existing in the form of commodities, but also of surplus-value. Consequently if simple reproduction takes place in this form, the C' at the terminal point is equal in size to the C' at the starting-point. If a part of the surplus-value enters into the capital circuit, C'', an enlarged C', appears at the close instead of C'. This is merely a larger C' than that of the proceeding circuit, with a larger accumulated capital-value. Hence it begins its new circuit with a relatively larger, newly created surplus-value. In any event C' always inaugurates the circuit as a commodity-capital which is equal to capital-value plus surplus-value.

C' as C does not appear in the circuit of an individual industrial capital as a form of this capital but as a form of some other industrial capital, so far as the means of production are the product of the latter. The act M — C (i.e., M — MP) of the first capital is C' — M' for this second capital.

In the circulation act M — C<LMP L and MP bear identical relations, as they are commodities in the hands of their sellers — on the one hand the labourers who sell their labour-power, on the other the owner of the means of production, who sells these. For the purchaser, whose money here functions as money-capital, L and MP function merely as commodities until he has bought them, hence so long as they confront his capital, existing in the form of money, as commodities of others. MP and L differ here only in this respect, that MP may be C', hence capital, in the hands of its seller, if MP is the commodity-form of his capital, while L is always nothing else but a commodity for the labourer and becomes capital only in the hands of its purchaser as a constituent part of P.

For this reason C' can never open any circuit as a mere C, as a mere commodity-form of capital-value. As commodity-capital it is always two-fold. From the point of view of use-value it is the product, in the present case yarn, of the functioning of P whose elements L and MP, coming as commodities from the sphere of circulation, have functioned only as factors in the creation of this product. Secondly, from the point of view of value, it is the capital-value P plus the surplus-value s produced by the functioning of P.

It is only in the circuit described by C' itself that C equal to P and equal to the capital-value can and must separate from that part of C' in which the surplus-value is lodged. It does not matter whether the two things can be actually separated, as in the case of yarn, or whether they cannot, as in the case of a machine. They always become separable as soon as C' is transformed into M'.

If the entire commodity-product can be separated into independent homogeneous partial products, as in the case of our 10,000 lbs. of yarn, and if therefore the act C' — M' can be represented by a number of successive sales, then the capital-value in the form of commodities can function as C, can be separated from C', before the surplus-value, hence before C' in its entirety, has been realised.

Of the 10,000 lbs. of yarn worth £500, the value of 8,440 lbs., equal to £422, is equal to the capital-value less the surplus-value. If the capitalist sells first 8,440 lbs. of yarn at £422, then these 8,440 lbs. of yarn represent C, the capital-value in commodity-form. The surplus-product of 1,560 lbs. of yarn, contained besides in C' and equal to a surplus value of £78, does not circulate until later. The capitalist could get through C — M — C<LMP before the circulation of the surplus-product c — m — c is accomplished.

Or if he sells 7,440 lbs. of yarn worth £372, and then 1,000 lbs. of yarn worth £50, he might replace the means of production (the constant capital c) with the first part of C, and the variable capital v, the labour-power, with the second part of C, and then proceed as before.

But if such successive sales take place and the conditions of the circuit permit it, the capitalist, instead of separating C' into c + v + s, may make such a preparation also in the case of aliquot parts of C'.

For example the 7,440 lbs. of yarn equal at £372, which as parts of C' (10,000 lbs. of yarn worth £500) represent the constant part of capital, may themselves be separated into 5,535.360 lbs. of yarn worth £276.768, which replace only the constant part, the value of the means of production used up in producing 7,440 lbs. of yarn; 744 lbs. of yarn worth £37.200, which replace only the variable capital; and 1,160.640 lbs. of yarn worth £58.032, which, being surplus-product, are the depositories of surplus-value. Consequently on selling the 7,440 lbs. of yarn, he can replace the capital value contained in them out of the sale of 6,279.360 lbs. of yarn at the price of £313.968, and he can spend as his revenue the value of the surplus-product amounting to 1,160.640 lbs., or £58.032.

In the same way, he may divide up another 1,000 lbs. of yarn equal to £50, equal to the variable capital-value, and sell them accordingly; 744 lbs. of yarn worth £37.200, constant capital-value contained in 1,000 lbs. of yarn; finally, 100 lbs. of yarn worth £5.000, variable capital-value ditto; hence 844 lbs. of yarn worth £42.200, replacement of the capital-value contained in the 1,000 lbs. of yarn; finally 156 lbs. of yarn worth £7.800, representing the surplus-product contained in it, which may be consumed as such.

Finally, he may divide the remaining 1,560 lbs. of yarn worth £78, in such a way, provided he succeeds in selling them, that the sale of 1,160.640 lbs. of yarn, worth £58.032, replaces the value of the means of production contained in those 1,560 lbs. of yarn, and that 156 lbs. of yarn worth £7.800, replaces the variable capital-value; altogether 1,316.640 lbs. of yarn equal to £65.832, replacement of the total capital-value; finally the surplus-product of 243.360 lbs., equal to £12.168, remains to be spent as revenue.

All the elements — c, v and s — contained in the yarn are divisible into the same component parts, and so is every individual pound of yarn, worth 1 s., or 12 d.

c = 0.744 lbs. of yarn = 8.928 d.
v = 0.100 lbs. of yarn = 1.200 d.
s = 0.156 lbs. of yarn = 1.872 d.
c + v + s = 1 lb. of yarn = 12 d.

If we add the results of the above three partial sales we obtain the same result on selling the entire 10,000 lbs. at one sweep.

We have of constant capital:

at the first sale: 5,535.360 lbs. of yarn = £276.768
at the second sale: 744.000 lbs. of yarn = £ 37.200
at the third sale: 1,160.640 lbs. of yarn = £ 58.032
Total . . . . . . . 7,440 lbs. of yarn = £372

Of variable capital:

at the first sale: 744.000 lbs. of yarn = £37.200
at the second sale: 100.000 lbs. of yarn = £ 5.000
at the third sale: 156.000 lbs. of yarn = £ 7.800
Total . . . . . . . 1,000 lbs. of yarn = £50

Of surplus-value:

at the first sale: 1,160.640 lbs. of yarn = £58.032
at the second sale: 156.000 lbs. of yarn = £ 7.800
at the third sale: 243.360 lbs. of yarn = £ 12.168
Total . . . . . . . 1,560 lbs. of yarn = £78

Grand Total:

Constant capital . . . . . . . . . . 7,440 lbs. of yarn = £372
Variable capital . . . . . . . . . . .1,000 lbs. of yarn = £ 57
Surplus-value . . . . . . . . . .... 1,560 lbs. of yarn = £ 78
Total . . . . . . . . 10,000 lbs. of yarn = £500

C' — M' in itself stands merely for the sale of 10,000 lbs. of yarn. These 10,000 lbs. of yarn, like all other yarn, are a commodity. The purchaser is interested in the price of 1 s. per lb., or of £500 for 10,000 lbs. If during the negotiations he goes into the value-composition of the yarn, he does so simply with the insidious intention of proving that it could be sold at less than 1 s. per pound and would still be a good bargain for the seller. But the quantity purchased by him depends on his requirements. If he is for example the owner of a weaving-mill, it depends on the composition of his own capital functioning in this enterprise, not on the composition of the spinner’s of whom he buys. The proportions in which C' has to replace on the one hand the capital used up in its production (or the various component parts of this capital), and on the other to serve as surplus-product either for the spending of the surplus-value or for the accumulation of capital, exist only in the circuit of capital which has as its commodity-form the 10,000 lbs. of yarn. These proportions have nothing to do with the sale as such. In the present case it is assumed besides that C' is sold at its value, so that it is only a question of its transformation from the commodity-form into the money-form. It is of course of decisive importance with regard to C', the functional form in the circuit of this individual capital out of which the productive capital is to be replaced, to what extent, if at all, there is a discrepancy between price and value in the sale. But this does not concern us here in the examination of mere distinctions of form.

In Form I, or M ... M', the process of production intervenes midway between the two complementary and mutually opposite phases of the circulation of capital. It is past before the concluding phase C' — M' begins. Money is advanced as capital, is first transformed into the elements of production and from these into the commodity-product, and this commodity-product in its turn is changed back into money. It is a full and complete business cycle that results in money, something everyone can use for everything. A new start is therefore only a possibility. M ... P ... M' may be either be the last circuit that concludes the functioning of some individual capital being withdrawn from business, or the first circuit of some new capital entering upon its function. The general movement is here M ... M', from money to more money.

In Form II, P ... C' — M' — C ... P (P'), the entire circulation process follows after the first P and precedes the second P; but it takes place in the opposite order from that of Form I. The first P is the productive capital, and its function is the productive process, the prerequisite of the succeeding circulation process. The concluding P on the other hand is not the productive process; it is only the renewed existence of the industrial capital in its form of productive capital. And it is such as a result of the transformation, during the last phase of circulation, of the capital-value into L plus MP, into the subjective and objective factors which by combining constitute the form of existence of the productive capital. The capital, whether P or P', is at the end once more present in a form in which it must function anew as productive capital, must again perform the productive process. The general form of the movement P ... P is the form of reproduction and, unlike M ... M', does not indicate the self-expansion of value as the object of the process. This form makes it therefore so much easier for classical Political Economy to ignore the definite capitalistic form of the process of production and to depict production as such as the purpose of this process; namely that as much as possible must be produced and as cheaply as possible, and that the product must be exchanged for the greatest variety of other products, partly for the renewal of production (M — C), partly for consumption (m — c). It is then possible to overlook the peculiarities of money and money-capital, for M and m appear here merely as transient media of circulation. The entire process seems simple and natural, i.e., possesses the naturalness of a shallow rationalism. In the same way profit is occasionally forgotten in commodity-capital and the latter figures merely as a commodity when the production circuit as a whole is under discussion. But as soon as the constituents of value are debated, commodity-capital figures as commodity-capital. Accumulation, of course, is seen in the same light as production.

In Form III, C' — M' — C .... P ... C', the two phases of the circulation process open the circuit, and do so in the same order which obtains in Form II, P ... P; next follows P, with its function, the productive process, the same as in Form I; the circuit closes with the result of the process of production, C'. Just as in Form II the circuit closes with P, the merely renewed existence of productive capital, so here it closes with C', the renewed existence of commodity-capital. Just as in Form II capital, in its concluding form P, must start the process over again as a process of production, so here upon the reappearance of industrial capital in the form of commodity-capital the circuit must re-open with the circulation phase C' — M'. Both forms of the circuit are incomplete because they do not close with M', the capital-value retransformed into money and self-expanded. Both must therefore be continued and consequently include the reproduction. The total circuit in Form III is C' ... C'.

The third form is distinguished from the first two by the fact that it is only in this circuit that the self-expanded capital-value — and not the original one, the capital-value that must still produce surplus-value — appears as the starting point of its self-expansion. C as a capital-relation is here the starting point and as such relation has a determining influence on the entire circuit because it includes the circuit of the capital-value as well as that of the surplus-value in its first phase, and because the surplus-value must at least in the average, if not in every single circuit, be expended partly as revenue, go through the circulation c — m — c, and must perform the function of an element of capital accumulation.

In the form C' ... C' the consumption of the entire commodity-product is assumed as the condition of the normal course of the circuit of capital itself. The individual consumption of the labourer and the individual consumption of the unaccumulated part of the surplus-product comprise the entire individual consumption. Hence consumption in its totality — individual as well as productive — enters into circuit C' as a condition of it. Productive consumption (which essentially includes the individual consumption of the labourer, since labour-power is a continuous product, with certain limits, of the labourer’s individual consumption) is carried on by every individual capital. Individual consumption, except in so far as it is required for the existence of the individual capitalist, is here assumed to be only a social act, but by no means an act of the individual capitalist.

In Forms I and II the aggregate movement appears as a movement of advanced capital-value. In Form III the self-expanded capital, in the shape of the total commodity-product, forms the starting-point and has the form of moving capital, commodity-capital. Not until its transformation into money has been accomplished does the movement branch out into movements of capital and of revenue. The distribution of the total social product, as well as the special distribution of the product for each individual commodity-capital, into an individual consumption-fund on the one hand and into reproduction fund on the other is included in this form in the circuit of capital.

In M... M' possible enlargement of the circuit is included, depending on the volume of m entering into the renewed circuit.

In P ... P the new circuit may be started by P with the same or perhaps even a smaller value and yet may represent a reproduction on an extended scale, for instance when certain elements of commodities become cheaper on account of increased productivity of labour. Vice versa, a productive capital which has increased in value may, in a contrary case, represent reproduction on a materially contracted scale as for instance when elements of production have become dearer. The same is true of C' ... C'.

In C' ... C' capital in the form of commodities is the premise of production. It re-appears as a premise within this circuit in the second C. If this C has not yet been produced or reproduced the circuit is obstructed. This C must be reproduced, for the greater part of as C' of some other industrial capital. In this circuit C' exists as the point of departure, of transition, and of the conclusion of the movement; hence it is always there. It is a permanent condition of the process of reproduction.

C' ... C' is distinguished from Forms I and II by still another feature. All three circuits have this in common, that capital begins its circular course in the same form in which it concludes it, and thus finds itself in the initial form in which it opens the circuit anew. The initial form M, P or C' is always the one in which capital-value (in III augmented by its surplus-value) is advanced, in other words its original form in regard to the circuit. The concluding form M', P or C' is always a changed form of a functional form which preceded in the circuit and is not the original form.

Thus M' in I is a changed form of C', the final P in II is a changed form of M (and this transformation is accomplished in I and II by a simple act of commodity circulation, by a formal change of position of commodity and money); in III, C' is a changed form of the productive capital P. But here, in III, the transformation, in the first place, does not merely concern the functional form of capital but also the magnitude of its value; in the second place, however, the transformation is not the result of a merely formal change in position pertaining to the circulation process, but of a real transformation experienced by the use-form and value of the commodity constituents of the productive capital in the process of production.

The form of the initial extreme M, P or C' is the premise of the corresponding circuit I, II or III. The form returning in the final extreme is premised and consequently brought about by the series of metamorphoses of the circuit itself. C', as the terminal point in the circuit of an individual industrial capital, presupposes only the non-circulation form P of the same industrial capital of which it is the product. M', as the terminal point of I, as the converted form of C' (C' — M'), presupposes that M is in the hands of the buyer, exists outside of the circuit M ... M', and is drawn into it and made its own terminal form by the sale of C'. Thus the terminal P in II presupposes that L and MP (C) exist outside and are incorporated in it as its terminal form by means of M — C. But apart from the last extreme, the circuit of individual money-capital does not presuppose the existence of money-capital in general, nor does the circuit of individual productive capital presuppose the existence of productive capital. In I, M may be the first money-capital; in II, P may be the first productive capital appearing on the historical scene. But in III,


C is presupposed twice outside the circuit. The first time in the circuit C' — M' — C<LMP . This C, so far as it consists of MP, is commodity in the hands of the seller; it is itself commodity-capital, so far as it is the product of a capitalist process of production; and even if it is not, it appears as commodity-capital in the hands of the merchant. The second time, in the second c of c — m — c, which must likewise be at hand as a commodity so that it can be bought. At any rate, whether they are commodity-capital or not, L and MP are just as much commodities as is C' and bear to each other the relation of commodities. The same is true of the second c in c — m — c. Inasmuch therefore as C' is equal to C (L plus MP), it has commodities as elements for its own production and must be replaced by the same commodities in the circulation. In the same way the second c in c — m — c must be replaced by similar commodities in the circulation.

On the basis that the capitalist mode of production is the prevailing mode, all commodities in the hands of the seller must, besides, be commodity-capital. And they continue to be so in the hands of the merchant or become such if they were not such before. Or they have to be commodities — such as imported articles — which replace original commodity-capital and hence bestow upon it merely another form of existence.

As forms of existence of P the commodity-elements L and MP, of which the productive capital P consists, do not possess the same form as in the various commodity markets where they are fetched. They are now united, and so combined they can perform the functions of productive capital.

That C appears as the premise of C only in this Form III, within the circuit itself, is due to capital in commodity-form being its starting point. The circuit is opened by the transformation of C' (in so far as it functions as capital-value, regardless of whether it has been increased by the addition of surplus-value or not) into those commodities which are its elements of production. But this transformation comprises the entire process of circulation, C — M — C (equal to L plus MP), and is its result. C here stands at both extremes, but the second extreme, which receives its form C by means of M — C from outside, the commodity-market, is not the last extreme of the circuit but only of its first two stages comprising the process of circulation. Its result is P, which then performs its function, the process of production. It is only as the result of this process, hence not as that of the circulation process, that C' appears as the terminal point of the circuit and in the same form as the starting-point, C'. On the other hand in M ... M' and P ... P, the final extremes M' and P are the direct results of the process of circulation. Here therefore it is presupposed only at the end that one time M' and the other time P exist in the hands of others. In so far as the circuit is made between the extremes, neither M in the one case nor P in the other — the existence of M as the money of another person and of P as the production process of another capital — appears as the premise of these circuits. C' ... C' on the contrary presupposes the existence of C (equal to L plus MP) as commodities of others in the hands of others — commodities drawn into the circuit by the introductory process of circulation and transformed into productive capital, as a result of whose functioning C' once more becomes the concluding form of the circuit.

But just because the circuit C' ... C' presupposes within its sphere the existence of other industrial capital in the form of C (equal to L + MP) — and MP comprises diverse other capitals, in our case for instance machinery, coal, oil, etc. — it clamours to be considered not only as the general form of the circuit, i.e., not only as a social form in which every single industrial capital (except when first invested) can be studied, hence not merely as a form of movement common to all individual industrial capitals, but simultaneously also as a form of movement of the sum of the individual capitals, consequently of the aggregate capital of the capitalist class, a movement in which that of each individual industrial capital appears as only a partial movement which intermingles with the other movements and is necessitated by them. For instance if we regard the aggregate of commodities annually produced in a certain country and analyse the movement by which a part of it replaces the productive capital in all individual businesses, while another part enters into the individual consumption of the various classes, then we consider C' ... C' as a form of movement of social capital as well as of the surplus-value, or surplus-product, generated by it. The fact that the social capital is equal to the sum of the individual capitals (including the joint-stock capital or the state capital, so far as governments employ productive wage-labour in mines, railways, etc., perform the function of industrial capitalists), and that the aggregate movement of social capital is equal to the algebraic sum of the movements of the individual capitals, does not in any way preclude the possibility that this movement as the movement of a single individual capital, may present other phenomena than the same movement does when considered from the point of view of a part of the aggregate movement of social capital, hence in its interconnections with the movements of its other parts, and that the movement simultaneously solves problems the solution of which must be assumed when studying the circuit of a separate, individual capital instead of being the result of such study.

C' ... C' is the sole circuit in which the originally advanced capital-value consists only a part of the extreme that opens the movement and in which the movement from its inception thus reveals itself as the total movement of the industrial capital — as the movement of that part of the product which replaces the productive capital as well as of that part which forms surplus-product and which on the average is spent in part as revenue and employed in part as an element of accumulation. Included in this circuit is the expenditure of surplus-value as revenue and to that extent individual consumption is likewise included. The latter is furthermore included for the reason that the starting-point C, commodity, exists in the form of some utility; but every article produced by capitalist methods is commodity-capital, no matter whether its use-form destines it for productive or for individual consumption, or for both. M ... M' indicates only the value side, the self-expansion of the advanced capital-value, as the purpose of the entire process; P ... P (P') indicates the process of production of capital as a process of reproduction with a productive capital of the same or of increasing magnitude (accumulation). Revealing itself already in its initial extreme as a form of capitalist commodity production, C' ... C' comprises productive and individual consumption from the start; productive consumption and the self-expansion of value therein included appear only as a branch of its movement. Finally, since C' may exist in a use-form which cannot enter any more into any process of production, it is indicated at the outset that C'’s various constituents of value expressed by parts of the product must occupy a different position, according to whether C' ... C' is regarded as the form of the movement of the total social capital or as the independent movement of an individual industrial capital. All these peculiarities of the circuit lead us beyond its own confines as an isolated circuit of some merely individual capital.

In the formula C' ... C', the movement of the commodity-capital, that is to say, of the total product created capitalistically, appears not only as the premise of the independent circuit of the individual capital but also as required by it. If the formula and its peculiarities are grasped, it is no longer sufficient to confine oneself to indicating that the metamorphoses C' — M' and M — C are on the one hand functionally defined sections in the metamorphoses of capital, on the other are links in the general circulation of commodities. It becomes necessary to elucidate the intertwining of the metamorphoses of one individual capital with those of other individual capitals and with that part of the total product which is intended for individual consumption. On analysing the circuit of an individual industrial capital, we therefore base our studies mainly on the first two forms.

The circuit C' ... C' appears as a form of a single individual capital, for instance in agriculture, where calculations are made from crop to crop. In Formula II, the sowing is the starting-point, in Formula III the harvest, or, to speak with the physiocrats, Formula II starts out with the avance, and Formula III with the reprises. The movement of capital-value appears in III from the outset only as a part of the movement of the general mass of products, while in I and II the movement of C' constitutes only a phase of the movement of some isolated capital.

In Formula III commodities in the market are the continuous premise of the process of production and reproduction. Hence, if attention is fixed exclusively on this formula all elements of the process of production seem to originate in commodity circulation and to consist only of commodities. This one-sided conception overlooks those elements of the process of production which are independent of the commodity-elements.

Since in C' ... C' the starting-point is the total product (total value), it turns out that (if foreign trade is disregarded) reproduction on an extended scale, productivity remaining otherwise constant, can take place only when the part of the surplus-product to be capitalised already contains the material elements of the additional productive capital; that therefore, so far as the production of one year serves as the premise of the following year’s production or so far as this can take place simultaneously with the process of simple reproduction within one year, surplus-product is at once produced in a form which enables it to perform the functions of additional capital. Increased productivity can increase only the substance of capital but not its value; but therewith it creates additional material for the self-expansion of that value.

C' ... C' is the groundwork for Quesnay's Tableau économique, and it shows great and true discretion on his part that in contrast to M ... M' (the isolatedly and rigidly retained form of the mercantile system) he selected this form and not P ... P.