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

form of M—M' on one side, and of P...P and C'...C' on the other appears, if a change in the value of the elements of production occurs.

      In the cycle M...M', the formula of newly invested capital, which for the first time appears in the role of money-capital, a fall in the value of elements of production, such as raw materials, auxiliary materials, etc., will require a smaller investment of money-capital than would have been necessary before this fall for the purpose of starting a business of a definite size, because the scale of the process of production depends on the mass and volume of the means of production (provided the productivity remains unchanged), which a given quantity of labor-power can assimilate; but it does not depend on the value of these means of production nor on that of the labor-power (the latter has an influence only on the creation of more value). Take the opposite case. If the value of the elements of production of certain commodities is increased, which are required as elements of a certain productive capital, then more money-capital is required for the establishment of a business of definite proportions. In both cases it is only the quantity of the money-capital required for investment which is affected. In the former case, money-capital is set free, in the latter it is tied up, provided the advent of new industrial capitals proceeds normally in a given branch of production.

      The cycles P...P and C'...C' assume the character of M...M' only to the extent that the movement of P and C' is at the same time accumulation, so that additional m, money, is converted into money-capital. Apart from this case, they are differently affected than M...M' by a change of value of the elements of production; here, too, we do not take into consideration the reaction of such changes in value on those parts of capitals which are engaged in the process of production. It is not the original investment, which is here directly affected, not a capital engaged in its first rotation, but one in a process of reproduction; in other words, C'...C{^LPm, the reconversion of commodity-capital into its elements of production, so far as they are composed of commodities. In a reduction of value (or price), three cases are possible: The process of reproduction is continued on the same scale; in that case a part of the available money-capital is set free and money-capital is accumulated, although no actual accumulation (production on an enlarged scale), or the transformation of m (surplus-value) into funds for accumulation initiating and accompanying it, has previously taken place. Or, the process of reproduction is renewed on a more enlarged scale than would have been ordinarily the case, provided the technical proportions admit it. Or, finally, a larger stock of raw materials, etc., is laid in.

      The opposite takes place if the value of the elements of reproduction of a commodity-capital increases. In that case, reproduction does not take place on its normal scale (work is done in a shorter time, for instance); or additional money-capital must be employed in order to maintain the old scale (money-capital is tied up); or the money-fund of the accumulation, if available, is entirely or partially employed for the enlargement of the process of reproduction to its old scale. This is also tying up money-capital, only the additional money-capital does not come from the outside, from the money-market, but out of the pockets of the industrial capitalist himself.

      However, there may be modifying circumstances in P...P and C'...C'. If our cotton spinner has a large stock of cotton (a large proportion of his productive capital in the form of a stock of cotton), a part of his productive capital is depreciated by a fall in the price of cotton; but if this price has risen, this part of his productive capital is enhanced in value. On the other hand, if he had tied up a large part of his capital in the form of commodity-capital, for instance in cotton yarn, a part of his commodity capital or for that matter of any of his rotating capital, is depreciated by a fall in the price of cotton, or enhanced by a rise in that price. Finally take the process C'—M—C{^LPm If C'—M, the realization on the commodity-capital, has taken place before a change in the value of the elements of C, then capital is affected only in the way indicated in the first case, that is to say, in the second act of circulation, M—C{^LPm but if such a change has occurred before the realization of C'—M, then, other conditions remaining equal, a fall in the price of the cotton causes a corresponding fall in the price of yarn, and a rise in the price of cotton a rise in the price of yarn. The effect on the various individual capitals in the same branch of production may differ widely according to the circumstances in which they find themselves. Money-capital may also be set free or tied up by differences in the duration of the process of circulation, in other words, by the pace of the circulation. But this belongs in the discussion of the periods of turn-over. At this point, we are only interested in the real difference arising from changes of values in the elements of productive capital between M...M' and the other two cycles of the process of rotation.

      In the section of circulation indicated by M—C{^LPm at a period of developed and prevailing capitalist modes of production, a large portion of the commodities composing Pm, means of production, will be rotating commodity-capital of some one else. From the standpoint of the seller, therefore, the transaction is C'—M', the transformation of commodity-capital into money-capital. But this does not apply absolutely. In the opposite case, in those sections of its process of rotation, where industrial capital performs either the functions of money or of commodities, the cycle of industrial capital, whether as money-capital or as commodity-capital, crosses the circulation of commodities of the most varied social modes of production, so far as they produce commodities. No matter whether a commodity is the product of slavery, of peasants (Chinese, Indian ryots), of communes (Dutch East Indies), or of state enterprise (such as existed in former epochs of Russian history on the basis of serfdom), or of half savage hunting tribes, etc., commodities and money of such modes of production, when coming in contact with commodities and money representing industrial capital, enter as much into its rotation as into that of surplus-values embodied in the commodity-capital, provided the surplus-value is spent as revenue. They enter into both of the cycles of circulation of commodity-capital. The character of the process of production from which they emanate is immaterial. They perform the function of commodities on the market, and enter into the cycles of industrial capital as well as into those of the surplus-value carried by it. It is the universal character of the commodities, the world character of the market, which distinguishes the process of rotation of the industrial capital. What is true of foreign commodities, is also true of foreign money. Just as commodity-capital has only the character of commodities in contact with foreign money, so this money has only the character of money in contact with commodity-capital. Money here performs the functions of world-money.

      However, two points must be noted here.

      First. As soon as the transaction M—Pm is completed, the commodities (Pm) cease to be such and become one of the modes of existence of industrial capital in its function of productive capital. Henceforth their origin is obliterated. They exist only as forms of industrial capital and are embodied in it. But it still remains necessary to reproduce them, if their places are to be filled, and to this extent the capitalist mode of production is conditioned on other modes of production outside of its own stage of development. But it is the tendency of capitalist production to transform all production as much as possible into a production of commodities. The mainspring, by which this is accomplished, is the implication of other modes of production into the circulation process of capitalist production. And developed commodity-production is capitalist production. The intervention of industrial capital promotes this transformation everywhere, and simultaneously with it also the transformation of all direct producers into wage laborers.

      Second. The commodities entering into the process of circulation (including the means of existence necessary for the reproduction of the labor-power of the laborer, who receives variable capital in the form of wages), regardless of their origin and of the social form of the productive process by which they were created, entertain the relation of commodity-capital, in the form of merchandise or merchant's capital, toward industrial capital. Merchant's capital, by its very nature, includes commodities of all modes of production.

      Capitalist production does not only imply production on a large scale, but also necessarily sale on a large scale, in other words, sale to the dealer, not to the individual consumer. Of course, so far as a consumer is himself a productive consumer, an industrial capitalist, whose industrial capital produces means of production for some other branch of industry, a direct sale of one industrial capitalist's product to many other capitalists takes place (orders, etc). To this extent, every industrial capitalist is