Capital Volume II chapter one

Capital Volume II
ENGELS’ PREFACE
Engels considers the charge that Marx plagiarizes Rodbertus. The latter claimed to have discovered that profit (or ‘rent’) is surplus-value derived from unpaid labor. But firstly, the classical economists (Smith, Ricardo, et al.) already knew this. And secondly, they did not understand what they had already demonstrated. But Marx showed how this happens, what type of capital and labor are involved, how labor-power is exchanged in such a way that surplus-value can result. Labor cannot be purchased because, as the creator of value, it does not have a value. Thus it is labor-power that is exchanged. Also, classical economics cannot explain how two equal capitals tend to produce equal surplus-values, even if they employ different quantities of labor, or have different ratios between constant and variable capital. Marx will show how this does not contradict the law of value but is explainable on the basis of it. This is not explained here, however.

CHAPTER ONE
The circuit of capital is reiterated. It comprises three stages: 1. The capitalist buys commodities (means of production) on the market (M-C). 2. Productive consumption of the commodities by the capitalist which results in commodities of greater value (P). 3. Capitalist returns to market as a seller and circulates his commodities (C’-M’). Thus the long form of the equation is M-C…P…C’-M’.
In volume one the first and third stages were discussed insofar as was necessary to understand the second stage (P). “Thus the different forms with which capital clothes itself in its different stages, alternately assuming them and casting them aside, remained uninvestigated. These will now be the immediate object of our inquiry” (111).
In order to focus on the forms that capital takes in its circuit in their ‘pure state’ it is assumed here that commodities are sold at their values under unchanging circumstances, and assume that the values remain stable.
1. First Stage. M-C
This is the conversion of a sum of money into a sum of commodities (from the perspective of the buyer). What distinguishes this stage is not the form of the act but the content, i.e. the use character of the commodities exchanged: means of production (mp) and labor-power (L). Thus we have the formula C=L+mp. Thus the act M-C considered in terms of content is comprised of M-L and M-mp. I will approximate Marx’s formula as M-C[L,mp]. These two purchases pertain to two different markets, the commodity market proper and the labor market.
There is also a quantitative relationship between M-L and M-mp. In short, the means of production must be sufficient to employ the amount of labor purchased. Thus M-C[L,mp] expresses a quantitative ratio between the portions of money spent on labor-power and means and this ratio is conditioned by the amount of surplus labor that will be demanded of the laborers.
Thus if the weekly wages of 50 workers in a spinning mill come to $50, and if these workers work 3,000 man-hours in a week, and if half the hours of labor will be surplus labor, then it will be necessary to spend $372 on means of production if that is the value of the means of production expended in a working week of 3,000 man-hours, 1500 of which are surplus labor. (the number is presumably somewhat arbitrary)
Thus M-mp is conditioned by M-L and by the amount of surplus labor that will be demanded of the workers. Not enough mp will not allow for the exploitation of labor, too much will be unable to be transformed into products.
Thus once the circuit M-C[L,mp] is completed, the purchaser has at his disposal not only the means of production and labor-power necessary to produce a useful article, but a greater capacity to set labor-power in motion than is needed to replace the value of the labor-power, as well as the means of production required to realize or objectify this amount of labor. (‘labor-power in motion’= labor) Thus he has the means to produce more value than he has in his hands. In other words, he begins with a sum of value, then transforms it into a form in which it can be realized as value that produces surplus-value, i.e. productive capital (P).
The value of P equals the value of L+mp. Therefore, P is the same amount of value as M was. Thus M is productive capital (P) in the form of money capital (M that will become P). Thus M-C is the transformation of capital value from its money form into its productive form, the transformation of money capital into productive capital. In this circuit, money is the original bearer of capital value.
Capital as money exists in a state where it can perform monetary functions=purchase and payment. Money capital has this power by virtue of being money, not by virtue of being capital. Capital in the form of money can only perform monetary functions and no others. What makes this money capital is its role in the movement of capital, i.e. its role in relation to the other stages of the circuit. Thus money capital already contains latently the result of the capitalist production process.
A part of the money that performs the function of money capital in M-C passes over into a function in which its capital character vanishes and only its money character remains. We have seen that the circulation of money capital breaks up into M-mp and M-L. Now we will consider the latter process by itself. M-L is the purchase of labor-power on the part of the capitalist, the sale of labor-power on the part of the worker. What is M-C (as M-L) for the purchaser is thus L-M (C-M) for the seller (the worker). For the seller of L this is the first stage of circulation (different circuit). The worker spends the money on commodities for consumption. Thus from his perspective the formula is L-M-C; first L-M (C-M) and second M-C, in other words for him the circuit is C-M-C.
The characteristic moment of the transformation of money capital into productive capital is M-L; M-mp is necessary only to realize the labor bought with M-L. However, M-L is not regarded by the political economists as characteristic of the capitalist mode of production because the purchase of labor-power is a transaction which determines that a greater quantity of labor is provided than is necessary to replace the value of the labor-power (the wage); it is rather its form, that in the form of wages labor is bought with money, which is taken as the characteristic feature of a ‘money economy.’ This misses what is essential about the transaction.
What is overlooked here is the irrationality of the form. This consists in the fact that labor as the value-forming element cannot itself possess any value, so a certain quantity of labor cannot have a value that is expressed in a price. However, wages are a disguised form in which the price of a day’s labor-power presents itself as the price of the labor set in motion by this labor-power so that the value produced by this labor-power in six hours (for instance) is expressed as the value of the 12-hour functioning of labor-power (i.e. labor).
M-L is taken as the hallmark of the ‘money economy’ because here labor appears as the commodity of its possessor and money as that of its buyer—because of the money relation. However, money appears historically as a buyer of services without its being transformed into money capital.
Because money is indifferent to the commodities it can be transformed into, the sale of labor-power on the market as a commodity does not appear any different from the sale or purchase of any other commodity. Thus what is characteristic of CAPITLISM is not that the commodity labor-power can be bought, but that labor-power appears as a commodity at all. (114)
The precondition of M-L is M-mp. In other words, it is necessary that the worker be separated from the means of production and need to sell his labor-power in order to set it in motion. Thus, although in the transaction M-L the worker and capitalist only relate to each other as seller and buyer, and this seem to be only in a money relationship with each other, in reality the buyer must appear from the start as the possessor of the means of production without which the productive expenditure of labor-power by its possessor is impossible. Thus the class relation between capitalist and wage-laborer is already presupposed the moment the two confront each other in the act M-L (L-M for the worker). Thus the function of money is not what is essential here, but the fact that the worker is already alienated from the means of production (including means of subsistence as means of production of labor-power). If M-L happens, this separation already exists.
“The capital relation arises only in the production process because it exists implicitly in the act of circulation, in the basically different economic conditions in which buyer and seller confront one another, in their class relation. It is not the nature of money that gives rise to this relation; it is rather the existence of the relation that can transform a mere function of money into a function of capital” (115).
Thus the underlying situation is one of distribution, in the sense of distribution of the elements of production with the objective factors and labor-power forming two separated groups.
Money capital can purchase equipment and pay laborers because it is money, not because it is capital. On the other hand it can purchase these specific things, such that it can produce surplus-value, because it is capital, not because it is money.
2. Second Stage. The Function of Productive Capital
The act M-C must complete itself as C-M. But the direct result of M-C[L,mp] is an interruption in the circulation of the capital advanced. The transformation of money capital into productive capital results in a form in which the capital cannot circulate any further, but must go into consumption (productive consumption).
As soon as production by way of wage-labor becomes general, commodity production must be the general form of production. Commodity production in turn brings about an ever growing division of social labor. The existence of a class of wage-laborers encourages the transition of all commodity production to capitalist commodity production. This has a dissolving effect on all earlier forms of production which are chiefly aimed at satisfying the direct needs of the producers and only transform the excess product into commodities. The sale of the product becomes the main goal of production, and once this has taken root all other forms of commodity production are gradually destroyed. Thus first the existence of the wage relation makes commodity production universal, then it gradually transforms all commodity production into capitalist commodity production.
In any social mode of production the main factors are workers and means of production. These must be connected for any production to take place. The particular manner in which this connection is effected is what distinguishes an epoch of the social structure. “All pursuit of commodity production becomes at the same time the pursuit of the exploitation of labor-power; but only capitalist commodity production is an epoch-making mode of exploitation, which in the course of its historical development revolutionizes the entire economic structure of society by its organization of the labor process and its gigantic extension of technique, and towers incomparably above all earlier epochs” (120).
The value of a product in this system is P+s, the value of the productive capital consumed in its production plus the surplus-value it engenders.
3. Third Stage. C’-M’
The product is now characterized by the fact that part of it is surplus-value, which is in the same commodity form as the original value and is thus symbolized as c. Thus we have the following formula: C+c=C’. What makes C into C’ is not the absolute amount of its value but rather the relative magnitude of its value compared with the value of the capital P consumed in its production. It contains the value of P (the same as C=L+mp) plus the surplus-value. Thus C’ exceeds P by the value of c. Thus the 10,000 lb. of yarn (for example) are C’ only when considered within the circuit of the individual capital, as the transformed form of P. Thus if the 10,000 lb. of yarn is sold to a spinning mill, it simply appears as C in the stage M-C from the perspective of the buyer. From the perspective of the seller, however, this act is the realization of a capital value (say $422) plus a surplus value (here, $78) and thus C’-M’.
The mass of commodities C’ must fully undergo the metamorphosis M’-C’. If of 10,000 lb. yarn, the capitalist only manages to sell 8,440 lb. at its value of $372, then he only replaces the value of the capital advanced. Any more than that and he realizes surplus-value, and he must sell all 10,000 lb. to realize all the surplus-value. If he pays the workers more, then the value of the yarn is unchanged, but he will realize less surplus-value. Thus it is an internal relation of values within the circuit of the individual capital that are decisive. C’=C+c, and C=P=M. If we call c expressed in monetary terms m, the full formula is M-C[L,mp]…P…(C+c)-(M+m).
In the first stage the capitalist withdraws articles of use from the market, in the 3rd he puts them into the market. If he withdraws more value from the market than he originally put into it, this is because he puts in a greater value in the form of commodities than he originally withdrew. He puts in M and withdraws C; then, he puts in C+c and withdraws M+m. This is a result of the exploitation of labor-power.
M’ functions as M at the head of a new circuit. In M’ M and m are distinguished numerically but are actually indistinguishable and have obliterated any trace of the passage through –C…P...C’-. Thus it is not the active function of money capital to present itself as M’, but rather this is a function of C’ (129). M’ and C’ are both capital, differentiated only in their form. But C’ is more rational because it recalls its origin, which is obliterated in M’. Thus M…M’ is irrational because it seems to be money breeding more money.
4. The Circuit as a Whole
The capital that appears as money capital, commodity capital and productive capital in the circuit of money capital is called industrial capital. The circuit only proceeds normally if it is continually moving. Also abstraction has been made here from the fact that mp only yield their value in the production process bit by bit. Other modifications of the preceding analysis are acknowledged here.
Industrial capital is the only mode of existence of capital in which not only the appropriation of surplus-value but also its creation is a function of capital. Thus it requires production to be capitalist in character; its existence includes the class antagonism between capitalists and workers (136-7).
The circuit ends with a sale, which from another perspective is the conversion of money back into commodities, but this falls outside the circuit of the individual capital. Capital performs its own circuit within the general circulation of commodities. This is why it is here called the ‘circuit of money capital,’ since the circulation of industrial capital is also the general circulation of commodities.