Tuesday, 11 March 2014

Capital II, Chapter 15 - Part 2

It can be seen that, whether the scale of operation is reduced, or else the capital is increased, to allow continuous production, on the same scale, both are determined by the ratio of the circulation time to the production time. £900 of capital used to cover 12 weeks instead of 9, has to be reduced from £100 a week to £75 a week, a 25% reduction, just as the 3 weeks circulation time is 25% of the total turnover time.

If instead, the £900 capital is increased to £1,200, a £300 increase, that is 25% of the total capital. Put another way, it is a third of the original capital, just as the circulation time, is a third of the production time.

At the end of 9 weeks, £900 of productive capital has become £900 of commodity capital, but cannot be used to replace productive capital for another three weeks. So, an additional capital of £300 is employed as productive capital to ensure continuous production on the same scale.

Its clear that the 9 week working period, and the 12 week turnover time do not coincide, so that when money from the sale of commodities from the first working period, is received, the second working period will already be 3 weeks old. So, of the £900 received, only £600 will be required to complete the second working period. This will leave £300, which can buy productive capital to cover the first 3 weeks of the third working period, and so on.

Marx gets a bit muddled up here. For example, he writes,

“Third period of turnover. At the close of the 9th week of the second period of turnover there is a new reflux of £900. But the third working period has already commenced in the 7th week of the previous period of turnover and 6 weeks have already elapsed. The third working period, then, lasts only another 3 weeks. Hence only £300 of the returned £900 enter into the productive process.” (p 264)

In fact, its clear that at the end of each turnover period, £600 is required to finance the the last two-thirds of the previous turnover, leaving a third to finance the first third of the next turnover. The table below, I think gives the correct illustration of the flow of funds, of how each working period is financed.

Working Period
Circulation Time
Financed By
1 - 9
10 - 12
£900 Capital
10 - 18
19 - 21
£300 Capital + £600 (sale week 12)
19 - 27
28 - 30
£300 (sale week 12) + £600 (sale week 21)
28 - 36
37 - 39
£300 (sale week 21) + £600 (sale week 30)
37 - 45
46 - 48
£300 (sale week 30) + £600 (sale week 39)

Marx takes the turnover period (9 weeks production time + 3 weeks circulation time) and, therefore, establishes the turnover periods in weeks 12, 24, 36, 48. For example, he writes,

“At the close of the 6th week of the second period of turnover the second working period is up.” (p 264) 

That is week, 18. But, in fact, because the working periods and circulation periods overlap, the turnover period for the additional capital starts in week 10, when the second working period begins, not in week 13. The capital advanced in the second working period is returned in week 21 not week 24. Put another way, in turnover period 1 (weeks 1 -12) only 75% of the capital advanced is turned over (900/1200). This is made clearer in the next example that Marx gives.

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