Capital II, Chapter 10 - Part 1

Theories of Fixed and Circulating Capital. The Physiocrats and Adam Smith 

Marx here examines the way fixed and circulating capital was analysed by the Physiocrats, and how their analysis was picked up by Adam Smith. For the Physiocrats, it is only agricultural capital that is productive. It is that which provides the food and raw materials that other workers need to live on, and which industry needs to produce. It is only the surplus provided here that enables the rest of society to engage in other activities.

This view was, of course, wrong, and the detailed reason why will be dealt with much later in examining “Theories of Surplus Value.” However, allowing for that peculiarity, as Marx points out, Quesnay is right to note that the distinction between what he calls “avances primitives” and “avances annuelles”, is one that only exists within productive capital.

“The difference between these two kinds of advances does not arise until advanced money has been transformed into the elements of productive capital. It is a difference that exists solely within productive capital. It therefore never occurs to Quesnay to classify money either among the original or the annual advances. As advances for production, i.e., as productive capital, both of them stand opposed to money as well as the commodities existing in the market. Furthermore the difference between these two elements of productive capital is correctly reduced in Quesnay to the different manner in which they enter into the value of the finished product, hence to the different manner in which their values are circulated together with those of the products, and hence to the different manner of their replacement or their reproduction, the value of the one being wholly replaced annually, that of the other partly and at longer intervals.” (p 193-4)

Because Quesnay and the Physiocrats were concerned with agriculture, this division between annual advances and advances for longer periods arose naturally from the turnover of the capital over the year. But, in their further analysis, they carried this division over as a description of capital involved in industry too.

It was from there that this division is picked up in the analysis of Adam Smith.

“With him it no longer applies to one special form of capital, the farmer’s capital, but to every form of productive capital. Hence it follows as a matter of course that the distinction derived from agriculture between an annual turnover and one of two or more years’ duration is superseded by the general distinction into different periods of turnover, one turnover of the fixed capital always comprising more than one turnover of the circulating capital, regardless of the periods of turnover of the circulating capital, whether they be annual, more than annual, or less than annual. Thus in Adam Smith the avances annuelles transform themselves into circulating capital, and the avances primitives into fixed capital. But his progress is confined to this generalisation of the categories. His implementation is far inferior to that of Quesnay.” (p 194)

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