Capital II, Chapter 10 - Part 3

Marx points out that using Smith's earlier definition of circulating capital, as that in the process of circulation, the machine would have to be defined as circulating capital, because for the machine maker, it forms part of his commodity-capital.

“Consequently with Adam Smith things can function as fixed capital (as instruments of labour, elements of productive capital), or as “circulating” capital, commodity-capital (as products thrust out of the sphere of production into that of circulation), all depending on the position they occupy in the life-process of capital.” (p 198)

Marx points out, however, that Smith then seems to abandon his definition of fixed and circulating capital based on whether it is employed in production or selling and writes,

“Different occupations require very different proportions between the fixed and circulating capitals employed in them.” (p 198)

In other words, he then reverts to a definition of fixed and circulating capital based on these divisions within productive capital.

Smith's other use of fixed and circulating is a distinction in which the “circulating” capital is one that changes masters, and it is in this process of exchange that profit arises. The impossibility of that being a source of profit in general, was discussed at length in Volume I. But, this idea of circulating capital being that which changes masters makes no sense either. Marx gives the example of a copper mine. The copper itself is a product of nature. The worker who mines it continues to belong to himself, and is not transferred to a new master. His labour itself does not form any material component of the end product. But also, the coal used to power the mine's steam engine, and all the other auxiliary materials, which do not enter materially in the end product, would have to be defined, on Smith's definition, as “fixed” capital, because they do not change masters!

If we take yarn and the cotton that composes it, the cotton as an element of productive capital, does not change masters. It remains in the possession of the productive capitalist, who does not exchange it, but processes it.

So, these materials do not circulate any more than the machines on Smith's basis. In fact, a portion of these raw materials and auxiliary materials, as well as labour-power, must always be “fixed” in Smith's sense, precisely because they are productive capital, and are engaged in the production process, which appears as an interruption in the process of circulation – be that circulation of commodities or of money.

“And all the elements of productive capital, whether fixed or circulating, equally confront, as productive capital, the capital of circulation, i.e., commodity-capital and money-capital.” (p 200)

Smith: ““The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession or continues in the same shape.” [Vol. II, p. 254.]” (p 201)

But, this statement about fixed capital, confuses the appearance that the value of the commodity has increased, as a consequence of its exchange with the reality that it has increased in the process of production. The process of exchange can only ever bring about exchange of the same commodities and their monetary equivalents, their transfer into other hands. Only the production process can create new products and new value. The process of circulation is required for productive capital to exist, because the industrial capitalist must exchange money for productive capital, but this signifies something qualitatively different to the mere exchange of commodities and money, C – M – C, which characterises Merchant Capital.

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