V. The Mediation of Exchange by the Circulation of Money
1) Between class I and class II:
I. 4,000c + l,000v + 1,000,
II 2,000c + 500v + 500s.
This disposes of the circulation of IIC = 2,000, which is exchanged for I (l,000v+1000,).
471 Ad notam for possible followers of the Rodbertian theory of crises.— F.E.
Leaving aside for the present the 4,000 lc there still remains the circulation of v + s within class II. Now Il{v+S) is divided between the sub-classes IIa and lib in the following manner:
2) II. 500v + 500s = a (400v+400s) + b (100v+100s). The 400v (a) circulate within its own sub-class; the labourers paid with it buy from their employers, the capitalists Ha, necessary means of subsistence produced by themselves.
Since the capitalists of both sub-classes spend [3]/[5] of their surplus value in products of Ha (necessities) and [2]/[5] in products of lib (luxuries), the [3]/[5] of the surplus value of a, or 240, are consumed within the sub-class Ha itself; likewise, [2]/[5] of the surplus value of b (produced and existing in the form of articles of luxury), within the sub-class lib.
There remains to be exchanged between IIa and lib: on the side of Ha: 160s, on the side of lib: 100v + 60s. These cancel each other. With their 100, received in the form of money wages, the labourers of lib buy necessities of life in that amount from Ha. The lib capitalists likewise buy necessities from IIa to the amount of [3]/[5] of their surplus value, or 60. The IIa capitalists thus obtain the money required for investing, as above assumed, [2]/[5] of their surplus value, or 160s, in luxuries produced by lib (100v held by the lib capitalists as a product replacing the wages paid by them, and 60s). The scheme for this is therefore:
3) Ha. //400v// + //240,// + 160s b 100v + 60s + //40,/A
the bracketed items circulating and being consumed only within their own sub-class.
The direct reflux of the money capital advanced in variable capital, which takes place only in the case of the capitalist department Ha producing necessities of life, is but an expression, modified by special conditions, of the previously mentioned general law that money advanced to the circulation by producers of commodities returns to them in the normal course of commodity circulation. From this it incidentally follows that if any money capitalist at all stands behind the producer of commodities and advances to the industrial capitalist money capital (in the strictest meaning of the word, i. e., capital value in the form of money), the real point of reflux for this money is the pocket of this money capitalist. Thus the mass of the circulating money belongs to that department of money capital which is organ-ised and concentrated in the form of banks, etc., although the money circulates more or less through all hands. The way in which this department advances its capital necessitates the continual final reflux to it in the form of money, although this is once again brought about by the reconversion of the industrial capital into money capital.
The circulation of commodities always requires two things: Commodities which are thrown into circulation and money which is likewise thrown into it. "The process of circulation ... does not, like direct barter of products, become extinguished upon the use values changing places and hands. The money does not vanish on dropping out of the circuit of the metamorphosis of a given commodity. It is constantly being precipitated into new places in the arena of circulation vacated by other commodities," etc. (Buch I, Kap. Ill, S. 92).(1)
For instance in the circulation between IIC and I(v+s) we assumed that II had advanced £500 in money for it. In the innumerable processes of circulation, into which the circulation between large social groups of producers resolves itself, representatives of the various groups will at various times be the first to appear as buyers, and hence throw money into circulation. Quite apart from particular circumstances, this is necessitated by the difference, if nothing else, in the periods of production, and thus of the turnovers, of the various commodity capitals. So with these £500 II buys from I means of production of the same value and I buys from II articles of consumption valued at £500. Hence the money flows back to II, but this department does not in any way grow richer by this reflux. It had first thrown £500 in money into circulation and drew commodities of the same value out of it; then it sells £500 worth of commodities and draws the same amount of money out of circulation; thus the £500 flow back to it. As a matter of fact, II has thrown into circulation £500 in money and £500 in commodities, which is equal to £1,000. It draws out of the circulation £500 in commodities and £500 in money. The circulation requires for the handling of £500 in I commodities and £500 in II commodities only £500 in money; hence whoever advanced the money in the purchase of commodities from other producers recovers it when selling his own. Consequently if I had at first bought commodities from II for £500, and later sold to II commodities of the value of £500, these £500 would have returned to I instead of to II.
In class I the money invested in wages, i. e., the variable capital advanced in the form of money, does not return directly in this form but indirectly, by a detour. On the contrary, in II the £500 of wages return directly from the labourers to the capitalists, and this return is always direct in the case where purchase and sale take place repeatedly between the same persons in such a way that they are acting alternately as buyers and sellers of commodities. The capitalist of II pays for the labour power in money; he thereby incorporates labour power in his capital and assumes the role of an industrial capitalist in relation to his labourers as wage earners, but does so only by means of this act of circulation, which is for him merely a conversion of money capital into productive capital. Thereupon the labourer, who in the first instance was a seller, a dealer in his own labour power, appears in the second instance as a buyer, a possessor of money, in relation to the capitalist, who now acts as a seller of commodities. In this way the capitalist recovers the money invested by him in wages. As the sale of these commodities does not imply cheating, etc., but is an exchange of equivalents in commodities and money, it is not a process by which the capitalist enriches himself. He does not pay the labourer twice, first in money and then in commodities. His money returns to him as soon as the labourer exchanges it for his commodities.
However, the money capital converted into variable capital, i.e., the money advanced for wages, plays a prominent role in the circulation of money itself, since the labourers must live from hand to mouth and cannot give the industrial capitalists credit for any length of time. For this reason variable capital must be advanced in the form of money simultaneously at innumerable territorially different points in society at certain short intervals, such as a week, etc.— in periods of time that repeat themselves rather quickly (and the shorter these periods, the smaller relatively is the total amount of money thrown at one time into circulation through this channel) —whatever the various periods of turnover of the capitals in the different branches of industry. In every country with a capitalist production the money capital so advanced constitutes a relatively decisive share of the total circulation, the more so as the same money, before its reflux to its point of departure, passes through the most diverse channels and functions as a medium of circulation for countless other businesses.
Now let us consider the circulation between I(v+5) and IIC from a different angle.
Capitalists I advance £1,000 in the payment of wages. With this money the labourers buy £1,000 worth of means of subsistence from capitalists II. These in turn buy for the same money means of production from capitalists I. Capitalists I thus get back their variable capital in the form of money, while capitalists II have reconverted one half of their constant capital from the form of commodity capital into that of productive capital. Capitalists II advance another £500 in money to get means of production from I. The capitalists I spend this money on articles of consumption from II. These £500 thus return to capitalists II. They advance this amount again in order to reconvert the last quarter of their constant capital, converted into commodities, into its productive natural form. This money flows back to I and once more withdraws articles of consumption of the same amount from II. Thus the £500 return to II. The capitalists II are now as before in possession of £500 in money and £2,000 in constant capital, the latter having been newly converted from the form of commodity capital into that of productive capital. By means of £1,500 a quantity of commodities worth £5,000 has been circulated, namely: 1) I pays £1,000 to his labourers for their labour power of the same value; 2) with these same £1,000 the labourers buy means of subsistence from II; 3) with the same money II buys means of production from I, thereby restoring to I variable capital to the amount of £1,000 in the form of money; 4) II buys £500 worth of means of production from I; 5) with the same £500 I buys articles of consumption from II; 6) with the same £500 II buys means of production from I; 7) with the same £500 I buys means of subsistence from II. Thus £500 have returned to II, which had thrown them into circulation besides its £2,000 in commodities and for which it did not withdraw from circulation any equivalent in commodities.[48]'
The exchange therefore takes the following course:
1) I pays £1,000 in money for labour power, hence for commodities = £1,000.
481 This presentation differs somewhat from that given above (p. 374a). There I likewise throws an independent amount of £500 into circulation. Here II alone supplies the additional money for the circulation. But this does not alter the final result.— F. E.
See this volume, p. 331.
2) The labourers buy with their wages amounting in money to £1,000 articles of consumption from II; hence commodities = £1,000.
3) With the £1,000 received from the labourers II buys means of production of the same value from I; hence commodities = £1,000.
In this way the £1,000 have returned to I as the money form of its variable capital.
4) II buys £500 worth of means of production from I, hence commodities = £500.
5) With the same £500 I buys articles of consumption from II; hence commodities = £500.
6) With the same £500 II buys means of production from I; hence commodities = £500.
7) With the same £500 I buys articles of consumption from II; hence commodities = £500.
Total amount of commodity values exchanged = £5,000. The £500 advanced by II for the purchase have returned to it. The result is as follows:
1) I possesses variable capital in the form of money to the amount of £1,000, which it originally advanced to the circulation. It furthermore expended'£1,000 for its individual consumption, in the shape of its own products; i. e., it has spent the money which it had received for the sale of means of production to the amount of £1,000.
On the other hand the natural form into which the variable capital existing in the form of money must be transformed, i. e., labour power, has been maintained, reproduced and again made available by consumption as the sole article of trade of its owners, which they must sell in order to live. The relation of wage labourers and capitalists has likewise been reproduced.
2) The constant capital of II is replaced in natura, and the £500 advanced by the same II to the circulation have returned to it.
As for the labourers I, the circulation is the simple one of C — M — C.C (labour power) —M ' (£1,000, money form of variable capital I) —C* (necessities of life to the amount of £1,000); these £1,000 convert into money to the same amount of value the constant capital II existing in the form of commodities, of means of subsistence.
As for the capitalists II, the process is C — M, the transformation of a portion of their commodity product into the money form, from which it is reconverted into the constituents of productive capital, namely into a portion of the means of production required by them.
In the money advance M (£500) made by capitalists II for the purchase of the other parts of the means of production, the money form ofthat portion of IIC which exists as yet in the form of commodities (articles of consumption) is anticipated; in the act M — C, in which II buys with M, and C is sold by I, the money (II) is converted into a portion of the productive capital, while C (I) passes through the act C — M, changes into money, which however does not represent any component part of capital value for I, but surplus value converted into money and expended solely for articles of consumption.
In the circuit M — C ... P ... C — M', the first act, M — C, is that of one capitalist, the last, C — M' (or part of it), is that of another; whether the C, by which M is converted into productive capital, represents a component of constant capital, of variable capital, or surplus value for the seller of C (who exchanges this C for money), is wholly immaterial for the commodity circulation itself.
Class I, so far as concerns the component v + s of its commodity product, draws more money out of the circulation than it has thrown in. In the first place, the £1,000 of variable capital return to it; in the second place, it sells means of production worth £500 (see above, exchange No. 4); one half of its surplus value is thus turned into money; then (exchange No. 6) it sells once more £500 worth of means of production, the second half of its surplus value, and thus the entire surplus value is withdrawn from circulation in the shape of money. Hence in succession: 1) variable capital reconverted into money = £1,000; 2) one half of the surplus value turned into money = £500; 3) the other half of the surplus value = £500; altogether l,000v + l,000s turned into money = £2,000. Although I threw only £1,000 into circulation (aside from those exchanges which promote the reproduction of Ic and which we shall have to analyse later), it has withdrawn double that amount from it. Of course s passes into other hands, (II), as soon as it has been converted into money, by being spent for articles of consumption. The capitalists of I withdrew only as much in money as they threw into it in value in the form of commodities; the fact that this value is surplus value, i. e., that it does not cost the capitalists anything, does not alter the value of these commodities in any way; so far as the exchange of values in commodity circulation is concerned, that fact is of no consequence at all. The existence of surplus value in money is of course transient, the same as all other forms which the advanced capital assumes in its metamorphoses. It lasts no longer than the interval between the conversion of commodities I into money and the subsequent conversion of the money I into commodities II.
If the turnovers had been assumed to be shorter — or, from the point of view of the simple circulation of commodities, the circulation of money more rapid — even less money would be ample to circulate the exchanged commodity values; the amount is always determined— if the number of successive exchanges is given — by the sum of the prices, or the sum of values, of the circulating commodities. It is immaterial in what proportion this sum of values consists of surplus value on the one hand, and of capital value on the other.
If the wages of I, in our illustration, were paid four times per year, we should have 4 x 250 = 1,000. Hence £250 in money would suffice for the circulation Iv — '/[2] IIC and for that between the variable capital Iv and the labour power I. Likewise, if the circulation between Is and IIC were to take place in four turnovers, it would require only £250, or in the aggregate a sum of money, or a money capital, of £500 for the circulation of commodities amounting to £5,000. In that case the surplus value would be converted into money four times successively, l/t each time, instead of twice successively, one half each time.
If I instead of II should act as buyer in exchange No. 4 and expend £500 for articles of consumption of the same value, II would buy means of production with the same £500 in exchange No. 5; 6) I buys articles of consumption with the same £500; 7) II buys means of production with the same £500 so that the £500 finally return to I, the same as before to II. The surplus value is here converted into money by means of the money spent by the capitalist producers themselves for their individual consumption. This money represents the anticipated revenue, the anticipated receipts from the surplus value contained in the commodities still to be sold. The surplus value is not converted into money by the reflux of the £500; for aside from £1,000 in the form of commodities Iv, I threw £500 in money into circulation at the close of exchange No. 4, and this was additional money, so far as we know, and not the proceeds from the sale of commodities. If this money flows back to I, I merely gets back its additional money, and does not thereby convert its surplus value into money. The conversion of the surplus value I into money takes place only by the sale of the commodities Is, in which it is incorporated, and lasts each time only until the money obtained by the sale of the commodities is expended anew in the purchase of articles of consumption.
With additional money (£500) I buys articles of consumption from II; this money was spent by I, which holds its equivalent in II commodities; the money returns for the first time by the purchase from I by II of commodities to the amount of £500; in other words, it returns as the equivalent of the commodities sold by I, but these commodities do not cost I anything, they constitute surplus value for I, and thus the money thrown into circulation by this very department turns its own surplus value into money. On buying for the second time (No. 6) I has likewise obtained its equivalent in II commodities. Take it, now, that II does not buy (No. 7) means of production from I. In that case I would have actually paid £1,000 for articles of consumption, thereby consuming its entire surplus value as revenue, namely 500 in its own I commodities (means of production) and 500 in money; on the other hand, it would still have £500 in its own commodities (means of production) in stock, and would have got rid of £500 in money.
On the contrary II would have reconverted three-fourths of its constant capital from the form of commodity capital into that of productive capital; but one-fourth (£500) would be held by it in the form of money capital, actually in the form of idle money, or of money which has suspended its function and is held in abeyance. Should this state of affairs last for any length of time, II would have to cut down its scale of reproduction by one-fourth.
However the 500 in means of production, which I has on its hands, are not surplus value existing in the form of commodities; they occupy the place of the £500 advanced in money, which I possessed aside from its £1,000 of surplus value in commodity form. In the form of money, they are always convertible; as commodities they are mo-mentarily unsaleable. So much is evident: that simple reproduction— in which every element of productive capital must be replaced in both II and I — remains possible in this case only if the 500 golden birds, which I first sent flying, return to it.
If a capitalist (we have only industrial capitalists still to deal with here, who are the representatives of all others) spends money for articles of consumption, he is through with it, it goes the way of all flesh. It can flow back to him only if he fishes it out of circulation in exchange for commodities, i. e., for his commodity capital. As the value of his entire annual commodity product (his commodity capital), so that of every one of its elements, i.e., the value of every individual commodity, is divisible, as far as he is concerned, into constant capital value, variable capital value, and surplus value. The conversion into money of every individual commodity (as elements constituting the commodity product) is consequently at the same time such a conversion of a certain portion of the surplus value contained in the entire commodity product. In this case, then, it is literally true that the capitalist himself threw the money into circulation — when he spent it on articles of consumption — by which his surplus value is converted into money, or realised. Of course it is not a question of the identical coins but of a certain amount of hard cash equal to the one (or to a portion of the one) which he had previously thrown into circulation to satisfy his personal wants.
In practice this occurs in two ways: If the business has just been opened, in the current year, it will take quite a while, at least a few months, before the capitalist is able to use any portion of the receipts of his business for his personal consumption. But for all that he does not suspend his consumption for a single moment. He advances to himself (immaterial whether out of his own pocket or by means of credit from the pocket of somebody else) money in anticipation of surplus value still to be snatched by him; but in doing so he also advances a circulating medium for the realisation of surplus value to be realised later. If, on the contrary, the business has been running regularly for a longer period, payments and receipts are distributed over different terms throughout the year. But one thing continues uninterruptedly, namely, the consumption of the capitalist, which antici-pates, and whose volume is computed on a definite proportion of, the customary or estimated revenue. With every portion of commodities sold, a portion of the surplus value to be produced annually is also realised. But if during the entire year only as much of the produced commodities is sold as is required to replace the constant and variable capital values contained in them, or if prices were to fall to such an extent that only the advanced capital value contained in the entire annual commodity product should be realised on its sale, then the anticipatory character of the expenditure of money in expectation of future surplus value would be clearly revealed. If our capitalist fails, his creditors and the court investigate whether his anticipated private expenditures were in proper proportion to the volume of his business and to the receipt of surplus value usually or normally corresponding to it.
So far as the entire capitalist class is concerned, the proposition that it must itself throw into circulation the money required for the realisation of its surplus value (correspondingly also for the circulation of its capital, constant and variable) not only fails to appear paradoxical, but stands forth as a necessary condition of the entire mechanism. For there are here only two classes: the working class dis-posing only of its labour power, and the capitalist class, which has a monopoly of the social means of production and money. It would rather be a paradox if the working class were to advance in the first instance from its own resources the money required for the realisation of the surplus value contained in the commodities. But the individual capitalist makes this advance only by acting as a buyer, expending money in the purchase of articles of consumption or advancing money in the purchase of elements of his productive capital, whether of labour power or means of production. He never parts with his money unless he gets an equivalent for it. He advances money to the circulation only in the same way as he advances commodities to it. He acts in both instances as the initial point of their circulation. The actual process is obscured by two circumstances:
1) The appearance in the process of circulation of industrial capital of merchant''s capital (the first form of which is always money, since the merchant as such does not create any "product" or "commodity") and of money capital as an object of manipulation by a special kind of capitalists.
2) The division of surplus value — which must always be first in the hands of the industrial capitalist — into various categories, the vehicles of which there appear, aside from the industrial capitalist, as the landlord (for ground rent), the usurer (for interest), etc., as well as the government and its employees, rentiers, etc. These gentry appear as buyers vis-à-vis the industrial capitalist and to that extent as converters of his commodities into money; they too throw "money" pro parte into the circulation and he gets it from them. But it is always forgotten from what source they derived it originally, and continue deriving it ever anew.
Endnotes
[48] Marx is referring to the Brussels edition of this book. In his personal library there was a copy of it with remarks made on the indicated pages.— 244
[3] From the numerous notebooks compiled by Marx in the period indicated by Engels, the Institute of Marxism-Leninism of the CC CPSU published nearly all the passages from Russian sources (see Marx-Engels Archives, vols XI-XII, XVI, Moscow, 1948, 1952, 1955, 1982) as well as Mathematical Manuscripts (Moscow, 1968). Marx's notebooks are published in full in Section IV of Marx-Engels Gesamtausgabe.— 7
[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
[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