Capital II, Chapter 1 - Part 4

3. Third Stage. C'-M'

Marx, in this section, gives a classic example of his method where apparently identical things are analysed in their specificity to demonstrate the actual difference between them. In particular, he analyses the category of commodity-capital. What is it that makes 10,000 lbs of yarn commodity-capital rather than just a commodity? It is the same question that can be asked of a sum of money. Why is it in one case money-capital as opposed to being just money used as a means of payment? Similarly, it could be asked of means of production. Why is it that a machine can in one case be just means of production, and in another be productive capital? 

The answer is that its real character can only be determined in conjunction with the social relations within which it functions.

“Commodities become commodity-capital as a functional form of existence — stemming directly from the process of production itself — of capital-value which has already produced surplus-value.” (p 38)

For Marx, a machine has to perform the function of a machine whether it does so in a slave society, peasant society, capitalist society, or communist society. It is after all a machine, and that is its function. But, Marx is not a functionalist. For Marx, defining something simply on the basis of the function it performs is trite and superficial. For one thing, that function is in reality quite different in each of these societies apart from its purely mechanical operation. In one it assists the slave owner in producing a greater surplus product. In another it facilitates the peasant in increasing his productivity, which might mean an ability to pay increased rent, but might also act to cause a differentiation within the ranks of the peasantry. In capitalist society, it raises productivity, lifting the creation of relative surplus value, and of a relative surplus population. In a Communist Society it is a means of increasing social wealth and of reducing the burden of labour.

“Capital in the form of commodities has to perform the function of commodities. The articles of which capital is composed are produced especially for the market and must be sold, transformed into money, hence go through the process C — M.” (p 38)

In this sense, commodities produced under capitalism have the same function as commodities produced in any other society.

“What is it that makes of this simple act of all commodity circulation at the same time a capital-function? No change that takes place inside of it, neither in the use-character of the commodity — for it passes into the hands of the buyer as an object of use — nor in its value, for this value has not experienced any change of magnitude, but only of form. It first existed in the form of yarn, while now it exists in the form of money. Thus a substantial distinction is evident between the first stage M — C and the last stage C — M. There the advanced money functions as money-capital, because it is transformed by means of the circulation into commodities of a specific use-value. Here the commodities can serve as capital only to the extent that they bring this character with them in ready shape from the process of production before their circulation begins.” (p 38-9)

In other words, what gives these commodities the character of commodity-capital is precisely the fact that they were produced capitalistically. They came out of a capitalist process of production. In that process, they become imbued with Surplus Value, and these commodities were thereby destined to be converted into their money equivalent whose sole function again is to purchase replacement commodities for those consumed in the production process.

Looking at the production of 10,000 lbs of yarn, we can see that its production begins with a certain amount of money laid out to purchase the means of production and labour-power. The capitalist lays out £372 for constant capital and £50 for variable capital. Using Marx's method from Volume I, both of these amounts can be equated to a given amount of yarn i.e. 8,440 lbs in total.

This is the amount of the commodity-capital C, required to reproduce its components. But, the commodity-capital is not 8,440 lbs, but 10,000 lbs. It is not now C but C+c i.e. C plus an increment of C equal to 1,560 lbs. A surplus product has arisen in the production process, and this product is equal to the surplus value produced by labour i.e. £78. C has become C'. The original commodities bought, whose value value was £422 (£372 + 50) equal to 8,440 lbs of yarn has become 10,000 lbs of yarn with a value of £500 (£422 + £78 surplus value). 

“The 10,000 lbs. of yarn are the bearers of the capital-value expanded, enriched by this surplus-value, and they are so by virtue of being the product of the capitalist process of production. C' expresses a value-relation, the relation of the value of the commodities produced to that of the capital spent on their production, in other words, expresses the fact that its value is composed of capital-value and surplus-value. The 10,000 lbs. of yarn represent commodity capital, C', only because they are a converted form of the productive capital P, hence in a connection which exists originally only in the circuit of this individual capital, or only for the capitalist who produced the yarn with the help of his capital. It is, so to say, only an internal, not an external relation that turns the 10,000 lbs. of yarn in their capacity of vehicles of value into a commodity-capital. They exhibit their capitalist birthmark not in the absolute magnitude of their value but in its relative magnitude, in the magnitude of their value as compared with that possessed by the productive capital embodied in them before it was transformed into commodities.” (p 39-40)

This incidentally is an important distinction made by Marx in relation to his method of calculating the Rate of Profit, as opposed to that of the proponents of the Temporal Single System Interpretation. Marx here makes clear that it is the relation between the Surplus Value and the Productive Capital (P) which is decisive, not the relation to the money originally used to purchase P.

These 10,000 lbs when sold at their value of £500 are then indistinguishable from any other yarn, however it was produced. It might have been produced by slave labour, or by a peasant spinning it in their cottage. Yarn produced by any of these means would still have the same exchange value, because the labour-time required for its production remains the same.

“If, then, these 10,000 lbs. of yarn are sold at their value of £500, this act of circulation, considered by itself, is identical with C — M, a mere transformation of an unchanging value from the form of a commodity into that of money. But as a special stage in the circuit of an individual capital, the same act is a realisation of the capital-value embodied in the commodity to the amount of £422 plus the surplus-value, likewise embodied in it, of £78. That is to say it represents C' — M', the transformation of the commodity-capital from its commodity-form into the money form.” (p 40)

The commodities must now perform their function and be transformed into money. Unless that happens the circuit cannot continue. New means of production and labour-power cannot be bought to replace those consumed in the previous cycle. The speed with which this conversion occurs then is vital for capital. This concept of the Rate of Turnover of Capital, is important for Marx in analysing the Rate of Profit, and the ability of capital to expand. As he says, it means that even small capitals can make big profits and accumulate more quickly, if they are able to turn over quickly i.e. to go from the stage of purchase of means of production to sale of commodities in a shorter space of time, compared to a larger capital.

“A given capital-value will serve, in widely different degrees, as a creator of products and value, and the scale of reproduction will be extended or reduced commensurate with the particular speed with which that capital throws off its commodity-form and assumes that of money, or with the rapidity of the sale.” (p 40)

If the capitalist sells less than the 10,000 lbs of yarn, they will not be able to expand their production, and depending on how much they sell, may not even be able to reproduce the means of production and/or labour-power previously consumed, without providing additional capital.

Marx explains the nature of the surplus value once again, to make clear that the fact that the capitalist receives more money back from the market place than he originally threw into it, is not down to some kind of cheating or unequal exchange.

Its true that he threw an amount of money M into the market and took out from it an amount of money equal to M+m, but that is because he took out commodities C in return for M, and threw back into the market commodities C+c. The additional m he takes out of the market is only to compensate for the additional c he has thrown into it.

“M was in our example equal to the value of 8,440 lbs. of yarn. But he throws 10,000 lbs. of yarn on the market, consequently he returns a greater value than he took from it. On the other hand he threw this increased value on the market only because through the exploitation of labour-power in the process of production he had created surplus-value (as an aliquot part of the product expressed in surplus-product). It is only by virtue of being the product of this process that the mass of commodities becomes commodity-capital, the bearer of the expanded capital-value.” (p 42)

Of course, each pound of the 10,000 lbs contains its fraction of the surplus value created. But, the surplus value and the capital-value contained in the yarn in reality go through a different process. For the surplus value it only came into existence in the production process. It has only ever existed in commodity form prior to being converted into money. So, it has only gone through C – M. But, the capital-value began life as money that bought the commodities that comprised the Productive Capital, so it has gone through M-C...P...C-M. 

“If we therefore consider merely the two circulation phases of capital-value, apart from its surplus-value, we find that it passes through 1) M — C and 2) C — M, in which the second C has a different use-form but the same value as the first C. Hence it passes through M — C — M, a form of circulation which, because the commodity here changes place twice and in the opposite direction — transformation from money into commodities and from commodities into money — necessitates the return of the value advanced in the form of money to its money-form — its reconversion into money.” (p 43)

Money acts both as the form of value assumed by the original capital value, and as the form of value of the new surplus value. For the former, it is a return to its original form, for the latter, it is its first incarnation.

“Just because the initial and final forms of this process are those of money-capital, M, we call this form of the circulation process the circuit of money-capital. It is not the form but merely the magnitude of the advanced value that is changed at the close.” (p 44)

In the yarn, it was impossible to separate the capital value and surplus value. Each pound contained its aliquot part of surplus value. But, as money that is not so. Now, the £422 of capital value can be easily separated from the £78 of surplus value, and this is significant from the perspective of the capitalist, who may then decide only to reproduce the original capital value, and consume unproductively the £78 of surplus value.

As soon as M was used to purchase productive capital it ceased to be. When the commodity capital, C' , is converted into money-capital, M', it has the same form as M, but it is not the same thing. 

“In M' capital has returned to its original form M, to its money-form, a form however in which it is materialised as capital. 

There is in the first place a difference of quantity. It was M, £422. It is now M', £500, and this difference is expressed by M ... M', the quantitatively different extremes of the circuit, whose movement is indicated only by the three dots. M' > M, and M' - M = s, the surplus-value. But as a result of this circular movement M ... M' it is only M' which exists now; it is the product in which its process of formation has become extinct. M' now exists by itself, independently of the movement which brought it into existence. That movement is gone; M' is there in its place.” (p 44-5)
But, M' stands in a qualitative relation to M also, precisely because it incorporates surplus value. 

“M became capital by virtue of its relation to the other part of M', which it has brought about, which has been effected by it as the cause, which is the consequence of it as the ground. Thus M' appears as the sum of values differentiated within itself, functionally (conceptually) distinguished within itself, expressing the capital-relation.” (p 45)

The movement from M- M' is comprised of two parts, that representing the capital-value (i.e. the value of the productive capital) and the surplus value. As money, this appears as principal and excess sum, rather like principal and interest. In other words, the source of the excess sum is obliterated in the process of circulation. The additional sum, m, is the monetary equivalent of c, and C – C' appears the same as M – M', but C – C' cannot be separated from the production process, which results in the increase in value. 

“The circuit of capital can never begin with M' (although M' now performs the function of M). It can begin only with M, that is to say it can never begin as an expression of the capital-relation, but only as a form of advance of capital-value. As soon as the £500 are once more advanced as capital, in order again to produce s, they constitute a point of departure, not one of return. Instead of a capital of £422, a capital of £500 is now advanced. It is more money than before, more capital-value, but the relation between its two constituent parts has disappeared. In fact a sum of £500 instead of the £422 might originally have served as capital.” (p 46)

M has not become M' in this process because it is money-capital, for example in the way that a money capitalist lends a principal sum and obtains interest on it. It has become M' only because it is capital in the money form, a capital that has expanded in value as depicted in C – C'.

“M' is composed of M plus m only because C' was composed of C plus c.” (p 47)
Both commodity capital and money capital are forms of existence of capital.

“The specific functions that distinguish them cannot therefore be anything else but differences between the functions of money and of commodities. Commodity-capital, the direct product of the capitalist process of production, is reminiscent of its origin and is therefore more rational and less incomprehensible in form than money-capital, in which every trace of this process has vanished, as in general all special use-forms of commodities disappear in money. It is therefore only when M' itself functions as commodity-capital, when it is the direct product of a productive process instead of being the converted form of this product, that it loses its bizarre form, that is to say, in the production of the money material itself. In the production of gold for instance the formula would be M — C... P ... M' (M plus m), where M' would figure as a commodity product, because P furnishes more gold than was advanced for the elements of production of the gold in the first M, the money-capital. In this case the irrational nature of the expression M ... M' (M plus m) disappears. Here a part of a sum of money appears as the mother of another part of the same sum of money.” (p 48)

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