Capital II, Chapter 1 - Part 6

As stated earlier, profit can only arise because a surplus product is created within society. Distribution/exchange then determines how that surplus is appropriated. So, Merchant Capital might secure profits, but only by securing for itself a share of the surplus product produced by slaves, or peasant producers. It does so by unequal exchange i.e. it pays the producers of these commodities less than the value of the commodities it buys from them, or else it sells to these same producers commodities above their value. 

Money capitalists are able to make profits in the same way. They lend money to slave owners, or to peasant producers and then receive back from them a greater sum of money.

Provided these actual producers – be they slave owners or peasants – produce a larger surplus product than is taken from them by the merchants and money capitalists, and by other exploiting classes, such as the aristocracy, then they can plough this surplus back into production. When it is not, future production will be curtailed.

That is what happened in the Mediterranean City States, when the merchants and money capitalists bled the peasant producers dry, and thereby prevented the nascent capitalist production from developing.

But, when industrial capital develops it is the centre of production, it becomes the source of society's surplus production.

“Its existence implies the class antagonism between capitalists and wage-labourers. To the extent that it seizes control of social production, the technique and social organisation of the labour-process are revolutionised and with them the economico-historical type of society. The other kinds of capital, which appeared before industrial capital amid conditions of social production that have receded into the past or are now succumbing, are not only subordinated to it and the mechanism of their functions altered in conformity with it, but move solely with it as their basis, hence live and die, stand and fall with this basis. Money-capital and commodity-capital, so far as they function as vehicles of particular branches of business, side by side with industrial capital, are nothing but modes of existence of the different functional forms now assumed, now discarded by industrial capital in the sphere of circulation — modes which, due to social division of labour, have attained independent existence and been developed one-sidedly.” (p 57)

If we consider money-capital it proceeds through the circuit M-C-M', and yet for the individual money capitalist it has its own circuit that can appear as simply M-M'. A capitalist may employ their money-capital in the way previously described. They buy means of production and labour-power, engage in production creating commodities with a greater value, which they then sell for a larger amount of money than they began with.

But, consider a money-capitalist who provides this money to an industrial capitalist, in the shape of a loan. The money capital lent goes through exactly the same stages, and results in M' at the end. The industrial capitalist out of M' – M = m now has to pay the money capitalist the interest on the money they have borrowed. So, they are left with m-i (the interest). But, for the money-capitalist it appears as simply M-M' where M' – M = I. It appears to them that their profit has arisen not because of the production process which created the surplus value, but has arisen simply as a consequence of their lending out their money – their abstinence etc. Yet, their interest, in reality, has the same source whether it is paid to them by an industrial capitalist, a slave owner or a peasant producer. It is only possible because of a surplus product created in the process of production.

The formula M-C...P...C'-M' is the circuit of money-capital, and in it is also expressed the fact that the purpose of production here is exchange value not use value. The purpose of production here is not to produce more use values per se, which is the purpose of production in all other modes of production. It is to produce more exchange value, and thereby to maximise the surplus exchange value. More use values are produced only because competition forces each capital to do so in order to produce more exchange value!

The real purpose appears M-M', with production appearing almost as an inconvenient interruption of this movement.

“All nations with a capitalist mode of production are therefore seized periodically by a feverish attempt to make money without the intervention of the process of production.” (p 58)

But, it is precisely the production phase of this circuit which defines it as capitalist because it is this form of production that is distinctively capitalist.

Yet, it is the fact that the circuit begins with M and ends with M', a greater sum of money, which is most apparent, and which distinguishes the circuit of M from that of C and P.

“And money is the independent, tangible form of existence of value, the value of the product in its independent value-form, in which every trace of the use-value of the commodities has been extinguished. On the other hand the form P ... P does not necessarily become P ... P' (P plus p), and in the form C ... no difference whatever in value is visible between the two extremes. It is therefore characteristic of the formula M — M' that for one thing capital-value is its starting-point and expanded capital-value its point of return, so that the advance of capital-value appears as the means and expanded capital-value as the end of the entire operation; and that for another thing this relation is expressed in money-form, in the independent value-form, hence money-capital as money begetting money. The generation of surplus-value by value is not only expressed as the Alpha and Omega of the process, but explicitly in the form of glittering money.” (p 59)

This circuit is only the circuit of capital, and in M-C-M', it signifies the self-expansion of capital, because the only consumption it represents M-C is productive consumption, the purchase of MP and L, and their consumption in the productive process. It does not include the circuit for the labourer or the capitalist. For the worker, for example, M-C(L) appears as C(L) – M, or the sale of their commodity labour-power for money wages, which then becomes M-C, as they spend those wages on commodities for their own consumption. And, for the capitalist there is a similar circuit, as they take a portion of m – the surplus value – and use it to buy their own commodities for personal consumption.

Yet, the circuit for the worker C(L)-M-C begins within the circuit of capital i.e. C(L)-M is their sale of labour-power to capital seen in its circuit as M-C(L). The second part of the circuit for the worker M-C is premised by the circuit of capital because it is necessary, i.e. the worker must buy necessaries M-C, because without them their labour-power is not reproduced, and so the production process cannot continue.

In short, without wages, indeed sufficient wages, and without the food etc. the worker needs to buy with those wages, the workers cannot live, and without workers, capital cannot produce.

By contrast, the means of production bought at M-C(MP) are only consumed productively. It enters C' , which leaves the circuit, precisely because it is produced for consumption by others.

“Capital’s movement in circuits is therefore the unity of circulation and production; it includes both. Since the two phases M — C and C' — M' are acts of circulation, the circulation of capital is a part of the general circulation of commodities. But as functionally they are definite sections, stages in capital’s circuit, which pertains not only to the sphere of circulation but also to that of production, capital goes through its own circuit in the general circulation of commodities. The general circulation of commodities serves capital in the first stage as a means of assuming that shape in which it can perform the function of productive capital; in the second stage it serves to strip off the commodity-function in which capital cannot renew its circuit; at the same time it opens up to capital the possibility of separating its own circuit from the circulation of the surplus-value that accrued to it.” (p 60-61)

In other words, capitalist PRODUCTION is itself only possible on the basis of the circulation, i.e. exchange, of commodities. That is not true of previous modes of production. The peasant did not need there to be a market in order to produce, precisely because the aim of his production was his own consumption.

“M ... M' becomes a special form of the industrial capital circuit when newly active capital is first advanced in the form of money and then withdrawn in the same form, either in passing from one branch of industry to another or in retiring industrial capital from a business. This includes the functioning as capital of the surplus-value first advanced in the form of money, and becomes most evident when surplus-value functions in some other business than the one in which it originated. M ... M' may be the first circuit of a certain capital; it may be the last; it may be regarded as the form of the total social capital; it is the form of capital that is newly invested, either as capital recently accumulated in the form of money, or as some old capital which is entirely transformed into money for the purpose of transfer from one branch of industry to another.” (p 61)

This circuit can only continue on the basis of capitalist social relations, because the component parts of it – capitalist production, the existence of a class of wage labourers, who sell their labour-power as a commodity, and means of production themselves produced and sold as commodities, only exist under capitalism.

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