Understanding Capital Volume II, John Fox, 1985

Chapter 3: The Circuit of Money Capital

"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." (p. 101 [p.178])

The circuit of commodity capital is represented by the "formula" C'--M'--C . . . P . . . C'. The components of this circuit are, of course, the same as in the circuits of money and productive capital, although these components are now arranged in a different order. The circuit begins with the commodity product C', which contains surplus-value because it is the result of capitalist production. The commodity product is exchanged for money M', a portion of which purchases new elements of productive capital C. Capital then enters the sphere of production P, giving rise to a commodity product C' containing surplus-value. If some of the surplus-value incorporated in the initial C' is capitalized, then the scale of production expands, resulting in a larger terminal C'.

Why does Marx introduce this third form of the circuit of industrial capital? We have seen how the first form of the circuit, M--M', serves to emphasize the motive underlying capitalist production, the augmentation of value. The second form of the circuit, P--P, provides a natural means for the analysis of the reproduction of an individual capital. The third form of the circuit, C'--C', the subject of the present chapter, emphasizes the relations among different capitals, and those between capital and personal consumption. The circuit of commodity capital, therefore, is employed by Marx in his examination of the reproduction of the total social capital, the aggregate of individual capitals. In a certain sense, then, the third form of the circuit is the most important for a general analysis of commodity circulation, since it is useful in describing the relationships among different economic actors. Marx takes up this approach in detail in the final part of Volume II.

The circuit of commodity capital begins, as mentioned above, with commodities C'. As use-values, these commodities exist either as articles of consumption, or as new means of production. If C' represents new means of production, it must be sold to another capitalist, who will employ it as productive capital. In other words, C'--M' for one capitalist is simultaneously M--C--MP for another. If C' comprises articles of consumption, it will be sold to workers or to capitalists for their personal (i.e., unproductive) use. Regardless of its shape and the manner in which it is consumed (productively or personally), however, C' is capital for its producer.

This is the sense in which the third form of the circuit is useful for an analysis of the economy as a whole. Because the beginning and end of the circuit are particular commodities, that is, particular use-values, it is possible to examine how different capitals fit together with each other through exchange of products (what Marx terms the "intertwining" of capitals) and with individual consumption. What was once automatic now becomes problematic: for a capitalist to acquire means of production of a specific variety (say, cloth for a clothing factory, or a sewing machine for the same factory), some other capitalist must have produced these articles. From the opposite perspective, if a capitalist hopes to sell a commodity product, this product must be in demand, either by other capitalists in their roles as producers (if the commodity is to be used productively), or by consumers.