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

form instead of its original one of productive capital, while it does not change places at all if held in the form of C'.

      C'—M'—C includes processes of circulation only for C', and they are phases in its reproduction, but the actual reproduction of C, into which C' is transformed, is necessary for the completion of C'—M'—C. This, however, is conditioned on a process of reproduction which lies outside of the process of reproduction of the individual capital represented by C'.

      In the first form, M—C Pm prepares only the first transformation of money-capital into productive capital; in the second form, it prepares the retransformation of commodity-capital into productive capital; that is to say, so far as the investment of industrial capital remains the same, the commodity-capital is retransformed into the same elements of production out of which it originated. Here as well as in the first form, the process of production is in a preparatory stage, but it is a return to it and its renewal, it is for the purpose of repeating the process of self-utilization.

      It must be noted, once more, that M—L is not merely the exchange of commodities, but the purchase of a commodity L, which is to serve for the production of surplus-value, just as M—Pm is a process which is indispensable for the same end.

      When M—C{^LPm has been completed, M has been retransformed into productive capital P, and the cycle begins anew.

      The elaborated form of P...C'—M'—C...P is

      The transformation of money-capital into productive capital is the purchase of commodities for the purpose of producing commodities. Consumption falls within the cycle of capital only in so far as it is productive consumption; its premise is that surplus-value is produced by means of the commodities so consumed. And this is quite different from a production, even though it be a production of commodities, which has for its end the existence of the producer. A replacing of one commodity by another for the purpose of producing surplus-value is a different matter than the exchange of products which is perfected merely by means of money. But some economists use this sort of exchange as a proof that there can be no overproduction.

      Apart from the productive consumption of M, which is transformed into L and Pm, this cycle contains the first phase M—L, which signifies, from the standpoint of the laborer L—M, or C—M. In the laborer's circulation, L—M—C, which includes his individual consumption, only the first factor falls within the cycle of capital by means of L—M. The second act, M—C, does not fall within the circulation of individual capital, although it is conditioned on it. But the continuous existence of the laboring class is necessary for the capitalist class, and this requires the individual consumption of the laborer, made possible by M—C.

      The act C'—M' requires only that C' be transformed into money, that it be sold, in order that capital-value may continue its cycles and surplus-value be consumed by the capitalist. Of course, C' is bought only because the article is a use-value and serviceable for individual or productive consumption. But if C' continues to circulate, for instance, in the hand of the merchant who has bought the yarn, this does not interfere with the continuation of the cycle of individual capital which produced the yarn and sold it to the merchant. The entire process proceeds uninterruptedly and simultaneously with the individual consumption of the capitalist and the laborer. This point is important in a discussion of commercial crises.

      As soon as C' has been sold for money, it may re-enter into the material elements of the labor process, and thus of the reproductive process. Whether C' is bought by the final consumer or by a merchant, does not alter the case. The quantity of commodities produced by capitalist production depends on the scale of production and on the continual necessity for expansion following from this production. It does not depend on a predestined circle of supply and demand, nor on certain wants to be supplied. Production on a large scale can have no other buyer, apart from other industrial capitalists, than the wholesale merchant. Within certain limits, the process of reproduction may take place on the same or on an increased scale, although the commodities taken out of it may not have gone into individual or productive consumption. The consumption of commodities is not included in the cycle of the capital which produced them. For instance, as soon as the yarn has been sold, the cycle of the capital-value contained in the yarn may begin anew, regardless of what may become of the sold yarn. So long as the product is sold, everything is going its regular course from the standpoint of the capitalist producer. The cycle of his capital-value is not interrupted. And if this process is expanded—including an increased productive consumption of the means of production—this reproduction of capital may be accompanied by an increased individual consumption (demand) on the part of the laborers, since this individual consumption is initiated and mediated by productive consumption. Thus the production of surplus-value, and with it the individual consumption of the capitalist, may increase, the entire process of reproduction may be in a flourishing condition, and yet a large part of the commodities may have entered into consumption only apparently, while in reality they may still remain unsold in the hands of dealers, in other words, they may still be actually in the market. Now one stream of commodities follows another, and finally it becomes obvious that the previous stream had been only apparently absorbed by consumption. The commodity-capitals compete with one another for a place on the market. The succeeding ones, in order to be able to sell, do so below price. The former streams have not yet been utilized, when the payment for them is due. Their owners must declare their insolvency, or they sell at any price in order to fulfill their obligations. This sale has nothing whatever to do with the actual condition of the demand. It is merely a question of a demand for payment, of the pressing necessity of transforming commodities into money. Then a crisis comes. It becomes noticeable, not in the direct decrease of consumptive demand, not in the demand for individual consumption, but in the decrease of exchanges of capital for capital, of the reproductive process of capital.

      If the commodities Pm and L, into which M is transformed in the performance of its function of money-capital, in its capacity as capital-value destined for retransformation into productive capital, if, I say, those commodities are to be bought or paid at different dates, so that M—C represents a series of successive purchases or payments, then a part of M performs the act M—C, while another part persists in the form of money, and does not serve in the performance of simultaneous or successive acts M—C, until the conditions of this process itself demand it. This part of M is temporarily withheld from circulation, in order to perform its function at the proper moment. This storing of M for a certain time is a function conditioned on its circulation and intended for circulation. Its existence as a fund for purchase and payment, the suspension of its movement, the condition of its interrupted circulation, are conditions in which money performs one of its functions as money-capital. I say money-capital; for in this case the money remaining temporarily at rest is itself a part of money-capital M (of M'—m equal to M), of that part of commodity-capital which is equal to P, of that value of productive capital from which the cycle proceeds. On the other hand, all money withdrawn from circulation has the form of a hoard. In the form of a hoard, money is thus likewise a function of money-capital, just as the function of money in M—C as a medium of purchase or payment becomes a function of money-capital. For capital-value here exists in the form of money, the money-form is a condition of industrial capital in one of its stages, prescribed by the interrelations of processes within the cycle. At the same time it is here once more obvious, that money-capital performs no other functions than those of money within the cycle of industrial capital, and that these functions assume the significance of capital functions only by virtue of their interrelations with the other stages of this cycle.

      The representation of M' as a relation of m to M, as a capital relation, is not so much a function of money-capital, as of commodity-capital C', which in its turn, as a relation of c to C, expresses but the result of the process of production, of the self-utilization of capital which took place in it.

      If the movement of the process of circulation meets with obstacles, so that M must suspend its function M—C on account of external conditions, such as the condition of the market, etc., and if it therefore remains for a shorter or longer time in its money-form, then we have once more money in the form of a hoard which it may also assume in the simple circulation of commodities, as