“As a matter of fact, supplies exist in three forms: in the form of productive capital, in the form of a fund for individual consumption, and in the form of a commodity-supply or commodity-capital. The supply in one form decreases relatively when it increases in another, although its quantity may increase absolutely in all three forms simultaneously.” (p 142)
Under direct production, little in the way of commodity-capital is needed, but the producer needs a larger supply for individual consumption. But, Marx explains,
“It does not assume the form of a commodity-supply and for this reason Adam Smith declares that there is no supply in societies based on this mode of production. He confuses the form of the supply with the supply itself and believes that society hitherto lived from hand to mouth or trusted to the hap of the morrow. This is a naive misunderstanding.” (p 143)
Under these previous modes of production, the supply of productive capital took the form of a stock of means of production. The difference here is that Capitalism develops the productivity of labour by a greater development of the technical instruments of labour, which in turn leads to the extension of the means of production.
“The material forms of existence of constant capital, the means of production, do not however consist only of such instruments of labour but also of materials of labour in various stages of processing, and of auxiliary materials. With the enlargement of the scale of production and the increase in the productive power of labour through co-operation, division of labour, machinery, etc., grows the quantity of raw materials, auxiliary materials, etc., entering into the daily process of reproduction. These elements must be ready at hand in the place of production. The volume of this supply existing in the form of productive capital increases therefore absolutely, in order that the process may keep going — apart from the fact whether this supply can be renewed daily or only at fixed intervals — there must always be a greater accumulation of ready raw material, etc., at the place of production than is used up, say, daily or weekly. The continuity of the process requires that the presence of its conditions should not be jeopardised by possible interruptions when making purchases daily, nor depend on whether the product is sold daily or weekly, and hence is reconvertible into its elements of production only irregularly. But it is evident that productive capital may be latent or form a supply in quite different proportions. There is for instance a great difference whether the spinning-mill owner must have on hand a supply of cotton or coal for three months or for one. Patently this supply, while increasing absolutely, may decrease relatively.” (p 144-5)
The more capitalist production is developed, facilitating transport and communication, then the more regular and rapid becomes the supply of these necessary means of production. As a result, the less the individual capitalist needs to hold as latent capital, of these items.
But, this reduction in supply, held as latent capital, does not represent a reduction in supply in total, only a change in its form e.g. coal supplies may not be held as stocks by capitalists burning it, but take the form of productive-capital and commodity-capital regularly supplied by the coal producer.
“In the third place the development of the credit-system also exerts an influence. The less the spinner is dependent on the direct sale of his yarn for the renewal of his supply of cotton, coal, etc. — and this direct dependence will be the smaller, the more developed the credit-system is — the smaller relatively these supplies can be and yet ensure a continuous production of yarn on a given scale, a production independent of the hazards of the sale of yarn.” (p 145-6)
Other commodities, required as means of production, can take long periods to produce e.g. agricultural products. If production is not to be interrupted, then a large stock must be in hand to suffice until the next crop. Where productive capitalists managed to reduce such stocks it was to the extent that Merchant Capitalists held them instead. Modern Capitalism resolves this problem also by sourcing supply from different parts of the globe and by replacing natural products with synthetic equivalents.
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