“The “acquired and useful abilities” (p. 187) which Smith mentions under the head of fixed capital are on the contrary component parts of circulating capital, since they are “abilities” of the wage-labourer and he has sold his labour together with its “abilities.”” (p 211)
Smith's necessity of dividing all capital into being either fixed or circulating stems from his division of all social wealth into a consumption fund and into capital – fixed and circulating. This contrasts to Marx’s analysis, which identifies money-capital and commodity-capital as capital involved in the process of circulation, and productive capital comprising fixed and circulating capital.


This is thoroughly confused, as Marx demonstrates. Of course, everything not provided by nature, that is bought under capitalism, be it for individual or productive consumption, be it raw material or a machine, is bought as a commodity and has circulated in the market as the commodity-capital of some capitalist.
“But it does not follow from this by any means that every fixed capital stems originally from some circulating capital; that follows only from the Smithian confusion of capital of circulation with circulating or fluent, i.e., non-fixed capital. Besides, Smith actually refutes himself. According to him himself, machines, as commodities, form a part of No. 4 of the circulating capital. Hence to say that they come from the circulating capital means only that they functioned as commodity-capital before they functioned as machines, but that materially they are derived from themselves; so is cotton, as the circulating element of some spinner’s capital, derived from the cotton in the market. But if Adam Smith in his further exposition derives fixed capital from circulating capital for the reason that labour and raw material are required to build machines, it must be borne in mind that in the first place, instruments of labour, hence fixed capital, are also required to build machines, and in the second place fixed capital, such as machinery, etc., is likewise required to make raw materials, since productive capital always includes instruments of labour, but not always material of labour. He himself says immediately afterwards:
“Land, mines, and fisheries, require all both a fixed and a circulating capital to cultivate them;”
(thus he admits that not only circulating but also fixed capital is required for the production of raw material)
“and” (new error at this point) “their produce replaces with a profit, not only those capitals, but all the others in the society.” (p. 188.)
This is entirely wrong. Their produce furnishes the raw material, auxiliary material, etc., for all other branches of industry. But their value does not replace the value of all other social capitals; it replaces only their own capital-value (plus the surplus-value). Adam Smith is here again in the grip of his physiocratic reminiscences.” (p 213-4)
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