The Process of Circulation of Capital (Capital Vol. II). Karl Marx

first stage of the cycle of money-capital, M—C. In spite of the different place at which we now find it, the function of money-capital, into which form the commodity-capital has now been transformed, is the same: Transformation into Pm and L, into means of production and labor-power.

      Simultaneously with c—m, capital-value in the function of commodity-capital (C'—M') has also gone through the phase C—M, and enters now into the supplementary phase M—C{^LPm. Its complete circulation is, therefore, C—M—C Pm.

      First: Money-capital M appeared in cycle I (M...M') as the original form in which capital-value is advanced; it appears at the very outset as a part of that sum of money into which commodity-capital transformed itself in the first phase of circulation, C'—M'. It is from the beginning the transformation of P by means of the sale of commodities into the money-form. Money-capital exists here as that form of capital-value which is neither its original nor its final one, since the phase M—C, which supplements the phase C—M, can only be completed by again discarding the money-form. Therefore, that part of M—C which is at the same time M—L appears now no longer as a mere advance of money in the purchase of labor-power, but also as an advance by means of which the same 1,000 pounds of yarn, valued at 50 pounds, which form a part of the commodity-value created by labor-power, are given to the laborer in the form of money. The money thus advanced to the laborer is merely a transformed equivalent of a fraction of the value of the commodities produced by himself. And for this very reason, the act M—C, so far as it means M—L, is by no means simply a replacement of a commodity in the form of money by a commodity in the form of a use-value, but it includes other elements which are in a way independent of the general circulation of commodities.

      M' appears as a changed form of C', which is itself a product of a previous function of P, of the process of production. The entire sum of money M is therefore a money-expression of past labor. In our illustration, 10,000 pounds of yarn (worth 500 pounds sterling), are the product of the spinning process. Of this quantity, 7,440 pounds represent the advanced constant capital c (worth 372 pounds sterling); 1,000 pounds represent the advanced variable capital v (worth 50 pounds sterling); and 1,560 pounds represent the surplus-value s (worth 78 pounds sterling). If in M', only the original capital of 422 pounds sterling is again advanced, other conditions remaining the same, then the laborer receives next week, in M—L, only a part of the 10,000 pounds of yarn produced in this week (the money-value of 1,000 pounds of yarn). As a result of C—M, money is always the expression of past labor. If the supplementary act M—C takes place at once on the commodity-market and M is given in return for commodities existing in this market, then this act is again a transformation of past labor from the money-form into the commodity-form. But M—C differs in the matter of time from C—M. True, these two acts may exceptionally take place at the same time, for instance when the capitalist who performs the act M—C and the other capitalist for whom this act signifies C—M mutually ship their commodities at the same time and M is used only to square the balance. The difference in time between the performance of C—M and M—C may be considerable or insignificant. Although M, as the result of C—M, represents past labor, it may, in the act M—C, represent the changed form of commodities which are not as yet on the market, but will be thrown upon it in the future, since M—C need not take place until C has been produced anew M may also stand for commodities which are produced simultaneously with the C whose money-expression M is; for instance, in the movement M—C (purchase of means of production), coal may be bought before it has been mined. In so far as m represents an accumulation of money which is not spent as revenue, it may stand for cotton which will not be produced until next year. The same holds good of the revenue of the capitalist represented by m—c. It also applies to wages, in this case to L equal to 50 pounds sterling; this money is not only the money-form of the past labor of the laborers, but at the same time a draft on simultaneously performed labor or on future labor. The laborer may buy for his wages a coat which will not be made until next week. This applies especially to the vast number of necessary means of subsistence which must be consumed almost as soon as they have been produced, to prevent their being spoiled. Thus the laborer receives in the money which represents his wages the changed form of his own future labor or that of others. By means of a part of the laborer's past labor, the capitalist gives him a draft on his own future labor. It is the laborer's simultaneous or future labor which represents the not yet existing supply that will pay for his past labor. In this case, the idea of the formation of a supply disappears altogether.

      Second: In the circulation C—M—C{^LPm the same money changes places twice; the capitalist first receives it as a seller and gives it away as a buyer; the transformation of commodities into the money-form serves only for the purpose of retransforming it from money into commodities; the money-form of capital, its existence as money-capital, is therefore only a passing factor in this movement; or, so far as the movement proceeds, money-capital appears only as a circulating medium when it serves to buy things; on the other hand, money-capital performs the function of a paying medium when capitalists buy mutually from one another and square only the balance of their accounts.

      Third: The function of money-capital, whether it is a mere circulating medium or a paying medium, mediates only the renewal of C by L and Pm, that is to say, the renewal of the commodities produced by productive capital, such as yarn (after deducting the surplus-value used as revenue), out of its constituent elements, in other words, the retransformation of capital-value from its commodity-form into the elements constituting this commodity. In the last analysis, the function of money-capital mediates only the retransformation of commodity-capital into productive capital.

      In order that the cycle may be completed normally, C' must be sold at its value and completely. Furthermore, C—M—C does not signify merely the replacing of one commodity by another, but also the replacing of the same relative values. We assume that this takes place here. As a matter of fact, however, the values of the means of production vary; it is precisely capitalist production which has for its characteristic a continuous change of value-relations, and this is conditioned on the ever changing productivity of labor, which is another characteristic of capitalist production. This change in the value of the factors of production will be discussed later on, and we merely refer to it here. The transformation of the elements of production into commodity-products, of P into C', takes place in the sphere of production, while their retransformation from C' into P takes place in the sphere of circulation; it is accomplished by way of the simple metamorphosis of commodities, but its content is a phase in the process of reproduction, regarded as a whole. C—M—C, considered as a form of the circulation of capital, includes a change of substance due to this function. The process C—M—C requires that C should be identical with the elements of production of the quantity of commodities C', and that these elements maintain their relative proportions toward one another. It is, therefore, understood that the commodities are not only bought at their value, but also that they do not undergo any change of value during their circulation. Otherwise this process cannot run normally.

      In M...M', the factor M represents the original form of capital-value, which is discarded only to be resumed. In P...C'—M'—C...P, the factor M represents a form which is only assumed in this process and which is discarded before this process is over with. The money-form appears here only as a passing independent form of capital-value. Capital is just as anxious to assume this form in C' as it is to discard it in M' after barely assuming it, in order to again transform itself into productive capital. So long as it remains in the money-form, it does not perform the function of capital and does not, therefore, generate new values; it then lies fallow. M serves here as a circulating medium, but as a circulating medium of capital. The semblance of independence, which the money-form of capital-value possesses in the first form of the circulation of money-capital, disappears in this second form, which, therefore, is the negation of the first form and reduces it to a concrete form. If the second metamorphosis M—C meets with any obstacles—for instance, if there are no means of production in the market—the uninterrupted flow of the process of reproduction is arrested, quite as much as it is when capital in the form of commodity-capital is held fast. But there is this difference: It can remain longer in the money-form than in that of commodities. It does not cease to be money, if it does not perform the functions of money-capital; but it does cease to be a commodity, or even a use-value, if it is interrupted too long in its functions of commodity-capital. Furthermore,