Chapter IX. The Aggregate Turnover of Advanced Capital. Cycles of Turnover
We have seen that the fixed and circulating component parts of productive capital are turned over in various ways and at various periods, also that the different constituents of the fixed capital of a business have different periods of turnover, depending on their different durabilities and therefore on their different times of reproduction. (On the real or apparent difference in the turnover of different constituents of circulating capital in the same business, see the close of this chapter, under 6.)
1 ) The aggregate turnover of an advanced capital is the average turnover of its various constituent parts; the mode of its calculation is given later. Inasmuch as it is merely a question of different periods of time, nothing is easier than to compute their average. But
2) we have here not alone quantitative but also qualitative difference.
The circulating capital entering into the process of production transfers its entire value to the product and must therefore be continually replaced in natura by the sale of the product, if the process of production is to proceed without interruption. The fixed capital entering into the process of production transfers only a part of its value (the wear and tear) to the product and despite this wear and tear continues functioning in the process of production. Therefore it need not be replaced in natura until the lapse of intervals of various duration, at any rate not as frequently as the circulating capital. This necessity of replacement, the reproduction term, is not only quantitatively different for the various constituent parts of fixed capital, but, as we have seen, a part of the perennial fixed capital, that which lasts longer, may be replaced annually or at shorter intervals and added in natura to the old fixed capital. In the case of fixed capital of different properties the replacement can take place only all at once at the end of its period of durability.
It is therefore necessary to reduce the specific turnovers of the various parts of fixed capital to a homogeneous form of turnover, so that they will remain different only quantitatively, namely, according to duration of turnover.
This qualitative identity does not come about if we take as our starting-point P ... P, the form of the continuous process of production. For definite elements of P must be constantly replaced in natura while others need not. However the form M ... M' undoubtedly yields this identity of turnover. Take for instance a machine worth £10,000, which lasts ten years of which '/,„ = £1,000 is annually reconverted into money. These £1,000 have been converted in the course of one year from money capital into productive capital and commodity capital, and then reconverted from this into money capital. They have returned to their original form, the money form, just like the circulating capital, if we study the latter in this form, and it is immaterial here whether this money capital of £1,000 is once more converted at the end of the year into the bodily form of a machine or not. In calculating the aggregate turnover of the advanced productive capital we therefore fix all its elements in the money form, so that the return to that form concludes the turnover. We assume that value is always advanced in money, even in the continuous process of production, where this money form of value is only that of money of account. Thus we can compute the average.
3) It follows that even if by far the greater part of the advanced productive capital consists of fixed capital whose period of reproduction, hence also of turnover, comprises a cycle of many years, the capital value turned over during the year may, on account of the repeated turnovers of the circulating capital within the same year, be larger than the aggregate value of the advanced capital.
Suppose the fixed capital = £80,000 and its period of reproduction = 10 years, so that £8,000 of it annually return to their money form, or it completes '/io of its turnover. Suppose further the circulating capital = £20,000, and its turnover is completed five times per year. The total capital would then be £100,000. The turned-over fixed capital = £8,000, the turned-over circulating capital = 5 x £20,000 = £100,000. Then the capital turned over during one year = £108,000, or £8,000 more than the advanced capital. 1 + [2]/[25] of the capital have been turned over.
4) Therefore the turnover time of the value of the advanced capital differs from its actual time of reproduction or from the actual time of turnover of its component parts. Take for instance a capital of £4,000 and let it turn over, say, five times a year. The turned-over capital is then 5 x £4,000 = £20,000. But what returns at the end of each turnover to be advanced anew is the originally advanced capital of £4,000. Its magnitude is not changed by the number of turnover periods, during which it performs anew its functions as capital. (Apart from surplus value.)
In the illustration under No. 3, then, the sums assumedly returned into the hands of the capitalist at the end of one year are (a) a sum of values amounting to £20,000 which he invests again in the circulating constituents of the capital, and (b) a sum of £8,000 which has been set free by wear and tear from the value of the advanced fixed capital; simultaneously this same fixed capital remains in the process of production, but with the reduced value of £72,000 instead of £80,000. The process of production therefore would have to be continued for nine years more, before the advanced fixed capital outlived its term and ceased to function as a creator of products and values, so that it would have to be replaced. The advanced capital value, then, has to pass through a cycle of turnovers, in the present case a cycle of ten annual ones, and this cycle is determined by the lifetime, hence the reproduction or turnover time, of the applied fixed capital.
As the magnitude of the value and the durability of the applied fixed capital develop with the development of the capitalist mode of production, the lifetime of industry and of industrial capital lengthens in each particular field of investment to a period of many years, say of ten years on an average. Whereas the development of fixed capital extends this life on the one hand it is shortened on the other by the continuous revolution in the means of production, which likewise in-cessantly gains momentum with the development of the capitalist mode of production. This involves a change in the means of production and the necessity of their constant replacement, on account of moral depreciation, long before they expire physically. One may assume that in the essential branches of large-scale industry this life cycle now averages ten years. However we are not concerned here with the exact figure. This much is evident: the cycle of interconnected turnovers embracing a number of years, in which capital is held fast by its fixed constituent part,, furnishes a material basis for the periodic crises. During this cycle business undergoes successive periods of de-pression, medium activity, precipitancy, crisis. True, periods in which capital is invested differ greatly and far from coincide in time.
But a crisis always forms the starting-point oflarge new investments. Therefore, from the point of view of society as a whole, more or less, a new material basis for the next turnover cycle.22a)
5) On the way to calculate the turnovers, an American economist states [37]:
"In some trades the whole capital embarked is turned or circulated several times within the year. In others a part is turned oftener than once a year, another part less often. It is the average period which his entire capital takes in passing through his hands, or making one revolution, from which a capitalist must calculate his profits. Suppose, for example, that a person engaged in a particular business has one half of his capital invested in buildings and machinery, so as to be turned only once in ten years; that one-fourth more, the cost of his tools, etc., is turned once in two years; and the remaining fourth, employed in paying wages and purchasing material, is turned twice in one year. Say that his entire capital is $50,000. Then his annual expenditure will be:
$25,000: 10 = $ 2,500
12,500: 2 = 6,250
12,500 x 2 = . 25,000
$33,750
... the mean term in which his capital is turned being sixteen months[38] ....
"Take another case, ... say that one-fourth of the entire capital circulates in ten years, one-fourth in one year, and one half twice in the year. Then the annual expenditure will be,
$12,500:10 =$ 1,250 12,500 = 12,500 25,000 x 2 = 50,000
Turned over in 1 year $63,750 "
(Scrope, Pol. Econ., edit. Alonzo Potter, New York, 1841, pp. 142, 143).
6) Real and apparent differences in the turnover of the various parts of capital.
The same Scrope says in the same passage:
"The capital laid out by a manufacturer, farmer, or tradesman in the payment of his labourer's wages, circulates most rapidly, being turned perhaps once a week (if his men are paid weekly), by the weekly receipts on his bills or sales. That invested in his materials and stock in hand circulates less quickly, being turned perhaps twice, per-
22a) "Urban production is bound to a cycle of days, rural production on the contrary to one of years" (Adam H. Müller, Die Elemente der Staatskunst, Berlin, 1809, III, p. 178).[36] This is the naive conception of industry and agriculture held by the roman-tic school.
50,000
~ "i"
50,000
50,000 haps four times in the year, according to the time consumed between his purchases of the one and sales of the other, supposing him to buy and sell on equal credits. The capital invested in his implements and machinery circulates still more slowly, being turned, that is, consumed and renewed, on the average, perhaps but once in five or ten years; though there are many tools that are worn out in one set of operations. The capital which is embarked in buildings, as mills, shops, warehouses, barns, in roads, irrigation, etc., may appear scarcely to circulate at all. But, in truth, these things are, to the full, as much as those we have enumerated, consumed in contributing to production, and must be reproduced in order to enable the producer to continue his operations; with this only difference, that they are consumed and reproduced by slower degrees than the rest ... and the capital invested in them may be turned perhaps every twenty or fifty years" [pp. 141-42].
Scrope confuses here the difference in the flow of certain parts of the circulating capital, brought about for the individual capitalist by terms of payment and conditions of credit, with the difference in the turnovers due to the nature of capital. He says that wages must be paid weekly out of the weekly receipts from paid sales or bills. It must be noted here in the first place that certain differences occur relative to wages themselves, depending on the length of the term of payment, that is, the length of time for which the labourer must give credit to the capitalist, whether wages are payable every week, month, three months, six months, etc. In this case, the law expounded before, holds good, to the effect that "the quantity of the means of payment required for all periodical payments" (hence of the money capital to be advanced at one time) "is in inverse proportion to the length of their periods" (Buch I, Kap. Ill, 3b, Seite 124).[39]
Endnotes
[2] Engels did not have time to publish Marx's Theories of Surplus Value as the fourth volume of Capital. It was first published in 1905-10 by Karl Kautsky. In 1954-61 and 1962-64, the Institute of Marxism-Leninism of the CC CPSU in Moscow published in Russian a new edition of Theories... which differed from that of Kautsky. In 1956-62 this Russian edition was used by the Institute of Marxism-Leninism of the CC SUPG as the basis for the publication of Theories... in German. In the present edition Theories of Surplus Value is published, according to MEGA 2, Abt. II, Bd. 3, Berlin, 1976-82, as part of the Economic Manuscript of 1861-63 (see present edition, vols 30-34).— 6
[25] D. Ricardo quotes the third edition of Say's Traité d'économie politique, oü simple exposition de la manière dont se forment, se distribuent et se consomment, les richesses, Paris, 1817, p. 433. Marx copied out passages from this book in one of his Paris notebooks for 1844 (MEGA 2, Bd. IV/2, Berlin, 1981, S. 301-27). Passages from the third edition of Ricardo's book are quoted by Marx in London notebooks IV (1850) (MEGA 2, Bd. IV/7, Berlin, 1983, S. 316-28) and VII (1851). Marx had both books in his personal library.— 154
[37] piled in London in 1858.—188 37 This passage is taken from A. Potter's book Political Economy: Its Objects, Uses, and Principles: Considered with Reference to the Condition of the American People, New York, 1841. As is seen from the introduction, the greater part of this book is a reprint (with changes introduced by A. Potter) of the first ten chapters of J. P. Scrope's book Principles of Political Economy..,, published in England in 1833. Passages from Scrope's book as given by Potter are copied out by Marx in his London Notebook VII for 1859-63. Passages taken directly from Scrope's book are quoted in Marx's Notebook IX (1851). See MEGA 2, Abt. IV, Bd. 8, Berlin, 1986, S. 592-96.— 188
[38] In the manuscript Marx points to the fallacy of such a method of calculating the period of the turnover of capital. The mean term of turnover (16 months) given in the quotation was calculated on the basis of a profit of 7.5 per cent on an aggregate capital of $50,000. Excluding profit, the turnover of capital is equal to 18 months.— 188
[36] Passages from H. Müller's book are quoted by Marx in one of his notebooks com-
[4] State socialism — a bourgeois-reformist and opportunist conception whose adherents reduced the essence of socialism to bourgeois state interference in economics and to a certain degree of regulation of social relations. Among its theoreticians were Louis Blanc (France), Ferdinand Lassalle, Karl Rodbertus-Jagetzow (Germany) and others. Armchair socialism (Kathedersozialismus) — a trend in German bourgeois political economy that emerged in Germany at the close of 1860s as a reaction to the growth of the working-class movement and the dissemination within it of the ideas of scientific socialism propounded by Marx and Engels. Under the banner of socialism its exponents (L. Brentano, A. Wagner, W. Zombart and others) preached bourgeois reformism; they asserted that any state, including the German Empire, had a super-class character and that with its help it was possible to achieve a considerable improvement in the condition of the working class through social reforms effected by governments. The armchair socialists called upon the workers to refrain from economic and political revolutionary struggle.— 9
[39] Marx has, presumably, made a slip of the pen, since the quantity of the means of payment required for all periodical payments is not in inverse but in direct proportion to the length of their periods. Just such a proportion is established by William Petty, whom Marx quotes in Note 107 to Chapter 3 of Capital, Vol. I. The meaning of the concept "the period of payment" is also defined in this concrete example. In all German editions oiCapital, Vol. II, published in recent years, including Complete Works of K. Marx and F. Engels in the languages of the original (Marx-Engels, Gesamtausgabe (MEGA), Zweite Abteilung, Band 5, Dietz Verlag, Berlin, 1983, S. 97), this passage has been corrected and reads as follows. "From the law of the rapidity of circulation of the means of payment, it follows that the quantity of the means of payment required for all periodical payments, whatever their source, is in direct proportion to the length of their periods." See also present edition, Vol. 35.—189