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

buyer of means of production, is C'-M' for their seller. Hence C' presupposes the existence of commodity-capital, and thus of commodities as the result of capitalist production, and this implies the function of productive capital.

      2. The Rotation of Productive Capital

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      The rotation of productive capital has the general formula P...C'-M'-C...P. It signifies the periodical renewal of the function of productive capital, in other words its reproduction, or its process of production as a reproductive process generating surplus-value. It is not only production, but a periodical reproduction of surplus-value; it is the function of industrial capital in its productive form, and this function is not performed merely once, but periodically so that the terminal point of one cycle is the starting point of another. A portion of C' may re-enter directly into the same labor process as means of production out of which it came in the form of commodities (for instance, in various branches of investment of industrial capital). This merely does away with the transformation of its value into money proper, or token-money, or else it finds an independent expression merely in calculation. This part of value does not enter into the circulation. Thus it is that values enter into the process of production which do not enter into circulation. The same is also true of that part of C' which is consumed by the capitalist, and which represents surplus-value in the form of means of consumption, in their natural state. But this is inconsiderable for capitalist production. It deserves consideration, if at all, only in agriculture.

      Two things are at once apparent in this form.

      In the first place, while in the first form, M...M', the process of production, a function of P, interrupts the circulation of money-capital and acts only as a mediator between its two phase M-C and C'-M', it is the entire circulation process of industrial capital, its entire movement within the sphere of circulation, which intervenes here and forms the connecting link between productive capitals, which begin the circulation at one extreme and close it at another, only to make this last extreme the starting point of a new cycle. Circulation proper appears but as an instrument promoting the periodic renewal, and thus the continuous reproduction, of productive capital.

      In the second place, the entire circulation assumes a form which is the reverse of that which it has in the circulation of money-capital. While the circulation of money-capital proceeds after the formula M—C—M (M—C. C—M), making exception of the determination of value, it proceeds in the case of productive capital, making the same exception, after the formula C—M—C (C—M. M—C). which is the form of the simple circulation of commodities.

I. Simple Reproduction

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      Let us first consider the process C'—M'—C, which takes place between the two extremes P...P.

      The starting point of this circulation is the commodity-capital C', equal to C plus c, or equal to P plus c. The function of commodity-capital C'—M' has been considered in the first form of the circulation. It consisted in the realization of the capital-value P, contained in it, which now exists as a part of the commodity C, and likewise in the realization of the surplus-value contained in it, which now exists as a part of the same mass of commodities C and has the value of c. But in the former case, this function formed the second phase of the interrupted circulation and the concluding phase of the entire cycle. In the present case, it forms the second phase of the cycle, but the first phase of the circulation. The first cycle ends with M', and since M' as well as the original M may again open the second cycle as money-capital, it was not necessary for the moment to analyze whether the parts of M', viz., M and m (surplus-value) continue in their course together, or whether each one of them pursues its own course. This would only have been necessary, if we had followed up the first cycle in its renewed course. But in studying the cycles of productive capital, this point must be decided, because the determination of its very first cycle depends on it, and because C'—M' appears in it as the first phase of circulation which has to be supplemented by M—C. It depends on the outcome of this decision, whether our formula represents the simple reproduction, or reproduction on an enlarged scale. The character of the cycle changes according to this decision.

      Let us, then, take first the simple reproduction of productive capital, assuming that the conditions are the same as those taken for a basis in the first chapter, and that the commodities are bought and sold at their value. Under these conditions, the entire surplus-value enters into the individual consumption of the capitalist. As soon as the transformation of the commodity-capital C' into money has taken place, that part of the money which represents the capital-value continues in the cycle of industrial capital; the other part, which represents surplus-value in the form of gold, enters into the general circulation of commodities as a circulation of money emanating from the capitalist but taking place outside of the circulation of his individual capital.

      In our illustration, we had a commodity-capital C' of 10,000 pounds of yarn, valued at 500 pounds sterling; 422 pounds sterling of this represent the value of productive capital and continue, as the money-form of 8,440 pounds of yarn, the capital circulation begun by C', while the surplus-value of 78 pounds sterling, as the money-form of 1,560 pounds of yarn, the surplus-product, leaves this circulation and describes its own separate course within the general circulation of commodities.

      The formula m—c represents a series of purchases by means of money which the capitalist spends either in commodities proper or for personal services to his cherished self or family. These purchases are made piece-meal at various times. Money, therefore, exists temporarily in the form of a supply, or hoard, of money destined for gradual consumption, for money interrupted in its circulation partakes of the nature of a hoard. Its function as a circulating medium, including that of a temporary hoard, does not share in the circulation of capital having the form of money M. This money is not advanced, but spent.

      We have assumed that the advanced total capital always passed entirely from one of its phases into the other. In this case, we, therefore, assume that the mass of commodities produced by P represents the total value of the productive capital P, or 422 pounds sterling plus 78 pounds sterling of surplus-value created in the process of production. In our illustration, which deals with an easily analyzed commodity, the surplus-value exists in the form of 1,560 pounds of yarn; if computed on the basis of one pound of yarn, it would exist in the form of 2.496 ounces. But if the commodity were, for instance, a machine valued at 500 pounds sterling and representing the same division of values, one part of the value of this machine would indeed be represented by 78 pounds sterling of surplus-value, but these 78 pounds sterling would exist only in the machine as a whole. This machine cannot be divided into capital-value and surplus-value without breaking it to pieces and thus destroying, with its use-value, also its exchange-value. For this reason the two parts of value can be represented only ideally as portions of a mass of commodities, not as independent elements of the commodity C', such as we are able to distinguish in each pound of yarn in the 10,000 pounds of our illustration. In the case of the machine, the total commodity representing the commodity-capital must be sold before m can enter into its independent circulation. On the other hand, when the capitalist has sold 8,440 pounds of yarn, the sale of the remaining 1,560 pounds of yarn would represent an entirely separate circulation of the surplus-value in the form of c (1,560 pounds of yarn)—m (78 pounds sterling) equal to c (articles of consumption). But the elements of value of each individual portion of yarn in the 10,000 pounds may be individually separated and valuated the same as the total quantity of yarn. Just as the entire 10,000 pounds of yarn may be divided into the value of the constant capital c (7,440 pounds of yarn worth 372 pounds sterling), variable capital v (1,000 pounds of yarn worth 50 pounds sterling, and surplus-value s (1,560 pounds of yarn worth 78 pounds sterling), so every pound of yarn may be divided into c (11.904 ounces of yarn worth 8.929 d.), v (1.600 ounces of yarn worth 1.200 d.), and s (2.496 ounces of yarn worth 1.872 d.). The