Capital II, Chapter 17 - Part 9

Given that we are talking only of simple reproduction, the situation is this. A capitalist starts a business with £5,000 of capital. They buy £4,000 of means of production, and £1,000 worth of labour-power. So, this £5,000, which they had in its money form, has now been spent, and is out there circulating, and consequently can come back to them to buy their commodities when they are put up for sale. However, as a capitalist, he expects to make a profit. This comes from the fact that the labour-power he buys is exploited at a rate of 100%. So, it produces £1,000 of surplus value.

Looking at the situation then, he has put £5,000 into circulation. £4,000 is in the hands of the producers of means of production. The £1,000 he paid as wages has been spent by his workers, to buy necessities, and is in the hands of the suppliers of means of subsistence. Of course, the producers of these means of production and subsistence will in turn have paid out money for wages, and for means of production themselves.

The fact, remains that £5,000 of money has been put into circulation by our capitalist and can return to buy his commodities. But, with the £1,000 of surplus value, created by his workers, those commodities now have a value of £6,000, leaving a shortfall of £1,000.

The answer to where this additional money, required to purchase these commodities, comes from requires us to take a step backwards. Because it takes a year for his commodities to come on to the market, and provide him with an income, he must have additional funds for his own consumption during that period. If his own consumption requirements come to £1,000, and we know they do because we have assumed simple reproduction where all surplus value is unproductively consumed, then he will have also, during the year, put this additional £1,000 into circulation, as he has bought the items required for his own consumption.

This £1,000 is not capital. It is not used capitalistically, to buy productive-capital. It is merely money used to buy commodities for individual consumption. The £1,000 of commodities he buys with this money themselves comprise a part of the society's total surplus product.

So, the total amount of money he has put into circulation is £6,000; £5,000 advanced as money-capital, £1,000 spent to buy commodities. Consequently, this £6,000, now in circulation, can return to him to buy the commodities he throws into the market. Of that £6,000, £5,000 go to replace the productive-capital, and £1,000 is available to him once again to fund his own personal consumption for the following year.

“And henceforth this operation is repeated every year. But beginning with the second year, the £1,000 which he spends are constantly the converted form, the money-form, of the surplus-value produced by him. He spends them annually and they return to him annually.” (p 339) 

If his capital turned over more frequently than once a year that wouldn't change things, but would mean he would need less money to cover his personal consumption, just as he would need to advance a smaller sum of money-capital to buy productive-capital. He would throw the same amount of money into circulation in total, its just that it would keep coming back to him faster, but in smaller amounts, for him to spend it again.

But, this has still not actually answered the question of where the money itself has come from. The question of where the additional money comes from has been dissolved because Marx has demonstrated that it comes from the same place that all of the other money comes from. Here the capitalist threw the additional £1,000 in to cover their expenditure. Yet, this simply poses the question where did this £6,000 come from?

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