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

they are forms of existence of a part of capital-value in general going through the process of its circulation, and its different parts perform their functions successively at different times. In the continuous process of production, money-capital in reserve is always formed, obligations being incurred today which will not be paid until later, and large quantities of commodities being sold today, while other large quantities are not to be bought until some other day. In these intervals, a part of the circulating capital exists continuously in the form of money. A reserve fund, on the other hand, is not a part of money-capital in the performance of its functions. It is rather a part of capital in a preliminary stage of its accumulation, of surplus-value not yet transformed into active capital.

      Of course, it requires no explanation, that the capitalist, when pressed for funds, does not concern himself about the definite functions of the money in his hands. He simply employs whatever money he has for the purpose of keeping the circulation-process of his capital in motion. For instance, in our illustration, M is equal to 422 pounds sterling, M' to 500 pounds sterling. If a part of the capital of 422 pounds sterling exists in the form of money as a fund for paying or buying, it is intended that all of it should enter into circulation, conditions remaining the same, and that it is sufficient for this purpose. The reserve fund, on the other hand, is a part of the 78 pounds sterling of surplus-value. It cannot enter the circulation process of the capital of 422 pounds sterling, unless this circulation takes place under changed conditions; for it is a part of the accumulated funds, and figures here under conditions, where the scale of the reproduction has not been enlarged.

      Accumulated money-funds represent latent money-capital, or the transformation of money into money-capital.

      The following is the general formula for the cycle of productive capital, combining simple reproduction and reproduction on an enlarged scale:

      P...C'—M'. M—C{^LPm...P (P').

      If P equals P, then M in 2) is equal to M'—m; if P equals P', then M in 2) is greater than M'—m, that is to say, m has been completely or partially transformed into money-capital.

      The cycle of productive capital is that form, under which classical political economy discusses the rotation process of industrial capital.

      3. The Circulation of Commodity-Capital

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      The general formula for the cycle of commodity-capital is:

      C'—M'—C...P...C'.

      C' appears not alone as the product, but also as the premise of the two previous cycles, since M—C includes for one capital that which C'—M' includes for the other, at least in so far as a part of the means of production represents the commodity-product of other individual capitals going through their circulation process. In our case, for instance, coal, machinery, etc., represent the commodity-capital of the mine-owner, of the capitalist machine-manufacturer, etc. Furthermore, we have shown in chapter I, IV, that not only the cycle P...P, but also the cycle C'...C' is assumed even in the first repetition of M...M', before this second cycle of money-capital is completed.

      If reproduction takes place on an enlarged scale, then the final C' is greater than the initial C' and we shall then call the final one C''.

      The difference between the third form and the first two is on the one hand, that in this case the total circulation opens the cycle with its two opposite phases, while in form I the circulation is interrupted by the process of production, and in form II the total circulation with its two complementary phases appears as a connecting link for the process of reproduction, intervening as a mediating movement between P...P. In the case of M...M', the cycle has the form M—C...C'—M'=M—C—M. In the case of P...P it has the opposite form, namely, C'—M'. M—C=C—M—C. In the case of C'—C', it likewise has this last form.

      On the other hand, when the cycles I and II are repeated, even if the final points M' and P' are at the same time the starting points of the renewed cycle, the form in which they were originally generated disappears. M'=M plus m, and P'=P plus p, begin the new cycle as M and P. But in form III, the starting point C must be designated as C', also in the case of the renewal of the cycle on the same scale, for the following reason. As soon as M' as such opens a new cycle in the form I, it performs the functions of money-capital M, as an advance in the form of money of the capital value to be utilized. The size of the advanced money-capital, increased by the accumulation resulting from the first cycle, is greater. But whether the size of the advanced money-capital is 422 pounds sterling or 500 pounds sterling, it nevertheless appears merely as a capital-value. M' no longer exists as a utilized capital pregnant with surplus-value, for it is still to be utilized. The same is true of P...P', for P' must always perform the functions of P, of capital-value used for the generation of surplus-value, and must renew its cycle for this purpose.

      Now the circulation of commodity-capital does not open with capital-value, but with augmented capital-value in the form of commodities. It includes from the start not only the cycle of capital-value represented by commodities, but also of surplus-value. Hence, if simple reproduction takes place in this form, C' at the starting point is equal to C' at the closing point. If a part of the surplus-value enters into the circulation of capital, C'', an enlarged C', appears at the close, but the succeeding cycle is once more opened by C'. This is merely a larger C' than that of the preceding cycle, and it begins its new cycle with a proportionately increased accumulation of capital-value, which includes a proportionate increase of newly produced surplus-value. In every case, C' always opens the cycle as a commodity-capital which is equal to capital-value plus surplus-value.

      C' as C does not appear in the circulation of some individual industrial capital as a form of this capital, but as a form of some other industrial capital, so far as the means of production are its products. What is M—C (or M—Pm) for the first capital, is C'—M' for this second capital.

      In the circulation act M—C{^LPm the factors L and Pm have identical relations, in so far as they are commodities in the hands of those who sell them; on the one hand the laborers who sell their labor-power, on the other hand the owners of the means of production, who sell these. For the purchaser, whose money here performs the functions of money-capital, L and Pm represent merely commodities, so long as he has not bought them, so long as they confront his money-capital in the form of commodities owned by others. Pm and L here differ only in this respect that Pm may be C', or capital, in the hands of its owner, if Pm is the commodity-form of his capital, while L is always nothing else but a commodity for the laborer, and does not become capital, until it is made a part of P in the hand of its purchaser.

      For this reason, C' can never open any cycle as a mere commodity-form of capital-value. As commodity-capital it is always the representative of two things. From the point of view of use-value it is the product of the function of P, in the present case yarn, whose elements L and Pm, coming from the circulation, have been active in creating this product. And from the point of view of exchange-value, commodity-capital is the capital-value P plus the surplus-value m produced by the function of P.

      It is only in the circulation of C' itself that C equal to P, and equal to the capital-value, can and must separate from that part of C' in which surplus-value is contained, from the surplus-product representing the surplus-value. It does not matter, whether these two parts can be actually separated, as in the case of yarn, or whether they cannot be separated, as in the case of a machine. They may always be separated, as soon as C' is transformed into M'.

      If the entire commodity-product is separable into independent homogeneous parts, as is the case in our 10,000 lbs. of yarn, so that the act C'—M' is performed by means of a number of successive sales, then capital-value in the form of commodities can perform the functions of C and can be separated from C', before the surplus-value, or the entire value of C', has been realized.

      In the 10,000 lbs. of yarn at 500 pounds sterling, the value of 8,440 lbs., equal to 422 pounds sterling, is separated from the surplus-value. If the capitalist sells first 8,440 lbs. at 422 pounds sterling, then these 8,440 lbs. of yarn represent