Capital II, Chapter 6 - Part 9

If the producer of a commodity sells it to a merchant C' – M', they realise the value of their productive capital and the surplus value. They can then proceed to reproduce and expand their productive-capital, even though their commodity is still in the market, still in the process of circulation. Had he sold it himself he would have had to have had two capitals employed. His own plus that equal to the merchant's, required for its circulation. From the standpoint of society, just as much capital, social labour-time is required in either case, but from the standpoint of the producer, less capital is required, and more of their capital can be kept in its productive form, thereby increasing its potential for expansion.

“Since the commodity-supply is nothing but the commodity-form of the product which at a particular level of social production would exist either as a productive supply (latent production fund) or as a consumption-fund (reserve of means of consumption) if it did not exist as a commodity-supply, the expenses required for its preservation, that is, the costs of supply formation — i.e., materialised or living labour spent for this purpose — are merely expenses incurred for maintaining either the social fund for production or the social fund for consumption. The increase in the value of commodities caused by them distributes these costs simply pro rata over the different commodities, since the costs differ with different kinds of commodities. And the costs of supply formation are as much as ever deductions from the social wealth, although they constitute one of the conditions of its existence.” (p 150-1)

The existence of a commodity supply i.e. of stocks of commodities, waiting to be sold, is only normal in the sense that it is a necessary condition for those commodities to be sold. That is like the reserves of money that have to be held in order that productive-capital can be bought without waiting for all production to be sold first.

But, when reserves of money are held because productive-capital is not available to be bought, or indeed because the producer decides not to buy, because they fear expanded production could not be sold, this is not normal. It constitutes a stagnation or breakdown in the circuit of capital. The same is true where commodity-capital exists as supply because it cannot be sold.

“It does not make any difference whether this jam occurs in the warehouses of the industrial capitalist or in the storerooms of the merchant. The commodity-supply is in that case not a prerequisite of uninterrupted sale, but a consequence of the impossibility of selling the goods. The costs are the same, but since they now arise purely out of the form, that is to say, out of the necessity of transforming the commodities into money and out of the difficulty of going through this metamorphosis, they do not enter into the values of the commodities but constitute deductions, losses of value in the realisation of the value. Since the normal and abnormal forms of the supply do not differ in form and both clog circulation, these phenomena may be confused and deceive the agent of production himself so much the more since for the producer the process of circulation of his capital may continue while that of his commodities which have changed hands and now belong to merchants may be arrested. If production and consumption swell, other things being equal, then the commodity-supply swells likewise. It is renewed and absorbed just as fast, but its size is greater. Hence the bulging size of the commodity-supply, for which stagnant circulation is responsible, may be mistaken for a symptom of the expansion of the process of reproduction, especially when the development of the credit-system makes it possible to wrap the real movement in mystery.” (p 151)

The costs of maintaining this supply are three fold. The commodities may diminish in quantity, as happens with grain, or with ice. Their quality may diminish. Finally, there is the cost of producing the storage facilities and of the labour-power to operate them.

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