Capital II, Chapter 11 - Part 1

Theories of Fixed and Circulating Capital. Ricardo

Ricardo discusses fixed and circulating capital as part of his explanation of why prices differ from values. His analysis lacks clarity and continues some of the confusion of Smith. So, for example, he basically calls labour circulating capital and the instruments of labour that “support labour”, fixed capital.

“On the one hand the circulating capital is here lumped together with the variable capital, i.e., with that part of productive capital which is laid out in labour. But on the other hand doubly erroneous definitions arise for the reason that the antithesis is not derived from the process of self-expansion of value — constant and variable capital — but from the process of circulation (Adam Smith’s old confusion).” (p 219)

But, Ricardo also distinguishes between these instruments of labour according to their durability, and places this distinction on the same level as the distinction between constant and variable capital. However, the former only determines how the value of constant capital is transferred to the end product, whilst the latter explains the source of surplus value.

“If instead of seeing through the internal machinery of the capitalist process of production one considers merely the accomplished phenomena, then these distinctions actually coincide. In the distribution of the social surplus-value among the various capitals invested in different branches of industry, the differences in the different periods of time for which capital is advanced (for instance the various degrees of durability of fixed capital) and the different organic compositions of capital (and therefore also the different circulations of constant and variable capital) contribute equally toward an equalisation of the general rate of profit and the conversion of values into prices of production.” (p 220)

That pre-empts Marx’s solution to the problem Ricardo sought to resolve i.e. the fact that prices differed from exchange values.

Looked at from the circulation process, there is instruments of labour (fixed capital) on one side, and labour and materials (circulating capital) on the other. Looked at from the production process and expansion of capital, there is constant capital (instruments of labour and materials) on one side, and variable capital (labour-power) on the other.

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