The Transformation Of Money Into Capital
General
Formula For Capital
Capital arises out of the circulation of commodities, and
particularly from the 16th Century,
when this circulation takes place in the context of a “world
embracing market.” (p 145) From the point of view of economic analysis it does not matter what
these commodities are in terms of Use Values (i.e. apples, guns,
jewellery). All that is significant is the economic forms this
takes, and, as Marx has described, the result of these processes is
the development of money as the embodiment of Exchange Value. Money
is the first form also in which Capital appears.
Under feudalism and previous modes of production, wealth takes forms
other than money e.g. land, slaves etc. By contrast, Capital
invariably takes first the money form in the hands of the Merchant
and Usurer.
NB. Its important to understand Marx's dialectical method
here. In subsequent Chapters he will appear to contradict this statement. For Marx, categories are not fixed and frozen. Categories are
historically determined. As Lenin puts it, “The truth is always
concrete.” This is true of all categories used by Marx, such as
his definition of Class, for example. Categories can only be
understood in their process of development. So, to pre-empt, Marx
further analysis, the use of the term “Capital” here does not
conform with his later definition. In that later definition, he
defines Capital as a social relation. This social relation is a
necessary one between Capital and Wage Labour. Neither can exist
without the other. They form a contradictory whole. On the basis of
this relation, Capital constitutes self-expanding Value, which is
accumulated, and becomes capital itself, which results in more Wage
Labour being employed, which produces more Surplus Value and so on.
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| The Medici were part of that poweful Merchant and Money Class who pauperised the producers through unequal exchange, and stifled Capitalism at birth. |
But, neither merchant nor Usurer's Capital are capital on this
definition. Both expand, not from the extraction of Surplus Value
from Wage Labour, but from a process of Unequal Exchange that can
have the opposite effect to creating a self-expanding Capital.
Indeed, in the Mediterranean City States, where this form of
“Capitalism” first developed, it eventually collapsed precisely
because it pauperised the actual peasant producers!
Marx is trying to present an historical as well as logical
development of capitalism, and so he is describing Capital here in
its pro-genesis. This is like the way he describes Exchange Value in
the Grundrisse. There he argues that Exchange Value can only take
its mature form when Wage Labour has developed to the stage where
workers form the dominant consumers.
But, Capital logically adopts the form of money first because it is
only in the form of money that it can purchase means of production
and labour power.
Marx begins by distinguishing between the circuit of money and the
circuit of Capital. Commodities circulate, C-M-C. That is selling
in order to buy. But, another circuit can be established, M-C-M1.
That is buying in order to sell. Here the owner of money buys
commodities for no other purpose than to sell them. We encountered
this earlier in relation to the merchant who buys commodities in the
expectation of being able to sell them at some other time and place
at a higher price (arbitrage). Clearly, there would be no purpose in
laying out money for commodities if their sale only returned the same
amount of money. It implies that the money that is returned is more
than than is laid out, and its in this sense of its expansion that
Marx describes it as Capital.
The difference between the circuit of commodities, C-M-C, and that of
Capital is that the former seeks only to exchange a commodity that
has no Use Value, for its owner, for one of the same Exchange Value that
does. Money merely facilitates this metamorphosis. But, in the
circuit M-C-M the only point is to end up with a larger amount of
Exchange Value (M) at the end than you had at the beginning –
whether you do or not is another matter. In other words, what look
like the same economic processes but with different starting and
finishing points, are in fact, completely different processes
reflecting different motivations, and economic relations built upon
them.
Quoting Steuart, Marx describes this use of money as an advance
rather than an expenditure, because the intention is not to spend the
money, never to see it again, but to advance it in the hope of seeing
it again soon after with an addition to it.
““When
a thing is bought in order to be sold again, the sum employed is
called money advanced; when it is bought not to be sold, it may be
said to be expended.” — (James Steuart: “Works,” &c.
Edited by Gen. Sir James Steuart, his son. Lond., 1805, V. I., p.
274.)” (note 1, p 147)
In the circuit of commodities, C-M-C, the process begins and ends
with commodities whose Exchange Value is the same (Quantity), but
whose quality (Use Value) is different. In the circuit of capital
the opposite is true. The Quality (Use Value) of the money at the
beginning and end is the same, but it is the Quantity of Exchange
Value that is different.
In reality then, the circuit of Capital is more correctly defined as,
M-C-M1.,.where M1 is M + ΔM.
Here Marx writes,
“This
increment or excess over the original value I call “surplus-value.”
The value originally advanced, therefore, not only remains intact
while in circulation, but adds to itself a surplus-value or expands
itself. It is this movement that converts it into capital.” (p 149)
But,
as pointed out in my earlier note, at this stage of his analysis,
Marx has only detailed the movement of commodities and money in the
realm of circulation. He is about to go on to demonstrate why, in
fact, Surplus Value cannot arise within the realm of circulation.
Resolving, this contradiction, and demonstrating where Surplus Value
does come from is perhaps is greatest revelation.
In
fact, the contradiction in Marx's presentation in this section is
apparent. He writes,
“Of
course, it is also possible, that in C-M-C, the two extremes C-C, say
corn and clothes, may represent different quantities of value. The
farmer may sell his corn above its value, or may buy the clothes at
less than their value. He may, on the other hand, “be done” by
the clothes merchant. Yet, in the form of circulation now under
consideration, such differences in value are purely accidental.” (p
149)
But, the only basis, at this
stage of his analysis, by which M-C-M1
can arise is precisely on this same basis of mis-pricing, sharp
practice or accident that allows the Merchant to either buy the
commodity, C, below its Value or else to sell it above its Value!!!
In other words, it assumes a breakdown of the very equivalence that
Marx has set as the cornerstone of his analysis or commodities, which
is the foundation of his analysis of Capital!
At this stage of his analysis
then, Marx is wrong when he states,
“The
circulation of capital has therefore no limits.” (p 150) because
he has not yet shown how real Surplus Value is created by Wage
Labour. He has only described the historical reality of the way
Merchants were able to to make profits through buying low and selling
high. But, in fact,as he describes elsewhere this 'Profit on
Appropriation' as Steuart calls it, must from the perspective of the
economy as a whole, be self-cancelling. If profits are essentially
made from swindling, by A selling commodities to B above their Value,
then A's profit is cancelled by B's loss., just as is the case if A
sells to B at its Value a commodity they bought from C below its
Value, in which case A's Profit is cancelled by C's loss.
It was precisely this fact that
demonstrated that there were very real limits to the accumulation of
this kind of Capital in relation to the City States. There the
peasant producers were so squeezed by the Merchants that they could
not even ensure their own reproduction, and that of their means of
production. Production collapsed killing the goose that laid the
golden eggs, appropriated by the merchants.
For the same reason, I would take
issue with Marx's statement.
“As
the conscious representative of this movement, the possessor of money
becomes a capitalist.” (p 151)
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| Merchants like the East India Company existed, under Mercantilism in a symbiotic relation with Feudalism. |
At this stage of his analysis, I
would argue that all we have is the existence of Merchants and Money
Lenders, and a system arising not of Capitalism, but of Mercantilism,
as a transitional phase between Feudalism and Capitalism. In it, the
Merchants and Money lenders co-exist in a symbiotic relation with
Landlords. Its true that as Capitalism does develop all of these
forms of property and economic activity take on the characteristics
of of capital, for example, Land becomes capitalistically owned land,
Rent becomes Capitalist Rent, and so on, but that is a consequence of
the dominance of Capital, a situation which has not yet arisen within
Marx's analysis.
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