Capital can only expand in technologically determined proportions. The Technical Composition of Capital determines, let us say, that with the existing machines, 10,000 kilos of cotton require 10 workers, working 20 hours to process into yarn, using 5 machines over two 10 hour shifts.
“The formation of a hoard thus appears here as a factor included in the process of capitalist accumulation, accompanying it but nevertheless essentially differing from it; for the process of reproduction itself is not expanded by the formation of latent money-capital. On the contrary, latent money-capital is formed here because the capitalist producer cannot directly expand the scale of his production.” (p 80)
“But just as the totality of the elements of production announces itself at the outset as productive capital by the fact that the labour-power is labour-power that belongs to others and that the capitalist purchased it from its proprietor, just as he purchased his means of production from other commodity-owners; just as therefore the process of production itself appears as a productive function of industrial capital, so money and commodities appear as forms of circulation of the same industrial capital, hence their functions appear as the functions of circulation, which either introduce the functions of productive capital or emanate from them. Here the money-function and the commodity-function are at the same time functions of commodity-capital, but solely because they are interconnected as forms of functions which industrial capital has to perform at the different stages of its circuit. It is therefore wrong to attempt to derive the specific properties and functions which characterise money as money and commodities as commodities from their quality as capital, and it is equally wrong to derive on the contrary the properties of productive capital from its mode of existence in means of production.” (p 83)
The money hoard may be used for other functions besides the expansion of the capital. Suppose, there is a delay between the production of the commodities and their sale C' – M'. Then the money hoard can be used to purchase means of production and labour-power, so that production is not disrupted. Suppose also that the commodities are sold, but, before the replacement means of production and labour power are bought, the prices of either or both rise, compared to those consumed in the previous cycle. In that case, the money hoard can be used as additional capital in addition to that realised in the sale M', again to ensure that production can proceed on the same scale.
“It is rather a part of capital in a preliminary stage of its accumulation, of surplus-value not yet transformed into active capital.” (p 87)
In order to increase production, i.e. expand the capital, it may then be necessary to buy an additional machine. But, the surplus value produced may may not be sufficient to fund this in one year. It will then be necessary to save/accumulate the surplus value over several years until a sufficient fund exists to purchase a machine, and to pay for the additional worker to operate it, and to buy the extra 2,000 kilos of cotton to be processed. In other words, a money hoard has to be produced as an inevitable part of capital expansion.
“The formation of a hoard thus appears here as a factor included in the process of capitalist accumulation, accompanying it but nevertheless essentially differing from it; for the process of reproduction itself is not expanded by the formation of latent money-capital. On the contrary, latent money-capital is formed here because the capitalist producer cannot directly expand the scale of his production.” (p 80)
Whether this hoard takes the form of actual money, bank deposits, the purchase of interest bearing securities, or commercial credit to customers, it does not enter the circulation of this capital. It may, of course, enter the circuit of some other capital, as provision of advanced money capital, used for the purchase of Productive Capital. Until such time as it does so, it is only money, only potential capital.
But, the essence of capitalist production is its self expansion, its conversion of surplus value into capital, and from this perspective the failure to convert the money hoard into Productive Capital represents a cost. Industrial Capital must always, therefore, seek to minimise the time when this money capital lies fallow.
The circuit M - M', giving the circuit of money capital, is qualitatively different to the circuit of Productive Capital, P – P'. The former indicates only that an amount of advanced money capital has been augmented, by the production of surplus value contained in C', and realised in an amount of money M'. There everything ends. But, P – P' tells us that the surplus value produced has been accumulated in additional Productive Capital, P'.
“M', as the simple close of M ... M', and also C', as it appears within all these circuits, do not if taken by themselves express the movement but its result: the self-expansion of capital-value realised in the form of commodities or money, and hence, capital-value as M plus m, or C plus c, as a relation of capital-value to its surplus-value, as its offspring. They express this result as various circulation forms of the self-expanded capital-value. But neither in the form of C' nor of M' is the self-expansion which has taken place itself a function of money-capital or of commodity-capital.” (p 82)
Money capital can only perform money functions, just as commodity-capital can only perform commodity functions, and productive capital, production functions. Each taken separately could perform these functions under other modes of production. Money is money, a commodity a commodity, and means of production and labour, forces of production under whatever mode of production. It is only in their totality, as stages within the circuit of industrial capital, that they can be properly understood as functioning as capital.
“But just as the totality of the elements of production announces itself at the outset as productive capital by the fact that the labour-power is labour-power that belongs to others and that the capitalist purchased it from its proprietor, just as he purchased his means of production from other commodity-owners; just as therefore the process of production itself appears as a productive function of industrial capital, so money and commodities appear as forms of circulation of the same industrial capital, hence their functions appear as the functions of circulation, which either introduce the functions of productive capital or emanate from them. Here the money-function and the commodity-function are at the same time functions of commodity-capital, but solely because they are interconnected as forms of functions which industrial capital has to perform at the different stages of its circuit. It is therefore wrong to attempt to derive the specific properties and functions which characterise money as money and commodities as commodities from their quality as capital, and it is equally wrong to derive on the contrary the properties of productive capital from its mode of existence in means of production.” (p 83)
Its clear that surplus value cannot have its origins in the properties either of money or of commodities. M' as the termination of the circuit M – M' exists only as a result, not as a process, revealing the origin of the surplus value m. The same is true of the circuit C – C'.
“C' is always the product of the function of P, and M' is always merely the form of C' changed in the circuit of industrial capital. As soon therefore as the realised money-capital resumes its special function of money capital, it ceases to express the capital-relation contained in M' = M plus m. After M ... M' has been passed through and M' begins the circuit anew, it does not figure as M even if the entire surplus-value contained in M' is capitalised.” (p 83-4)
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| Ford could not just set up in business. To produce cars efficiently required a minimum amount of capital to begin with. |
If m, the money representation of the surplus value, is to be used as new capital, to start another business, then it must be of the minimum size required to start such a business. If its to be used to expand the existing business it must be of the minimum size required to do that as determined by the technical composition of the capital.
“Thus the owner of a spinning-mill cannot increase the number of his spindles without at the same time purchasing a corresponding number of carders and roving frames, apart from the increased expenditure for cotton and wages which such an expansion of his business demands.” (p 85)
If not then several circuits of this capital will be required so that the surplus value builds up to the necessary level.
“Hence the accumulation of money, hoarding, appears here as a process by which real accumulation, the extension of the scale on which industrial capital operates, is temporarily accompanied. Temporarily, for so long as the hoard remains in the condition of a hoard, it does not function as capital, does not take part in the process of creating surplus-value, remains a sum of money which grows only because money, come by without its doing anything, is thrown in the same coffer.” (p 85)
This money can take the form of actual money, but also of claims on debtors for commodities sold but not yet paid for. It can also take the form of interest bearing deposits etc., which, at least temporarily, takes this money out of the circuit of industrial capital. The nature of these latter, Marx discusses later.
The money hoard may be used for other functions besides the expansion of the capital. Suppose, there is a delay between the production of the commodities and their sale C' – M'. Then the money hoard can be used to purchase means of production and labour-power, so that production is not disrupted. Suppose also that the commodities are sold, but, before the replacement means of production and labour power are bought, the prices of either or both rise, compared to those consumed in the previous cycle. In that case, the money hoard can be used as additional capital in addition to that realised in the sale M', again to ensure that production can proceed on the same scale.
Marx says its important not to confuse this reserve fund with the money balances, which naturally accumulate within a continual process of production. Suppose, there was no surplus value, and so no money surplus waiting to be invested. There would still be money balances. That is because purchases and sales are not taking place simultaneously. A large amount of sales may take place on Day 1, bringing in a large amount of cash. However, there may not be a corresponding large amount of purchases of materials etc. until Day 10. So, this cash will sit as a balance for 10 days. But, it does not constitute a Reserve Fund, precisely because all of that cash is required on Day 10, to make those purchases. It is only the original capital-value in a money form. The Reserve Fund, by contrast, is a fund of money over and above the original capital-value.
“It is rather a part of capital in a preliminary stage of its accumulation, of surplus-value not yet transformed into active capital.” (p 87)
Marx then gives the circuit for Productive Capital.
It can be used to illustrate both simple and expanded reproduction.
It can be used to illustrate both simple and expanded reproduction.
“If P equals P, then M in 2) equals M' minus m; if P equals P', then M in 2) is greater than M' minus m; that is to say m has been completely or partially transformed into money-capital.
The circuit of productive capital is the form in which classical Political Economy examines the circular movement of industrial capital.” (p 88)
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