## Thursday, 28 August 2014

### Maito and The Rate of Turnover of Capital - Part 2

If we examine the circuit, for a restaurant, what we see then is that such a restaurant has customers come in, who place orders. Variable capital is advanced, in the production process, (P) as labour-power, which takes the order, as well as the labour-power that cooks the food. Circulating constant capital is advanced in the form of electricity to power the till, to light and heat the restaurant etc., and in the form of the materials used in the food. In fact, in a fast food restaurant, payment for the food (M') will usually be made, even before the commodity has been supplied, but the circuit of this capital is really only complete at the point that the commodity has been supplied to the customer, and payment made, so that the above payment can be used to reproduce the consumed productive-capital, ready to fulfil the next order. It is complete, because not only is this money-capital then available to reproduce the productive-capital, but that productive-capital is itself already immediately on hand, in the form of a productive-supply, i.e. the workers are already there in place, and the materials are already on site, waiting to be advanced to the production process, to replace those consumed in the previous circuit. In reality, the circulating capital advanced is turned over in this way, not just on a daily basis, as I suggested previously, but many times, even just during a single day.

If you want a practical example of how that might occur, it would be of a pimp, who immediately takes the money paid to a prostitute, by a client, and, after taking out their profit and any expenses, pays the remainder to the prostitute, so that they can reproduce their labour-power, and continue to the next client.

If, on average, there are 500 customer orders completed during the day, the variable capital turns over 500 times, (in reality modified by how many orders are on average filled simultaneously) and this is not changed by the fact that, in practice, the value of the commodity is not used, after each completed circuit, to pay the workers, or to buy replacement material, used in that particular production process. The fact remains that, after the completion of each order, the circuit of capital has been completed, the capital required to reproduce the productive-capital, used in the commodity's production and circulation, has been realised, along with additional capital to cover the wear and tear of fixed capital, plus the relevant amount of surplus value, and sits in the till, available for use, or else has been transferred, by electronic means, into the company's bank account, equally available for use. In a 7 day week, the advanced circulating capital will have been turned over 3500 times, even before any money has been paid to workers as wages, or to cover payments to material suppliers.

In fact, if the workers are paid one month in arrears, and the material is supplied on the basis of payment within a month of receipt, no money-capital will need to be advanced for its purchase, because the required capital will be generated from the sale of commodities during that month, made possible by the advance of labour-power and circulating constant capital! That is one reason why Marx calculates the rate of profit on the current reproduction cost of this advanced capital value, and not on the historic money prices paid for it.

But, just as the fact that workers are paid a week or a month in arrears, and materials are paid for on one month's commercial credit from suppliers, does not affect the rate of turnover, of the advanced productive-capital, so it would not matter, either, if they were paid for in advance, rather than in arrears. All that would change here, is that the capital value would assume a different form. As Marx points out, in Capital II, the individual firm, for various reasons, may buy up inputs in advance of the production process, which then constitute, not productive-capital, advanced to the production process, but constitute merely a productive supply, that is in the hands of that particular producer, rather than the hands of the merchant or other producer that supplies them.

If a particular capital has 10,000 units of materials in a productive-supply, but only requires 1,000 of those units to be advanced to meet the needs of production for one turnover period, the advanced capital is not calculated on the value of the 10,000 units, but on the value of the 1,000 units actually advanced to production. The fact, that the capitalist has this additional 9,000 units, simply means they have a capital value equal to that amount in the form of commodities, rather than money-capital (or more accurately in the form of commodities rather than money, because money that is not being used productively so as to expand is not acting as capital, and the same applies to the commodities).

The fact, remains that in order to have continuous production during the whole of the turnover period, the capitalist only requires to advance 1,000 units. When these 1,000 units are processed into commodities, and sold, their value assumes the form of money, which now the capitalist does not need to immediately transform into materials, to reproduce those consumed in production, because they already have a productive supply, of an additional 9,000 units, ready to be advanced to production, without any additional purchases, or advance of money-capital.

The commodity-capital when sold assumes the form of money, not money-capital, precisely because it can be used for unproductive consumption rather than to buy additional productive-capital.  It does not need to immediately buy additional productive-capital, because of the existence of the productive-supply.  At the point that the next 1,000 units of these commodities leave the productive supply and are advanced to production, they cease being merely commodities, and become productive-capital, just as money when it is advanced to buy productive-capital ceases being simply money, and becomes money-capital.

The same is true above. If the pimp immediately took the money, paid by each client, to the prostitute, but only paid the wages, to the prostitute, at the end of the day, and only paid out expenses at the end of the day, this would not change the fact that the variable capital, represented by the labour of the prostitute, had turned over several times during the day, and that the pimp had obtained their surplus value, on it, several times during the day, which would have been available for them, after each circuit, to invest in other ways.

The same is true in relation to the payment for orders provided by a fast food restaurant. But, this also demonstrates the problem with Maito's methodology, of calculating the rate of turnover based on “the number of times the total stock of inventories is expressed in the flow of total costs of the economy.” That is that, besides the problem of accurately determining, in a Marxist sense, what those total costs are, there are numerous reasons why the total stock of inventories may vary, in proportion to those costs, that has nothing to do with changes in the rate of turnover of productive-capital.