Chapters 16 & 17 of Capital v. II

Chapter 16: The Turnover of Variable Capital
"The variable circulating capital expended in production can serve afresh in the process of circulation only to the extent that the product in which its value is reproduced has been sold, converted from a commodity-capital into a money-capital, in order to be once more laid out in payment of labour-power. But the same is true of the constant circulating capital (materials of production) invested in production, the value of which reappears in the product as a portion of its value."
"Fixed capital continues to function in the process of production in its old use-form for a longer or shorter cycle of turnover periods of the circulating capital (equal to constant circulating plus variable circulating capital), while every single turnover is conditioned on the replacement of the entire circulating capital passing from the sphere of production - in the form of commodity-capital - into the sphere of circulation."

fixed capital never has to be remetamorphosed into money then back to production--circulating capital is always on the move, and this is the distinction.

Marx then explains (in no small amount of space) that while a faster turnover period for the circuit of an individual capital means both that its annual rate of surplus value will be higher, this does not actually change its real rate of surplus value because only part of the capital advanced is applied at any given time and if you calculate the rate of surplus value from the capital actual applied to production at any given time, rather than from the capital advanced, you will get the same figure "Only the capital actually employed in the labour-power produces surplus-value and to it apply all laws relating to surplus-value, including therefore the law according to which the quantity of surplus-value, its rate being given, is determined by the relative magnitude of the variable capital. [See Karl Marx, Capital, Ch. XI. - Ed.]" (p. 373) "The real rate of surplus-value expresses nothing but the ratio of the variable capital employed during a definite period to the surplus-value produced in the same time; or the quantity of unpaid labour set in motion by the variable capital employed during this time. It has absolutely nothing to do with that portion of the variable capital which is advanced during the time in which it is not employed. Hence it has likewise nothing to do with the ratio between that portion of capital which is advanced during a definite period of time and that portion which is employed during the same period of time - a ratio that is modified and differentiated for different capitals by the turnover period." (p. 379, penguin)

Pts. 2 & 3: However, not only does the annual rate of surplus value grow (without a change in real rate of surplus value) from a shortened turnover of capital, but such a venture also requires less initial capital advanced to set in motion more labor faster, because you can use the surplus value recouped from the sale of the produced commodities over and over, instead of having to wait a long time before recouping any expenses. This is because the surplus value produced that has not yet been sold cannot be reconverted into variable capital. In Marx's fast-turning-over capital (A), "The money which the A labourer throws into circulation is not only, as it is for the B labourer, the money-form of the value of his labour-power (in fact a means of payment for labour already performed); it is, counting from the second turnover period after the opening of the business, the money-form of his own value (equal to the price of the labour-power plus the surplus-value) created during the first period of turnover, by which his labour is paid during the second period of turnover. This is not the case with the B labourer. As far as the latter is concerned, the money is here, true enough, a medium of payment for work already done by him, but this work done is not paid for with the value which it itself produced and which was turned into money" (p. 388, penguin). There is also a greater period during which "labor-power, means of subsistence for this labor-power, fixed capital in the form of the means of labor applied under capital B [a long-turning capital], and production materials, are ALL withdrawn from the market, and an equivalent in money is cast into the market to replace them with, but no product is cast into the market during the year in question to

"If we conceive society as being not capitalistic but communistic, there will be no money-capital at all in the first place, not the disguises cloaking the transactions arising on account of it. The question then comes down to the need of society to calculate beforehand how much labour, means of production, and means of subsistence it can invest, without detriment, in such lines of business as for instance the building of railways, which do not furnish any means of production or subsistence, nor produce any useful effect for a long time, a year or more, while they extract labour, means of production and means of subsistence from the total annual production. In capitalist society however where social reason always asserts itself only post festum great disturbances may and must constantly occur." replace the material elements of productive capital withdrawn from it." (389-90). (390) Marx then gives examples of these disturbances (partly in the increase in demand when there's extra money and less commodities and also the increase in demand for labor--specific example of the construction of a railway, many workers formerly superfluous for value production are suddenly needed and perhaps wages rise, etc., until the railroad is finished and workers are in the shit again. Interesting manuscript note after this, which I think encapsulates the overproduction problem nicely: "Contradiction in the capitalist mode of production: the labourers as buyers of commodities are important for the market. But as sellers of their own commodity - labour-power - capitalist society tends to keep them down to the minimum price. -Further contradiction: the periods in which capitalist production exerts all its forces regularly turn out to be periods of over-production, because production potentials can never be utilised to such an extent that more value may not only be produced but also realised; but the sale of commodities, the realisation of commodity-capital and thus of surplus-value, is limited, not by the consumer requirements of society in general, but by the consumer requirements of a society in which the vast majority are always poor and must always remain poor. However, this pertains to the next part."

Lastly there is a discussion of why apparent crises in the money market can actually have their origins in anomalies in the production process, because of the problem of realizing surplus value in order to continue production/reproduction (English/Indian trade relations in cotton as example, including the possibility that England loans India the money to buy English cotton)

Chapter 17: The Circulation of Surplus Value
"there are furthermore necessarily differences in the capitalisation of surplus-value, in accumulation, and also in the quantity of surplus-value produced during the year, while the rate of surplus-value remains the same."

Marx seems to be setting up a number of time-differences to later investigate further to find contradictions in--in fact the whole question of time intervals between different operations of the production process seems to be central not only for the whole volume and the idea of the circulation of capital, but particularly for this chapter. For example: "One portion of the productive capital, which it is difficult to classify namely the additional capital required for the repair and maintenance of the fixed capital, is now likewise seen in a new light. In the case of A this portion of capital is not advanced - in full or for the greater part - at the beginning of production. It need not be available or even in existence. It comes out of the business itself by a direct transformation of surplus-value into capital, i.e., by its direct employment as capital. A part of the surplus-value which is not only periodically generated but also realised during the year can defray the expenditures that must be incurred for repairs, etc. A portion of the capital needed to carry on the business on its original scale is thus produced in the course of business by the business itself by means of capitalising part of the surplus-value. This is impossible for capital B."

More potential complications: "As soon as the development of credit interferes, the relation between originally advanced capital and capitalised surplus-value becomes still more complicated. For instance from not having sufficient capital of his own at the very outset for this purpose, A borrows from banker C a portion of the productive capital with which he starts in business or continues it during the year. Banker C lends him a sum of money which consists only of surplus-value deposited with the banker by capitalists D, E, F, etc. As far as A is concerned there is as yet no question of accumulated capital. But with regard to D, E, F, etc., A is, in fact, nothing but an agent capitalising surplus-value appropriated by them. that accumulation, the conversion of surplus-value into capital, is essentially a process of reproduction on a progressively increasing scale, whether this expansion is expressed extensively in the form of an addition of new factories to the old, or intensively by the enlargement of the existing scale of operation.Along with the real accumulation or conversion of surplus-value into productive capital (and a corresponding reproduction on an extended scale), there is, then, an accumulation of money, a raking together of a portion of the surplus-value in the form of latent money-capital, which is not intended to function as additional active capital until later, when it swells to a certain volume.That is how the matter looks from the standpoint of the individual capitalist. But simultaneously with the development of capitalist production the credit system also develops. The money-capital which the capitalist cannot as yet employ in his own business is employed by others, who pay him interest for its use. It serves him as money-capital in its specific meaning, as a kind of capital distinguished from productive capital. But it serves as capital in another's hands. It is plain that with the more frequent realisation of surplus-value and the rising scale on which it is produced, there is an increase in the proportion of new money-capital or money as capital thrown upon the money-market and then absorbed - at least the greater part of it - by extended production."

Next follows an interesting discussion about the difference between titles to wealth and the actual productive capacity of humanity, particularly with relation to money-capital that is not circulating in and out of production: "In all such cases, whatever may be the form of existence of this additional money-capital, it represents, so far as it is capital in spe, nothing but additional and reserved legal titles of capitalists to future annual additional social production.

'The mass of real accumulated wealth, in point of magnitude ... is so utterly insignificant when compared with the powers of production of the same society in whatever state of civilisation, or even compared with the actual consumption for even a few years of that society, that the great attention of legislators and political economists should be directed to 'productive powers' and their future free development, and not, as hitherto, to the mere accumulated wealth that strikes the eye. Of what is called accumulated wealth, by far the greater part is only nominal, consisting not of any real things, ships, houses, cottons, improvements on land, but of mere demands on the future annual productive powers of society, engendered and perpetuated by the expedients or institutions of insecurity ... The use of such articles (accumulations of physical things or actual wealth) as a mere means of appropriating to their possessors the wealth to be created by the future productive powers of society, being that alone of which the natural laws of distribution would, without force, gradually deprive them, or, if aided by cooperative labour, would in a very few years deprive them.'"

simple reproduction:

Here follows a long discourse about the gold production industry as an example (I think) of simple reproduction because you only ever need a specified quantity of gold(????) depending on how much value has to circulate how fast, etc. Marx goes on to talk about "how the capitalist manages always to withdraw more money from circulation than he throws into it. The question...is not where the surplus-value comes from but whence the money comes into which it is turned." I don't really understand this section and I'm probably oversimplifying and misinterpreting but it seems like after exhausting every possibility, Marx says that the extra money comes from the capitalist class--that they put that money into circulation for their own personal consumption before their first returns and surplus arrive to survive before the first revenues/profits/sv/etc come in. I guess this makes sense, and I know Marx is not talking about value but money--the nature of the setup seems strange to me to consider the whole capitalist class rather than the individual capitalist--obviously they are all doing this at different times so it's not as though they buy their means of survival from some alien body but out of the commodity capital already in existence, but it still just seems funny. "paradoxical as it may appear at first sight, it is the capitalist class itself that throws the money into circulation which serves for the realisation of the surplus-value incorporated in the commodities. But, nota bene, it does not throw it into circulation as advanced money, hence not as capital. It spends it as a means of purchase for its individual consumption. The money is not therefore advanced by the capitalist class, although it is the point of departure of its circulation. ...This money is not thrown into circulation by the capitalist as capital. But it is a decided trait of the capitalist to be able to live on means in his possession until surplus-value begins to return." Do others understand this portion differently?

Marx then moves into a discussion of rises and falls in wages and their effect on prices, contradicting both bourgeois economists and Lassallean 'iron law of wages' types to say that in fact any price rises are temporary and that with "a different division of the value of the product between wages and surplus-value, so that either the former rises and the latter falls, or visa-versa, the mass of the circulating money is not affected thereby. This change can take place without any expansion or contraction of the money currency. Let us consider particularly the case in which there is a general rise in wages, so that, under the assumptions made, there will be a general fall in the rate of surplus-value, but besides this, also according to our assumption, there will be no change in the value of the circulating mass of commodities. In this case there naturally is an increase in the money-capital which must be advanced as variable capital, hence in the amount of money which performs this function. But the surplus-value, and therefore also the amount of money required for its realisation, decreases by exactly the same amount by which the amount of money required for the function of variable capital increases. The amount of money required for the realisation of the commodity-value is not affected thereby, any more than this commodity-value itself. The cost price of the commodity rises for the individual capitalist but its social price of production remains unchanged. What is changed is the proportion in which, apart from the constant part of the value, the price of production of commodities is divided into wages and profit."

Intriguing remarks about credit, gold, the constitution of real wealth and the possibility of a "REAL" capacity for expanded reproduction without credit: "The entire amount of labour-power and social means of production expended in the annual production of gold and silver intended as instruments of circulation constitutes a bulky item of the faux frais of the capitalist mode of production, of the production of commodities in general. It is an equivalent abstraction from social utilisation of as many additional means of production and consumption as possible, i.e., of real wealth. To the extent that the costs of this expensive machinery of circulation are decreased, the given scale of production or the given degree of its extension remaining constant, the productive power of social labour is eo ipso increased. Hence, so far as the expediencies developing with the credit system have this effect, they increase capitalist wealth directly, either by performing a large portion of the social production and labour-power without any intervention of real money, or by raising the functional capacity of the quantity of money really functioning. This disposes also of the absurd question whether capitalist production in its present volume would be possible without the credit system (even if regarded only from this point of view), that is, with the circulation of metallic coin alone. Evidently this is not the case. It would rather have encountered barriers in the volume of production of precious metals. On the other hand one must not entertain any fantastic illusions on the productive power of the credit system, so far as it supplies or sets in motion money-capital. A further analysis of this question is out of place here."

In connexion with money reserve funds and the possibility of their accumulation without a lot more effort to import or mine more gold, Marx tells us,

"if we assume that the same amount of money is still in the country as before, then the accumulated and accumulating money has accrued from the circulation. Only its function is changed. It has been converted from money in currency into latent money-capital gradually taking shape.If we look upon this process merely as an individual phenomenon, there is nothing to explain. A part of the capitalists keeps a portion of the money realised by the sale of its product without withdrawing products from the market in return. Another part of them on the other hand transforms its money wholly into products, with the exception of the constantly recurring money-capital required for running the business.
....But the difficulty arises when we assume not an individual, but a general accumulation of money-capital on the part of the capitalist class. Apart from this class, according to our assumption — the general and exclusive domination of capitalist production — there is no other class at all except the working-class. All that the working-class buys is equal to the sum total of its wages, equal to the sum total of the variable capital advanced by the entire capitalist class. This money flows back to the capitalist class by the sale of its product to the working-class. Its variable capital thus resumes its money-form. Let the sum total of the variable capital be x times £100, i.e., the sum total of the variable capital employed, not advanced, during the year. The question now under consideration is not affected by how much or how little money, depending on the velocity of the turnover, is needed to advance this variable capital-value during the year. The capitalist class buys with these x times £100 of capital a certain amount of labour-power, or pays wages to a certain number of labourers — first transaction. The labourers buy with this same sum a certain quantity of commodities from the capitalists, whereby the sum of x times £100 flows back into the hands of the capitalists — second transaction. And this is constantly repeated. This amount of x times £100, therefore, can never enable the working-class to buy the part of the product which represents the constant capital, not to mention the part which represents the surplus-value of the capitalist class. With these x times £100 the labourers can never buy more than a part of the value of the social product equal to that part of the value which represents the value of the advanced variable capital."

" ...Apart from the case in which this universal accumulation of money expresses nothing but the distribution of the precious metal additionally introduced, in whatever proportion, among the various individual capitalists, how is the entire capitalist class then supposed to accumulate money?
They would all have to sell a portion of their product without buying anything in return. There is nothing mysterious about the fact that they all have a certain fund of money which they throw into circulation as a medium of circulation for their consumption, and a certain portion of which returns to each one of them from the circulation. But in that case this money-fund exists precisely as a fund for circulation, as a result of the conversion of the surplus-value into money, and does not by any means exist as latent money-capital.
If we view the matter as it takes place in reality, we find that the latent money-capital, which is accumulated for future use, consists:
1) Of deposits in banks; and it is a comparatively trifling sum which is really at the disposal of the bank. Money-capital is accumulated here only nominally. What is actually accumulated is outstanding claims which can be converted into money (if ever) only because a certain balance arises between the money withdrawn and the money deposited. It is only a relatively small sum that the bank holds in its hands in money.
2) Of government securities. These are not capital at all, but merely outstanding claims on the annual product of the nation.
3) Of stocks. Those which are not fakes are titles of ownership of some corporative real capital and drafts on the surplus-value accruing annually from it.
There is no accumulation of money in any of these cases. What appears on the one side as an accumulation of money-capital appears on the other as a continual actual expenditure of money. It is immaterial whether the money is spent by him who owns it, or by others, his debtors."

This is interesting as it seems partly to imply that there is no accumulation of money at all (at least without intermediary or external classes who are neither workers or capitalists), but the question then must be asked about the accumulation of capital itself and of course all the problems of the realisation of surplus value discussed in Luxemburg v. Grossman-Mattick/Bukharin/Bauer/Lenin about the overproduction/underconsumption theory. But I may be reading that into it, since it's really the only thing I knew about v. 2 going into it (from mostly Luxemburgist sources). What do others think about this? What is Marx talking about--is there no accumulation of money period? What about accumulation of surplus value? Will we get into that more with the concept of "the TOTAL SOCIAL CAPITAL"? Did people read the Introduction to the Penguin Edition volume by Ernest Mandel (which talked about this a bit)?