Capital II, Chapter 7

The Turnover Time and the Number of Turnovers

The entire turnover period of capital is the total of the time of production and time of circulation. The objective of this process, under capitalism, is not the production of commodities, of items of consumption, but of surplus value, the self-expansion of the capital. Once capitalist production has commenced, it does not just reproduce what it has consumed, in the productive process, but must also reproduce capital i.e. reproduce the very need to expand.

In the three circuits of capital, this self-expansion is manifest, in the circuit of money-capital, M – M'. It is manifest in the final term, but also in the expansion of this circuit to show that surplus value has been created. In the circuit of productive capital, P...P, it is again manifest in the expansion of that circuit, to illustrate the production of surplus value. But, neither of these circuits demonstrate that this expansion is more than a potential. In M – M', we do not know what happens to M. The capitalist could shut up shop. In P...P, we know that M has been reinvested to buy P, but again there is no reason that the second P should represent more capital than the first. However, in the circuit of commodity capital, C' – C', we have from the beginning a statement that the advanced capital has been expanded. Whether or not the surplus-value arising from that is consumed or accumulated, the second term also indicates that capital has expanded.

“If the process is renewed on the same scale, M is again the starting-point and m does not enter into it, but shows merely that M has self-expanded as capital and hence created a surplus-value, m, but cast it off. In the form P ... P capital-value P advanced in the form of elements of production is likewise the starting-point. This form includes its self-expansion. If simple reproduction takes place, the same capital-value renews the same process in the same form P. If accumulation takes place, then P' (equal in magnitude of value to M', equal to C') reopens the process as an expanded capital-value. But the process begins again with the advanced capital-value in its initial form, although with a greater capital-value than before. In form III, on the contrary, the capital-value does not begin the process as an advance, but as a value already expanded, as the aggregate wealth existing in the form of commodities, of which the advanced capital-value is but a part.” (p 157)

However, for this reason, this third circuit is no use for analysing the turnover of capital. The first circuit, M – M', is useful in certain conditions, and where the value of the money-capital is held constant. But, where that is not the case, and, therefore, for analysing things such as the rate of profit, it is the second circuit P...P, which is relevant, because it is based upon the value of the advanced capital in its commodity form, as productive capital, and it is that which has to be physically reproduced. The circuit M – M', in that context, is only relevant in respect of analysing newly invested capital – including that arising from surplus value i.e. of accumulation.

“Of the circuits I and II, the former is of service in a study primarily of the influence of the turnover on the formation of surplus-value and the latter in a study of its influence on the creation of the product.” (p 157)

In general, economists have viewed things only through the lens of the circuit M – C - M'. That is because it is on that basis that individual capitalists have calculated their specific profits.

The problem here of that, as Marx says, M – C - M' only provides a potential for the reproduction of the capital. As stated, there is no reason why the money-capital here reproduced would be invested. The capitalist could simply take all their money and spend it. But, that would be to present a view of capital alien to its nature, as self-expanding value. The whole point of the circuit of productive-capital, P...P, is that it illustrates the true nature of industrial capital, and its need to continually reproduce itself i.e. to continually reproduce its physical components, in the form of the various commodities – machines, raw materials, labour-power etc. - whether it does so only at the level of simple reproduction, or of expanded reproduction.

Its in this context, of the need during the year, to be continually reproducing these commodities, as they are consumed, in the production process, that makes the analysis of the rate of turnover of this capital important.

“Just as the working day is the natural unit for measuring the function of labour-power, so the year is the natural unit for measuring the turnovers of functioning capital. The natural basis of this unit is the circumstance that the most important crops of the temperate zone, which is the mother country of capitalist production, are annual products. If we designate the year as the unit of measure of the turnover time by T, the time of turnover of a given capital by t, and the number of its turnovers by n, then n = T/t. If, for instance, the time of turnover t is 3 months, then n is equal to 12/3, or 4; capital is turned over four times per year. If t = 18 months, then n = 12/18 = ⅔, or capital completes only two-thirds of its turnover in one year. If its time of turnover is several years, it is computed in multiples of one year. 

From the point of view of the capitalist, the time of turnover of his capital is the time for which he must advance his capital in order to create surplus-value with it and receive it back in its original shape.” (p 159)

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