Capital II, Chapter 2 - Part 5

The money in C – M – C changes hands twice, once into the hands of the capitalist in selling his commodities, and secondly out of his hands, when he buys means of production and labour-power. Money-capital has only a transient role, acting as a means of circulation. But, it can act as merely means of payment where capitalists trade between each other, and the money merely makes up the outstanding balance of payments.

“Thirdly, the function of money-capital, whether it is a mere circulating medium or a paying medium, effects only the replacement of C by L and MP, i.e., the replacement of the yarn, the commodity which represents the result of the productive capital (after deducting the surplus-value to be used as revenue), by its elements of production, in other words, the retransformation of capital-value from its form as a commodity into the elements that build this commodity. In the last analysis, the function of money-capital promotes only the retransformation of commodity-capital into productive capital.” (p 74)

Marx once again here outlines the role of changes in the value of these components.

“In order that the circuit may be completed normally, C' must be sold at its value and in its entirety. Furthermore C — M — C includes not merely replacement of one commodity by another, but replacement with value-relations remaining the same. We assume that this takes place here. As a matter of fact, however, the value of the means of production vary. It is precisely capitalist production to which continuous change of value-relations is peculiar, if only because of the ever changing productivity of labour that characterises this mode of production. This change in the value of the elements of production will be discussed later on, and we merely mention it here. The transformation of the elements of production into commodity-products, of P into C', takes place in the sphere of production, while the transformation from C' into P occurs in the sphere of circulation. It is brought about by a simple metamorphosis of commodities, but its content is a phase in the process of reproduction, regarded as a whole. C — M — C, being a form of circulation of capital, involves a functionally determined exchange of matter. The transformation C — M — C requires further that C should be equal to the elements of production of the commodity-quantum C', and that these elements should retain their original value-relations to one another. It is therefore assumed that the commodities are not only bought at their respective values, but also do not undergo any change of value during the circular movement. Otherwise this process cannot run normally.” (p 74-5)

Marx here refers forward to Section 5 of Chapter 15, where these effects of price changes are dealt with, though they are dealt with more extensively in Volume III.

Marx also restates the argument he made earlier that money-capital fulfils its function in purchasing means of production and labour-power, not because it is capital, but because it is money. And,

“So long as it remains in the garb of money, it does not function as capital and its value does not therefore expand.” (p 75)

He also repeats the point made earlier about the various points at which this circulation could be frustrated. Commodity-capital may not be sold, but also money-capital might find that means of production and labour-power are not available to be bought.

“But there is this difference: It can remain longer in the money-form than in the transitory form of commodities. It does not cease to be money, if it does not perform the functions of money-capital; but it does cease to be a commodity, or a use-value in general, if it is delayed too long in the exercise of its function of commodity-capital. Furthermore, in its money-form it is capable of assuming another form in the place of its original one of productive capital while it cannot budge at all if held in the form of C'.” (p 75-6)

In other words, in the phase C' – M' - C, C is ideally reproduced as a part of C'(C + c), by being metamorphosed into money, M, as part of M'. But, the actual reproduction, C, i.e. M – C, is dependent on C being available.

“This however is conditioned on processes of reproduction which lie outside of the process of reproduction of the individual capital represented by C'.” (p 76)

The first transformation of money into means of production and labour-power is the preparatory stage to its transformation into Productive-Capital. The transformation of commodity-capital, into money-capital, and this second transformation of money-capital into means of production and labour-power is really the retransformation of the commodity-capital into the productive-capital that was its original source, and is in reality a reproduction of that productive-capital.

“It must be noted once more that M — L is not a simple exchange of commodities but the purchase of a commodity, L, which is to serve for the production of surplus-value, just as M — MP is only a procedure which is materially indispensable for the attainment of this end.” (p 76)

At this point, the circuit has been completed. Its expanded form is,



Previously, the purchase of commodities was for the purpose of consumption. For Merchant Capital, it was for the purpose of sale at a higher price. But, under capitalism, it is for the purpose of production of other commodities.

“Consumption falls within the circuit of capital itself only in so far as it is productive consumption; its premise is that surplus-value is produced by means of the commodities so consumed. And this is something very different from production and even commodity production, which has for its end the existence of the producer. A replacement — commodity by commodity — thus contingent on the production of surplus-value is quite a different matter from the bare exchange of products brought about merely by means of money. But the economists take this matter as proof that no overproduction is possible.” (p 76-7)

This last comment is an attack on Say's Law, which maintains that supply creates its own demand.

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