Tuesday, 15 October 2013

Capital II, Chapter 8 - Part 6

The distinction between fixed and circulating capital is a distinction between different types of productive capital, based on whether or not their use value is entirely consumed within the production process. For that reason neither money-capital nor commodity-capital can be classed as fixed or circulating capital. Money-capital can only become fixed or circulating capital when it has been transformed into productive capital. Commodity-capital similarly has to be sold and transformed into money, and then transformed into productive capital, before it can be either fixed or circulating.

“No matter how much money-capital and commodity-capital may function as capital and no matter how fluently they may circulate, they cannot become circulating capital as distinct from fixed capital until they are transformed into circulating components of productive capital. But because these two forms of capital dwell in the sphere of circulation, Political Economy as we shall see has been misled since the time of Adam Smith into lumping them together with the circulating part of productive capital and assigning them to the category of circulating capital. They are indeed circulation capital in contrast to productive capital, but they are not circulating capital in contrast to fixed capital.” (p 170-1)

By definition, the turnover time of fixed capital is equal to several turnovers of the circulating capital. The turnover time of the circulating capital is the time it takes the product to go through the production process, to be sold, and the proceeds to be used to buy the replacement productive capital. For example, suppose the necessary labour and materials are on hand to build a house. The house takes a month to build. A buyer is already on hand, and the purchase process takes two more weeks. At this point, the builder has all the money required to purchase the labour-power, the bricks, cement, plaster etc. needed to build another identical house. All of those things were fully consumed in the production process, and have to be replaced in their entirety. They are circulating capital.

If the builder works 48 weeks a year, then on this basis, of his circulating capital turning over in six weeks, it will turn over eight times a year. But, his fixed capital will not have been worn out during one or even all eight of these production processes. The lump hammers may last a couple of decades, the shovels a couple of years, the excavators up to ten years and so on. During all this time, the value of the fixed capital transfers part of its value to the end product, and its own value diminishes with wear and tear in the same amount.

The capitalist has to buy the fixed capital required all in one lump, whereas only that circulating capital required for the production process has to be bought. At the end of that process, the capitalist gets back all of the value of the circulating capital, but only that part of the fixed capital lost in wear and tear.  The other side of this, however, is that the circulating capital has to be completely replaced at the end of each production cycle, whereas the fixed capital continues to function until it is worn out. The circulating capital withdraws from society's total production, a value equal to what it has thrown into it, at the end of each cycle, but the fixed capital throws into the market value that it does not immediately withdraw. It only does so when it has been completely worn out.

In a sense, the circulating capital is also fixed in production, because the continuous nature of capitalist production means that they must always be present in that process. The difference resides in the fact that the fixed capital remains bodily within that process. The circulating capital continually changes its bodily form. It is not the same physical piece of cotton being continuously transformed into yarn, but different pieces of cotton that perpetually represent the same capital-value. No sooner has one piece of cotton become yarn than the capital-value that was embodied in its physical shell has passed instantaneously into its replacement.

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