Chapter I. The Circuit of Money Capital
The circular movement '' of capital takes place in three stages, which, according to the presentation in Volume I, form the following series:
First stage: The capitalist appears as a buyer on the commodity and the labour market; his money is transformed into commodities, or it goes through the circulation act M — C.
Second stage: Productive consumption of the purchased commodities by the capitalist. He acts as a capitalist producer of commodities; his capital passes through the process of production. The result is a commodity of more value than that of the elements entering into its production.
Third stage: The capitalist returns to the market as a seller; his commodities are turned into money, or they pass through the circulation act C — M.
Hence the formula for the circuit of money capital is: M — C ... P ... C — M', the dots indicating that the process of circulation is interrupted, and C and M' designating C and M increased by surplus value.
The first and third stages were discussed in Book I only in so far as this was necessary for an understanding of the second stage, the process of production of capital. For this reason, the various forms which capital takes on in its different stages, and which it now assumes and now strips off in the repetition of its circuit, were not considered. These forms are now the direct object of our study.
In order to conceive these forms in their pure state, one must first of all discard all factors which have nothing to do with the changing or building of forms as such. It is therefore taken for granted here not only that the commodities are sold at their values but also that this
[11] From Manuscript II.
takes place under the same conditions throughout. Likewise disregarded therefore are any changes of value which might occur during the movement in circuits.
I. First Stage. M - C
M — C represents the conversion of a sum of money into a sum of commodities; the purchaser transforms his money into commodities, the sellers transform their commodities into money. What renders this act of the general circulation of commodities simultaneously a functionally definite section in independent circuit of some individual capital is primarily not the form of the act but its material content, the specific use character of the commodities which change place with the money. These commodities are on the one hand means of production, on the other labour power, material and personal factors in the production of commodities whose specific nature must of course correspond to the special kind of articles to be manufactured. If we call labour power L, and the means of production MP, then the sum of commodities to be bought, C, is equal to L + MP, or more briefly C < Mp. M — C, considered as to its substance, is therefore represented by M — C <v['P, that is to say M — C breaks up into M — L and M — MP. The sum of money M is separated into two parts, one of which buys labour power, the other means of production. These two series of purchases belong to entirely different markets, the one to the commodity market proper, the other to the labour market.
Aside from this qualitative division of the sum of commodities into which M is transformed, the formula M — C < M P also represents a most characteristic quantitative relation.
We know that the value, or price, of labour power is paid to its owner, who offers it for sale as a commodity, in the form of wages, that is to say as the price of a sum of labour containing surplus labour. For instance, if the daily value of labour power = the product of five hours' labour valued at 3 marks, this sum figures in the contract between the buyer and seller as the price, or wages, for, say, ten hours of labour. If such a contract is made for instance with 50 labourers, they are supposed to work altogether 500 hours per day for the purchaser, and one half of this time, or 250 hours = 25 days of labour of 10 hours each, represents nothing but surplus labour. The quantity and the volume of the means of production to be pur-
2; Beginning of Manuscript VII, started July 2, 1878.
chased must be sufficient for the utilisation of this mass of labour.
M — C <MP, then, does not merely express the qualitative relation indicating that a certain sum of money, say £422, is transformed into a corresponding sum of means of production and labour power, but also a quantitative relation between L, the part of the money spent for labour power, and MP, the part spent for means of production. This relation is determined at the outset by the quantity of excess labour, of surplus labour to be expended by a certain number of labourers.
If for instance in a spinning-mill the weekly wage of its 50 labourers amounts to -£ 50, £ 372 must be spent for means of production, if this is the value of the means of production which a weekly labour of 3,000 hours, 1,500 of which are surplus labour, transforms into yarn.
It is quite immaterial here how much additional value in the form of means of production is required in the various lines of industry by the utilisation of additional labour. The point merely is that under all circumstances the part of the money spent for means of production— the means of production bought in M — MP — must be sufficient, i. e., must at the outset be calculated accordingly, must be procured in corresponding proportion. To put it another way, the quantity of means of production must suffice to absorb the amount of labour, to be transformed by it into products. If the means of production at hand were insufficient, the excess labour at the disposal of the purchaser could not be utilised; his right to dispose of it would be futile. If there were more means of production than available labour, they would not be saturated with labour, would not be transformed into products.
As soon as M — C < jJfP is completed, the purchaser has at his disposal more than simply the means of production and labour power required for the production of some useful article. He disposes of a greater capacity to set labour power in motion, or a greater quantity of labour than is necessary for the replacement of the value of this labour power, and he has at the same time the means of production requisite for the realisation or objectification of this quantity of labour. In other words, he has at his disposal the factors making for the production of articles of a greater value than that of the elements of production — the factors of production of a mass of commodities containing surplus value. Thus the value advanced by him in money form has now assumed a natural form in which it can be realised as a value generating surplus value (in the shape of commodities). In brief, value exists here in the condition or form of productive capital, which has the faculty of creating value and surplus value. Let us call capital in this form P.
Now the value of P is = to that of L + MP, it is = to M transformed into L and MP. M is the same capital value as P, only it has a different mode of existence, it is capital value in the state or form of money—money capital.
M — C <MP, or its general form M — C, a sum of purchases of commodities, an act of the general circulation of commodities, is therefore at the same time — as a stage in the independent circuit of capital — a transformation of capital value from its money form into its productive form or, more briefly, it is the transformation of money capital into productive capital. In the diagram of the circuit which we are here discussing, money appears as the first depository of capital value, and money capital therefore represents the form in which capital is advanced.
Capital in the form of money capital is in a state in which it can perform the functions of money, in the present case the functions of a universal means of purchase and universal means of payment. (The last-named inasmuch as labour power though first bought is not paid for until it has been put into operation. To the extent that the means of production are not found ready on the market but have to be ordered first, money in M — MP likewise serves as a means of payment.) This capacity is not due to the fact that money capital is capital but that it is money.
On the other hand capital value in the form of money cannot perform any other functions but those of money. What turns the money functions into functions of capital is the definite role they play in the movement of capital, and therefore also the interrelation of the stage in which these functions are performed with the other stages of the circuit of capital. Take, for instance, the case with which we are here dealing. Money is here converted into commodities the combination of which represents the natural form of productive capital, and this form already contains latently, potentially, the result of the process of capitalist production.
A part of the money performing the function of money capital in M — C <MP assumes, by consummating this act of circulation, a function in which it loses its capital character but preserves its money character. The circulation of money capital M is divided into M — MP and M — L, into the purchase of means of production and the purchase of labour power. Let us consider the last-named process by itself. M — L is the purchase of labour power by the capitalist. It is also the sale of labour power — we may here say of labour, since the form of wages is assumed — by the labourer who owns it. What is M— C ( = M — L) for the buyer, is here, as in every other purchase, L — M
( = C — M) for the seller (the labourer). It is the sale of his labour power. This is the first stage of circulation, or the first metamorphosis, of the commodity (Buch I, Kap. Ill, 2a) .(1) It is for the seller of labour a transformation of his commodity into the money form. The labourer spends the money so obtained gradually for a number of commodities required for the satisfaction of his needs, for articles of consumption. The complete circulation of his commodity therefore appears as L — M — C, that is to say first as L — M (= C — M) and secondly as M — C; hence in the general form of the simple circulation of commodities, C — M — C. Money is in this case merely a passing means of circulation, a mere medium in the exchange of one commodity for another.
M — L is the characteristic moment in the transformation of money capital into productive capital, because it is the essential condition for the real transformation of value advanced in the form of money into capital, into a value producing surplus value. M — MP is necessary only for the purpose of realising the quantity of labour bought in the process M — L, which was discussed from this point of view in Book I, Part II, under the head of "The Transformation of Money into Capital." We shall have to consider the matter at this point also from another angle, relating especially to money capital as the form in which capital manifests itself.
Generally M — L is regarded as characteristic of the capitalist mode of production. However not at all for the reason given above, that the purchase of labour power represents a contract of purchase which stipulates for the delivery of a quantity of labour in excess of that needed to replace the price of the labour power, the wages; hence delivery of surplus labour, the fundamental condition for the capitalisation of the value advanced, or for the production of surplus value, which is the same thing. On the contrary, it is so regarded because of its form, since money in the form of wages buys labour, and this is the characteristic feature of the money economy.
Nor is it the irrationality of the form which is taken as characteristic. On the contrary, one overlooks the irrational. The irrationality consists in the fact that labour itself as a value-creating element cannot have any value, nor can therefore any definite amount of labour have any value expressed in its price, in its equivalence to a definite quantity of money. But we know that wages are but a disguised form, a form in which for instance the price of one day's labour power presents itself as the price of the labour set in motion by this labour power in one day. The value produced by this labour power in, say, six hours of labour is thus expressed as the value of twelve hours' functioning or operation of the labour power.
M — L is regarded as the characteristic feature, the hallmark of the so-called money economy, because labour there appears as the commodity of its owner, and money therefore as the buyer — hence on account of the money relation (i. e., the sale and purchase of human activity). Money however appears very early as a buyer of so-called services, without the transformation of M into money capital, and without any change in the general character of the economic system.
It makes no difference to money into what sort of commodities it is transformed. It is the universal equivalent form of all commodities which show, if only by their prices, that ideally they represent a certain sum of money, anticipate their transformation into money, and that they only acquire the form in which they may be converted into use values for their owners by changing places with money. Once labour power has come into the market as the commodity of its owner and its sale takes the form of payment for labour, assumes the shape of wages, its purchase and sale is no more startling than the purchase and sale of any other commodity. The characteristic thing is not that the commodity labour power is purchasable but that labour power appears as a commodity.
By means of M — C <M P, the transformation of money capital into productive capital, the capitalist effects the combination of the objective and personal factors of production so far as they consist of commodities. If money is transformed into productive capital for the first time or if it performs for the first time the function of money capital for its owner, he must begin by buying means of production, such as buildings, machinery, etc., before he buys any labour power. For as soon as labour power passes into his control, he must have means of production to which he can apply it as labour power.
This is the capitalist's presentation of the case. The labourer's case is as follows: The productive application of his labour power is not possible until the moment when it is sold and brought into connection with means of production. Before its sale, labour power exists therefore separately from the means of production, from the material conditions of its application. In this state of separation it cannot be used either directly for the production of use values for its owner or for the production of commodities, by the sale of which he could live. But from the moment that as a result of its sale it is brought into connection with means of production, it forms part of the productive capital of its purchaser, the same as the means of production.
True, in the act M — L the owner of money and the owner of labour power enter only into the relation of buyer and seller, confront one another only as money owner and commodity owner. In this respect they enter merely into a money relation. Yet at the same time the buyer appears also from the outset in the capacity of an owner of means of production, which are the material conditions for the productive expenditure of labour power by its owner. In other words, these means of production are in opposition to the owner of the labour power, being property of another. On the other hand the seller of labour faces its buyer as labour power of another which must be made to do his bidding, must be integrated into his capital, in order that it may really become productive capital. The class relation between capitalist and wage labourer therefore exists, is presupposed from the moment that the two face each other in the act M — L (L — M on the part of the labourer). It is a purchase and sale, a money relation, but a purchase and sale in which the buyer is assumed to be a capitalist and the seller a wage labourer. And this relation arises out of the fact that the conditions required for the realisation of labour power, viz., means of subsistence and means of production, are separated from the owner of labour power, being the property of another.
We are not concerned here with the origin of this separation. It exists as soon as M — L goes on. The thing which interests us here is this: If M — L appears here as a function of money capital or money as the form of existence of capital, it is not for the sole reason that money here assumes the role of a means of paying for a useful human activity or service; hence by no means in consequence of the function of money as a means of payment. Money can be expended in this form only because labour power finds itself in a state of separation from its means of production (including the means of subsistence as means of production of the labour power itself), and because this separation can be overcome only by the sale of the labour power to the owner of the means of production; because therefore the functioning of labour power, which is not at all limited to the quantity of labour required for the reproduction of its own price, is likewise the concern of its buyer. The capital relation only emerges during the process of production because it is inherent in the act of circulation, in the different fundamental economic conditions in which buyer and seller confront each other, in their class relation. It is not money which by its nature creates this relation; it is rather the existence of this relation which permits of the transformation of a mere money function into a capital function.
In the conception of money capital (for the time being we deal with the latter only within the confines of the special function in which it faces us here) two errors run parallel to each other or cross each other. In the first place, the functions performed by capital value in its capacity of money capital, which it can perform precisely owing to its money form, are erroneously derived from its character as capital, whereas they are due only to the money form of capital value, to its form of appearance as money. In the second place, on the contrary, the specific content of the money function, which makes it simultaneously a capital function, is traced to the nature of money (money being here confused with capital), while the money function premises social conditions, such as are here indicated by the act M — L, which do not at all exist in the mere circulation of commodities and the corresponding circulation of money.
The purchase and sale of slaves is formally also a purchase and sale of commodities. But money cannot perform this function without the existence of slavery. If slavery exists, money can be invested in the purchase of slaves. On the other hand the mere possession of money by a buyer cannot make slavery possible.
In order that the sale of one's own labour power (in the form of the sale of one's own labour or in the form of wages) may constitute not an isolated phenomenon but a socially decisive premise for the production of commodities, in order that money capital may therefore perform, on a social scale, the above-discussed function M — C <MP, historical processes are assumed by which the original connection of the means of production with labour power was dis-solved— processes in consequence of which the mass of the people, the labourers, have, as non-owners, come face to face with the non-labourers as the owners of these means of production. It makes no difference in this case whether the connection before its dissolution was such in form that the labourer, being himself a means of production, belonged to the other means of production or whether he was their owner.
What underlies M — C <^p is distribution; not distribution in the ordinary meaning of a distribution of articles of consumption, but the distribution of the elements of production itself, the material factors of which are concentrated on one side, and labour power, isolated from them, on the other.
The means of production, the material part of productive capital, must therefore face the labourer as such, as capital, before the act M — L can become a universal, social one.
We have seen on previous occasions(2) that in its development capitalist production, once it is established, not only reproduces this separation but extends its scope further and further until it becomes the generally prevailing social condition. However, there is still another side to this question. In order that capital may be able to arise and take control of production, a definite stage in the development of trade is assumed. This applies therefore also to the circulation of commodities, and hence to the production of commodities; for no articles can enter circulation as commodities unless they are produced for sale, hence as commodities. But the production of commodities does not become the normal, dominant type of production until capitalist production serves as its basis.
The Russian landowners, who as a result of the so-called emanci-pation of the peasants ' [5] are now compelled to carry on agriculture with the help of wage labourers instead of the forced labour of serfs, complain about two things: First, about the lack of money capital. They say for instance that comparatively large sums must be paid to wage labourers before the crops are sold, and just then there is a dearth of ready cash, the prime condition. Capital in the form of money must always be available, particularly for the payment of wages, before production can be carried on capitalistically. But the landowners may take hope. Everything comes to those who wait, and in due time the industrial capitalist will have at his disposal not only his own money but also l'argent des autres.b The second complaint is more characteristic. It is to the effect that even if one has money, not enough labour power is to be bought at any time. The reason is that the Russian farm labourer, owing to the common ownership of land in the village community, has not yet been fully separated from his means of production and hence is not yet a "free wage labourer" in the full sense of the word. But the existence of the latter on a social scale is a sine qua non for M — C, the conversion of money into commodities, to be able to represent the transformation of money capital into productive capital.
It is therefore quite clear that the formula for the circuit of money capital, M — C ... P ... C — M ' , is the matter-of-course form of the circuit of capital only on the basis of already developed capitalist production, because it presupposes the existence of a class of wage labourers on a social scale. We have seen that capitalist production does not only create commodities and surplus value, but also reproduces to an ever increasing extent the class of wage labourers, into whom it transforms the vast majority of direct producers. Since the first condition for its realisation is the permanent existence of a class of wage labourers, M — C ... P ... C — M' presupposes a capital in the form of productive capital, and hence the form of the circuit of productive capital.
Endnotes
[11] burgh, 1826, p. 31), described McCulloch. See present edition, Vol. 32, pp. 374-400. Marx copied out passages from this pamphlet in Notebook VII (London, 1859-63).—16 11 This refers to the social Utopian theory expounded by Robert Owen in The Book of the New Moral World (Parts I-VII, London, 1836-44) and in other of his works. Owen was the only one among great Utopian socialists who sought to realise social-ist ideals with the participation of workers themselves, and he founded a number of communist colonies in the USA and Great Britain. Appraising the importance of Owen's activity for the English working-class movement in the first decades of the 19th century, Engels wrote: "Every social movement, every real advance in England on behalf of the workers links itself unto the name of Robert Owen" (see present edition, Vol. 25, p. 251).— 17
[5] Engels is referring to the letter written by K. Rodbertus to J.Zeller on March 14, 1875. Rodbertus died in 1875 but his letter to Zeller was not published until 1879. A copy of Briefe und Sozialpolitische Aufsätze mentioned below (ed. by R.Meyer, Berlin, 1881), with Engels' remarks, was kept in Marx's personal library.—10