Monday, 20 January 2014


Money-Capital refers to the money form of capital value within the circuit of industrial capital, in the same way that commodity-capital, and productive-capital refer to those specific forms of capital value within that circuit, which as Marx describes is a unity of the circuits of these three different forms of capital value. In the same way that the growth of commodity-capital leads to the development of Merchant Capital that specialises in its circulation, so the growth of money-capital leads to the development of Money-Capitalists that specialise in its circulation.

Money-capital is the money equivalent of the commodity-capital which arises as a consequence of the production process. The commodity-capital, as Marx describes in Capital II, always contains the surplus value, because it arises out of the production process in which the surplus value is created. Consequently, the money-capital itself at this point also always contains the surplus value. The commodity-capital represented by C' becomes M'. However, as Marx points out, the circuit of money-capital always ends at this point, i.e. at the point of the realisation of the commodity-capital. Its circuit is M – C .. P.. C' – M'. At this point the money capital exists not as money-capital, but as money, i.e. as the universal equivalent form of value. It could just as easily be used for purposes of consumption by the capitalist, or for speculation in stocks, bonds etc. as for productive investment.

It only becomes money-capital if it is once more used to purchase productive-capital, so that its circuit always begins anew as M – C .. P.. C' – M' rather than commencing with M', even if this M is the increased sum previously represented by M'. Money-capital then also refers to the money equivalent of the capital value of the productive capital which engages in the productive process. The increase in M to M' = m, is then the money equivalent of the surplus value created in the production process.

Because M is the money equivalent of the capital value advanced as productive-capital, C, rather than the actual payment of money for that productive-capital, and because M' is the money equivalent of the commodity-capital, C', it is then clear that m is the money equivalent of c, the surplus product, and can only arise as a result of production, rather than being an increase in M arising from an exogenous change in the value or market price of C.

Whatever, money is laid out for the purchase of C (means of production and labour-power) is irrelevant to the actual value of C advanced to production as productive-capital, because the value of C (as commodities) is objectively determined in accordance with the labour theory of value by the labour-time currently required for its reproduction. If the value of C changes, therefore, after it has been bought, then M the money equivalent of C also changes.

“If the price of raw material, for instance of cotton, rises, then the price of cotton goods — both semi-finished goods like yarn and finished goods like cotton fabrics — manufactured while cotton was cheaper, rises also. So does the value of the unprocessed cotton held in stock, and of the cotton in the process of manufacture. The latter because it comes to represent more labour-time in retrospect and thus adds more than its original value to the product which it enters, and more than the capitalist paid for it.”

Unless, we follow Marx in his method set out in Capital II, of determining M, as merely the money equivalent of the capital value, rather than the historical price paid for it, we would arrive at a position which undermines his theory of surplus value, because any change in the capital value of C would automatically change c, and thereby s. It would mean that an amount of surplus value could be created other than as a result of the production process, which would mean that labour was not the sole source of surplus value, thereby undermining the fundamental basis of Marx's theory.

If C is £100, and is bought with £100 in money, then as a result of the production process, C rises to £120. The value of C, the advanced productive-capital remains £100, contained in C but is now supplemented by a surplus commodity-capital c with a value of £20. C and c are sold at their value of £120, providing a surplus value of £20.

However, if the value of C rises, after it has been bought, to £120, because the value of raw material has risen, then this increased value would be reflected in the value of the finished product. Its value would then rise from £120 to £140. But, the actual amount of surplus value created in production has not changed. It remains £20. If we look at the situation from the point of capital-value this is clear. The value of C is now £120, the value of the final product is £140, leaving a surplus value of £20. But, if we consider the situation from the perspective of the historic price paid and the current price received, things look different. The money laid out for C was £100, the money received from the sale of the finished product is £140, giving a surplus value of £40, even though only £20 was produced as surplus value in production. The additional £20 of surplus value is attributable to the rise in value of the raw material, which means that labour is no longer here the only source of surplus value.

In fact, what this amounts to is a form of commodity fetishism, but the commodity being fetishised is the money commodity. It is then also a form of money-illusion. If we remember that money is the universal equivalent form of value, then the real situation is revealed because not only does money act as a measure of the value of every other commodity, but its own value is measured by them. Although the value of money itself may not change, i.e. the amount of labour-time required for its production remains the same, its exchange value against any other commodity is altered by any change in the value of that other commodity – value is determined only for the individual use value, whereas exchange value is determined by the relation between the value of the two use values/commodities being compared.

If the Value of C rises, then if the value of M remains constant, the exchange value of M relative to C falls. This is manifest in the fact that M buys less C. If M is considered then, as Marx does, as being merely the money equivalent of the capital value of the productive-capital, rather than the actual money paid for it, this problem of the change in the exchange value of money relative to C disappears. The value of C rises from £100 to £120. This value is reproduced in C'. But, C has a money equivalent M, also equal to £120. But, although the nominal value of M has risen (from £100 to £120) it only buys the same quantity of C as previously, because the exchange value of M has fallen relative to C.

This is significant for looking at the situation from the perspective of the productive capitalist as compared to the money-capitalist. The money-capitalist is only interested in the increase in their own money capital, M – M', but M cannot self-expand. Money-capital is only capital if it is used to purchase productive-capital, which is the role of the productive-capitalist not the money-capitalist. But, this also means that the money-capitalist is free to utilise their money-capital for investment in any activity which brings an increase of M to M'. The money-capitalist can only increase their money-capital by obtaining a share of the surplus value created by the productive-capitalist. But, the greater the share taken as interest by the money-capitalist, the smaller the share available to the productive-capitalist for productive investment. Moreover, the surplus value produced by the productive-capitalist always takes the form for them of a profit, but for the money-capitalist, the surplus value can also take the form of a capital gain, which is the other side of a capital loss suffered by some other capital. This is most notable where M is used not for the purchase of productive-capital, but is used for the purchase of fictitious capital, i.e. for speculation in stocks, bonds, property etc.

The productive capitalist is interested not particularly in an increase in M, but in an increase in C, their productive-capital. The productive-capitalist is only able to produce additional surplus value, if the rate of surplus value remains the same, by employing additional productive-capital. It is not the nominal money equivalent of that productive-capital that is determinant of the amount of surplus value, but its physical quantity, and in particular the quantity of Variable Capital. A productive-capital might have a productive-capital of £1,000,000, and yet produce less surplus value than one with only £100,000 of productive-capital. The first might be a jeweller whose productive-capital is made up of £950,000 of constant capital in the form of a relatively small quantity diamonds, with only £50,000 in the form of variable capital, required to process them, and producing £50,000 of surplus value. The second capitalist may be a cotton spinner whose productive-capital is made up of just £20,000 of constant capital in the form of a large amount of cotton, with £80,000 in the form of a variable capital to process it, and producing £80,000 of surplus value.

“Growth of capital involves growth of its variable constituent or of the part invested in labour power...

Accumulation of capital is, therefore, increase of the proletariat.” 

(Capital I, Chapter 25)

That is why in measuring the rate of profit, Marx bases his calculation not on the change in M-M', but on the circuit P..P or C'-C', only measured in the money equivalent. 

“The rate of profit must be calculated by measuring the mass of produced and realised surplus-value not only in relation to the consumed portion of capital reappearing in the commodities, but also to this part plus that portion of unconsumed but applied capital which continues to operate in production. However, the mass of profit cannot be equal to anything but the mass of profit or surplus-value, contained in the commodities themselves, and to be realised by their sale.”

Capital III, Chapter 13

“In calculating the aggregate turnover of the advanced productive capital we therefore fix all its elements in the money-form, so that the return to that form concludes the turnover. We assume that value is always advanced in money, even in the continuous process of production, where this money-form of value is only that of money of account. Thus we can compute the average.” (Capital II, p 187) 

Note Marx's terminology here. Firstly he begins by making clear that what he is talking about is “the advanced productive capital” or “the consumed portion of capital reappearing in the commodities” . To make clear it is not the advance of the money-capital, or historic price, used to purchase that productive capital, that Marx is talking of, he then says that what he is doing is only to “fix all its elements in the money-form”. Finally, to make clear that his analysis here is one based on the actual capital-value advanced, and not on the money-capital advanced, he makes clear that the use of money here, is merely a convenience of calculation, and that he is using it essentially only in its role as “money of account”

But, even when merchant-capital and money-capital arises as specialist functions to engage in the process of circulation of commodity-capital and money-capital, the industrial capitalist must also continue to undertake these functions as well as that of productive-capitalist. Every productive-capitalist must also be a merchant-capitalist in that, following production, a portion of their capital-value assumes the form of commodity-capital, which they must sell even if only to merchant capitalists. They must also retain a proportion of their capital-value in the form of money-capital, because they always require working-capital to purchase their productive-capital, to cover unforeseen events and so on, including using it for the purpose of speculation so as to obtain a capital gain, whether that be from purchasing commodities they expect to rise in value, or to purchase the shares or bonds of other companies with the same intent.

Money-capital understood as being the specific function of money-capitalists includes bank-capital and financial capital, the latter taking into consideration the role in modern economies of not just the banks, but of the quasi bank sector including insurance companies etc. Financial Capital here is not the same as Finance-Capital, which as defined by Hilferding, refers to a specific concept in which Financial-Capital has been merged with Productive-Capital via the ownership of shares in the trusts and monopolies.

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