Monday, 3 November 2014

Capital II, Chapter 20 - Part 19

If a capitalist spends money for consumption, both the money and the commodity are finished with. The money goes to the seller and the commodity is consumed. The capitalist can only get his money back if it is advanced rather than spent. The money he throws into circulation for consumption provides the means by which his own commodities can be bought, and the surplus value realised, but it is the sale of his commodities that makes that possible, not the throwing into circulation of his money.

“As the value of his entire annual commodity-product (his commodity-capital), so that of every one of its elements, i.e., the value of every individual commodity, is divisible, as far as he is concerned, into constant capital-value, variable capital-value, and surplus-value.” (p 424)

Marx describes two ways this occurs. With a new business, the capitalist has to continuously throw money into circulation, to buy articles of consumption, because, for a considerable time, the business will not generate him an income. He continues to do this in the expectation that, at some point, the business will be sufficiently profitable to provide him with such an income. In financing his consumption, in this way, from his own pocket, or via some form of borrowing, he also throws money into circulation – money which can finance other transactions. That money is precisely the means by which his surplus value can be realised in the future.

The second means by which it is effected is where the business has been in operation for some time. There, payments and receipts for commodities bought and sold, occur at varying time periods, but the capitalist's personal consumption needs continue at regular periods and have to be financed accordingly.

As commodities are sold, the constant and variable capital values are thereby replaced along with the realisation of surplus value. Depending upon the cash-flow of the business, determined by the periods during which payments are made, and receipts come in, the surplus value will accumulate as cash or bank deposits, which are then available for distribution to cover his spending.

But, money may still be required to ensure a regularity of personal income each month, to cover that spending. Moreover, if he is only able to sell enough commodities during the year to cover the variable and constant capital, there will be no surplus value to realise and use to cover his spending. The same is true if prices fall so that his commodities only realise the advanced capital. This, of course, is a fall in market prices of his commodities, for example, due to a dramatic change in the conditions of supply and demand, not a fall in the value of those commodities resulting from a change in the value of the productive-capital.

“So far as the entire capitalist class is concerned, the proposition that it must itself throw into circulation the money required for the realisation of its surplus-value (correspondingly also for the circulation of its capital, constant and variable) not only fails to appear paradoxical, but stands forth as a necessary condition of the entire mechanism.” (p 425)

It is not paradoxical for the reasons we have elaborated before. The workers own only their labour-power, and it is only that they advance. They can spend money only after they have sold their labour-power. In contrast, the capitalists own both means of production and money. Workers can only sell labour-power if capitalists buy it. Capitalists advance both money and commodities into circulation. They advance money to buy productive-capital, and they advance commodities to realise the surplus value contained within them. They spend money for personal consumption.

“He never parts with his money unless he gets an equivalent for it. He advances money to the circulation only in the same way as he advances commodities to it. He acts in both instances as the initial point of their circulation.” (p 425)

That is obscured for two reasons.

  1. “The appearance in the process of circulation of industrial capital of merchant’s capital (the first form of which is always money, since the merchant as such does not create any “product” or “commodity”) and of money-capital as an object of manipulation by a special kind of capitalists.” (p 425)
  2. The division of the surplus value amongst the other exploiters, i.e. landlords, money-capitalist, and the capitalist state.

    “These gentry appear as buyers vis-à-vis the industrial capitalist and to that extent as converters of his commodities into money; they too throw 'money' pro parte into the circulation and he gets it from them. But it is always forgotten from what source they derived it originally, and continue deriving it ever anew.” (p 425)

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