Wednesday, 13 August 2014

Capital II, Chapter 18 - Part 2

2) The Role of Money-Capital

The study of individual capitals demonstrated that money-capital is the form capital first manifests itself. It is in the money form that capital is first advanced to buy productive-capital, and in order for productive capital to be reproduced, money-capital must continue to be periodically laid out for its purchase. How much money-capital must be advanced to set in motion a given quantity of productive capital depends on the turnover of the capital and the ratio between the working period and the circulation period.

The reality of capitalist production is that it is continuous and so consequently capital, both at the individual and the aggregate level, always exists in its three forms, money-capital, productive-capital, and commodity-capital, simultaneously.

Commodity production requires commodity circulation, which in turn requires money, both for the expression of price and for circulation. So, capitalist production presupposes capital in the form of money – money-capital, both for the creation of every business and for its continued functioning. That is particularly clear with the circulating capital, which must be continually bought.

But, the scale of production is not determined in any absolute sense by the amount of available money-capital. That is not just a matter of the rate of turnover. It is also a function of what today would be called economies of scale.

For example, the scale of production may increase but no more money-capital laid out, if some natural resource can be harvested. For example, a windmill might harness the free productive power of the wind, a fusion reactor that of the atom etc.

Alternatively, the scale of production might rise without laying out additional capital, if existing labour-power is used more extensively/intensively or simply more efficiently, to take advantage of the free productive power of co-operative labour. Even if labour is used more extensively/intensively, resulting in higher wages, (overtime etc.) the additional money-capital laid out will be proportionately less than the increase in production.

Such extensive or intensive methods mean fixed capital is used more effectively, and although it will then wear out more quickly, it will not do so proportionately. Moreover, the increased scale of production means that its value will be returned more quickly, via the sale of commodities, and losses due to depreciation will be reduced, so less rather than more capital has to be advanced for its replacement.

“True enough, the increase in the productive power of labour, so far as it does not imply an additional investment of capital-value, augments in the first instance only the quantity of the product, not its value, except insofar as it makes it possible to reproduce more constant capital with the same labour and thus to preserve its value. But it forms at the same time new material for capital, hence the basis of increased accumulation of capital.” (p 360)

In order to take advantage of these economies of scale, more capital-value absolutely, has to be set in motion, and that includes money-capital. But, that does not mean that more capital-value or money-capital is set in motion relative to the increase in production.

The increase in the absolute quantity of money-capital required by individual capitals poses a problem for private capital, which becomes a fetter on further development. But, as was shown in Volume I, this is overcome first by the centralisation and concentration of capital, and then by the expropriation of private capital by socialised capital, in the form of the joint stock companies and workers' co-operatives. 

“If the prices of the elements of production — the means of production and labour-power — are given, the magnitude of the money-capital required for the purchase of a definite quantity of these elements of production existing as commodities is determined. Or the magnitude of value of the capital to be advanced is determined. But the extent to which this capital acts as a creator of values and products is elastic and variable.” (p 361)

The labour-time required to replace worn out coins is a diminution of social production. It is one reason why capital moves to replace it with paper money tokens, credit-money and today electronic money. Today, this money can simply be assumed to exist, because it is produced by central banks, by the fractional reserve banking system, and the quasi bank sector. If the fetish for gold is overcome, and the real nature of money focused upon i.e. it is merely a representative of social labour-time, then any token, generally accepted, can be used as representative of that social labour-time.

For example, if the total amount of commodities to be circulated, in the economy, amounts to 200 billion hours of labour-time, and each hour is given a notional value of £10, then £2 Trillion of money is required. If the money has a velocity of circulation of ten, then £200 billion has to be put into circulation. In effect, this is no different than the situation described by Marx, under socialism, where each individual is given a voucher entitling them to take out of society's store goods with an equivalent value to that they have contributed in hours to that store. Here each money token simply represents an aliquot part of total social wealth. The difference being under capitalism that these tokens can be obtained without performing labour, and can be amassed in great volume by individuals, who can then use them as capital.

It does not matter whether this is in the form of £1 coins, notes of various denominations, credit money, or electronic transfers into accounts. But, similarly – and this applies to the situation under socialism too – if more notes are put into circulation than are required to circulate the value of commodities, the value of these money tokens will fall. Gold continues to be the money-commodity for all the reasons previously set out, it is real money in that sense. But, it only assumes that role in those times of crisis, when the existing money tokens have fallen into disrepute.

Similarly, in Marx's day the money, even as precious metals, was already there, built up over generations, and was either in circulation or residing in hoards.

“It cannot be regarded as a limit set to these things. By its transformation into elements of production, by its exchange with other nations, the scale of production might be extended. This presupposes, however, that money plays its role of world-money the same as ever.” (p 361)

The period of turnover is largely determined by the material conditions of production. But, under capitalist production, large scale operations that have long periods for completion, involve taking out value from the economy without putting value back for prolonged periods.

“Production in such spheres depends therefore on the magnitude of the money-capital which the individual capitalist has at his disposal. This barrier is broken down by the credit system and the associations connected with it, e.g., the stock companies. Disturbances in the money-market therefore put such establishments out of business, while these same establishments, in their turn, produce disturbances in the money-market. 

On the basis of socialised production the scale must be ascertained on which those operations — which withdraw labour-power and means of production for a long time without supplying any product as a useful effect in the interim — can be carried on without injuring branches of production which not only withdraw labour-power and means of production continually, or several times a year, but also supply means of subsistence and of production. Under socialised as well as capitalist production, the labourers in branches of business with shorter working periods will as before withdraw products only for a short time without giving any products in return; while branches of business with long working periods continually withdraw products for a longer time before they return anything. This circumstance, then, arises from the material character of the particular labour-process, not from its social form.” (p 361-2)

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