Capital II, Chapter 17 - Part 17

Assuming only the existence of the capitalist and working classes, then the money paid out as wages – variable capital - to workers, returns in its entirety to capital, in return for means of subsistence. However many times this is repeated, the workers always end up only able to afford the means of subsistence. If we take an economy where we have:

C 1000 + V 1000 + S 1000

the workers wages equal £1,000. They can only ever buy back the value of their own labour-power. Which means they cannot buy the means of production, C, let alone the surplus product, S.

If the capitalists, as a whole, then cannot accumulate money-capital, by selling more to workers than they have paid them in wages, how do they realise this additional money-capital? This, of course, is a very important and topical question. How indeed was, particularly the US, and UK capital, during the 1980's and 90's to accumulate money-capital, by selling to its workers, who made up the bulk of its consumers, more than it paid them in wages, particularly as those wages were stagnant or falling?

“They would all have to sell a portion of their product without buying anything in return. There is nothing mysterious about the fact that they all have a certain fund of money which they throw into circulation as a medium of circulation for their consumption, and a certain portion of which returns to each one of them from the circulation. But in that case this money-fund exists precisely as a fund for circulation, as a result of the conversion of the surplus-value into money, and does not by any means exist as latent money-capital.” (p 353)

In reality, the latent money-capital, which takes the form of a hoard, takes a number of forms, some of which are only apparent. For example, with fractional reserve banking, only a tiny proportion of deposits are retained as money. Banks know that, at any one time, depositors will only want 10% of their deposit. So, the bank lends out the other 90%, receiving interest on those loans. The loans themselves appear as deposits in the accounts of those to whom the money has been lent. So, although the deposit has the appearance of a money hoard, the money itself, in large part, has been thrown back into circulation.

Similarly, money can be hoarded by purchasing government bonds.

“These are not capital at all, but merely outstanding claims on the annual product of the nation.” (p 353)

In the same way, commercial bonds are not capital, but a similar claim on the future revenue of the company issuing them. Money invested in shares is not itself capital, but only fictitious capital, whose value can be wholly removed from the value of the underlying capital, to which it is a title of ownership. Like a bond, it gives the right to a share of the firm's future surplus value.

“There is no accumulation of money in any of these cases. What appears on the one side as an accumulation of money-capital appears on the other as a continual actual expenditure of money. It is immaterial whether the money is spent by him who owns it, or by others, his debtors.” (p 353)

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