Tuesday, 7 May 2013

Capital II, Chapter I - Part 1

Marx returns to the circuit of Capital arrived at in Vol. I, i.e. M – C … P... C1 – M1. Here, Money Capital [M] is laid out to buy commodities [C] (Constant Capital and Variable Capital), which are then consumed in the production process [P]. The labour involved in this process creates Surplus Value, so that the commodities produced in this process now have a greater value than those which entered it – represented by C1. These commodities are then sold, realising the monetary equivalent of that value M1. This Capital is ready to begin its next circuit on an expanded scale.

In Volume I, Marx was concerned with analysis of the part of this process in the middle i.e. the production process, because it is this part of the circuit that explains how capital itself is produced via the accumulation of Surplus Value. Now he turns his attention to the aspects of Circulation of Capital i.e. the forms that Capital takes outside the production process. This breaks down into Capital as Money Capital, and as Commodity Capital.

Once again, in order to analyse this in its purest form, Marx assumes that commodities exchange at their Exchange Values, and that no change in these values occurs within the circuit (other than that resulting from the production of Surplus Value).

Looking at this in more detail, we can break down C into L and MP, where [L] = Labour Power, and [MP] = Means of Production. So, the first part of the circuit is now M – C [L + MP]. But, we also know that, because of the Technical Composition of Capital, L and MP are both quantitatively and qualitatively related.

The capitalist only buys these commodities for the purposes of creating Surplus Value. If they lay out £1,000 of Capital, this has to be divided between L and MP in specific proportions determined by the Technical Composition of Capital, in order for the Capitalist to maximise Surplus Value. Suppose there is a 100% Rate of Surplus Value. So, for every £1 of wages received the worker produces £1 of Surplus Value. If the worker works for 2 hours, 1 hour goes to cover their wages, the other to produce surplus value.

If it takes 10 hours to process 100 k. of cotton into yarn, then with a 10 hour working day, one worker will process 100 k. per day. If a day's wage is £10, then a capitalist with £1000 could employ 100 workers, but this would leave no capital left to buy cotton. The capitalist must divide the £1,000 between cotton and workers to maximise Surplus Value. Suppose cotton costs £10 per 100 k. With £1,000 the capitalist could buy 10,000 k. But then they would have no capital to buy labour power.

If, however, the capitalist buys 5,000 k. of cotton, costing £500, this will require 50 workers to process it = £500 wages. On that basis, all of the available capital is just consumed. No more means of production are bought than can be processed by the 50 workers, and by the same token these workers are kept fully employed throughout the day so that the maximum amount of surplus value is extracted from them.

If less MP were bought, the workers would not be kept fully employed, so some potential surplus value would be lost. If too much MP were bought some of it could not be processed, meaning capital was standing idle, and was therefore unproductive.

Once capital has ceased being in its money form, (Money Capital) and has taken the form of these commodities (means of production and labour-power) in the above proportions, it has now become Productive Capital. In other words, it has become Capital in another form, where its potential to reproduce the means of production and labour-power plus an amount of Surplus Value already exists.

The Value of P (Productive Capital) is equal to L and MP, which is equal to M. But, once the production process takes place, that potential to expand its value, that was inherent in P is released. The result of the production process – the end commodity (here yarn) – has a higher value than P. The additional value is equal to the surplus value created by the workers. We can now calculate this amount.

We know that the worker was paid £10 for a 10 hour day. But, we also know that the Rate of Surplus Value is 100%. In other words, this £10 actually represents 5 hours labour, the amount required to produce the workers labour-power. So, for every £1 the worker is paid wages, they produce £1 of surplus value. Here £500 was paid in wages, and because the workers were fully employed they produced £500 of surplus value. We now have:

M 1000 – C (L 500 + MP 500) … P... C1 1500.

If we take a step back here, we can see that a number of processes of metamorphosis have occurred. Money has been metamorphosed into various commodities – cotton and labour-power. These in turn have metamorphosed into yarn, as a consequence of the production process. But, Money Capital has also metamorphosed into Productive Capital.

If we look at the initial stage of this process we can see that it is the money form which is the necessary form for capital to begin this circuit, because it is in this form that it is able to purchase means of production and labour-power. It acts here as money in its capacity as means of payment. Labour-power is first bought, but only paid its wages at the end of the day/week/month. Cotton is bought, but only paid for on Invoice. In other words,

“This capacity is not due to the fact that money-capital is capital but that it is money.” (p 28)

Marx makes an important point here. He writes,

“On the other hand capital-value in the form of money cannot perform any other functions but those of money. What turns the money-functions into functions of capital is the definite role they play in the movement of capital, and therefore also the interrelation of the stage in which these functions are performed with the other stages of the circuit of capital. Take, for instance, the case with which we are here dealing. Money is here converted into commodities the combination of which represents the bodily form of productive capital, and this form already contains latently, potentially, the result of the process of capitalist production.” (p 28)

In other words, money becomes capital by purchasing means of production and labour-power, which “represents the bodily form of productive capital, and this form already contains latently, potentially, the result of the process of capitalist production.” But, the value of those same commodities in money form is not capital, it “cannot perform any other functions but those of money.”

This is important because it means for Marx there can be no question of moving from M - M1, without there being some process of production in between, which creates the additional value. Or more specifically, any such instance can be based only upon unequal exchange. As was seen in Volume I, the totality of such unequal exchanges cancel each other out. Moreover, although it is money which buys these commodities, the context in which it does so, as capital is itself conditioned by the social relations in which this exchange occurs. In order to buy these means of production and labour power as commodities a given set of social conditions must themselves exist. Marx described this in Chapter 16, where he discussed the situation of the natives who could live all week for just 6 hours work harvesting the sago tree. The fact they could do so, and leave the rest of the week free as leisure time or else surplus labour, does not of itself determine which of these options will be adopted. It is only the development of social relations that ultimately determines that this surplus labour-time will be appropriated by Capital.

But, just as the various metamorphoses of money into commodities was described above, so an opposite movement occurs. So, whilst money metamorphosed into Labour-power, so Labour-power likewise metamorphosed into money. That is the worker sells their Labour-power and obtains money in the form of wages. For the worker, the process is C – M – C. They sell their commodity labour-power, obtain money as wages, which they in turn exchange for commodities required to reproduce their labour-power.

At the same time, in order to act as money capital, and buy this labour-power, the money capital itself has to abandon its role as capital, and simply assume the role of money. The wages paid to the worker are in the form merely of money not capital. That conforms with the observation in Chapter 3, of Volume I, that in each of these acts of exchange, the commodity exits the circuit, as it is consumed, whereas the money is continually thrown back into circulation.

It is M- L rather than M – MP, which is the “characteristic moment” in the transformation of money capital into productive capital, because it is only the labour which creates the surplus value. It is the relation between paid and unpaid labour that is again decisive here. Suppose £1 = 1 hour of labour-time. If the value of labour-power is £5 = 5 hours, then with a 100% rate of surplus value, we have a 10 hour day, with £5 of Surplus Value.

In this 10 hour day, 100 k. of cotton is processed. However, suppose the rate of surplus value rises to 200%, but we still have £5 laid out as wages = 5 hours. But, now surplus value rises to £10 = 10 hours = 15 hours worked. This could be because of a longer working day, or because the same wage bill now buys more workers. Either way, if 100 k. of cotton is processed in 10 hours then 150 k. will be processed in 15 hours. Consequently the means of production that need to be bought will move up and down in line with the ratio of unpaid to paid labour.

It is the labour-power purchased with the money capital that produces the surplus value, whereas the means of production purchased is determined by the amount of labour power to be exploited.

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