Capital II, Chapter 17 - Part 4

In this economy, the gold producers immediately have their surplus value in the form of money, because gold here is money. As soon as it is produced, they can go into the market and use this surplus value to buy the articles of personal consumption they desire. Moreover, the workers employed by these capitalists can immediately be paid in gold too. This is different to the workers and capitalists in other industries, who first have to sell the commodity before the variable capital and the surplus value embodied in it can be reproduced.

For the same reason, the gold mining capitalist can immediately use his gold production to reproduce the constant capital, the materials etc. used in production. Considering the circuit of this capital it is M – C … P … M', because here C', the commodity-capital resulting from the production process, and incorporating surplus-value, is immediately money – gold. M' here comprises C, which is made up of the labour-power, the circulating constant capital, the portion of the fixed capital transferred in wear and tear, and in addition, the surplus value.

“If the sum were smaller, the general value of gold remaining the same, then the mine would be unproductive or, if this got to be generally the case, the value of gold compared with the value of commodities that remains unchanged would subsequently rise; i.e., the prices of commodities would fall, so that henceforth the amount of money laid out in M — C would be smaller.” (p 331)

Normally, when a capital buys circulating capital, it does so by withdrawing money from circulation. That is, either the capitalist withdraws money from the money market, or else, in selling their own commodities, to be able to reproduce their capital, they withdraw money from circulation in payment for them. But, that is not the case for the gold producer. Their output is immediately an increase in the potential money supply. Their output can immediately be utilised to buy circulating capital, without imposing any additional demand on the existing money supply. However, Marx has to be careful here. He could fall into the same error as Ricardo, in equating gold as money. Gold acts as the money commodity, but gold is not money. Gold is a commodity as well as acting as the money commodity. Not all gold production goes to be money. If more gold is put into circulation than is required as money, which could be the result of the process Marx describes here, the value of that money falls below the value of gold. It then gets taken out of circulation, and melted down.

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