Capital II, Chapter 17 - Part 14

With the simple circulation of commodities, C – M – C, the money form of these commodities is only transient. C assumes the form of M only as part of this exchange, prior to being consumed, just as M is only a means towards the purchase of C, to complete the metamorphosis.

The assumption of the money form is a necessary part of that process. In the same way, under capitalist production, a portion of the capital must always be in the money form, prior to the purchase of productive-capital. Similarly, a portion of surplus-value must always be in the money form, whether it is waiting to be used to buy additional productive-capital, or individual items of consumption for the capitalist.

“Apart from this, the circuit of money — that is, the return of money to its point of departure — being a phase of the turnover of capital, is a phenomenon entirely different from, and even the opposite of, the currency of money, which expresses its steady departure from the starting-point by changing hands again and again. Nevertheless, an accelerated turnover implies eo ipso an accelerated currency.” (p 346)

In other words, we have seen that the circuit of money capital proceeds, M – C … P … C' – M'. But, the currency of money involves money spent by A passing to B, who passes it to C and so on. However, if capital turns over more quickly, by its nature, this means that money is also circulated faster. Instead of a capitalist keeping £5,000 of money-capital on hand, they may require only £1,000, releasing £4,000 to circulate. The £1,000 returns five times faster, and is thereby put back into circulation that much sooner, and more often.

This applies whether it is a more rapid turnover of either the constant or the variable capital, the same sum of money being used to purchase an increased value of commodities. Similarly, the faster the turnover, the more often the surplus value is realised, and, therefore, this amount of money being thrown back into circulation to buy additional productive capital or items of individual consumption.

The opposite does not necessarily apply. An increase in the velocity of money does not imply an increase in the rate of turnover of capital. But, it might. If it is brought about because of an improvement in the payment systems, then this might mean that the circulation time falls, because payment for goods sold is faster, making that money available to purchase productive-capital sooner.

Capitalist production, based on wage labour, assumes a sufficient money hoard to enable the payment of wages.

“This is the historical premise, although it is not to be taken to mean that first a sufficient hoard is formed and then capitalist production begins. It develops simultaneously with the development of the conditions necessary for it, and one of these conditions is a sufficient supply of precious metals. Hence the increased supply of precious metals since the sixteenth century is an essential element in the history of the development of capitalist production. But so far as the necessary further supply of money material on the basis of capitalist production is concerned, we see surplus-value incorporated in products thrown into circulation without the money required for their conversion into money, on the one hand, and on the other surplus-value in the form of gold without previous transformation of products into money.

The additional commodities to be converted into money find the necessary amount of money at hand, because on the other side additional gold (and silver) intended for conversion into commodities is thrown into circulation, not by means of exchange, but by production itself.” (p 348)

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